Saving Advice Forums  

Go Back   Saving Advice Forums > Financial Chit Chat > Investing & Banking

Investing & Banking Stocks, bonds, banking interest rates, CDs and all other investment vehicles you want to talk about.

Like Tree3Likes
  • 1 Post By kork13
  • 1 Post By TexasHusker
  • 1 Post By Nutria

Reply
 
LinkBack Thread Tools
  #1 (permalink)  
Old 08-01-2017, 05:16 PM
disneysteve's Avatar
Super Moderator
 
Join Date: Jun 2006
Location: New Jersey
Forum Posts: 26,702
Default How much is too much in one mutual fund/ETF?

I've often read that you shouldn't have more than 10% of your portfolio in a single stock but what about a mutual fund or ETF? Since those are generally broadly diversified, is there any rule of thumb about those? What if it's a sector fund like commodities or energy or health care? Then what? Does the 10% rule still apply?
__________________
Steve

* Despite the high cost of living, it remains very popular.
* Why should I pay for my daughter's education when she already knows everything?
* There are no shortcuts to anywhere worth going.
Reply With Quote
  #2 (permalink)  
Old 08-01-2017, 05:57 PM
$ Saving College Sophomore
 
Join Date: May 2015
Forum Posts: 866
Default

I'll try, but no means an expert, so here are my thoughts from what I've read...

if you have a fund that is 5% or less of your total investments, then it is not really worth being in that fund as it cannot really "move the needle" on your investment dollars.

10% is a suggestion for individual stock and probably would include funds that are not diversified enough (sector funds).

If you know of the 3-fund portfolio, that would suggest something like 40% in Total US Stock fund, 20% Total International and 40% in Total Bonds... so that shows more than 10% is "acceptable"

guessing you're thinking about VGHCX among others...

Vanguard Wellesley is at about 33% of my total investments...

Last edited by Jluke; 08-01-2017 at 05:59 PM. Reason: VWINX info
Reply With Quote
  #3 (permalink)  
Old 08-01-2017, 07:06 PM
$ Saving College Senior
 
Join Date: Dec 2010
Forum Posts: 2,080
Default

100% is fine, if the fund/etf is diverse enough.
Reply With Quote
  #4 (permalink)  
Old 08-02-2017, 05:47 AM
$ Saving College Sophomore
 
Join Date: Mar 2015
Forum Posts: 916
Default

I don't think it matters. Any good Mutual fund is highly diversified anyway. It's not the same as having a whole bunch of money concentrated in shares of stock of one company.
Reply With Quote
  #5 (permalink)  
Old 08-02-2017, 05:57 AM
disneysteve's Avatar
Super Moderator
 
Join Date: Jun 2006
Location: New Jersey
Forum Posts: 26,702
Default

Quote:
Originally Posted by Fishindude77 View Post
I don't think it matters. Any good Mutual fund is highly diversified anyway. It's not the same as having a whole bunch of money concentrated in shares of stock of one company.
True, but what about concentration in one industry. A sector fund may only hold 50-75 stocks all in the same field. Do you think that matters?
__________________
Steve

* Despite the high cost of living, it remains very popular.
* Why should I pay for my daughter's education when she already knows everything?
* There are no shortcuts to anywhere worth going.
Reply With Quote
  #6 (permalink)  
Old 08-02-2017, 06:19 AM
$ Saving College Junior
 
Join Date: Oct 2013
Forum Posts: 1,498
Default

Quote:
Originally Posted by disneysteve View Post
True, but what about concentration in one industry. A sector fund may only hold 50-75 stocks all in the same field. Do you think that matters?
That does matter. You could set up a 3 fund portfolio with total U.S. stock, total international stock, and total bond. That shouldn't be subject to a sector specific issue (up or down).

But then you can tilt towards tech, energy, health care or value via funds or ETF's. Just like with stocks, if you tilt too much you take on risk (and opportunity).

DS, I think you are heavily tilted towards health care right now in a mutual fund. That's fine, but if it gets higher than 10% of your total portfolio, I think you need to evaluate the risk you are taking. Obviously it has been very good for you.

Tom
Reply With Quote
  #7 (permalink)  
Old 08-02-2017, 06:55 AM
disneysteve's Avatar
Super Moderator
 
Join Date: Jun 2006
Location: New Jersey
Forum Posts: 26,702
Default

Quote:
Originally Posted by corn18 View Post
That does matter. You could set up a 3 fund portfolio with total U.S. stock, total international stock, and total bond. That shouldn't be subject to a sector specific issue (up or down).

But then you can tilt towards tech, energy, health care or value via funds or ETF's. Just like with stocks, if you tilt too much you take on risk (and opportunity).

DS, I think you are heavily tilted towards health care right now in a mutual fund. That's fine, but if it gets higher than 10% of your total portfolio, I think you need to evaluate the risk you are taking. Obviously it has been very good for you.

Tom
I need to run the numbers but a rough calculation has it at about 14% which is what made me pose the question. I may want to direct new money elsewhere to bring that % down a little.
__________________
Steve

* Despite the high cost of living, it remains very popular.
* Why should I pay for my daughter's education when she already knows everything?
* There are no shortcuts to anywhere worth going.
Reply With Quote
  #8 (permalink)  
Old 08-02-2017, 07:16 AM
james.hendrickson's Avatar
Administrator
 
Join Date: Nov 2015
Forum Posts: 764
Default

Actually, this is a very good point. Some actively managed mutual funds can have up to a third or a half of their equity in a single company. If the performance of that company is very poor, the fund's shares will be impacted accordingly.

A lot of aggressive growth banking funds in the 2000s were heavily invested in Washington Mutual shares before the company went bankrupt.
__________________
[email protected]
202.468.6043
Reply With Quote
  #9 (permalink)  
Old 08-02-2017, 08:14 AM
$ Saving Post Graduate
 
Join Date: Mar 2008
Location: Alaska
Forum Posts: 3,477
Default

Quote:
Originally Posted by disneysteve View Post
I need to run the numbers but a rough calculation has it at about 14% which is what made me pose the question. I may want to direct new money elsewhere to bring that % down a little.
A related consideration for you specifically, Steve... Just like we all tell people not to hold too much company stock (in the company you work for), it wouldn't be advisable to focus too much into a sector fund for the sector that you work in. If you work in healthcare or tech or real estate, and that sector takes a nosedive, you could be out both your job and your investments.

The rule of thumb I've always heard is to keep any individual stock to no more than 5% of your portfolio, and I'd go with about the same (*maybe* 10%) for a particular sector fund.
scfr likes this.
__________________
"Praestantia per minutus" ... "Acta non verba"
Reply With Quote
  #10 (permalink)  
Old 08-02-2017, 06:45 PM
$ Saving College Senior
 
Join Date: Mar 2016
Forum Posts: 1,665
Default

Quote:
Originally Posted by disneysteve View Post
I've often read that you shouldn't have more than 10% of your portfolio in a single stock but what about a mutual fund or ETF? Since those are generally broadly diversified, is there any rule of thumb about those? What if it's a sector fund like commodities or energy or health care? Then what? Does the 10% rule still apply?
Not in my opinion, because a mutual fund has diversified your investments by definition.

A fund such as Dodge and Cox Income has a consistent, stodgy return, and is very well diversified: Cash, bonds, treasuries, consumer staples, technology, foreign, and even some energy and precious metals!
Nutria likes this.
__________________
How can you have any pudding if you don't eat your meat?
Reply With Quote
  #11 (permalink)  
Old 08-03-2017, 05:26 AM
$ Saving Fourth Grader
 
Join Date: Jun 2017
Forum Posts: 28
Default

I believe it depends on the ETF itself and how specific that ETF is. For example having all of your money in the Vanguard Total Stock Market Index Fund isn't the worst idea (in regards to volatility). But having all of your money in a sector specific ETF wouldn't be the best confidence IMHO.
Reply With Quote
  #12 (permalink)  
Old 08-03-2017, 05:46 AM
disneysteve's Avatar
Super Moderator
 
Join Date: Jun 2006
Location: New Jersey
Forum Posts: 26,702
Default

Quote:
Originally Posted by TexasHusker View Post
Not in my opinion, because a mutual fund has diversified your investments by definition.
But what if it is a narrowly-focused fund? VGHAX only holds 75 stocks and the top ten make up over 40% of assets.
Quote:
Originally Posted by colby99 View Post
having all of your money in a sector specific ETF wouldn't be the best confidence IMHO.
Right, so how much is too much? 10%? More? Less?
__________________
Steve

* Despite the high cost of living, it remains very popular.
* Why should I pay for my daughter's education when she already knows everything?
* There are no shortcuts to anywhere worth going.
Reply With Quote
  #13 (permalink)  
Old 08-03-2017, 10:40 AM
$ Saving College Senior
 
Join Date: Mar 2016
Forum Posts: 1,665
Default

Quote:
Originally Posted by disneysteve View Post
But what if it is a narrowly-focused fund? VGHAX only holds 75 stocks and the top ten make up over 40% of assets.

Right, so how much is too much? 10%? More? Less?
A sector fund is a different animal. Yes, it's diversified, but diversified within a specific sector: Energy, technology, precious metals, etc.

You could own 10 different sector funds and accomplish the same as Dodge and Cox Income. Or maybe not. They are paid to do this, so I would hope they would be more proficient at choosing equities than yours truly.

I've found this often isn't the case, which is why I became disillusioned and walked away from equities entirely. But that's another topic.
__________________
How can you have any pudding if you don't eat your meat?
Reply With Quote
  #14 (permalink)  
Old 08-04-2017, 09:55 AM
amarowsky's Avatar
$ Saving Jr. College Student
 
Join Date: Jun 2008
Location: Livonia
Forum Posts: 468
Default

I think it's fine to have much more than 10% in a diversified fund (i.e an index fund).

I am re-balancing my primary taxable account to the point that it is at least 60% SP500 in the form of SPY (etf).

As for my retirement stuff it's all pretty true to the 60/20/20 passive investment strategy. Some slight anomalies.
Reply With Quote
  #15 (permalink)  
Old 08-05-2017, 06:10 AM
$ Saving College Senior
 
Join Date: Sep 2006
Forum Posts: 2,383
Default

Quote:
Originally Posted by disneysteve View Post
Right, so how much is too much? 10%? More? Less?
What percentage were you comfortable with when you first invested with this fund? Do you think your reasoning was sound? Has anything about your investment strategy or style changed since then?
Reply With Quote
  #16 (permalink)  
Old 08-05-2017, 07:50 AM
disneysteve's Avatar
Super Moderator
 
Join Date: Jun 2006
Location: New Jersey
Forum Posts: 26,702
Default

Quote:
Originally Posted by scfr View Post
What percentage were you comfortable with when you first invested with this fund? Do you think your reasoning was sound? Has anything about your investment strategy or style changed since then?
I had far less money when I first invested in the fund. I don't recall what % it was back then. Also, this is historically one of the best performing funds around, so over time, it has grown very nicely. It has averaged nearly 17%/year since inception in 1984.

I need to sit down and take a good look at the big picture and the current allocation of our portfolio and see where things stand. I haven''t done that recently but with the ongoing bull market, I'm sure things have gotten a little out of whack.
__________________
Steve

* Despite the high cost of living, it remains very popular.
* Why should I pay for my daughter's education when she already knows everything?
* There are no shortcuts to anywhere worth going.
Reply With Quote
  #17 (permalink)  
Old 08-05-2017, 04:22 PM
$ Saving College Senior
 
Join Date: Mar 2016
Forum Posts: 1,665
Default

Quote:
Originally Posted by disneysteve View Post
I had far less money when I first invested in the fund. I don't recall what % it was back then. Also, this is historically one of the best performing funds around, so over time, it has grown very nicely. It has averaged nearly 17%/year since inception in 1984.

I need to sit down and take a good look at the big picture and the current allocation of our portfolio and see where things stand. I haven''t done that recently but with the ongoing bull market, I'm sure things have gotten a little out of whack.
Good idea. The stronger the bull, the bigger the coming bear. Bear markets can forever cancel the retirement dreams of those who are close when it occurs.

In a bull market, there's seemingly nothing that keeps the markets from rising.

In a bear market, there's seemingly nothing that keeps them from falling.
__________________
How can you have any pudding if you don't eat your meat?
Reply With Quote
  #18 (permalink)  
Old 08-12-2017, 10:49 PM
$ Saving College Senior
 
Join Date: Aug 2005
Location: Northwestern Pennsylvania
Forum Posts: 1,583
Default

As long as what fund you are invested in is diversified and is bringing in what you want/need I to I can't think of any reason that it would be a bad thing to stick with a fund. I read a lot and while I have read about some folks being invested in too many funds as well as stocks, I've never seen advice to have more of them when they are getting a good a good return.

But then I have seen some advice that I think is downright weird. Such as when you are about to retire at 65 or so, they tell you to pull out of stocks and go into bonds. With so many living another 20-30+ YEARS following retirement, why not keep your money in the stocks that are making you money? At least for another 15-20 years, for when you really are getting old and don't want to be dealing with the finances anymore.

I also don't understand the evening up of your portfolio on a yearly basis. Selling your stocks that is doing the best to buy more of something that isn't doing so well. Makes no mathematical sense to me.

I have started way to late to save for retirement. Well actually didn't start too late, but personal problems caused the money to have to be spent ore than once and completely wiped out. So my retirement money has been limping along and the last thing I want to do is sell one of best stocks that has more than doubled to buy something else and hope it will eventually double itself and provide dividends as well. I have been happy to see the numbers this year though. Everything I do buy pays dividends so I have more shares each year. I've never managed to see a portfolio grow like this due to the power of the internet and no need to cash it in, as in no matter how broke we are, I won't cash it in! It is fun to see things grow!
__________________
Gailete
http://www.MoonwishesSewingandCrafts.com
Reply With Quote
  #19 (permalink)  
Old 08-13-2017, 03:51 AM
$ Saving College Junior
 
Join Date: Oct 2013
Forum Posts: 1,498
Default

Asset allocation is all about risk management. These articles in the boglehead wiki explain it way better than I can:

https://www.bogleheads.org/wiki/Asset_allocation

https://www.bogleheads.org/wiki/Rebalancing

https://www.bogleheads.org/wiki/Risk...n_introduction
Reply With Quote
  #20 (permalink)  
Old 08-19-2017, 06:01 PM
$ Saving College Senior
 
Join Date: May 2015
Forum Posts: 1,737
Default

Quote:
Originally Posted by disneysteve View Post
But what if it is a narrowly-focused fund? VGHAX only holds 75 stocks and the top ten make up over 40% of assets.

Right, so how much is too much? 10%? More? Less?
https://personal.vanguard.com/us/Fun...MonthEnd=false

If your portfolio was 100% in VGHAX, then -- as of 07/31 -- you'd be slightly over-exposed to Bristol-Myers Squibb Co., Allergan plc and UnitedHealth Group.

If VGHAX is only 20%, then you're far under 5% on all your stocks.
disneysteve likes this.
Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are Off



All times are GMT -7. The time now is 01:41 PM.


Powered by vBulletin®
Copyright ©2000 - 2017, Jelsoft Enterprises Ltd.
SEO by vBSEO 3.6.0 PL2 ©2011, Crawlability, Inc.