Here we are,  already at mid-year, a short 9 days from the official start of summer. I have been "awake" for 8 months, anchored mostly at home in pandemic associated isolation. Since being vaccinated in April, I am increasingly getting out in public and I've been engaged along several fronts in preparing to re-enter the public square. I have been paying more specific attention to retirement assets, due to my need to occupy my time, my lower overall income and a re-emergence of my interest in investing as a topic of interest now that I'm not working at a day job. So, I'm considering the possibility of returning to self-management of my IRAs. Why would I do this, having split our assets in half and employed two professional money management firms about 2 years ago?  

Several features of professional management don't sit very well with me. First is reliance of funds and funds of funds for diversification. I know this runs against the common wisdom, but even no-load low fee funds bleed off fees, and include low performers within their investment portfolios. I personally think that one can make choices amongst equities based on principal, which can better serve the individual investor's needs, even if the total return may be different (i.e. less) than indexed funds. 

Second, advisor fees. both of my advisors take approximately 1% of assets under management. That's with or without much work. 1% of assets under management is somewhere between 3 and 10% of total return/year. That's not peanuts. Over a few decades, the difference adds up to very substantial differences in overall portfolio performance. 

Third; the asset allocation models, even "aggressive" approaches, includes fixed income classes such as bond index funds, whose performance is currently pretty poor. I think there are alternatives that can provide non-correlated performance to the SP500 or total market index fund returns. In today's environment, holding assets in bonds is about like having a savings account. If inflation increases, interest rates rise and bond prices drop. Bond prices are unlikely to rise much further, as bond interest rates are near zero, so there's barely any upside at all to holding bonds. They are a "hedge against inflation" but don't do much to enhance portfolio performance. 

Fourth, I'm not a fan of harvesting dividends and selectively reinvesting them; perhaps it makes more sense in a fund-based investing scheme, since the investor can't adjust individual holdings weighting, but it tends to obscure the overall performance of pieces of one's asset allocation. When I own individual equities, dividend reinvestment is a decent fraction of an individual holding's performance, and it isn't obscured by purchases made from another holding's dividend payout. I much prefer DRIP investing, which allows me to clearly see total performance of a given holding. An increasing share count is very meaningful when one wants to build a portfolio that can produce enough cash to support distributions in retirement, and DRIP is a really good way to grow a position. Every distribution results in a larger position (number of shares) irrespective of what price is doing. 

 Building cash within a portfolio assists with rebalancing strategies which may or may not be on a quarterly basis, reducing the amount of buying or selling of equities to carry out the rebalancing. Building cash is also helpful if one is living off of distributions. Once one has a portfolio large enough to safely cover living expenses out of total return with some margin of error, precisely matching or beating the market is no longer so important, but it certainly is useful to attempt to continue growing the asset base, i.e. earning more than one is withdrawing. 

 I have some compunction about kicking the advisors to the curb; however I think there must be a compensation scheme that is more performance-based than AUM. Perhaps I should research that topic a bit before taking any major moves away from professional management. After all, I wouldn't expect any of the managers to switch to self-serve surgical care, and I am paid for my work, even if complications occur. I do my best and a portion of the outcome is out of my hands. Likewise the money managers...

I'll be revisiting this topic periodically as the months go along. If I'm successful in defining and executing on my plans for an encore career, the incentive to self-manage retirement assets could easily reverse itself again.