Reply to Am I overpaying my financial advisor?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]
Is there any decent reason as to why my FA would put us in all of these different index funds (the ones I listed way up thread) instead of just one or two strong performing ones? [/quote]

Diversification. Notice a bunch of people in this thread have said just put it in VTI or VTSAX and that's all you need to do. Those funds represent the total US stock market.

But... is that all you want to be exposed to? Companies in India and China saw rapid gains in the last 10 years. European stocks provide a level of stability in some times when the US markets take a dive (for example, related to US elections of inability to keep the government funded).

Then, when markets go down, do you want to take the ride the entire way down, or would you like it cushioned by holding some funds that are more stable in recessionary times, like bond funds?

Put another way, let's say you picked 1 tech stock and that was your portfolio. You wouldn't want to put all your eggs in that basket, as now you're tied to one company. So let's say you instead by 10 different tech stocks. Better, but now if the tech sector has a downturn, you're going down with it, so you diversify more into other sectors. Then you end up at the entire US market, which is what VTI/VTSAX represent. Great, but do you want to stop there, or go further in your diversification to other markets geographically, as well as adding on a bit higher proportion in certain industries, perhaps those that do better in downturns?

[/quote]

There's no reason to have more than a 3-fund strategy.  Yes, you can throw around a lot of scare tactics.  But there's no reason to buy separate funds to get total US market exposure. [/quote]

Yup, or a total international fund for the international exposure. As you said, more than 3 funds (domestic stock, international stock, bond) is unnecessary and not really diversifying, just clumping the peanut butter in spots on the bread instead of spreading it evenly.[/quote]

Most of the advice on this thread has been to just buy a US stock index fund. Why ignore other markets (abroad)?[/quote]

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