When more investments means less clarity
Keep things simple when it comes to your portfolio
Last month, a woman in her late-60s sent me her Fidelity statements to review.
She has $3.7 million.
She’d worked with the same advisor for several years.
On paper, everything looked fine.
Then I started counting.
Forty-nine different investments.
Different mutual funds, ETFs, and individual stocks scattered across her accounts.
Her weighted average fund expense was over 0.48%—nearly five times what I use for clients.
And because many of her holdings were actively managed funds, she was getting hit with taxable capital gains distributions most years.
Even though she was a long-term investor.
When I asked her to explain her portfolio strategy, she paused.
“I think I’m diversified?” she said.
“My advisor says I have exposure to everything.”
She did have exposure to everything.
She also had seven different funds that all owned Apple, Microsoft, Amazon and more.
She was paying for diversification and getting a lot of overlap. Not a very efficient portfolio.
Her investments had no clear connection to how they funded her life.
Here’s the idea: your portfolio isn’t a recipe if you’re just throwing ingredients into a pot and hoping it tastes good.
A good recipe has a purpose
When you follow a recipe, every ingredient has a reason to be there.
The measurements matter.
The order matters.
And the result is something you can taste, enjoy, and make again.
Your investment portfolio should work the same way.
Each holding should serve a clear purpose in your overall financial plan.
You should know why you own what you own, how it fits together, and what it’s designed to help you do—whether that’s funding monthly income in retirement, managing taxes, or leaving a legacy.
The woman with 49 investments didn’t have a recipe.
She had a crock-pot full of random ingredients.
Some were expensive.
Some were duplicates.
And nobody—including her advisor, it seems—could clearly explain how they worked together to support her retirement.
The cost of complexity
More investments don’t mean better results.
In fact, they usually mean the opposite.
Here’s what complexity often creates:
Higher fees. The more funds you own—especially actively managed ones—the more you pay. Small percentages add up. Over 20 years, a 0.48% expense ratio on a $3 million portfolio costs you roughly $300,000 more than a 0.10% portfolio, assuming similar returns.
Higher taxes. Actively managed mutual funds tend to generate capital gains distributions, even if you never sell a share. That creates a tax bill you didn’t plan for. Meanwhile, low-cost index ETFs are far more tax-efficient because they rarely distribute gains.
Lower clarity. When you own 40+ investments, it’s nearly impossible to understand what you actually own or how your portfolio is positioned. You can’t explain it to your spouse. You can’t make informed decisions. And when markets move, you’re guessing instead of adjusting with confidence.
The real risk isn’t market volatility.
It’s that your focus stays on managing investments instead of using your money to live the life you’ve worked so hard to build.
What to do next
If you’re wondering whether your portfolio is a recipe or a random grab-bag of ingredients, here are a few steps you can take:
Count your holdings. Pull your most recent statement for every investment account you own. Count how many unique investments you hold across all your accounts. There’s no reason to own more than five. I use three.
Check your costs. Look up the weighted average expense ratio of all your holdings, or ask your advisor to calculate it for you. The total investment cost for the portfolios I manage is less than 0.10%. If you’re paying significantly more, ask why.
Review your tax efficiency. Look at the Morningstar Tax Cost Ratio for each mutual fund or ETF you own. This tells you how much taxes are eating into your returns each year. Lower is better.
Ask your advisor a simple question. “Do you own the same investments you’ve recommended to me? If not, why?” The answer will tell you a lot. I own the same investments I recommend to my clients.
Zoom out. Think about how much of your financial life revolves around your investment portfolio versus the bigger picture—your spending plan, your tax strategy, your insurance coverage, your estate plan. If most of your conversations with your advisor are about performance and almost none are about how your money supports your life, something’s off.
Bottom line
Your portfolio should be simple, clear, and connected to your plan.
And your life.
You deserve to understand what you own, why you own it, and how it helps you live the life you want—without unnecessary fees, taxes, or complexity.
Want a second opinion? Let’s talk.
I appreciate your continued readership.
Please let me know if you have any feedback or suggestions for future essays.
Until next Wednesday,
Russ
Great post on a situation, unfortunately, seen far too often. As Rick Ferri says, "Complexity is job security." The "less is more" message is one more plan sponsors should follow