Our Philosophy
Simplicity is Sophistication
Welcome to The Anti Advisor, where we strip away the unnecessary complexity that has plagued the investment industry for decades. We believe that Wall Street's tendency to over-complicate investing isn't just confusing – it is harmful to your wealth.
In a world where financial advisors craft portfolios that would make Leonardo da Vinci's notebooks look straightforward, we are taking a stance: complexity is nothing more than a justification for higher fees.
Why a Simple Strategy is All That is Needed
Think about this: Would you rather have a watch with a thousand moving parts or one with just ten? Which is more likely to break down? Which costs more to maintain? Investment portfolios are no different.
Our philosophy is built on three pillars of wisdom:
Simplification isn't sacrifice - By focusing on simplicity, we capture the essence of market returns without the bloat
Cost efficiency is wealth efficiency - Every dollar saved in fees is a dollar that compounds for your future
Transparency breeds trust - When you can understand every component of your portfolio, you make better decisions
The beauty of our three-fund approach lies in its simplicity:
A growth engine
A stabilizer
A safety net
This isn't just minimalism for minimalism's sake. It's about understanding that complexity serves as a smokescreen for higher fees, hidden risks, and under-performance.
Remember: Sophistication is not about adding layers – it is about stripping away everything that isn't essential.
Simplicity is the ultimate sophistication.
- Leonardo da Vinci
See how we put our philosophy into action on our Case Studies page.
The Power of Less: A Case Study in Portfolio Efficiency
Understanding the Visual Evidence
1. Portfolio Allocations: Clarity vs. Complexity
The allocation table below visually demonstrates the contrast in complexity between the two approaches: A Simple Portfolio vs a Complex ETF portfolio from an advisor.
The three-fund portfolio has just three strategic positions:
VOO (60%): Core market exposure
AGG (35%): Fixed income stability
BIL (5%): Cash equivalent safety
Meanwhile, the ten-fund portfolio fragments these same exposures (60/35/5) across multiple vehicles, introducing unnecessary complexity and inefficiencies:
Market Exposure (60%):
VOO (25%): Large Cap
IJH(10%): Mid Cap
IWM (10%): Small Cap
VNQ (5%): Real Estate
GSG (5%): Commodities
EEM(2.5%): Emerging Markets
VEA (2.5%): Developed International
Fixed Income (35%):
AGG (20%): US Aggregate Bond
IEF (15%): 7-10 Year Treasury Bond
Cash (5%):
BIL (5%): 1-3 Month T-Bill
NOTE: Not all advisors use the 10 fund approach above, but they do use somewhat similar approaches with mutual funds and other investment vehicles to balance their allocations to bonds and equities.
These tables provide the foundation for our subsequent detailed analysis, showing that the superior three-fund approach isn't just theoretical – it is demonstrated by real-world performance data over an extended period.
2. Total Portfolio Returns of $100,000 (2010-2024)
The $100,000 returns graph spans 15 years and tells a compelling story of outperformance. The three-fund portfolio (pink line) demonstrates remarkable resilience and superior growth compared to the ten-fund portfolio (navy line), with the divergence becoming pronounced after 2015. This separation illustrates a crucial point: complexity doesn't enhance returns – it often detracts from them.
Key observations:
Three-Fund Portfolio: Grew to approximately $365,000
Ten-Fund Portfolio: Grew to approximately $300,000
Outperformance: ~$65,000
Wider performance gap during market stress periods
More robust recovery patterns after downturns
3. Yearly Portfolio Returns (2010-2024)
The data supports the principle that simpler portfolio construction has delivered superior returns compared to the more complex Ten-Fund approach over this extended period.
Notable Performance Patterns:
Consistency: Three-Fund portfolio outperformed in 11 out of 15 years
Volatility Management: Lower drawdowns during most market stress events
Recovery Efficiency: Quicker rebounds after market corrections
Key Performance Metrics:
Best Years
Three-Fund: 2019 (21.63%)
Ten-Fund: 2019 (20.93%)
Most Challenging Years
Three-Fund: 2022 (-15.15%)
Ten-Fund: 2022 (-14.46%)
Recovery Periods
2020 COVID Crash:
Three-Fund: 14.28% recovery
Ten-Fund: 10.61% recovery
2022 Market Downturn:
Three-Fund: Strong 17.73% rebound in 2023
Ten-Fund: Moderate 13.72% rebound in 2023
4. Rolling Volatility Comparison (2010-2024)
The rolling 21-day annualized volatility chart reveals something remarkable: our simpler portfolio achieves its returns without taking on additional risk. In fact, it exhibits lower volatility than its more complex counterpart. The dramatic spike in 2020 shows both portfolios responding to extreme market stress, demonstrating that complexity offered no special protection during crisis periods.
Notable features:
Similar volatility patterns in normal markets
Three-fund portfolio shows more contained volatility spikes
No evidence that additional complexity reduces risk
Cleaner risk profile in recent years
5. Portfolio Metrics: The Numbers Don't Lie
The metrics table provides quantitative validation of our simplicity thesis. Each key metric favors the three-fund approach:
Higher annualized returns (9.72% vs 8.11%)
Annualized Return: How much money made per year on average
Lower overall volatility (10.30% vs 11.80%)
Volatility (Risk): Price swings of the portfolio up and down
Lower annual downside risk (VaR: -$15,209 vs -$18,424)
VaR: Maximum expected loss in any given normal year
Better annual tail risk protection (CVaR: -$30,549 vs -$43,586)
CvaR: Average loss during worst market scenarios
Key Performance Metrics
Looking at the data from our analysis, the three-fund portfolio demonstrates superior characteristics across multiple dimensions:
Higher Returns: 9.72% vs 8.11% (annual)
Lower Volatility: 10.30% vs 11.80% (annual)
Better Risk-Adjusted Performance
Reduced Complexity Risk
Lower Total Cost of Ownership
The Hidden Cost Advantage
Let us break down the real impact of costs using a $100,000 portfolio:
Three-Fund Portfolio
Average ETF expense ratio: ~0.05%
Annual cost: $50
Trading costs: Minimal (3 positions to rebalance)
Time cost: ~1 hour per year for rebalancing
Advisor fee: $0 (self-managed)
Ten-Fund Portfolio
Average ETF expense ratio: ~0.15%
Annual cost: $150
Trading costs: Higher (10 positions to rebalance)
Time cost: ~3-4 hours per year for rebalancing
Advisor fee: 1% ($1,000 on $100,000)
Total annual cost: $1,150
Advisor Fee Impact:
1% may seem small, but it is typically charged on the total portfolio value
As your portfolio grows, so does the dollar amount of the fee to advisors
Year 1: $100,000 → $1,000 yearly fee
Year 15: $500,000 → $5,000 yearly fee
The fee is charged regardless of portfolio performance
Represents a significant drag on long-term returns
30-Year Impact (Assuming 9.72% vs 7.11% returns after 1% advisor fees):
Three-Fund Portfolio: $100,000 → $1,583,974
Ten-Fund Portfolio: $100,000 → $789,072
Difference: $794,902
Why Less is More: A Deeper Look
1. Reduced Overlap
- The ten-fund portfolio includes multiple equity funds (VOO, IWM, IJH) that often hold overlapping positions with similar correlations
- This creates an illusion of diversification while actually increasing costs
2. Clearer Risk Management
- The three-fund approach makes it easier to understand and adjust your risk exposure
- Simple 60/35/5 allocation provides clear lines of defense in market downturns
3. Behavioral Advantages
- Fewer opportunities for performance chasing
- Reduced tendency to overtrade
- Clearer decision-making during market stress
4. Tax Efficiency
- Fewer positions mean fewer taxable events
- Simpler tax loss harvesting when needed
- More straightforward cost basis tracking
The Compounding Effect of Simplicity
The three-fund portfolio's 2.53% annual outperformance (9.72% - 7.11%) compounds dramatically over time:
5 years: +13.3% additional wealth
10 years: +28.5% additional wealth
20 years: +65.7% additional wealth
30 years: +100.7% additional wealth
This outperformance becomes even more pronounced when factoring in the lower costs and reduced drag from unnecessary complexity.
Conclusion
The three-fund portfolio isn't just simpler – it's better. The combination of higher returns, lower volatility, and reduced costs creates a powerful engine for long-term wealth creation.
Simplicity is the master key to financial success.
- Jack Bogle
Remember: Complex portfolios often exist to justify higher fees, not to deliver better returns. The three-fund portfolio proves that you can achieve more by doing less.