I have a confession that will surprise nobody who has listened to me talk about money for more than four minutes: my portfolio is a mess. It’s a profitable mess and a well-tracked mess, but it’s a mess. Lately I’ve come around to the idea that it’s time to simplify your portfolio. By “your” I mean mine. (I also probably mean yours.)
Here’s the inventory. We have investments at Fidelity, Vanguard, Schwab and Robinhood. (Robinhood made the list because they offered us a percentage of our portfolio to move money over, and I’ve never met free money I didn’t want.) We’ve also had accounts at Interactive Brokers and E*Trade over the years. That’s six brokerages, six logins and six sets of security questions asking for the name of a childhood pet I invented with I was six with some ridiculous name that I hope I’m spelling right each time I enter it.
And that’s only the stuff with a ticker symbol. We also own pieces of real estate syndications, shares in pre-IPO companies, stakes in local small businesses and a handful of mortgage notes. None of those show up neatly on a brokerage statement. Several of them communicate exclusively through email whenever they feel like it.
For years, checking on everything meant logging into all of those sites one at a time. Then I connected my accounts in Monarch, and now I can see the whole picture in one place. That’s lovely. But seeing a complicated thing on one screen doesn’t make it less complicated. It makes it a complicated thing with better lighting.
Here’s the part that’s hard for a card-carrying money nerd to say out loud: I have the time to track all of this. I just don’t want to anymore.
The Sentence That Rearranged My Brain
We recently recorded an episode with a guest named Mike, and he made a point I haven’t been able to shake.
In most couples, one person is the money person. The money person tends to build a portfolio that they can handle. But they’re handling it at their best, when they’ve built it from the ground up and know where everything is. It can be a full-time job for them to manage at their best. What you need to build instead is a portfolio your partner, the one who is not the money person, can manage at their worst.
Picture both halves of that. You at your best: rested, caffeinated, spreadsheet open, feeling mildly smug about your asset allocation. Your partner at their worst: grieving, exhausted, fielding phone calls and casseroles, and being asked by a stranger on a customer service line for an account number they’ve never seen in their life.
Then Mike told us about a relative who lost a spouse unexpectedly, and how difficult it was just to find the money. Forget managing it or optimizing it. The first problem was locating it. Which institutions? Which accounts? What did they own, and who do you even call to ask?
Nobody in this story did anything wrong. Someone spent a lifetime building savings and fully intended to explain it all someday. Someday just didn’t show up on schedule.
I sat there doing the math on my own household. Six brokerages, past and present. Syndications. Notes. Small businesses where the investor portal is a text thread with the owner. If my family had to reconstruct all of that without me in the room, how long would it take? Would they find everything? I’d like to say yes. I’m not sure I’d bet a mortgage note on it.
That’s the best reason I’ve ever heard to simplify your portfolio. Returns have very little to do with it. The person who inherits your login screen has everything to do with it.
Complexity Is a Hobby, Not a Strategy
Nobody sets out to build a financial junk drawer. Complexity sneaks in one perfectly defensible decision at a time.
There’s the old 401(k) you never rolled over. The brokerage you opened for a sign-up bonus. The deal a friend brought you that sounded interesting. The “small position” you took in something so you’d pay attention to it. Each choice made sense on the day you made it. None of them was made while asking, “Who has to deal with this if I’m not here?”
Those of us in the FI community are especially prone to this, because we like this stuff. We read the fine print for fun. We have opinions about expense ratios. Give us a free Saturday and a new account type and we’re happy as clams. The urge to simplify your portfolio never shows up on its own.
But be honest about what the complexity has bought you. For many in the FI Community, plain old index funds did the heavy lifting, and the exotic stuff mostly supplied the stories and the extra tax forms.
There’s nothing wrong with investing as a hobby. I’ve enjoyed mine. But a hobby has an audience of one. It’s like the elaborate model train layout in the basement: magnificent, lovingly built, and nobody else in the house has any idea how to run it.
The 20-Year-Old With the Enviably Blank Slate
At BPCon, I had an excellent conversation with a young man who is 20 years old and has no real education in investing. His employer recognized his drive and brought him to the conference, which tells you something good about him and something very good about his employer.
Talking with him, it hit me that he has something I don’t: nothing to untangle. No orphaned accounts. No mystery K-1s. No six logins. He gets to start simple and then stay simple on purpose. And during the course of our conversation, I told him this.
Nobody starting from zero looks at a setup like mine and says, “Yes, that one. I’d like half a dozen brokerages and a filing cabinet, please.” The advice we’d give any beginner is to pick one brokerage, buy low-cost broad index funds, automate the contributions and go live your life.
The portfolio you’d design for a 20-year-old beginner and the portfolio you’d design for a grieving spouse turn out to be nearly the same portfolio. Both need to work without expertise. Both need to survive being ignored. If you simplify your portfolio to the point that a smart beginner could run it, you’ve also built one your partner can run on the worst day of their life.
How to Simplify Your Portfolio Without Blowing It Up
You can’t fix this in a weekend, and you shouldn’t try. Some of it is easy, some of it has tax consequences and some of it simply takes years. Here’s the order I’d tackle it in.
Count your logins. Write down every institution where you have money. All of them, including the old HSA and the account with $212 in it. If the list is longer than your grocery list, that’s useful information.
Consolidate your brokerages. Most brokerages can pull an account over from another firm as an in-kind transfer. Your investments move as they are, nothing gets sold, and the move itself doesn’t create a tax bill. You start the process at the firm you’re moving to, and they’re delighted to help. Two cautions: if you took a transfer bonus, read the fine print, because those offers usually require you to leave the money there for a set period. And some funds that are proprietary to one firm won’t transfer in kind, so ask before you move.
Collapse your holdings where it’s free. Inside an IRA, 401(k) or other tax-advantaged account, you can sell 11 overlapping funds and buy one or two broad ones without owing a dime in taxes. Do that first.
Go slowly in taxable accounts. Selling appreciated investments in a regular brokerage account means capital gains taxes, and “tidiness” is an expensive reason to write the IRS a check. Instead, turn off dividend reinvestment on the stragglers, send all new money to your core funds, and sell the positions with losses or small gains first. If you have a low-income year, the 0% long-term capital gains bracket can do some of the cleanup for you. Talk to your tax pro before you sell anything large.
Put the illiquid stuff on a run-off plan. You can’t sell a syndication, a private company stake or a mortgage note with one click. What you can do is stop adding new ones. Let the existing deals mature, pay off or exit, and send the proceeds to the simple pile. This is the hardest step for me, because I love an interesting deal. But every yes today is a homework assignment for someone else later.
Check your beneficiaries. Retirement accounts let you name beneficiaries, and most brokerages offer a transfer on death designation for taxable accounts. Those forms generally override whatever your will says. If you filled yours out in 2009, go look at it. You may be surprised by who’s on there.
Write the “Where the Money Is” Letter
Even after you simplify your portfolio, your partner needs a map. Write one document, two or three pages at most, that covers:
- Every account: the institution, the type of account and what it’s for
- How to get in: where the password manager lives and how emergency access works (don’t put the passwords themselves in the letter)
- The illiquid investments: what each one is, who the contact person is, where the paperwork lives and when it’s expected to pay out
- The people: your CPA, your attorney, your insurance agent and anyone else who already knows your situation
- The cash flow: which bills are on autopay, which account they come from and where income lands
- What to do first, and what not to do
That last item matters more than you’d think. Mine will say something like: “Nothing here is on fire. Don’t sell anything for the first several months. Anyone who calls with an urgent investment opportunity may be hung up on with my blessing.”
Then run a fire drill. Once a year, hand your partner the letter and sit on your hands. Can they log in? Can they find the balances? Can they figure out how the mortgage gets paid? Every place they get stuck is a bug in your system, not a flaw in your partner. Fix the letter and try again.
While you’re at it, introduce your partner to the people on the list. A phone call from a stranger is hard. A phone call from “the CPA we had lunch with last spring” is a lot easier.
And if you’re single, none of this lets you off the hook. Somebody will be your executor someday. Your sister deserves a map, too.
What “Manage at Their Worst” Looks Like
Here’s the test you should be using. Could my partner, in the worst week of their life and with zero interest in asset allocation, keep the household running and leave the investments alone for a year without anything breaking?
A portfolio that passes looks something like this:
- One or two institutions, not six
- A handful of broad, low-cost funds
- Bills on autopay from a single checking account
- Enough cash in a place they know how to reach
- One short letter and the names of two people to call
When you simplify your portfolio, optimal stops being the goal. I know that stings. We’re optimizers by nature, and consolidating might cost a fraction of a % in theoretical returns or a transfer bonus here and there.
But run the comparison. An account earning 12% that nobody can find is earning your family 0%. Simple and found beats brilliant and lost every time.
My Own To-Do List
I’m not writing this from the finish line. I’m writing it from the starting blocks, holding a list of six brokerages.
So here’s my plan. Fewer institutions. I’m not entirely unhappy with our asset allocation, but I don’t like that we’re in multiple places. While I can figure this out, my daughters will not be able to unwind all this stuff without a LOT of help. (Luckily, they know who to go to for the help.)
Your plan might look differently. Fewer institutions but also fewer funds. No new shiny deals just because they’re interesting. One letter, one annual fire drill and one very patient conversation at the kitchen table.
You built a portfolio you can manage at your best. Carl and I did too, and we’re proud of it. Now it’s time to simplify your portfolio for the person you love at their worst.
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