I have a family member that kindly invited me to attend their advisor meeting to discuss their equities/bond portfolio.
This is just a small fraction of their overall wealth. Their net wealth is north of 15M. I assume they have 80-90% of their wealth invested in small businesses and desirable real estate.
For this exercise, they have a 1.5M equity portfolio that they're looking for both steady cash flow and growth growth (the WFA portfolio underperformed the benchmarks and hence why I was asked to sit in and revamp portfolio). There's another 1.5M equity portfolio that's mostly in speculative stocks (fun for them).
I'd like to suggest an alternative portfolio to the WFA, that would both be: simpler, accomplish their goals, produce $40-$50K cashflow, do a better job of keeping up with the benchmarks and most importantly remove the need to pay an advisor.
EXISTING:
Emergency funds: Covered
Debt: None
Tax Filing Status: (Married Filing Jointly
Tax Rate: Highest
State of Residence: FL
Age: 70s
Current Asset allocation: 66% stocks / 32% bonds / 2% cash
Desired International allocation: 5.5% of stocks
Portfolio size: ~1.5M
Taxable
35.2% ($540K)US Large Cap (WFS selected individual stocks to supposedly beat inflation? I did not like the names)
20.5% ($320K)US Mid Cap (where 21% is in iShares Core S&P Mid-Cap ETF (IJH) and 79% is WFS selected individual stocks)
4.5% ($70K) US Small Cap (where 80% is in iShares Core S&P Small-Cap ETF (IJR) and 20% is WFS selected individual stocks)
3.7% ($55K) Developed Mkts (100% iShares Core MSCI EAFE ETF (IEFA))
1.8% ($30K) Emerging Mkts (100% iShares Core MSCI Emerging Markets ETF (IEMG))
31.9% ($490K) Fixed Income (bond ladder over 18 months (~9 month duration) yielding a weighted average ~4.7%)
2.4% ($40K) Cash (idle)
Estimated Income in 2025 - $40K per year (16K from equity dividends and 20K from bond interest)
PROPOSED:
Here's what I'm thinking. First, invest the cash. Next get rid of all the Developed and Emerging Mkts (the S&P 500 derives plenty of their exposure from international). After that, get rid of the bond ladder and buy 1 or 2 short term bond ETFs to get equivalent duration. Finally add 5% of NASDAQ and 2% BTC for a little growth fuel.
Desired Asset allocation: 80% stocks / 20% bonds
Taxable
60% iShares Core S&P 500 ETF (IVV)
13% iShares Core S&P Total U.S. Stock Market ETF (ITOT)
5% iShares Nasdaq Top 30 Stocks ETF (QTOP)
2% iShares Bitcoin Trust ETF (IBIT) - Just to spice it up some.
10% iShares® iBonds 2025 Term High Yield and Income ETF (IBHF) - 5.9% yield
10% iShares® iBonds 2026 Term High Yield and Income ETF (IBHE) - 7.2% yield
Estimated Income in 2025 - $36K ($16K from equity dividends $20K from bond interest)
Thoughts? To repeat myself, my goal is to be simpler, $40-$50K cashflow, keeping up with the benchmarks and remove the advisor. I assume they track the performance of both portfolios in 2025 and if my proposed beats the advisor portfolio, they will invest accordingly.
Thanks in advance for your time and help!
This is just a small fraction of their overall wealth. Their net wealth is north of 15M. I assume they have 80-90% of their wealth invested in small businesses and desirable real estate.
For this exercise, they have a 1.5M equity portfolio that they're looking for both steady cash flow and growth growth (the WFA portfolio underperformed the benchmarks and hence why I was asked to sit in and revamp portfolio). There's another 1.5M equity portfolio that's mostly in speculative stocks (fun for them).
I'd like to suggest an alternative portfolio to the WFA, that would both be: simpler, accomplish their goals, produce $40-$50K cashflow, do a better job of keeping up with the benchmarks and most importantly remove the need to pay an advisor.
EXISTING:
Emergency funds: Covered
Debt: None
Tax Filing Status: (Married Filing Jointly
Tax Rate: Highest
State of Residence: FL
Age: 70s
Current Asset allocation: 66% stocks / 32% bonds / 2% cash
Desired International allocation: 5.5% of stocks
Portfolio size: ~1.5M
Taxable
35.2% ($540K)US Large Cap (WFS selected individual stocks to supposedly beat inflation? I did not like the names)
20.5% ($320K)US Mid Cap (where 21% is in iShares Core S&P Mid-Cap ETF (IJH) and 79% is WFS selected individual stocks)
4.5% ($70K) US Small Cap (where 80% is in iShares Core S&P Small-Cap ETF (IJR) and 20% is WFS selected individual stocks)
3.7% ($55K) Developed Mkts (100% iShares Core MSCI EAFE ETF (IEFA))
1.8% ($30K) Emerging Mkts (100% iShares Core MSCI Emerging Markets ETF (IEMG))
31.9% ($490K) Fixed Income (bond ladder over 18 months (~9 month duration) yielding a weighted average ~4.7%)
2.4% ($40K) Cash (idle)
Estimated Income in 2025 - $40K per year (16K from equity dividends and 20K from bond interest)
PROPOSED:
Here's what I'm thinking. First, invest the cash. Next get rid of all the Developed and Emerging Mkts (the S&P 500 derives plenty of their exposure from international). After that, get rid of the bond ladder and buy 1 or 2 short term bond ETFs to get equivalent duration. Finally add 5% of NASDAQ and 2% BTC for a little growth fuel.
Desired Asset allocation: 80% stocks / 20% bonds
Taxable
60% iShares Core S&P 500 ETF (IVV)
13% iShares Core S&P Total U.S. Stock Market ETF (ITOT)
5% iShares Nasdaq Top 30 Stocks ETF (QTOP)
2% iShares Bitcoin Trust ETF (IBIT) - Just to spice it up some.
10% iShares® iBonds 2025 Term High Yield and Income ETF (IBHF) - 5.9% yield
10% iShares® iBonds 2026 Term High Yield and Income ETF (IBHE) - 7.2% yield
Estimated Income in 2025 - $36K ($16K from equity dividends $20K from bond interest)
Thoughts? To repeat myself, my goal is to be simpler, $40-$50K cashflow, keeping up with the benchmarks and remove the advisor. I assume they track the performance of both portfolios in 2025 and if my proposed beats the advisor portfolio, they will invest accordingly.
Thanks in advance for your time and help!
Statistics: Posted by TimingTrader — Fri Dec 20, 2024 9:41 am — Replies 7 — Views 215