Buffett Roasts Your 57-Stock Portfolio: Why Your ETF Zoo Is a Mess

Well, looking at the sheer number of accounts and tickers you've got going on here, I'd say you have more broker logins than I have hot meals in a week. You are sitting on an unrealized gain of around 24%, which is a fine sight to see, but without a long-term track record against a benchmark, we have to judge your portfolio by its plumbing rather than its paint job.

I always tell folks that investing isn't a game where the guy with the 160 IQ beats the guy with the 130 IQ. It is about temperament, discipline, and keeping things remarkably simple. You have a solid foundation hidden in here, but you've buried it under a mountain of unnecessary activity. It looks like you've got sensible instincts, but somewhere along the line, you got bored and started treating your brokerage accounts like a casino buffet. Let’s open up the books and see what you actually own.

The smartest thing you've done is park over 80% of your money in broad market indexes. Betting on American business is a strategy that has never failed over the long term, and your 93% exposure to North America shows you understand that. Your heavy lifting is being done right where it should be—in those T. Rowe Price and Vanguard funds like your Institutional Index (VIIIX) and Equity-Income (VEIRX). Those are the sturdy engines pulling your train.

But then we look at the rest of the train, and it is dragging a whole lot of unnecessary luggage. You own 57 distinct positions. Your HSA account alone holds 18 different ETFs, with most of them sitting at less than half a percent of your total money. Charlie Munger used to say that diversification is protection against ignorance. What you have here isn't diversification; it is deworsification. You are buying the same underlying companies a dozen different ways and probably paying extra fees to do it.

And then there is your cash reserve. You are holding roughly half a percent in cash. I love cash. Idle money might not earn much, but it gives you the power to act when Mr. Market gets depressed and starts offering wonderful businesses at steep discounts. With your cash this low, you have absolutely no dry powder. If a fat pitch comes across the plate tomorrow, you don’t even have a bat to swing with.

The illusion of safety

You own 57 different positions, but your top three make up a third of your money. The bottom forty positions are doing absolutely nothing for your wealth except making your tax accountant sweat. Holding 0.1% of an S&P 500 Covered Call ETF doesn't protect you from anything; it just clutters your mind.

Watering the weeds

You have a nasty habit of speculating on businesses with zero competitive advantage. Orion Properties is down nearly 90%, and Hippo Holdings is down 85%. When we bought See's Candies back in 1972, we learned exactly what a real brand moat and pricing power were worth. Hippo is no See's Candies. Buying businesses with no moat just because the price has fallen is like trying to catch a falling safe.

Chasing exotic yield

You are holding covered call funds (QYLD, RYLD) and mortgage REITs like Arbor Realty Trust. With long-term Treasury yields sitting pretty around 5% recently, reaching for exotic, high-tax yield in funds with no underlying business growth is a fool's errand. You are trading your upside for a meager monthly check.

Running on empty

Operating with 0.5% in cash leaves you entirely at the mercy of the market. You are fully invested at a time when equity benchmarks are sitting near all-time highs and structural headwinds are blowing. If financial conditions tighten further, you have no flexibility to buy the dip.

6/10

Your saving grace is that the bulk of your money is sitting exactly where it should be: in broad, sensible index funds. The core of this portfolio is sound, but the edges are a tangled mess of speculative bets and redundant ETFs.

Here is what you need to do:

1. Liquidate the speculative losers. Take your lumps on the businesses with no moats and use the capital for something productive.

2. Consolidate your ETF zoo. Pick one or two broad index funds for your HSA and Etrade accounts and sell the tiny fractional slices of sector-specific funds.

3. Stop chasing exotic yield. A growing business that reinvests its capital wisely will compound your wealth far better than a covered call ETF.

4. Build up a cash reserve of at least 5 to 10 percent so you have some dry powder ready for the next market panic.

Remember, a wonderful company at a fair price beats a fair company at a wonderful price. Stop buying fair companies, and start letting your wonderful ones do the work.