comments on my Plan?

[LOL!]

You are getting there, but I still do not think it's the best way to go.

There is no reason to have VNJTX whatsoever because you have more room for fixed income in your Fidelity IRA. The Fidelity 4-in-1 index fund has stocks and bonds, so you do not want it in taxable, but you also have enough money to buy the individual index funds yourself. The 4-in-1 overlaps the FBIDX as well. Thus, there is no reason to even own it. The Fidelity Growth fund is weird. It's not an index fund and there is no reason to own it as well. It distorts your 9-box style grid to overweight large cap growth.

Anyways, if you go back to one of my previous posts and answer the E%, F%, I%, B%, S%, etc, then one can easily fill out the funds to own and where.

 

[DayDreaming]

...There is no reason to have VNJTX whatsoever because you have more room for fixed income in your Fidelity IRA.

Since it's tax-exempt, it seemed like a good thing to have. Is it better to have a regular bond fund in an IRA than to have a tax-exempt bond fund in one's taxable account?

The Fidelity 4-in-1 index fund has stocks and bonds, so you do not want it in taxable, but you also have enough money to buy the individual index funds yourself. The 4-in-1 overlaps the FBIDX as well. Thus, there is no reason to even own it.

The FFNOX Fidelity 4-in-1 fund is in my IRA, so those bonds should be okay, no? Even though it overlaps the FBIDX bond fund, FFNOX looked like a really good fund to me, with a lower expense ration than the funds that go into it. Isn't that a good reason to own it?

The Fidelity Growth fund is weird. It's not an index fund and there is no reason to own it as well. It distorts your 9-box style grid to overweight large cap growth.

I kept this one because it had been part of my 401k for years and has done well. Why do you say there's no reason to own it? I don't know what you mean!

Anyways, if you go back to one of my previous posts and answer the E%, F%, I%, B%, S%, etc, then one can easily fill out the funds to own and where.

Will do! Obviously I have more reading to do.

LOL, I really do appreciate your comments. If I'm asking too many questions, it's only because I have a lot to learn.

 

[LOL!]

Since it's tax-exempt, it seemed like a good thing to have. Is it better to have a regular bond fund in an IRA than to have a tax-exempt bond fund in one's taxable account?

Yes it is better to get higher interest rate than a lower interest rate.

The FFNOX Fidelity 4-in-1 fund is in my IRA, so those bonds should be okay, no? Even though it overlaps the FBIDX bond fund, FFNOX looked like a really good fund to me, with a lower expense ration than the funds that go into it. Isn't that a good reason to own it?

If it means that you run out of room in your tax-advantaged account for fixed income, REITs and other tax-inefficient investments, then it's bad to have it. It's better to split up tax-inefficient and tax-efficient funds into the appropriate accounts.

I kept this one because it had been part of my 401k for years and has done well. Why do you say there's no reason to own it? I don't know what you mean!

Let me give you a specific example. The 4-in-1 has an international fund in it. By holding in the 4-in-1 in the IRA, you lose any foreign tax credit that would be available if you held the international fund n your taxable account. That's like throwing away money.

 

[walkinwood]

LOL!
Your "money is money" post was very well written. I plan to use the same strategy, but couldn't have explained it as well.

You bring up a good point about wash sales. People (like me) may be tempted to sell in a taxable account and buy in a tax-deferred account to avoid wash-sale rules, but that doesn't work. See
Wash Sales and IRAs
for a detailed discussion.

 

[LOL!]

Wash-sales only apply to positions sold for a loss and not for positions sold for a gain. It is very easy to buy a different replacement fund or ETF to replace a position sold at a loss that avoids the wash sale rule. One just needs to aware of the rules.

 

[DayDreaming]

Okay, I've put a lot more thought into this, used Morningstar's Portfolio Allocator (nice tool!) to help with the fund allocations, and here's what I came up with:

Fidelity IRA:

1. 24.00% FBIDX Fidelity US Bond
2. 21.48% FSMKX Fidelity Spartan 500
3. 11.13% FGMNX Fidelity Ginnie Mae
4. 3.97% TAREX Third Avenue Real Estate Value

Vanguard taxable:

1. 16.73% VTSMX Vanguard Total Stock Mkt Idx
2. 13.19% VGTSX Vanguard Total International Stock
3. 5.70% VGENX Vanguard Energy Fund Investor Shares
4. 3.80% cash

results in:

• 10.20% cash
• 41.62% U.S. Stocks
• 17.92% Foreign Stock
• 29.41% Bonds
• 0.85% Other

stock style box:
28 27 26
5 5 5
2 1 1

Any better? Worse? Fire away!

 

[LOL!]

Lots better. You have tax-efficient index funds in taxable. But don't use VGTSX, use VFWIX.

Also your 9-box style grid shows that you are overweight large cap and underweight mid and small cap. I would take the 22% in Fidelity Spartan 500 in your IRA and use it to get 22% small/mid cap index fund.

 

[DayDreaming]

Some revisions:

• switched VGTSX to VFWIX for foreign tax credit
• got rid of VGENX Energy, replaced with more VGSMX and VFWIX
• switched FBIDX to FIBAX bond funds for lower ER of .1 vs .31
• moved some cash into VIPSX Inflation Prot Secs in IRA
• moved TAREX to FRESX Real Estate for lower ER of .82 vs 1.10
• moved some FSMKX to FSEMX for more small/mid cap

Fidelity IRA:

1. 23.8% Fidelity Spartan Intermediate Bond (FIBAX)
2. 16.9% Fidelity Spartan 500 (FSMKX)
3. 4.7% Fidelity Spartan Extended Mkt Index Inv (FSEMX)
4. 11.0% Fidelity Ginnie Mae (FGMNX)
5. 4.0% Fidelity Real Estate (FRESX)
6. 2.0% Vanguard Inflation Protected Secs (VIPSX)

Vanguard taxable:

1. 17.5% Vanguard Total Stock (VTSMX)
2. 18.0% Vanguard FTSE All-World (VFWIX)
3. 2.1% cash

results in:

• 8.08% cash
• 41.48% U.S. Stocks
• 18.17% Foreign Stock
• 31.49% Bonds
• 0.77% Other (wonder what that is anyway!)

stock style box:
24 26 23
6 9 5
3 2 1

Any better / worse?

 

[LOL!]

Hi Joe, I see you posting at the diehards site as well. It's getting better, but you are still underweight small caps based on your style box that you posted. The total market index fund has a style box today that looks like:
22 25 26
6 7 6
4 2 2
and many people would say to overweight small cap and value (while avoiding small cap growth). So I would explore reducing FSMKX and increasing FSEMX or a small cap value ETF like VBR or even the international ETFs DLS or GWX.

But it's your decision

 

[DayDreaming]

Hi Joe, I see you posting at the diehards site as well.

Just looking for a 2nd opinion. Or is that you replying to me over there too?

It's getting better, but you are still underweight small caps based on your style box that you posted. The total market index fund has a style box today that looks like:
22 25 26
6 7 6
4 2 2
and many people would say to overweight small cap and value (while avoiding small cap growth). So I would explore reducing FSMKX and increasing FSEMX or a small cap value ETF like VBR or even the international ETFs DLS or GWX.

What percentage large cap vs small/mid cap should I be aiming for? I have been doing a lot of reading & research, but don't remember any particular guidelines on this.

 

[jIMOh]

Just looking for a 2nd opinion. Or is that you replying to me over there too?

What percentage large cap vs small/mid cap should I be aiming for? I have been doing a lot of reading & research, but don't remember any particular guidelines on this.

Look at the style box for total market. That is the risk "of the market". If you overweight one style over another (large vs small) if that sector does better than the market, then you will do better than the market.

Based on age, having more in large caps is not a bad thing closer to retirement. Do not let others tell you how much risk to take.

I am 20-40 years away from retirement. 30% of my holdings are small and mid cap. I will decrease these positions as I near retirement.

 

[LOL!]

I think one should have at least the market weight of mid/small caps. That would be about 26-28% mid/small caps.

Some experts (Fama&French, Merriman, Bernstein, Ferri, Swedroe) actually recommend that one should have 50% mid/small cap with a tilt to small cap.

Your portfolio showed 6% in what M* calls small cap, while the market weight is 8%. So I will argue that you need 2% more small cap or even more.