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What do you think of this asset allocation?
Old 08-30-2011, 12:01 AM   #1
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What do you think of this asset allocation?

Hi ER, It's been a few weeks.

I've been meaning to get my retirement bucket set-up in Ameritrade but the markets got a little nutty and I decided to step back and take a little break from the headlines.

So what do you think of this portfolio? (This is just for retirement which is 25+ years away.)

64% US Equities
(Mix of IVV, IWM and IWV in a taxed account. I know the Russel 3000 and S&P500 ETFs are redundant but I'm reluctant to sell and pay taxes).

11% International Equities (in taxed account)
(I'm thinking about buying Vanguard Total International Stock (VGTSX I think) to minimize the number of funds we own and need to rebalance).

25% Bonds (in taxed and untaxed accounts, I'll shelter as much as I can) I'm thinking about going with Vanguard Total Bond Market (BND) to keep things simple. One bond fund to rule them all.

If you are interested this is what we actually own right now:

64% US Equities (see above)

5% Oregon Muni Fund. I didn't pick it and I am thinking of selling it as we now live in California where it is taxed. The expense ratio is kind of high.

16% Cash from old-school mutual funds with high expense ratios that we have finally extracted and transferred to Ameritrade.

~15% IRA that is currently in some balanced fund with a high expense ratio.

As always, thanks!
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Old 08-30-2011, 01:56 AM   #2
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I think it looks excellent. I agree with you it seldom makes sense to pay taxes to try and switch to ETFs with very similar portfolio and/or modestly lower expense ratio.

One alternative to BND maybe to set a CD ladder or a California Muni fund. The rates are lousy but there is a reasonable chance that if inflation continues to increase, and the interest rates increase that BND price will go down enough to offset any interest income collected. PenFed has a 7 year CD pay 2.75% which is only modestly below the 3.25% yield of BND.
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Old 08-30-2011, 08:49 AM   #3
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Nothing wrong with it given 25+ years to retire, a touch conservative for my tastes, but you know your risk tolerance. It's also more domestic than I think most would recommend, if you're going to be 75% equity, many mainstream recommendations would put you into 50% domestic, 25% foreign. Vanguard has tax managed international funds which may be helpful for you (I own same).

But there is no right answer. Your portfolio is only mildly aggressive and US focused, that may be exactly as you want it.
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