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How to allocate taxable/non-tax accounts into ETFs?
Old 07-06-2005, 12:17 AM   #1
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How to allocate taxable/non-tax accounts into ETFs?

Hi all.

Thanks so much again for all the helpful comments on my previous ETF question. Now that it comes down to it, I need help composing two ETF portfolios.

To start with, I am 27, so can take on risk. I'd prefer to be about 80%-90% in equities.

I currently have:
92k in a taxable account and
43k in tax free accounts (IRAs)

I would like to allocate this into the best use of each fund (least tax efficient in tax free account, etc).

Can anyone recommend an allocation? I would specifically like to earmark about 5% to a REIT ETF in the non-tax and at least 20-25% of all money in Intl stock (as I believe the rest of the world will begin to outpace us in the near future)

Any help is greatly appreciated!


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Re: How to allocate taxable/non-tax accounts into ETFs?
Old 07-06-2005, 12:44 AM   #2
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Posts: 420
Re: How to allocate taxable/non-tax accounts into ETFs?

Hi Olav,
as a US non-resident alien I am certainly not a US tax expert but putting REITs and any other asset class paying high div/interest and/or having high turnover in the non-taxable account makes good sense.

I also think that international (especially emerging) will outperform the US but with higher volatility of course. Personally I keep 50% of my equity in international.

Here is a very simple ETF/closed end fund portfolio I made for a friend of mine that do not have access to US open end mutual funds and who wanted things super simple:

VTI (US total stock market)
VNQ (US reits)
EFA (foreign developed)
VWO (emerging market)
AGG (US total bond)
GIM (foreign bonds)

He put an even share in each and I still have a hard time beating his returns with my more complicated portfolio! Some energy stocks (XLE) and metals (ASA/CEF/GLD) could be used if one wanted to redice the bond part as you indicate. Cheers!


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Re: How to allocate taxable/non-tax accounts into ETFs?
Old 07-07-2005, 03:46 PM   #3
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Re: How to allocate taxable/non-tax accounts into ETFs?

Hi Olav,

It will probably be a whole lot easier to choose the asset classes you want, and how much of each asset class, before you go choosing funds/etf and where to hold them.

For an example, Roger Gibson gave this example of an Investment Portfolio Design Format. For example, how much of a small cap tilt, or possibly value tilt do you want? Do you want to include commodities? etc.

And then once you've decided on the %'s of each asset class, you can compare ETF's at M* ETF Screener.

Personally, I don't think you need to use ETF's or a brokerage account in the IRA, since you can get similar index funds for tax inefficient asset classes like bonds, REITS, small value, etc., for no extra fees [brokerage maintenance fees] and no commissions when you buy or sell directly from someone like Vanguard.

- Alec
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