Is the risk character of your investments compatible with you? If not, it’s a telltale sign that your investment portfolio is seriously flawed.

Frequently, these risk incompatibilities are camouflaged by an uptrending stock market. But when the market reverses and volatility (NYSEARCA:VXX) jumps, the problems of investment portfolios with unsuitable risk levels becomes apparent.

My latest Portfolio Report Card is for PK a 74-year old single retiree living in Colorado. He asked me to analyze and grade his $ 1,756,192 investment account which consists of a taxable trust account and Roth IRA.

PK told me in Oct. 2013 he gave his portfolio to an investment advisor who sold everything and set up the current portfolio. Prior to that he had invested heavily in commodities, gold, and technology, and had not done well.

His Roth IRA has $684,376 while his taxable trust account has a value of $1,071,816 and both accounts are advisor managed.

How does PK’s portfolio do when it comes to cost, risk, diversification, taxes, and performance? Let’s find out.


Reducing investment cost, commissions, and transactions should be a priority for all investors. Why? Because the less you spend, the more you keep. How does PK do?

Some of PK’s holdings like the American Funds Washington Mutual (Nasdaq:WSHFX), American Century Mid-Cap Value (Nasdaq:ACMVX), and American Euro Pacific Growth (Nasdaq:AEGFX) have obscured 12b-1 fees that get funneled to his advisor. Yet, this same advisor is collecting another 0.85% on top of the 12b-1 fees. Talk about double dipping!

Overall, PK’s portfolio holds 33 mutual funds in the taxable trust account and 26 mutual funds in the Roth IRA. The asset weighted annual fund expenses are 0.71% plus another 0.85% for advisor fees which pushes the portfolio’s annual expenses to 1.66%.

The cost of PK’s portfolio is eight-times higher versus a blended benchmark of index ETFs matching PK’s asset mix.

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