Institutional Diversification

[barrett]

As many of you know, there's a good section in Craig and MT's PP book about institutional diversification. I am curious how seriously folks on here take this recommendation. So far I have only diversified away from Fidelity because I was unable to set up a solo 401(k) Roth with them. So I have a couple of accounts with TD Ameritrade but haven't really moved significant assets over there... mostly out of laziness, I guess.

Any input would be greatly appreciated. To be clear, I am looking for comments on institutional diversification, not about my laziness!

[Libertarian666]

I have my accounts spread out among several providers partly for this reason.

My criterion is that nothing short of another Chixulub event should wipe me out completely.

[curlew]

I have accounts at Fidelity, Vanguard, TransAmerica, TIAA/CREF,Treasury Direct, and the Social Security Administration. Is that diverse enough?

I'm actually planning on simplifying things and possibly moving the Vanguard accounts to Fidelity when I retire next year.

[dualstow]

I don't worry to much about having mostly everything at Vanguard. I only got a solo 401(k) at Fidelity because at the time, Vanguard didn't offer them. The diversity was just a by-product.

If it were any other company, I'd probably want to diversify a bit.

[MachineGhost]

Any input would be greatly appreciated. To be clear, I am looking for comments on institutional diversification, not about my laziness!

It's more of an afterthought with me since I have accounts all over the place.  Each provider has its own speciality, i.e. Fidelity for T-Bonds, Schwab for free, lowest-cost ETFs, Vanguard for corporate bonds, RobinHood for commission-free trading, etc.  It adds complexity and its annoying to reconcile what feels like almost every day, but if you want much better returns than the vanilla, you've just got to do the work.

[MachineGhost]

I have my accounts spread out among several providers partly for this reason.

My criterion is that nothing short of another Chixulub event should wipe me out completely.

I thought you didn't invest in financial assets, only gold? 

[clacy]

I have too much institutional diversification. I find that it's a huge pain in the behind 5 bro merge accounts at 4 institutions (between wife and I).

[Libertarian666]

I have my accounts spread out among several providers partly for this reason.

My criterion is that nothing short of another Chixulub event should wipe me out completely.

I thought you didn't invest in financial assets, only gold? 

No, I have some financial assets.

No equities, though.

[I Shrugged]

I have a big portfolio, and it's all at Vanguard.  I am conflicted about that.

[MachineGhost]

No equities, though.

Why not?  I'm not saying I have 25% either, just curious as to why.

[WiseOne]

I've got the opposite problem as well:  too many accounts!  Fidelity, Vanguard, TIAA-CREF, Treasury Direct, HSA Bank/TD Ameritrade, and the bank.  I kinda wonder what will happen if I get hit by a truck or something and a family member has to sort everything out.  Not much I can do except make sure all the accounts are written down somewhere.

[Mountaineer]

I have a big portfolio, and it's all at Vanguard.  I am conflicted about that.

Well, if you have to have it all at one institution, Vanguard's the right place. 

I have more than 50% at Vanguard, with the remainder mostly in CD's, Fidelity, a 529 and some physical assets.  In my opinion, Vanguard is the best investment company in the world with no close second.

+1

... M

[Pointedstick]

I have accounts at 7 different places right now, but in retirement, my plan is to consolidate everything at Vanguard for simplicity.

Ditto.

[barrett]

Why so much love for Vanguard on here? I've been happy with Fidelity. Not happy with my little slice at TD Ameritrade. I only opened an account with them because Fidelity couldn't set me up with a solo 401(k) Roth. Ditto with Vanguard unless I moved some other assets over there. TD's site and statements (electronic or paper) are just terrible.

Anyway, is Vanguard doing anything special besides keeping fund expenses low? I know that is huge but Fido does the same, no?

[MachineGhost]

Anyway, is Vanguard doing anything special besides keeping fund expenses low? I know that is huge but Fido does the same, no?

I suspect its a philosophical decision because Vanguard is non-profit and the shareholders are owners.  Interests are aligned.  Vanguard's website is an archaic joke and they're only good for corporate bonds from a competitive broker standpoint.  They're just way behind but their #1 priority is not growing or making a profit like the others.

Fidelity is great for Treasuries and Schwab is great for lower cost, free ETFs over Vanguard.  TDA is a bloated, sad sack but their huge list of free ETF's might be great for rotation investing.  Interactive Brokers is great for trading.  Motif Investing is great for portfolio investing.  RobinHood is great for commission-free.  FolioFn would be great for fractional shares and commission-free if they would drop the stupid monthly fees.

So just by using best of breed, you will naturally diversify institutionally.

[Pointedstick]

The primary reason for me is a unique feature: automatic investment. You can have them automatically buy shares for you with your contributions. It has the effect of putting everything on almost 100% autopilot, which drastically reduces the temptation to tinker (at least for me).

[MachineGhost]

The primary reason for me is a unique feature: automatic investment. You can have them automatically buy shares for you with your contributions. It has the effect of putting everything on almost 100% autopilot, which drastically reduces the temptation to tinker (at least for me).

But thats only for their mutual funds and other brokers offer that feature.  No big deal.  Been around for decades.  You could even autoinvest directly with the fund for added security.

[Mountaineer]

Anyway, is Vanguard doing anything special besides keeping fund expenses low? I know that is huge but Fido does the same, no?

I suspect its a philosophical decision because Vanguard is non-profit and the shareholders are owners.  Interests are aligned. Vanguard's website is an archaic joke and they're only good for corporate bonds from a competitive broker standpoint.  They're just way behind but their #1 priority is not growing or making a profit like the others.

Fidelity is great for Treasuries and Schwab is great for lower cost, free ETFs over Vanguard.  TDA is a bloated, sad sack but their huge list of free ETF's might be great for rotation investing.  Interactive Brokers is great for trading.  Motif Investing is great for portfolio investing.  RobinHood is great for commission-free.  FolioFn would be great for fractional shares and commission-free if they would drop the stupid monthly fees.

Correct.  I'd rather have my portfolio at a company that does not cater to family (Fidelity) or wall street (most everyone else) interests ahead of mine.  I rarely look at the Vanguard website (I'm retired) and when I do, it's good enough.  I keep cash accounts in a local bank that has a safety deposit box for papers and such that I might need to access occasionally - and I can obtain reasonablly reliable information about the owners and operators.  YMMV

... M

[Pointedstick]

The primary reason for me is a unique feature: automatic investment. You can have them automatically buy shares for you with your contributions. It has the effect of putting everything on almost 100% autopilot, which drastically reduces the temptation to tinker (at least for me).

But thats only for their mutual funds and other brokers offer that feature.  No big deal.

They do? Which ones?

[MachineGhost]

They do? Which ones?

All of those brokers that offer mutual funds via a fund network offer autoinvestment into such.  Well, perhaps not the bottom tier players like SogoTrade, but certainly Schwab, Fidelity, TDA, etc..  It's been around since the 80's or 90's.  I suspect Schwab first invented it since they were the first to offer a fund network.

And don't overlook dealing with the mutual fund itself instead of through a broker.  They might have lower autoinvestment minimums and no transanction or annual fees.  It's how things were done before the Internetz, young grasshopper!

[Pointedstick]

They do? Which ones?

All of those brokers that offer mutual funds via a fund network offer autoinvestment into such.  Well, perhaps not the bottom tier players like SogoTrade, but certainly Schwab, Fidelity, TDA, etc..  It's been around since the 80's or 90's.  I suspect Schwab first invented it since they were the first to offer a fund network.

Aha, just found it at Schwab! Thanks a ton! Still haven't found it at TDA.

And don't overlook dealing with the mutual fund itself instead of through a broker.  They might have lower autoinvestment minimums and no transanction or annual fees.  It's how things were done before the Internetz, young grasshopper!

Hey, that's not a bad idea.

[MachineGhost]

[img width=800]http://i.imgur.com/M1FO8HC.png[/img]

I'm pretty sure ETF's are still not included, but it could have changed.  Fidelity definitely offers it and their active management funds are among the -- if not the -- best in the world, especially the Select Sector.

And don't overlook dealing with the mutual fund itself instead of through a broker.  They might have lower autoinvestment minimums and no transanction or annual fees.  It's how things were done before the Internetz, young grasshopper!

Hey, that's not a bad idea.

Three issues.  It can make rebalancing challenging if there's not a money market fund available in the family.  Would have to go to and from over ACH.  The other is a very high lack of online banking support via the aggregators (for Quicken, Mint, etc.).  And most families have limitations on how often you can rotate from fund to fund without incurring a penalty fee.

[MachineGhost]

Automatic investment in ETF's can be done with ShareBuilder, but it'll cost you $3.95 per investment.  Mutual funds have the advantage of letting you buy fractional shares also.

https://www.capitaloneinvesting.com/mai ... tools.aspx