Finance check-up, opinions sought

September 19, 2023 12:26 PM

Should I do anything different to re-jigger/optimize what's on the stove or just let it simmer more?

I am lucky, fortunate and thankful to be in a good financial situation, and ever since (sort of) listening to Dave Ramsey, it's made me wonder if I need to change things up or let it ride.

I've been 50/50 flying by the seat of my pants and taking the past advice of my dad. I've had a brokerage/portfolio managed by someone I trust (I've worked with him for many years). It consists of a few IRA's, stock holdings, a child's 529. Outside of that financial institution I've got more stock sitting w/ another outfit, also a good chuck of savings with 2 other banks (liquid). Plus my 401k which was doing great years ago but I was forced to cash out/convert it and the new employer's plan so it about 1/4 the size of what it was.

I don't know if this diversity is good or bad at this point, I've always heard the phrase you've got to diverisfy (your bonds...Wu-Tang Financial)........I digress.......Would it make sense to put most of everything under the same roof as the managed brokerage account above? That is where the bulk of my finances are. Specifically, the stocks/cash that are kind of outlyers with other banks....?

posted by kilohertz to Work & Money (13 answers total)

What are your goals?
posted by ThePinkSuperhero at 12:37 PM on September 19, 2023

Several years ago, we consolidated (almost) all of our holdings within one brokerage. We have mostly mutual funds, but it is much easier to move money around when we only have to deal with one company.
posted by DrGail at 1:06 PM on September 19, 2023 [1 favorite]

What you said doesn't actually mean a whole lot. What are you invested in? Your IRAs are just tax advantaged vehicles to hold money. You presumably are putting that money to work in some way?

Index funds are the standard good-sense advice and generally always outperform actively managed funds over time. If you only own a few single-company stocks, that's not a great long-term strategy.

Are your savings in high yield accounts? If you're not getting at least 4% APY right now, your bank is ass.

I'm also not understanding what happened with your 401k. You say you were forced to cash this out. Did you choose to cash out because you needed the liquidity for personal reasons? If so that's fine. But if you "cashed out" (i.e. took the withdrawal and the tax penalty vs "rolling it over") simply because you changed employers then you got bad advice, and whoever gave you that bad advice should not be anywhere near your money.
posted by phunniemee at 1:11 PM on September 19, 2023 [9 favorites]

Oh also, diversified doesn't mean how many different financial institutions your money is in.

Diversified means you have spread your financial risk out over a variety of different asset classes.

That's things like: stocks, bonds, interest-earning cash, real estate if you're real fancy. The types of funds you're invested in (index, mutual/actively managed, ETFs, etc) should be diverse, too. It's the "don't put all your eggs in one basket" of finance.
posted by phunniemee at 1:17 PM on September 19, 2023 [6 favorites]

Response by poster: Replying to the 3 posts above ^

The 401k situation was not optimal in the sense that I was not able to roll it over into the new 401k plan -- tldr; a big company aquired my small company and didn't/wouldn't/couldn't offer a roll-over for some reason that I have forgotten. Sorry for not being more clear about that. So I ended up rolling it over into my main (managed) portfolio, and started the new 401k with the new ownership's plan at that time. I do have my finance mgr work with me to optimise the 401k to perform as much as I am currently able to balance it.

The main portfolio itself is a mix of stocks, annuities, mutual funds, IRAs. The stock holdings are very un-diversified, but I have a lot of them they perform above average. All this been managed well and it has done nothing but grow, whether or not the growth rate is up to anyone else's metric is open to discussion, I've generally directed my manager to aim towards the middle of aggressive and semi-agressive if that makes sense.

---

I didn't mention this in my original post, but on the table is the possibiltiy of paying off a 30 yr fixed mortgage. Fully paying it off would cost almost half of my assets. We got a super low rate in 2020 so I'm on the fence about that, the monthly payment is affordable, the property taxes are near criminal. My family can potentially hunker down for the next 15-20 years, but because we live in a state with high taxes all over, I would like to keep the option of pulling up stakes on the table too (if I can get wife, etc on board with the idea).
posted by kilohertz at 1:35 PM on September 19, 2023

The information you’ve shared mostly isn’t the actual relevant information to figure out whether you’re at an appropriate level of risk diversification for your personal goals, age, responsibilities, etc. That suggests you’re probably doing the right thing to get a better handle on what all of this stuff means and how to make good choices! But I don’t think you should rush to do anything given your current level of understanding of where things are.

I think it might make sense to pay your trusted brokerage guy for a meeting to review your stuff that’s outside of his purview. Make sure he has the big picture and is therefore appropriately managing the stuff within his realm (like, if your other stock holdings are on the risky side or all in one industry or whatever, he can be balancing that out with a less risky portfolio or avoiding more stocks in that industry or whatever - but only if he knows what the big picture is. Perhaps, depending what his services offered are, he can provide some financial education or pointers to where to get that education.

Some of that conversation might well include building a long term plan together to consolidate some of the other holdings under him as well. If you trust this specific guy and his institution that’s a good argument for doing that. But don’t start changing things up just for the sake of changing things up, absent specific goals and a good understanding of how your actions will support those goals.
posted by Stacey at 1:41 PM on September 19, 2023

If you have a person to manage your portfolio you are at a major disadvantage because you have to pay them somehow. Most financially savvy people either do it themselves based on some very simple principles, or invest everything in a target date fund, or use a robo advisor which is cheaper than a real human. What are this person's fees?

Also, it sounds like you are trying to beat the market by investing in individual stocks which is pretty questionable. Read up on the "Bogleheads" method of investing.
posted by acidic at 1:45 PM on September 19, 2023 [4 favorites]

If your mortgage rate is fixed and less than your return you shouldn't pay it off early. I also bought my house in 2020 and even my boring cash savings APY is earning more than my mortgage interest is costing me.

If you rolled your old 401k over into an IRA properly then it wasn't cashed out, and you at least shouldn't have incurred any tax penalty on it. (Definitely possible/likely you took a bath having to transfer out of certain holdings at a bad time, bummer on that.)


The main portfolio itself is a mix of stocks, annuities, mutual funds, IRAs.

I'm assuming your IRAs are invested in annuities, mutual funds, and stocks, and you also have a brokerage account, but that's not an assumption anyone should make. It's unfortunately pretty common for people to get in the mindset of "I have a retirement account" but not actually realize they have to invest that money in something, or else it's just going to sit there getting dinged with fees and not earning anything against inflation.

If I were you that would be my number one question to take back to my money guy: WHAT are my IRAs invested in? Because right now you are saying "my main portfolio itself...is an account." With a managed account they are almost certainly invested in something, we'd hope, but that's not something you want to just assume!!!
posted by phunniemee at 1:49 PM on September 19, 2023

I agree there is not enough information here to assess your performance.


IMO, you don't have enough money to require a professional manager, if you only have about 2X enough to pay off a mortgage, unless you mean a really huge mortgage. What are that guy's fees?

What are you actually invested in? It sounds to me like a bunch of individual stocks too, even if it's (current) good ones, that's a bad idea.

I'm also not a 'location diversification' guy. Having as much as possible with as few companies as possible, and as few funds as possible, makes it much easier to compare, cheaper for taxes, etc. So I would consolidate a lot of that together. 1 money market, 1 stock fund, 1 CD, 1 bond fund, etc. What you have is up to your risk profile, but don't have a bunch of the same thing with different companies.
posted by The_Vegetables at 1:51 PM on September 19, 2023 [1 favorite]

What are this person's fees?

This is another really important question. Index funds generally have an expense ratio of (much much) less than 1%.

Actively managed funds like mutual funds are considered expensive these days if they're over 2%. Most places (Vanguard, Fidelity, etc) will have much lower fee/expense ratios.

I googled it because I'm largely unfamiliar with annuity investing, and it looks like they can have more than a 3% expense ratio???? Damn.

Add to that that you're being managed by one person, who like acidic said, is getting paid somehow, by you, instead of that money going into your pocket. Once you figure out where your investments actually are, find out what your expense ratio is.
posted by phunniemee at 2:05 PM on September 19, 2023 [1 favorite]

Best answer: If you go over to the bogleheads forum, you'll find instructions for how to make a portfolio checkup post because they get this question so often.

Making that post is work. But it's super-informative work, you'll learn a lot in the process. And then you'll have your stuff in a format where other people can understand and comment on it coherently.
posted by Dashy at 5:03 PM on September 19, 2023 [2 favorites]

If everything else is in order, then you need to be thinking about fees, which are the enemy of returns for retail investors, and just from your thumbnail sketch I'm guessing you're paying far too much.
posted by praemunire at 8:15 AM on September 20, 2023

I don't see any harm in putting all your investments under one brokerage. That said, where the accounts are located has absolutely nothing to do with how appropriately your overall portfolio is diversified - the investments within do. I'm not sure how you ended up with some of the things listed - multiple IRAs? a needlessly cashed out 401k? multiple cash accounts? - but unless we are talking about a multi-million portfolio with issues not presented, it all seems overly complicated to me.

I'd simplify to 6-7 accounts at most:
- one checking account for day-to-day expenses
- one high-yield savings account for cash savings
- consolidate IRAs into one account (or two if you've got both traditional & ROTH flavors)
- one 401k account with your current employer
- one brokerage account for non-retirement investments
- one 529 account for the kiddo

Also, though I haven't listened to Dave Ramsey for a few years, I'll opine that he is okay for the get-out-of-debt portion of personal finance. But his investment advice always wanted to direct you towards affiliated brokers pushing high-fee funds, which just eat up returns over time for no real benefit. I don't know what portfolio value you are looking at, but I personally have a fairly substantial one that invested in just two funds (VTI and BND). I manage it myself via a no-fee broker (Schwab), with quarterly rebalancing if the ratio between those two starts to wander too far from my personal ideal of 90/10. (But please, talk to a tax accountant before doing anything like reallocating your non-retirement investments if you've got a lot of gains in them!)
posted by Doktor at 12:41 PM on September 20, 2023