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Looking to make some portfolio changes and need advice
Old 08-15-2012, 01:04 PM   #1
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Looking to make some portfolio changes and need advice

55 years old, single, no debt and considering making some changes to my portfolio.
Presently it is 55% stock, 30% bond, 15% cash. Would like to go 50-55 stock, 40-45 bond and 5 cash. Portfolio is over $600k. Federal tax rate 15%, state 5.3%
Taxable:
Vanguard Mass Tax Exempt VMATX 4%
Vanguard FTSE All World ex US VFWAX 10%
Vanguard Primecap Core VPCCX 14%
Vanguard Mid Cap Index VIMAX 9%
I Bonds 4%
Exxon XOM 5%
St Joe Co JOE 2%
Spider Materials XLB 2%
ROTH
Vanguard Total Bond Mkt VBTLX 11%
Brown Capital Mgmt Small Co BCSIX 5%
IRA
Loomis Sayles LSBRX 7%
T Rowe Price Real Estate TRREX 7%
Vanguard Intermediate Term VFICX 5%
Possible Changes
Taxable- sell VPCCX, XLB. Buy Vanguard Mega Cap MGC and iShares Small Cap IJR
Roth- sell VBTLX and BCSIX. Buy Vanguard Intermediate Term Bond VBILX, TCW Total Return Bond TGLMX, Doubleline Total Return Bond DLTNX
IRA sell TRREX and VFICX. Buy Realty Income O and Fidelity New Markets Income Bond FNMIX

Thoughts?
Thanks
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Old 08-15-2012, 03:01 PM   #2
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No offense, I mean this in a constructive manner, but that's one hell of a mess! My advice, and you are paying what it is worth, would be to:

1 use Vanguard funds
2 Total Stock Market Index, Total International Stock Market Index, Total Bond Market Index and if you want the REIT fund.


The IRA and Roth have no tax consequences, the taxable account well you know better than I do. The 2 equity funds are tax efficient so they would replace the taxable investments, the bond fund would be best in the IRA and Roth. The bonds shouldn't go in taxable but some of the equity funds can go into the IRA and Roth depending upon how much is involved. The REITs would go into the Roth.

I'm sure others will have other suggestions but from a KISS perspective that's what I would do. My own investments are what I suggested.
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Old 08-15-2012, 05:05 PM   #3
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+1 You probably have enough in VG to get a complimentary financial plan and they could give you detailed recommendations on what to do.

Does VMATX really make sense given your tax rate? (Asking - I don't know what its yield is vs your taxable bond portfolio).
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Old 08-16-2012, 03:49 AM   #4
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I don't agree that your portfolio is mess, but I do think you maybe unnecessarily complicating things.

Essentially what you want to do is buy 10% more bond in the most tax efficient manner. Leaving aside why you want to buy bonds with interests rate at historically low interest levels.

Why not sell the Small Cap BCSIX put the money in Vanguard total bond market in your Roth
Sell LSBRX, TRREX and put it in VFICX, or VBILX.

This will leave you 35% of your money in bonds all in tax deferred accounts in 2 Vanguard index funds. 8% in bonds in in your taxable account (I echo PB4 does muni make sense in your bracket?) for a total of 43%

Next take 10% of your cash and either reallocated to your existing Vanguard funds, and/or buy Vanguard Small Cap index fund to take the place of the fund you sold in your roth.
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Old 08-16-2012, 07:37 AM   #5
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You have stated a few moves that you want to make. However, so little is known about your personal situation. For instance, how much will you need to withdrawal?

For all I know your array of investments has and will outperform the market. OTH, it may be a mess as someone suggested. I think you will benefit by reading one or two short books. This will help you define an allocation for your needs.

One item that stands out is the XOM, which is surely replicated elsewhere in your funds. I haven't checked all of your funds, but it will probably be in the mega capital you seek. Be careful when you go over 5% in one company.

Try the free instant xray at Morningstar to get a better idea of what you have covered now.
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Old 08-16-2012, 08:43 AM   #6
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Thank you everyone for your feedback. I purchased the MA muni fund when I was in the 25% bracket, but have not added to it in awhile and I don't think I will get back to that level again. I was thinking of going to a small number of funds as possible, bu if I sell the mid cap index, I am looking at a LTG of over 25k, where as by selling VPCCX and XLB, the LTG would only be about 4k in total.
I know that by getting into MGC, that I will have more XOM, so I am not sure if I should sell some shares. I have to see if I could get a loss on specific shares.

I think I will not have as many bond funds in the tax deferred to keep as simple as possible as was suggested.

I hopefully do not plan to make withdrawals for a few years and looking to withdraw about 30k pre tax annually not including SS.
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Old 08-16-2012, 09:30 AM   #7
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What are you trying to accomplish? Do you have an asset allocation, asset class, placement model you're working toward, from a particular author/published strategy? There is no single ideal from which any of us should be making recommendations. There are all sorts of different strategies among members here though portfolios made up of low expense index funds modeling one of the many lazy portfolios (from 3 to 10 funds total) seem to be the most popular here...just a few examples below.
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Old 08-16-2012, 11:56 AM   #8
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Midpack,

My allocation would be a little similar to unconvential, but I would decrease REIT to about 5-7%. US Mkt with 20% Large Cap, 10% Mid and 5-7% Small. International 10-15% to include emerging.

Bond side 40% to include Corp, Foreign, Inflation protected.
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Old 08-16-2012, 04:24 PM   #9
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Quote:
Originally Posted by joecaf53 View Post
....I think I will not have as many bond funds in the tax deferred to keep as simple as possible as was suggested......
Joe, I think you want to load your tax deferred and Roth with your bond funds since they are the least tax efficient investments. Since between the IRA and Roth they are only 35% of the total, ideally they should be all fixed income, which would leave another 5-10% of fixed income in your taxable portfolio to get to total fixed income of 40-45%. Make sense?

If the TRREX generates a lot of taxable income (like a bond) then you could keep that in your IRA. The idea is to have all your tax inefficient investments in your IRA and Roth.
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Old 08-16-2012, 06:09 PM   #10
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What's with the Mass Tax-exempt? In your tax-bracket, it doesn't make sense. You could have a US Treasury bond fund in taxable (I wouldn't myself) and the dividends would be exempt from Mass state tax anyways.
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Old 08-16-2012, 09:42 PM   #11
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pb4uski,

You are right in making the bond side as simple as possible. I will definitely alter what I was planning on doing.

lol,

I now see that the ma muni was a bad idea. I am thinking of selling it, (would only be a small LTG).

Thank you all for great advice.
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