I need some help with AA for my taxable account. My taxable investments are held at Vanguard, and will be the primary source of living expenses for 8-10 years. (My tax advantaged and tax-deferred accounts are scattered among Vanguard, TIAA-CREF and Fidelity.)
Through a combination of ignorance ("gotta learn more about bond markets -- manana"), neglect and an infusion of uninvested cash, my current taxable holdings are:
- · 39% Money Market Prime
- · 5% Inflation Protected Securities Fund
- · 7% Balanced Index -- Admiral(40% bond, 60% equities)
- · 7% Total International Stock – Admiral
- · 27%Total Stock – Admiral
- · 15% Extended Market Index Admiral
This leads to an asset allocation of:
- · 39% cash
- · 8% bonds
- · 47% domestic stock
- · 7% international stock
A bit short on bonds and dividend generating stocks, I’d say!
I also have a tiny brokerage account – about 2% of my taxable assets – as “play money” currently all invested in MMM. I’ve started reading about ETFs.
I’m 54 (single, no kids), and had planned to FIRE in a couple of years, but now it may be in 6 months (unless I’m willing to relocate from TX to NC – nope.) My intention has been to draw down the taxable account for living expenses (modest, currently living on 25% of gross monthly income) for 8-10 years, after which I will turn to tax-deferred and tax-advantaged accounts.
Since I will only have w*rkforce income for half of 2012, I’m not gun-shy about generating income rather than capital appreciation, if that is advisable: the tax hit won’t be too bad.
The cash in this account can be used to rebalance to get to something more appropriate for my time horizon. But what should I do? The simplest would be to dump all the cash into Total Bond Market Admiral shares, but there might be a better strategy. Put half in GNMA? Or elsewhere?
Also, should I stick with mutual funds, or invest the cash in ETFs? I’ve just begun to educate myself on the merits of ETFs in taxable accounts rather than mutual funds.
Many thanks for your help.