A medical professional might have a lot of reasons why they don’t want a financial adviser. Sure, some are only out to take your money, try to regurgitate the same index fund story to you, or might rarely be available to you otherwise. But they can also help you with you plan your financial life, pay off debt, plan for retirement, and come up with the right asset allocation for you.

I got an email from a reader asking if they should have a financial adviser since they only invest in a single fund. This person invests all their money in a total US index fund and in a similar ETF outside of their retirement accounts.

He particularly asked about the asset allocation part of such a single-fund portfolio. Since there is only one fund, what’s the point of worrying about an asset allocation?

Single Fund Investing

I appreciate single fund investing. I’m a minimalist down to preferring a loafer over a shoe with laces. I love simplicity. Single fund investing means holding only a single fund in one’s investment portfolio.

In the case of this reader, he invests all his money in VTSAX or VTI. He is the prototypical single fund investor.

Simplicity might be the main advantage. With a single fund portfolio you wouldn’t have to do any rebalancing of a portfolio. Without the need to rebalance one would think that asset allocation isn’t a factor.

I know a physician who has held all her money in cash since 2008. She’s a high income specialist so she has quite a lot cash. She, too, is a single fund investor; she happens to have chosen US currency as her fund of choice.

Asset Allocation

Your assets include not just the disposable income that you can invest in your retirement accounts – 401k’s, 403b’s, IRA’s. You can also invest your assets in a private brokerage or in real estate.

You can hold cash in your savings or checking account as you have to do in the case of an emergency fund. You might also have money tied up in a pension, or cash balance plan.

Cash Holdings

I don’t have any physical cash currently and if I did I wouldn’t tell you thieving bastards – don’t wanna get robbed by a urologist in the middle of the night. I have a lot of cash in my checking and savings account, however.

Most of this is for my emergency fund. The rest is my buffer fund for my savings account. I have a buffer fund that I use to plan out my spending using my YNAB budgeting software.

I also have cash-equivalent holdings. My cash balance plan is just such an example. It grows at a fixed, nominal 4% a year or about 1% real rate, aka, effective rate. The real rate is after we deduct inflation, for example.

Real Estate

Some of us have equity in our home. I don’t believe that a primary residence is an investment but its equity is an asset. It’s a real estate asset.

Others have real estate investments in the form of REIT’s or rental income properties. A few of my friends invest aggressively in real estate crowdfunding.

I had to exchange a few more emails with my reader to tease some of this out. He has a pension, real estate, and he does have a healthy bit of cash on the sidelines.

His asset allocation allocation certainly isn’t the 100% equities he assumes it is.

His entire financial profile is not represented by a single fund. His asset classes are diverse, including cash, real estate, and securities.

Adjusting Asset Allocation

Could a person let their asset allocation stay the same over their entire lifetime? Sure.

However, the potential volatility of such a portfolio might be too high for steady returns. Or the volatility might be so low that the returns are sacrificed.

A 100% equities portfolio made up of stock index funds might be great when you’re 35 years old. But at the age of 63 the investor may not want to experience 40% portfolio swings.

Beyond the scope of this post, one could oversave for retirement and not have to worry about such wild fluctuations. I’m not a fan of oversaving, or condoms – both wise and prudent but inefficient.

Most investors never adjust their asset allocation as they get older. That sexy portfolio that has been growing year after year is now an unstable bomb during their retirement years.

I recall a nurse in her mid-60’s who returned to work as an RN in 2009 because her retirement portfolio was no longer supporting her household expenses. I didn’t know shit about investing at the time but I assume she had never adjusted her asset allocation towards a more conservative portfolio.

My financial adviser and I have set 2 different asset allocations for my taxable and tax-deferred accounts. We both agreed that the asset allocations might change as I get older. But they are fairly conservative at 70%/30% and 80%/20%.

Consider All Your Assets

Invariably, when the next market crash lands on us, many investors will panic and sell out of their securities investments. This will drive down the price of these index funds which means I’ll get a better deal when I continue to invest in them.

Selfishly, I’m all for the general public not having a financial adviser but this blog is to educate and empower my medical professional colleagues. I wish we didn’t need lawyers, financial advisers, and roofers. But there are some things best left to professionals.

Few physicians will have a true 100% stock portfolio. It’s important to consider all the different assets you own and make a plan for each asset class.