r/Bogleheads • u/DrawingOk8403 • 1d ago
Advisor vs three fund portfolio
I have vt and bnd in my ira at chase. The advisor there had tried to sell me a divided configured sma promising it offered more downside protection. (Less growth). However it comes with a 1.45% AUM fee. It’s also actively managed. Which may in cases like what’s happening now may be beneficial.
I’d like to know what others here think about this? It’s probably too late to switch over now but is this something anyone here would consider ?
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u/buffinita 1d ago
No
1.45% is a HUGE drag; plus whatever other high fee funds they might have placed you in
Bullit dodged
My portfolio is dividend-centric; following Bogle principles…..total ER of my portfolio is like 0.17 because of my heavy small cap allotment
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u/DrawingOk8403 1d ago
Are you picking individual stocks or an etf like schd ?
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u/buffinita 1d ago
Definitely ETFs; like I said very bogleheads.
All my funds are passivly managed following an index; and I’m globally diverse
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u/ivobrick 1d ago
That price is extreme, even for eu standards. If you have bnd and vt, you have what i have. Im good, even after drops. We continue.
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u/Zhimbeaux 1d ago edited 1d ago
Run away. Downside protection isn't magic, or mysterious, and does not come from dividends. Broad diversification across asset classes with decent allocation to low-volatility investments (i.e. bonds) does it. Any manager who is remotely capable of adding 1.45% value on top of a basic investing strategy, if they exist at all, isn't available to you. 1.45% will absolutely RAVAGE your long term returns.
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u/StatisticalMan 1d ago edited 1d ago
1.45% is a huge portion of your lifetime returns. Stocks average 10% but due to inflation money is devalued each year. So what really matter is the real return which is around 7%. So giving up 1.45% off the top (5.55% vs 7.00%) is giving up 20% of the lifetime gains. It is worse when we consider a bogle 3 fund portfolio. Bonds have a historical return of 2% real. So a 60/40 porfolio is closer to 5% real return. The 1.45% is taking 35% off the lifetime gains (3.55% vs 5.00%).
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u/DrawingOk8403 1d ago
Just so I understand. Do you mean the allocation in the boggle three fund should be higher stocks to keep up with inflation ?
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u/Cruian 1d ago
Many people go higher in bonds as they age.
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u/DrawingOk8403 1d ago
But why did you say it’s worse when we consider a boggle portfolio.
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u/Cruian 1d ago
I'm a different person, that was my first comment to you.
Different people have different needs and even the same person may have different needs at different points in their life. Someone with 40 years until retirement can take more risk than someone 3 years from their intended retirement.
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u/lwhitephone81 1d ago
Surely it's better to read the Boglehead's Guide or similar and educate yourself, rather than falling for such scams.
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u/njx58 1d ago
Not in a million years. The advisor would have to beat the market by 1.45 points just for you to break even on the deal.