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would like some advice on my current asset allocation...thanks
Old 01-30-2011, 09:24 AM   #1
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would like some advice on my current asset allocation...thanks

Well, i finally took the time to really try to understand how to invest for my retirement and it was quite an eye opener. I read a few books, including Boglehead's Guide to Investing, to help me with all the concepts and lingo that i didn't understand. I chatted with you all on this forum as well as the Boglehead forum which helped me a lot. So let's see what i have done..since i have gained some new knowledge and hopefully for the better. You tell me.

I got out of the clutches of Ameriprise. Yeah, i was young when i got involved with them and i thought i was doing the right thing, but i was naive. I now realize they are crooks and i supported my financial planner's trips/condo to Florida and his nice home in a upscale town in my state. So my wife and I moved our Ameriprise ROTH IRAs TO VANGUARD.

My wife and I are both teachers and we have about 25 years until each of us can retire, so we moved our 403bs from AXA-Equitable and Metlife to Fidelity. Fidelity was the best company we had in our plan. Metlife and AXA representatives show up at the school and you think they are there to help you and then when you do some research you realize these insurance companies are killing you with fees. So, we just put the paperwork through to transfer and are just waiting.

In term of Fidelity, I had two options that i thought were the best. The Fidelity 4 in 1 fund, which invests in the Spartan funds, or to simply invest in each of those Spartan funds separately. Well, i decided to invest in each of the funds separately because when i did an instant x-ray with Morningstar the four funds individually had a better expense ratio/ fees then the 4 in 1, even though it wasn't by much. So i decided to give my wife and myself the same asset allocation at this time because we are pretty close in age. I'm 36 and she's 33. I feel i'm aggressive when it comes to investing, but i'm still new to this so i could use some input. So tell me what you think of our current allocation at fidelity

Stock: Large Cap Spartan 500 Index (FUSEX) 50%
Stock: Mid-Cap Spartan Extended Market Index Fund (FSEMX) 15%
Stock: International Spartan International Index Fund (FSIIX) 20%
Bonds: Income Fidelity U.S. Bond Index Fund (FBIDX) 15%


Here's what i have at vanguard. it's the target retirement 2040..I feel like i'm missing something
Vanguard Total Stock Market Index Fund 63.1%
Vanguard Total International Stock Index Fund 26.8%
Vanguard Total Bond Market II Index Fund Investor Shares† 10.1%


any thoughts would be appreciated on the asset allocation and any moves i have made so far. thanks
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Old 01-30-2011, 09:26 AM   #2
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I did use paragraphs but they disappeared when i posted? why?

{mod edit--paragraph breaks added to first post}
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Old 01-30-2011, 09:56 AM   #3
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Originally Posted by dooo42 View Post
Stock: Large Cap Spartan 500 Index (FUSEX) 50%
Stock: Mid-Cap Spartan Extended Market Index Fund (FSEMX) 15%
Stock: International Spartan International Index Fund (FSIIX) 20%
Bonds: Income Fidelity U.S. Bond Index Fund (FBIDX) 15%
I think you've made all the right moves from what you describe above. Understanding what you're investing in and why is essential IMO, hopefully you appreciate that now with your reading & study.

As for your investment choices & allocations, they make very good sense for a relatively young aggressive investor like yourselves. Kind of a variation of Coffeehouse or Couch Potato, both considered solid low maintenance approaches.

No one has a crystal ball, but long term your probability of success is excellent based on history. Best of luck, I suspect you're way ahead of most of your peers if not many older than you are...
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Old 01-30-2011, 10:09 AM   #4
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So what are your Roth IRAs invested in?

Your 403(b) with Fidelity is missing some asset classes. In particular, that international fund covers only large-cap developed markets of Europe, Japan, Australia, but lacks small-cap developed markets and all of emerging markets (large and small cap). You could use your Roth IRAs to fill in the missing gap by investing in VFSVX (aka VSS) and VEIEX (aka VWO).
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Old 01-30-2011, 10:24 AM   #5
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I was thinking 30% in international but stuck with 20% for now..any thoughts would be appreciated
There are endless debates on the percentage allocated to international. If you want to mirror the composition of the world index, you should allocate about 50% to international holdings. If you are concerned about currency and investment risks associated with international investing, limit your exposure to 20% is generally advised.
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Old 01-30-2011, 10:33 AM   #6
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I'd tweak your FUSEX and FSEMX allocations given the out performance of FSEMX. Perhaps even them up.
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Old 01-30-2011, 10:38 AM   #7
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I'd tweak your FUSEX and FSEMX allocations given the out performance of FSEMX. Perhaps even them up.
I have owned both these funds for a while in my 401(k). If you add to FSEMX beyond some market weight, you could be accused of performance chasing.

For myself, I rebalanced out of FSEMX (because of big gains in US small caps) and into FSIIX (because of mediocre returns in developed markets). That said, I like to overweight small caps in both domestic and foreign markets. But I do not like to overweight my overweight.
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Old 01-30-2011, 10:41 AM   #8
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Originally Posted by dooo42 View Post
I did use paragraphs but they disappeared when i posted? why?
Sometimes (most, actually) you have to put two Paragraph markers to look correctly. This is particularly true when "cutting and pasting" or using the "Quote" option. I, usually, click on the "Preview" button before submitting to confirm what I intend. When I forget (most often -- in a hurry), I make extensive use of the "Edit" button. (I have "edited" as many as four or five times until I got it right -- haste makes waste -- and even then...)
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Old 01-30-2011, 10:48 AM   #9
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you could be accused of performance chasing.

But I do not like to overweight my overweight.

Perhaps my sins as a performance chaser will be balanced by the fact that I never overweight my overweight..

Plus I eat 7 servings of fruit per day
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Old 01-30-2011, 11:05 AM   #10
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All in all, I think you have done a great job of not only educating yourself, but also of creating a simple, effective portfolio. Assuming you have coordinated this AA with the rest of your holdings, you just need to sit back an reallocate yearly.
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Old 01-30-2011, 11:40 AM   #11
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Here's what i have at vanguard. it's the target retirement 2040..I feel like i'm missing something? small cap?

Vanguard Total Stock Market Index Fund 63.1%
Vanguard Total International Stock Index Fund 26.8%
Vanguard Total Bond Market II Index Fund Investor Shares† 10.1%
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Old 01-30-2011, 11:52 AM   #12
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Here's what i have at vanguard. it's the target retirement 2040..I feel like i'm missing something? small cap?

Vanguard Total Stock Market Index Fund 63.1%
Vanguard Total International Stock Index Fund 26.8%
Vanguard Total Bond Market II Index Fund Investor Shares† 10.1%
Your 3-funds portfolio covers the majority of all asset classes. Both the Total Market and International funds cover small cap, REIT, emerging markets already. However, there are many posters who believe that those classes are under-weighted because of their smaller market capitalization and therefore additional exposure is needed. There are also people in the value-tilted camp that advocates more allocation to small valued U.S. and international stocks.
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Old 01-30-2011, 11:57 AM   #13
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Here's what i have at vanguard. it's the target retirement 2040..I feel like i'm missing something? small cap?

Vanguard Total Stock Market Index Fund 63.1%
Vanguard Total International Stock Index Fund 26.8%
Vanguard Total Bond Market II Index Fund Investor Shares† 10.1%
You will always be missing something. You have to decide how complicated you want to make things and understand that for the more slices/dices you choose there is only a marginal increase in expected returns (NOT guaranteed returns) for substantially increased rebalancing work. At some point you just have to decide that a good plan suffices and stop trying to find the "best" plan (which will only be obvious in hindsight). If I were you I would stop, take a deep breath, and bask in the satisfaction of a job well done and carry on with life. If the investing stuff interests you and you want to educate yourself further about AA and diversification etc then have at it but it doesn't have to happen now.

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Old 01-30-2011, 12:05 PM   #14
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As DblDoc suggests, simplicity is a good thing - less stress and hassle trying to optimize your portfolio. There are more asset classes used to further diversification: REIT, private equity, commodity, precious metals, oil and energy, gold, emerging markets, lumbers, etc.
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Old 01-30-2011, 05:05 PM   #15
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Other than increasing your bond allocation by about 5% every 5 years or so. I think you have a fine AA and can relax and enjoy life. At this stage in your life it is probably most important to get in the habit of increasing your saving as you get pay raises than worrying about complicating your investments.
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