Opions on Vanguard recommendations

[yak651]

Finally received my "plan" from Vanguard for my 401k rollover plus a small IRA I have at another place. Background I'm 35, married, wife is a teacher so she has a good pension plan, put 19% into my current 401k, 11% into wifes 403b, would like to retire by 55.

Initial plan from Vanguard:
32% Vanguard total stock market index fund
16% Vanguard total international stock index fund
11% Vanguard Morgan growth fund
11% Windsor II fund
10% Vanguard extended market index fund
20% Vanguard total bond market index fund

After my free consultation I asked about eliminating the bond fund as I'm fairly young and feel I would recover if something happened to the market by the time I retire. They came back with this:
40% Vanguard total stock market index fund
20% Vanguard total international stock index fund
14% Vanguard Morgan growth fund
14% Windsor II fund
12% Vanguard extended market index fund

Any comments on these recommendations? Let me know if you need more information from me.

[Rich_by_the_Bay]

Quote:

Originally Posted by yak651

You would need a Morningstar analysis tool to be sure, but I'd check to see how many duplicate holdings you have among total stock market, Morgan growth, extended market and Windsor II. That may not necessarily be a bad thing, but at least check the Morningstar instant x-ray to be sure your asset allocation is what you actually want it to be when you add them all up. It's at this page, then Tools, then Instant X-ray.

I was very surprised and enlightened when I did this and made some adjustments as a result.

[LOL!]

You can use the Vanguard Portfolio Watch tool which is similar to the M* Portfolio X-ray tool.

One can always tell a Vanguard plan because it will have Vanguard Morgan Growth. It will also try to mimic the total stock market with neither a value nor a growth tilt. This is where WindsorII comes in to offset Morgan. My feeling is that they need to keep Morgan alive, so they recommend it.

It may also help from a psychological perspective to have at least least one fund in a portfolio do better than the market average. So some years WindsorII will do better, some years Morgan Growth. And if they both do worse than the index, Vanguard can say, "Hey indexing is where it's at."

Personally, I prefer the asset allocation at www.fundadvice.com with more international, more small cap value, international small cap and a bit of REIT. Also, bonds really will help you weather a downturn. That is, returns will not be hurt much by 20% bonds, but potential worst down year for you will drop considerably. I think it's worth it to have some fixed income and short-term reserves in your asset allocation.

Anyways, that's my opinion. I've seen enough of these Vanguard plans posted here, that I have not bothered to get my free plan. I already know what it will be.

[Mwsinron]

Did they give you reason for why there is no small cap exposure? Vanguard has a small cap index fund that has a great expense ratio .23 I believe. Myself I wouldn't bother with the Windsor and Morgan Growth fund. Instead I would put some into the Total Stock Market fund and check out their small cap index fund.

[73ss454]

Morgan growth was never mentioned in my Vanguard plan.

[dex]

This is my asset allocation.
I've excluded my 3 yr cash reserve for expenses I'm RE'd

12.6% 0028 V-Long Term Invest Gr
11.0% 0029 V-High Yield Corp Fund
7.3% 0123 V Reit Index Fund
7.7% Fidelity Seclect Nat Resources
9.1% 0860 V-Small Cap Value
9.1% 0835 V-Mid Cap Value Indes
9.1% 0006 V-Value Index
9.1% 0027 Wellesley Income Fund
24.8% 0770 FTSE all world Ex Us WFWIX
100.0% 100.0%

[ats5g]

Quote:

Originally Posted by yak651 Finally received my "plan" from Vanguard for my 401k rollover plus a small IRA I have at another place. Background I'm 35, married, wife is a teacher so she has a good pension plan, put 19% into my current 401k, 11% into wifes 403b, would like to retire by 55. Initial plan from Vanguard: 32% Vanguard total stock market index fund 16% Vanguard total international stock index fund 11% Vanguard Morgan growth fund 11% Windsor II fund 10% Vanguard extended market index fund 20% Vanguard total bond market index fund After my free consultation I asked about eliminating the bond fund as I'm fairly young and feel I would recover if something happened to the market by the time I retire. They came back with this: 40% Vanguard total stock market index fund 20% Vanguard total international stock index fund 14% Vanguard Morgan growth fund 14% Windsor II fund 12% Vanguard extended market index fund Any comments on these recommendations? Let me know if you need more information from me.

I wrote the following in Lancelot's recent conversation about his Vanguard plan. Notice any similarities:

Quote:

If he kept stressing that your portfolio should match the overall market, why the heck did he include Windsor II, Morgan Growth, Small Cap Index, + Extended Market Index? Windsor II [LV] and Morgan Growth [LG] cancel each other out to simply increase your exposure to Large caps over "the market", which is then cancelled out by adding more small caps. This seems like a really confusing way to match the market, when you can just do the Total Stock Market Index fund and pay less in expenses and have less funds.

Adding Windsor II, Morgan, and Ext Market to TSM seems a little stupid, since it brings you back to the TSM holdings again, while paying more in fees.

- Alec

[yak651]

Thanks for the inputs, anyone else? I guess I have some research to do before committing to anything. One good thing is the market has been seesawing quite a bit lately so I don't think I'm missing out on much by having my money in a temporary money market account.

[gindie]

Quote:

Originally Posted by Mwsinron Did they give you reason for why there is no small cap exposure? Vanguard has a small cap index fund that has a great expense ratio .23 I believe. Myself I wouldn't bother with the Windsor and Morgan Growth fund. Instead I would put some into the Total Stock Market fund and check out their small cap index fund.

I believe Extended Market has small-cap exposure.

[Mwsinron]

Quote:

Originally Posted by gindie I believe Extended Market has small-cap exposure.

Interesting. When I looked it up it only showed mid cap allocation. Is it one of those things they throw in some small cap companies with the mid caps?

[lswswein]

Quote:

Originally Posted by yak651 Thanks for the inputs, anyone else? I guess I have some research to do before committing to anything. One good thing is the market has been seesawing quite a bit lately so I don't think I'm missing out on much by having my money in a temporary money market account.

Don't try to market time. If you are in for the long time, just gt in and then forget it.

[gindie]

Quote:

Originally Posted by Mwsinron Interesting. When I looked it up it only showed mid cap allocation. Is it one of those things they throw in some small cap companies with the mid caps?

Here's Morningstar's allocation for the Extended Market Index:

Market Capitalization % of Portfolio
Giant 1.44
Large 3.60
Medium 53.47
Small 30.67
Micro 10.82

[Mwsinron]

Quote:

Originally Posted by gindie Here's Morningstar's allocation for the Extended Market Index: Market Capitalization % of Portfolio Giant 1.44 Large 3.60 Medium 53.47 Small 30.67 Micro 10.82

Thanks the Vanguard site just shows a yellow box for mid cap blend. I guess it just shows the majority. My mistake for ASSuming

[Alex]

I think the Vanguard plan is decent, but not great. One are where I agree with Vanguard is that you need bonds in your Asset Allocation, regardless of your age. Studies show that adding 20% bonds lowers risk substantially (as measured by standard deviation), but only reduces overall returns minimally. At any rate if you like to slice and dice your asset classes - for your equity portion, I'd break it down as follows:

30% Large Cap index (VLACX) (or use the SP500 index)
25% Ftse world ex-usa index (VFWIX)
20% Value index (VIVAX)
15% Small cap index (NAESX)
5% Small cap Value Index (VISVX)
5% Reit Index (VGSIX)

This 100% Index portfoio has an ultra low expense ratio of 0.21. and gives you 75% USA and 25% International. It also has a slight value tilt and sensibly overweight small/mid caps (not too much!).

M* X-ray =
27 22 10
11 8 5
7 6 4

Quote:

Your Portfolio (%) Wilshire 5000 (%) Large Cap Value 37.67 37.69 Large Cap Growth 20.68 33.04 Mid/Small Value 25.69 13.66 Mid/Small Growth 15.95 15.61 Your overall portfolio style: Core Your portfolio's stock exposure is spread evenly across the market and includes a good mix of small, medium, and large companies, as well as a fairly even mix of conservatively priced value stocks and high-flying growth stocks. For most investors, maintaining such broad-based market exposure is a prudent way to invest

Well, that's my two cents worth!! Good luck!