VTI Only – Low Maintainence

VTI Only -> Low Maintenance

There are several “costs” to maintaining a portfolio other than monetary costs.
Making decisions about a retirement portfolio can take a heavy mental toll on those who have so many decisions to make and the decisions continue long after the initial diversified portfolio has been established.

  • First, there is the time spent seeking advice and learning  about what to do.
    This problem is not solved by using a financial advisor.

    Advisors typically charge 1.5% of your invested assets per year. Now you have to better VTI’s performance by 1.5% just to be even.
    Advisors “recommend” those funds that provide them the greatest return via front-end load fees, commissions from fund vendors, management fees on funds they manage, etc.
    There is no guarantee you will select an advisor that can do better than just owning VTI.
  • As you can see from below, there are 22,600 possible funds that could find their way into your diversified portfolio. The chances that you will pick the optimal 5 or 6 funds to include in your diversified portfolio are zero.
    7,596 mutual funds (excludes the 490 funds that “died” during the year).
    602 Closed End Funds
    1194 ETFs
    873 “Share Classes” of 373 index funds (103 track S&P500)
    5787 Unit Investment Trusts
    1623 Share Classes of money market funds
    2,846 “retirement” fund share classes
    2599 “target date” fund share classes

    Total Number of domestic decisions: 22,620
    Plus 73.243 mutual funds world wide

    With a single security portfolio, your decisions are reduced to one. Decide to buy and hold VTI and that is all. No more mental angst expended on your retirement planning.

  • Then here is the constant second-guessing about the composition of your portfolio.
  • There is the constant filtering and assessing the barrage of media information about retirement strategy.
  • There is the constant question of whether or not to stay with a security that is failing to perform.

You Can Ignore the Noise of the Financial Advisors That Permeate the Media

Below are several comments/headlines scraped from random “investment advice” columns and articles.

“Investing in mutual funds takes work. Whether you own actively managed funds or index funds you still need to monitor your holdings. Here are four reasons you might consider selling a fund other than simply disappointing returns.’

We cover the latest mutual fund news, commentary, and investing strategies for the everyday investor.
The Long and Short of Managing Volatility
Should You Deep-Six Your Mutual Fund?
Know What Kind of Advisor You Hire
Where Bargain Investors Can Still Find a Deal
Funds Stage a Comeback: Time to Forgive and Forget?
Avoiding pitfalls in active investing

You don’t need that. How do you know which “advice” is good? What are you supposed to do? Run out and undo what the last advisor told you and do what this one is telling you to do? It’s mind numbing.

Repeat after me: “Nobody can time the market. Nobody can time the market.” One of the big challenges of market timing is that requires you to make not one, but two lucky decisions: when to sell and when to buy back in.

Confidence Building Information

The table below counts the number of times the DOW (and consequently, the markets) rose for X years in a row and counts the number of times the DOW fell for X years in a row.

Consecutive Years
DOW went same direction
Frequency of Consecutive Years
1 Year 2 Years
In A Row
3 Years
In A Row
4 Years
In A Row
5 Years
In A Row
9 Years
In A Row
Number of times Dow had Positive runs. 6 13 3 4 1 1
NO CHANGE 4 0 0 0 0 0
Number of times Dow hadNegative runs. 16 5 2 1 0 0

The DOW was UP or no change for 75  years, down for 36 years.
UP or EVEN = (4 + 2*13 + 3*3 + 4*4 + 1*5 + 1*9) = 75
DOWN = (16 + 2*5 + 3*2 +4*1) = 36

Because we are considering only the long run, we welcome those years during the accumulation period when our monthly investment buys  more shares of DIA than when the market was up. (See “Dollar Cost Averaging”).  Only if the market is down when it is time to retire, do we care about a falling market. More on withdrawal strategy later.

Return to “EVIDENCE BASED PROOF OF PLAN

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