“A Complex Portfolio, a Modest Account”
Question:
If someone has a relatively small IRA—say, around $54,000—do they need to be as diversified as someone managing a much larger retirement portfolio?
Here’s what prompted the question.
My neighbor recently lost his wife. She had taken the lead on their finances, working closely with an advisor at a national investment firm. Now he’s on his own, trying to navigate retirement decisions without much guidance.
I tried to help by simply asking questions—not giving advice.
Me: “What are you invested in?”
Him: “Morgan Stanley.”
Me: “Right—but what are the actual investments? Stocks, mutual funds, ETFs?”
Him: “What’s an ETF?”
That opened the door to a good conversation. We looked through his IRA together. It’s worth about $54,000, and is split between 4 individual stocks, 3 ETFs, and 3 mutual funds, plus a little cash.
At first glance, it looked diversified. But as we went through the holdings, I noticed something: a lot of overlap. Several of the funds and stocks owned similar large-cap, dividend-paying companies. He was holding different wrappers of essentially the same thing.
To me, it seemed unnecessarily complex for a portfolio of that size. It didn’t add much diversification, and it made the portfolio harder for him to understand—especially now that he’s managing things alone.
So here’s my question to the HumbleDollar community:
Does a small IRA really benefit from that level of diversification—or is it more helpful to keep things simple and clear?
If someone has a relatively small IRA—say, around $54,000—do they need to be as diversified as someone managing a much larger retirement portfolio?
Here’s what prompted the question.
My neighbor recently lost his wife. She had taken the lead on their finances, working closely with an advisor at a national investment firm. Now he’s on his own, trying to navigate retirement decisions without much guidance.
I tried to help by simply asking questions—not giving advice.
Me: “What are you invested in?”
Him: “Morgan Stanley.”
Me: “Right—but what are the actual investments? Stocks, mutual funds, ETFs?”
Him: “What’s an ETF?”
That opened the door to a good conversation. We looked through his IRA together. It’s worth about $54,000, and is split between 4 individual stocks, 3 ETFs, and 3 mutual funds, plus a little cash.
At first glance, it looked diversified. But as we went through the holdings, I noticed something: a lot of overlap. Several of the funds and stocks owned similar large-cap, dividend-paying companies. He was holding different wrappers of essentially the same thing.
To me, it seemed unnecessarily complex for a portfolio of that size. It didn’t add much diversification, and it made the portfolio harder for him to understand—especially now that he’s managing things alone.
So here’s my question to the HumbleDollar community:
Does a small IRA really benefit from that level of diversification—or is it more helpful to keep things simple and clear?
The post “A Complex Portfolio, a Modest Account” appeared first on HumbleDollar.
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