The True Cost Of Investing In Too Many ETFs

Is it possible to invest in too many funds? The simple answer is yes. The longer you invest the easier it is to slowly acquire more and more investment funds. This includes index funds, thematic funds, sector funds, and other actively managed funds that charge very high fees. This is a problem I've seen come up quite a bit that needs to be addressed.
The problem with actively managed funds: • The Truth About Outper...
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Why People Overcomplicate Investing- The reason anyone holds more than a few investment funds is because of stories and narratives. Two of the most powerful factors in the decisions you make. As you hear about different funds on KZbin and in the media you might start adding a few funds here and a few investment funds there. Eventually, you have a portfolio full of random funds that don't make sense together.
Effort Does Not Always Equal Value- A more complex portfolio does not always mean you're going to end up with better returns compared to a simple 2 fund portfolio or 3 fund portfolio. Even if you do get a higher return you'll need to calculate if it was worth your time. In this part of the video, I'll break down the hours spent on a complex portfolio vs. a simplified investment portfolio.
Financial Professionals and complex investment portfolios- You'll usually see financial professionals put investors into 15+ actively managed funds. The reason for this is that they're incentivized to keep things complicated so you stay with them as a client. If all they did is put you in a simplified portfolio you might question why you're paying them such a high fee. Complexity is job security for these people. On top of that, they'll sometimes get kick backs from some of these actively manged funds which means they're more likely to have you invest there.
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Disclaimer: This video is for entertainment purposes only. Everyone's situation is different so do your own research before making any decisions with your money. If you need help then contact a Certified Financial Fiduciary before trying anything that is mentioned in this video. I prefer a Fiduciary financial advisor that charges an hourly fee as opposed to an ongoing fee based on a % of your portfolio. Always remember that incentives determine the type of advice they give you so one that charges an hourly fee is less likely to be problematic.

[@JarradMorrow]

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[@rjlane3475]

I agree with just about everything in this video. The one exception would be the discussion about 'how much my time is worth'. Most people waste so much of their time during the day, but when it comes to mowing the yard, raking leaves, or whatever, they want to claim their time is worth $100/hr.

[@apoch2001]

Time spent researching and learning to get the extra edge isn't time wasted. Arguably, the time could be wasted at the bar getting drunk

[@Seoulsearch616]

Great video. One thing I really appreciate about your channel is that you are covering aspects and no nonsense thinking about investing that no one else does.

[@2EXTRM]

yes! he made 15 dollars per hour. Which is pretty bad, and nobody can buy an hour from me for $15 at this moment. However was he enjoying that time? what else would he have done with that hour? doom scroll twitter? what if he actually enjoys researching companies and funds? some people sink hours following sports, celebrities, etc. maybe he enjoys following money and learning while investing. You're also assuming that this person took an hour of his time to do something he didn't enjoy for 30 years. That is not realistic at all. I mean I enjoy investing and I took up Forex a while ago, Once I got a good rhythm and better trades i spend less time on it and make more money trading currencies. instead of 2 hors a day now I spend 2 hours on Sundays doing my swing trades and just look at my trades during the week. maybe try to scalp some cause its fun but I don't even spend 3 hours a week total on it.

[@JarradMorrow]

Very good point. Thanks for sharing your opinion 👍🏻

[@julianruggiero9701]

You make many excellent points, Jarrad! What resonates with me is the question of whether the extra time we put into our portfolios is worth it in terms of the monetary reward we can expect to see from that effort. Another great example of the effort not being worth the reward, in my opinion, is spending time on coupon clipping. Sure, some people can save a couple hundred dollars a month by constantly looking for deals and trying to find the best coupons for whatever products they buy. But how much time and stress did they spend searching for all those deals? I would rather just work one hour of overtime each week, end up with more money in my bank than I would have with coupon clipping, and then be able to buy what I need when I need it. Many money-saving strategies simply aren't worth the time or stress they cost. Thanks for the great video as usual!

[@FearIess1221]

Speak the truth!!!!!

[@patriksmerda1489]

Whats complex on choosing 5 ETF focused on different sectors. Just watch overlap and TER and let it ride. ETFs are already simple as it gets. What would complex chris (or how was it) be changing on it every week? Doesnt make sence because all ETFs are long term investment. Changing them every week would kill any possible return. I would say that he spend more hours at the start on making portfolio. But after that there is no point.

[@GotterVibez]

I dont get it either

[@rustystark]

Lots of great content on your channel. Thanks for all the insight. I have one request however… can you do a video on what kind of portfolio changes make sense at retirement, when contributions cease and one must begin generating monthly cash flow from investments (usually a combination of tax deferred acts and regular taxable brokerage accts). Keeping in mind that the time horizon is still fairly long if one expects to live 30+ years in retirement. Thanks!

[@HL-uw7fk]

2-3 etfs max and that should be it

[@Allen-by6ci]

Good video. I realized some of this the hard way. Ouch :(

[@JarradMorrow]

Most people do as well so don't feel bad 👍🏻

[@briand.1694]

If you are a "Set-It-And-Forget-It" type of investor, then Simple-Sam's portfolio style makes a lot of sense. Some of us like to spend time analyzing different funds. Especially with all the tools available to compare funds, Complex-Chris' portfolio style makes more sense to some.

[@peterlee4131]

Yea, if you enjoy doing it, if it is a hobby and you get a kick out of it then go for it!

[@matthewfarrell317]

The only thing I disagree with you is the time. I dig for gold for a hobby. I can spend a few days a year making barely a few hundred in raw gold, but I do it for fun. Same with the stock market, my autistic brain, loves numbers, data and problem solving. I enjoy the time playing around and researching. That said, most of my investments are in 4 etfs, an Aussie, and American, emerging markets and all world ex USA. That covers me for the entire world and I do zip for it. But my 20% of the portfolio is for me to enjoy, picking individuals I like, investing in markets like India. And actually enjoying the process.

[@christianperalta3226]

All of Global X etf are extremely expensive 0.60%, and bst is another etf with outrageous 1% expense ratio.

[@cassandragonzalez5660]

How would you systematically change your complex portfolio to a simple one? I have a few ETFs but also have individual stocks. The more I learned, I noticed some of my individual stocks were covered in the ETF. That got me thinking…how do I cover my bases, and slim down my portfolio to a more manageable plan.

[@michaelcummins5974]

Are these in a tax advantaged plan? If so, you can sell and buy different assets with no tax consequences, so would simply mean making a plan and executing it. Sell off a bunch of the groups of ETFs and individual stocks you want to replace, and immediately buy a market index to replace them. Maybe do that in a few chunks, as making a lot of moves with a lot of money at one time does have some inherent risk. In a taxable account, I'd probably avoid doing such a thing. Just ride it out, or sell some off slowly over time when you think they're at a relatively high point or something (not really trying to time the market, just choosing to sell off individual stuff when its not at what appears to be a low point) and reinvest that money immediately into an index. Plan for any taxable events, if you'll need to hold back some cash or something for that.

[@JOpalensky]

Find two quality ETFs, one that offers growth and one that offers stability (dividends) Ex.) SPYG (growth), SPHD (stability). Now find 5 equities that you believe in. Ex.) AMZN, GOOGL, BABA, UBER and HD. Set up Bi-weekly or monthly recurring investments. Also, make sure to max our your 401k **Not a financial advisor** Just don't spend too much time looking at your stock portfolio. Time is money as Jarrad stated in the video.

[@trrealestatenycrealestate200]

great way of doing it , it's 8/22/24 how has it been working out for you ?

[@AshknFX]

i just spent the day creating my etfs plan and ended up with 8. and then i remembered my broker 25$ fee per trade lol. i gotta some work to do

[@mr.financial]

Good job buddy for calling this out. FAs can be terrible or great, depending on the individual. It's a coin toss.

[@JarradMorrow]

Appreciate it. The FA's who charge an ongoing fee never made sense to me. It's like paying for a Netflix subscription every month when you only use the service once per year (maybe even less than that on average). Pay the one time fee to a fiduciary advisor when you actually need to talk to someone.

[@mr.financial]

@@JarradMorrow I've been trying to convince my parents of exactly that. They pay 1% of assets under management. It's robbery if you ask me ... Oh wait many mutual funds cost 2% or more. 😭

[@yota1092]

Wonderful vidéo

[@JarradMorrow]

Thanks!

[@Garabins1]

SPY, QQQ, DIA long term portfolio?

[@JarradMorrow]

If that's what works for you

[@davidbrooks8809]

Love the food...lol..great information

[@JarradMorrow]

👍🏻

[@Mr.Mini_Moto]

It doesn't help. when you're (me btw) a new investor learning about this stuff and your (me) income isn't all that great. Then you see a video about a dude talking about.... You needing to diversify your portfolio as much as possible. So you go through buying a bunch of ETF's for that reason lmao! Thanks for clearing this up! Just going hold two ETFs in my Robinhood app

[@scottv5813]

I’m trying to figure out a bond fund (I know nothing). Why do you think BND? Returns are ballpark of 0%. Fidelity’s version FXNAX is basically same thing. Wouldn’t it be better to do the example in the video of FAGIX? Even if expense is .67% the returns are around 5%.

[@paulr1]

Very interesting, but why only the US stockmarket ?

[@krustyhappyclown]

Because US market outperform the world index market.

[@paulr1]

@@krustyhappyclown maybe in the past, I'm not sure about the future

[@JarradMorrow]

The only reason is that the complex portfolio that the individual chose was U.S. based stock and bond funds. My example was to show how he could take that same type of portfolio and simplify it with a U.S. stock index and bond index. I personally think having a little international in there would have been a more well-rounded portfolio, but that wasn't necessarily the point of that example.

[@gferrigno]

Great insight. There was a time when we were all in the dark and paid those that had light for their light because light was hard to find, but in today's age light is everywhere.

[@gferrigno]

a little lite humor :joy:

[@Username_CC_]

Pretty happy with my boglehead portfolio plus a little tilt towards REITs and small value. Even if I lose some points of growth

[@georgialee6755]

I have approximately 10 ETF’s in different sectors and I believe that’s too many. My dad set it up for me in my Fidelity account but I’m thinking it’s too many given the fees although they’re small they add up. I’m thinking it’s best to combine in one fund such as FXAIX or VOO

[@michaelcummins5974]

Many ways to skin a cat, but simply put, all you really need is a US market index - Jarrad and I agree on preferring a total market, but S&P 500 market is fine too for the bulk of your holdings, then some slice of an international total market (excluding us) fund. Currently I choose 10% for that, but there are many reasons to pick many different allocations. If you're younger and not highly risk adverse, this is all you really need. If you have a high risk adversion, add a slice for a bond index to stabilize. As you approach retirement, you should become more risk adverse, and add some bonds. It doesn't need to be complicated. That will be 1% of all your future earnings. Thanks 😛

[@shaereub4450]

Betterment makes their own portfolio that has: Stock ETFs: VTI, VWO, VEA, VOE, VBR, VTV, & Bond ETFs: STIP, MUB, AGG, BNDX, EMB, VWOB. Is that too diversified for taxable accounts?

[@RespectfullyCurious]

Most of those funds do different things, so there's not a whole lot of overlap. There's just too many people these days that buy multiple funds that do the same thing and have the same stocks in it. It's common to see people with like 5+ dividend funds that do almost the same thing and have basically the same holdings.

[@donbright3340]

Totally TRUE

[@JarradMorrow]

👍🏻

[@justinmercado1185]

Simple funds: Want average returns: invest in sp 500 or total index Want above returns (more risk): invest in growth index Want below returns (less risk): invest in value index

[@mncbabu]

I learned hard way. The best all weather portfolio is VTI -60%, VXUS 15%, BND 25%.

[@JarradMorrow]

👍🏻

[@scottv5813]

I’m trying to figure out a bond fund (I know nothing). Why do you think BND? Returns are ballpark of 0%. Fidelity’s version FXNAX is basically same thing. Wouldn’t it be better to do the example in the video of FAGIX? Even if expense is .67% the returns are around 5%.

[@davidbrooks8809]

I don't like bonds

[@xristossampanis8291]

I have 6 etfs. The first is VOO. i have 1 global and 1 us dividend etf. I have 1 europe etf. I have jets and i bought a banking etf a month ago after the crisis incident. I do not think that i have too many.

[@JarradMorrow]

okay

[@mattball2700]

That's a lot of food to waste! :-0

[@alex182618]

Statistically most people who invest without financial advisor don't get any results. Paying 1+% maintenance is still better than falling for Bitcoin, or jumping in and out of biotech stocks. Any robo or human advisor still keeps people invested in a more or less decent portfolio.

[@Drumax0]

I really enjoy more articles based on facts like the article at 13:00 hope we can get more of that, thank you!

[@cestjane2260]

I enjoy learning about all this stuff, so I don’t mind putting a little time. I know we’re “investing,” but it still feels like gambling, but with better returns.

[@JarradMorrow]

Putting in more time doesn't automatically guarantee you're going to get "better returns". This is where average investors get it wrong. Most of them end up underperforming the market.

[@cestjane2260]

@@JarradMorrow Thanks! I agree with you. I’m not an emotional investor, but I like, AND ENJOY, putting in my due diligence before investing. I’ve been watching your channel, as well as a few others, for information, advice and strategies. I’m learning lots! Thanks for everything!

[@JarradMorrow]

Of course you're an emotional investor (not a knock on you personally)! We're all human so we're all 100% emotional investors whether we like to admit it or not. Human nature is way more powerful than any of us. Just make sure you take that into account when deciding how you invest your money so you can hopefully prevent yourself from making a mistake. I've talked to quite a few people who have lost 10's of thousands of dollars over the past couple of years because they invested based on emotion and followed stock picking KZbin channels into certain investments. Be careful out there 👍🏻

[@denissemedina4619]

Why would I invest on what’s harming others? I don’t eat junk food so why would I invest in it? Sounds very unethical to me

[@JarradMorrow]

You should do what you want with your money.

[@JohnDoe-q7k1g]

I enjoy managing my portfolio. Making $15 an hour doing it is a whole lot more profitable than going skiing which would end up costing me $25 an hour. I enjoy doing both, yet....

[@JarradMorrow]

😂

[@anthonyjames4319]

Can you do a video on building a portfolio on quarterly dividend paying ETFs that cover every month?

[@JarradMorrow]

Negative. I don't focus on dividends when investing so I'm not your guy for that info

[@anthonyjames4319]

@@JarradMorrow fair enough. Thanks for the reply.

[@shaereub4450]

I have a 100% stock portfolio for retirement: VTI, VWO, VEA KOMP. I also have a 70/30 stock/bond taxable account for a goal 8 years away).

[@johnbrown1851]

I like your point about the fiduciary that charges a fee for one time or hourly consulting. Paying recurring one percent is a lot when you think about it compounding.

[@jed638]

Jarrad. Love your enthusiasm, knowledge, sense of humor, and of course Molly. I've been watching your videos for the last few months and have learned a lot. Taking your advice on doing the HSA at work for the first time next year, at the ripe old age of 62, wish I had known more about them years ago, better late than never. Current dilemma, where this video struck home, is mutual funds/stocks/bonds I inherited from my father last August, who naturally, had all of his investments with Edward Jones. Yippee. I was told, by my new advisor, whether true or not, that I needed to open an Edward Jones account to have dad's $$ transferred from his accounts to my new accounts. So here we are, I have two accounts, one is Trad IRA and the other is what they call a Single Select Account, with all of dads mutual funds/stocks/bonds that they/he selected. American Funds and Bridge Builder are the two funds I seem to have the most of, there are many others. I have work 401K through Vanguard and have recently gotten out of the Target 2030 fund and into the only low cost Vanguard fund they had, VINIX, that follows the S&P 500. I am now putting all $$ into Roth 401K, for about the last 6 years, previous was traditional 401K. I also have a Trad IRA and Roth IRA with Fidelity, currently maxing out Roth IRA into the 3 mutual funds you recommended ,and adding to Traditional IRA with my new Visa Signature Rewards card, using the same 3 mutual funds. My advisor seems nice enough, but I'm not in this to pay for his new car. Everything about their fee structures is like digging for gold, their monthly statements don't give you a clue what they're charging you. Any chance you could cover methods of getting out of an Edward Jones or similar type of financial advisor fee based account(s) to keep the costs down and not pay penalties or capitol gains? I'd be happy to transfer to Fidelity. I'm still learning the jargon like capitol gains that I didn't have to contend with, with my Mutual Funds, so a lot of this has my head spinning with confusion. Thanks for all you do, keep up the good work. John

[@malcolmjames1161]

You can transfer your assets for a fee to a different broker. You don't have to sell them in most cases. Most brokers carry the same mutual funds. However, speak to a fidelity advisor or fidelity rep first. I'm under 20 and I use them because of their low fee structures and many financial advisors are turned off by my age.