Good advice there, 3% just seems a little low for the diversified portfolio. Anyway early thirties, a good job, 2 mil in the bank plus a profitable system for 25% of that money, that's a pretty good place to be, probably several options would work out fine (but sure as mentioned before, if you can avoid it, don't park your savings in a fragile institution)
The point is that preservation of capital is key ! If you are building a diversified portfolio with preservation of capital at the core, then you seriously cannot expect to get more than 3–5% income. Any more than that and its highly likely you're taking stupid risks and don't really have preservation of capital in mind. As I said earlier, don't be greedy. $1.5m is a respectable sum, and your number one priority should be preserving it as a comfortable cushion for a rainy-day.... not wasting it on booze, cars, women and risky trading endeavours. Generate low-risk income off the $1.5m and play with that instead.
As a quant I trust you are well aware that your 11 diversified streams of return may turn out to be very highly correlated in adverse market conditions... (not saying a 'standard' stocks / bonds portfolio is a perfect solution btw.). I just wanted to highlight this risk for less sophisticated investors who, as per the opening post, may be looking to invest a large part (if not all) of their liquid assets.
With the kind of money you have, you can invest in Silicon Valley tech companies pre-ipo. It's a 20,000 minimum. Investing like this puts you in the hedge fund playing field.
Yes, fine with your numbers, 4% is often advanced by institutions as the return one can expect on a low risk portfolio, I'm looking for a little more (not significantly more but every half/single percent matters once it's compounded over many years) than that in a long term growth portfolio but with a significant part of the portfolio in volatile emerging markets equities. If looking for a 3 or 4% return and low volatility, it might be a good bet to invest the money through specialised hedge funds, it would save as well time to OP, as setting up than rebalancing the portfolio can be time (research ) consuming.
You are right, newcomers usually end up with a concentrated portfolio although it may not seem concentrated until it is. In my case, I doubt that a trader that holds Live Cattle spreads for 3 months ends up correlated to a HFT fixed-income contrarian fund, regardless of what the SPX / global market does. At worst, I expect to experience a higher volatility in my daily returns as some managers are trading gold/oil/financials, but most of them adjust their risk profile to the volatility of the market anyway.
Besides OP is 31 according to his profile, he can also opt for a more risky growth portfolio if he is not about to panic during drawdowns. I'm a little past that age (and that amount of savings) but in his position I would probably hold a riskier portfolio than I do now.
3% is the income (dividend, bond coupons) not the total return. If you're mostly living off this portfolio you shouldn't be touching any capital increase. Yes you can get a slightly higher income than this without harming your diversification, but again it's wise to build in a margin of safety. Those of use who live almost entirely off trading and investment income have to be a lot more cautious about our return expectations than people who are still working... GAT
Usually your broker (e.g. @Robert Morse) has a list of CTAs or funds that offer managed accounts with their brokerage firm and that's a good start. Another good place is a CTA database such as IASG.com, RCM Alternatives, etc. Most of these database offer you a portfolio construction service ( which I highly DON'T advise ! they charge a lot for it in hidden execution fees, but it costs nothing to register and browse ). You can have a somewhat diversified portfolio with 1m$ of cash, even maybe 500k - 700k. As Robert mentioned, the minimum is usually around 500k - 1m$, but you can often partially fund it (e.g. a manager with a max drawdown target of 10% on a 500k minimum will trade your account with only 50k of cash) and in most cases you can do a master-allocation account where you have 1 account with your margin and give power of attorney to the traders/managers on a sub-account with no money on it, this way you can cumulate margins easily.
This is why he shouldn't stop working in his high paying soul crushing job. He can turn 2mm into 100mm (pv dollars) by the end of his career if he doesn't spend any of it