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Retirement Portfolios
Old 12-14-2010, 12:22 PM   #1
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Retirement Portfolios

I am trying to simplify (and hopefully reduce the no. of mutual funds) in our portfolio. Problem is we have some funds in a 401k, others in IRAs and still others in Roth IRAS. Would be curious to see Early Retirees portfolio construction (note I am not asking for $amounts) but would like to see percentage in each fund, how/where you dist. capital gains and/or dividends.

Note I have access to many of the Vanguard Funds including their major index funds and all their Target Retirement Funds thru my 401k.

Presently, between my wife and I we have 23 funds mostly with Vanguard and some with Fidelity. Would really like to reduce this to approx. 10 funds.

Looking forward to feedback here.
Thanks,
Golfnut
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Old 12-14-2010, 12:27 PM   #2
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There is no right answer as you know, but the group here just shared AA info recently so your timing is good.

What is your portfolio asset allocation?

As for specific holdings within asset classes, the options are unlimited. The Four Pillars of Investing by William Bernstein [my personal favorite] offers very specific options, many are Vanguard funds.
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Old 12-14-2010, 03:18 PM   #3
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We have the same level of funds you do. I manage it without trying to reduce the number of mutual funds.

Our allocation is

45% large cap domestic
15% mid cap domestic
15% small cap domestic
15% foreign large cap
10% foreign small cap and/or emerging markets

75% domestic, 25% foreign

If a bond fund is held, it reduces the domestic large cap position
basic idea behind that allocation of the wilshire 5000 is about 75% large cap, and I want a heavier small cap weighting than the overall market.

We have 6 accounts
My 401k
wife's 401k
My rollover
Wife's rollover
My Roth
wife's Roth

If I were to try to put large cap in just one or two of those, and small cap in another, and foreign in one, with bonds in another I would get lost anytime I rebalanced. Especially since (in the past) my 401k turned over 3 times in 5 years (4 different providers over 5 years). Wife had a similar period where she had 3 jobs over 6 years (some of this overlapped my issues), so I would not want to make one decision, only to have a job change require me to "re do" the whole portfolio.

So what I do is I try (my best) to mimic the whole portfolio in each account.

My wife's 401k is about 1/4 what my 401k balance is
but both 401ks are allocated 45-15-15-15-10

In my case, I have no mid cap fund, so I have 30% small cap. I have no foreign small cap, but I do have an emerging markets fund.
In wife's case her 401k is thru Fidelity, and she has no good small cap fund, so she is 30% mid cap, she has no foreign small cap and no foreign emerging markets, so she is 25% foreign large cap.
Both 401ks are 75%-25% domestic-foreign and both are overweighted to mid caps/small caps relative to wilshire.

My rollover is quite large- it is about the same size as my 401k which is 4X bigger than wife's 401k. So I chose an allocation which is 40-15-15-15-5-5 (the last 5% is a bond fund I am in which I like).

My Roth is decent size, not quite as big as my rollover... it is 45-15-15-15-10 allocation exactly how I want it.

My wife's Roth+Rollover is small... her $5000 Roth deposits might be 25% of her IRA balance each year, so spreading it out could work, but I chose to use sector funds to make up the 75-25 allocation, and I try my best to weight the small caps more, but with sector funds. What we do is buy a sector which is low (for example right now we buy real estate, health care, and tech) relative to what we think market is doing. In 2008 and 2009 we were buying real estate and financials. As the sector recovers, we change to the sectors which are underperforming at that time. We own natural resources, emerging markets, africa/middle east, tech, health care, a global tech fund, a value fund, a growth fund and a few others. We BUY low and "hold" when that sector is high. If we xray portfolio it comes real close to 75-25 allocation, and also comes really close to 45% large cap/30% small cap and 25% foreign.


We are not ready to FIRE yet, so its OK for us to own 25+ funds. As the 401ks get rolled over into IRAs, the fund count drops by 5 or 6 and that works to simplify.

If you know the order you will liquidate accounts, that helps to know as if a rollover was used, make sure there is a money market account in that tax shelter.
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Old 12-14-2010, 04:22 PM   #4
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There is no "right answer". I simplified to 70/30 stocks/bonds. I split my stocks into thirds between large cap, small/mid cap, & international. Bonds are split 50/50 between Total Bond and TIPS. I sleep at night.
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Old 12-14-2010, 05:09 PM   #5
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And if you want detail right down to the funds themselves, here is an even better resource IMO. You can look at what others have posted there, or better yet, enter your info in the format they request and they will give you very specific recommendations...

Bogleheads :: View topic - Asking Portfolio Questions
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Old 12-14-2010, 06:04 PM   #6
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Bogleheads will help you simplify. Portfolio construction is relatively simple once you realize that you look at ALL your assets as one big portfolio. This allows you to have one fund per one account in most cases and to use a single account for all the rebalancing.

Here's a partial example:

Her inherited IRA: Vanguard short-term bond
Her rollover IRA: Vanguard short-term bond
Joint taxable @ Vanguard: Vanguard Total Stock Market Index fund.
Her Roth: Vanguard FTSE all-world ex-US small cap.
Her 401(k): PIMCO total return.

That's 5 accounts with just 4 funds. Each account is 100% a single fund. Then you got his accounts that contain the rest of the asset allocation. You just don't need multiple funds in each account. However:

His 401(k): Bond fund, S&P500 index fund, Extended market index fund, International index fund. This account allow for all rebalancing between equities and bonds, between US and foreign, between large cap and small cap.
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Old 12-14-2010, 09:06 PM   #7
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I try to just index everything with Vanguard. So I pretty much have two of Prime Money Market, Total Bond, Total US Stock, Total International Stock. Two of each because one out outside IRA and one in IRA. This makes the rebalancing easier as when that time comes (such as start of new year), I try to rebalance first with the IRAs (non tax event). For allocations, for the most part, I use 100-Age as percentage in equites, Age as percent in fixed income.

OP: 23 mutual funds..brings back memories of when I had about that much before I discovered indexing
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Old 12-15-2010, 11:31 AM   #8
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Quote:
Originally Posted by Midpack View Post
And if you want detail right down to the funds themselves, here is an even better resource IMO. You can look at what others have posted there, or better yet, enter your info in the format they request and they will give you very specific recommendations...

Bogleheads :: View topic - Asking Portfolio Questions
Thanks for the tip. I am very familiar with the Boglehead Forum. Looks like I have my work cut out for me - gathering the details.
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Old 12-15-2010, 11:37 AM   #9
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Quote:
Originally Posted by easysurfer View Post
I try to just index everything with Vanguard. So I pretty much have two of Prime Money Market, Total Bond, Total US Stock, Total International Stock. Two of each because one out outside IRA and one in IRA. This makes the rebalancing easier as when that time comes (such as start of new year), I try to rebalance first with the IRAs (non tax event). For allocations, for the most part, I use 100-Age as percentage in equites, Age as percent in fixed income.

OP: 23 mutual funds..brings back memories of when I had about that much before I discovered indexing
Sounds like you have it covered. I have some other accounts I need to deal with i.e. 401k which I understand I can take distributions from since I was separated from my job at the age of 55. Question I have - where would the dists. go into - the Prime Money Market Fund ina taxable account?

Thanks for the response.
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Old 12-15-2010, 04:00 PM   #10
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Quote:
Originally Posted by golfnut View Post
Sounds like you have it covered. I have some other accounts I need to deal with i.e. 401k which I understand I can take distributions from since I was separated from my job at the age of 55. Question I have - where would the dists. go into - the Prime Money Market Fund ina taxable account?

Thanks for the response.
If you want to pay taxes on the distributions now: A Roth IRA or your Taxable account, as you suggested.

If you don't want to pay taxes now: a Traditional IRA.

-- Rita
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Old 12-19-2010, 04:34 PM   #11
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There are many flavors to retirement portfolios.

For your info and entertainment, Here are some links to some of the old standby model portfolios:
  1. Couch Potato Portfolio
  2. Bogleheadís Guide To Investing
  3. All About Asset Allocation
  4. The Intelligent Asset Allocator
  5. A Random Walk Down Wall Street
  6. FundAdvice.com by Merriman
  7. Unconventional Success by Swensen
  8. Columnist Ben Stein
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