Gyroscopic Investing

I've been mulling over Craig R's post on diversifying across brokerages and find his arguments compelling (much as I hate complexity!):

http://crawlingroad.com/blog/2012/05/13 ... imit-risk/

For better or worse (I have no complaints) I'm with Schwab now. I respect Vanguard of course - used to be with them - but I'm all in individual Treasury bonds and non-Vanguard ETFs except for one big chunk of VTI so I'm reluctant to open an account with them. IMHO their mutual funds are the best but because their brokerage operation is entirely separate (and no great shakes, with fairly high fees) dealing with statements from them is a royal PITA. So if I must diversify, any recommendations? Am leaning towards TD Ameritrade. My gold is held outside all of these accounts but apparently that's not enough diversification.

There a several things to consider.

First if you really want to stick with your broker, you can consider using multiple funds from different companies.

For instance, Schwab Total Stock Market, State Street T-Bill ETF, bonds owned directly and gold bullion somewhere safe like stored at a bank or maybe a gold fund for some of it.

That will put your money across four different fund providers and the broker insurance would cover any losses for the broker holding the assets in event of fraud, etc. But you'd at least diversify the manager risk in each component piece.

Second you can do is actually transfer funds/shares to a new brokerage. You can do this transfer without having to sell the shares. They would simply be moved to the new account at the new brokerage. You can do this if you have positions with capital gains you don't want to incur.

Third is you hybrid split it. So you keep the stocks and cash at one brokerage and the bonds and gold funds (if used) at another brokerage.

Finally, you could just say "forget it" and keep your stocks, bonds and cash at one brokerage and park some gold somewhere geographically diversified and call it a day.

The main thing for me really is I wouldn't use all of Company X's funds for the entire portfolio. So even when people ask about an all ETF portfolio I would be less inclined to recommend all iShares unless they had no other option. I would more likely recommend Vanguard, iShares, StateStreet, etc. for the mix. If you keep them all at the same brokerage the paper work is the same but at least you have diversified fund company manager risk a little better.

Thanks Craig, that's really helpful.

No problem. I blogged this question because I think many people would want to know those details as well:

https://web.archive.org/web/20160324133 ... ification/