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Please give me feedback on my portfolio's asset mix
Old 05-20-2018, 12:47 PM   #1
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Please give me feedback on my portfolio's asset mix

Hello all,

I'm 32 years old who enjoys work. I really dont't know when my plan is to retire. I'm married with no children and we don't intend on having any. I have 80k in an IRA with Vanguard, 390k in a taxable acct with Vanguard, 8k in a 401(k) with empower retirement, and 80k in cash. We rent in a HCOL area. No debt of any kind. My income is to high for her to have an IRA. Please let me know how my asset mix looks and where I should allocate future contributions. Thanks!

Taxable Acct:
24% Vanguard U.S. Growth Fund Admiral Shares $93K
16% Vanguard Total Stock Market Index Fund Admiral Shares $63K
24% Vanguard Star Fund Investor Shares $93K
13% Vanguard Small-Cap Growth Index Fund Admiral Shares $50K
17% Vanguard International Growth Fund Admiral Shares $65
5% Vanguard Global Minimum Volatility Fund Investor Shares 21K
1% Vanguard Emerging Markets Bond Fund Investor Shares 4K

IRA: (no longer contributing)
64% Vanguard U.S. Growth Fund Admiral Shares 51k
18% Vanguard Small-Cap Growth Index Fund Admiral Shares 15k
18 % Vanguard International Growth Fund Investor Shares 15k

Empower Ret 401(k) (just became eligible and maxing out)
40% future contribution - Vanguard Index Trust -Total Stock Market 4k
24% future contribution - Vanguard Small Cap Index Fund 2k
36% future contribution - Vanguard FTSE All-World ex-US Index Inv 2k
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Old 05-20-2018, 01:14 PM   #2
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Welcome to the forum, ChaseThatDream.

You have a good mix of funds. Allocation between stocks and bonds, and possibly cash is important. At your age, I would probably be somewhere around 80% stocks, but that is a very personal allocation. Some here are 100% stocks and a few are 100% bonds and cash. Most are somewhere in between. I prefer most of my investments in large caps with a bit in small, and intermediate, and a bit more in international. There are some here who have quite a bit in real estate.

If you have not checked them out, you might also try Boggleheads. They are very much focused on allocations and fund selection in some of their forums.
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Old 05-20-2018, 01:16 PM   #3
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Waaay too complicated for my taste.

My guess is that all that stuff (excluding the bonds) in your taxable account nets out to about the same as a single total US stock fund. You might try Portfolio Visualizer (https://www.portfoliovisualizer.com/) and make the comparison.

The IRA is all growth, which the academic research says is generally not a good choice. If you want tilt, small and value stocks are where the research would send you.

It this were me, all the accounts would look like your 401k with the same three funds. You're passively buying the world with a small cap tilt. If you want to make the portfolio 33% more complicated you could add some value tilt.

IMO investing should be uncomplicated (i.e., passive and broad) and should be boring. IOW, a very small number of funds, looked at once a year.

Bond comments, I'll leave to the fixed income afficianodos here
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Old 05-20-2018, 01:27 PM   #4
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I agree with OldShooter on this one. Your taxable is overly complicated and has a large tilt to Growth. That is working out great right now, but may be a sign of chasing what has the latest success. I would go with broad market funds similar to the 401K and then carve out 5-10% if you want to take concentrated bets with more risk. I would also have 10-20% in bonds as they stabilize the portfolio without giving up much of the return. Emerging market bonds would not be my choice to stabilize the assets. If you like the emerging market bonds for return, why not just buy more stocks? You have a long term horizon for these funds, so US intermediate bonds would make more sense to me.

Good luck with your investments, you have a great start!

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Old 05-20-2018, 01:33 PM   #5
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I had a feeling this would be the general consensus. I've been thinking of just using Vanguard Target Retirement - 2050 for all three accounts which right now consists of:

Vanguard Total Stock Market Index Fund Investor Shares 53.8%
Vanguard Total International Stock Index Fund Investor Shares 36.1%
Vanguard Total Bond Market II Index Fund Investor Shares 7.1%
Vanguard Total International Bond Index Fund Investor Shares 3%

Or I can just use this guide and buy the %'s of each individually and save some money on the expense ratio's with admiral share on my taxable acct. Thoughts on making the exchange?
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Old 05-20-2018, 01:45 PM   #6
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Originally Posted by ChaseThatDream View Post
I had a feeling this would be the general consensus. I've been thinking of just using Vanguard Target Retirement - 2050 for all three accounts which right now consists of:

Vanguard Total Stock Market Index Fund Investor Shares 53.8%
Vanguard Total International Stock Index Fund Investor Shares 36.1%
Vanguard Total Bond Market II Index Fund Investor Shares 7.1%
Vanguard Total International Bond Index Fund Investor Shares 3%

Or I can just use this guide and buy the %'s of each individually and save some money on the expense ratio's with admiral share on my taxable acct. Thoughts on making the exchange?
It depends on your take on rebalancing. Do you want to rebalance once a year or every day? I think most funds of funds rebalance every day. I prefer rebalancing once a year or when things get out of balance more than around 5%.
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Old 05-20-2018, 01:47 PM   #7
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Originally Posted by ChaseThatDream View Post
I had a feeling this would be the general consensus. I've been thinking of just using Vanguard Target Retirement - 2050 for all three accounts which right now consists of:

Vanguard Total Stock Market Index Fund Investor Shares 53.8%
Vanguard Total International Stock Index Fund Investor Shares 36.1%
Vanguard Total Bond Market II Index Fund Investor Shares 7.1%
Vanguard Total International Bond Index Fund Investor Shares 3%

Or I can just use this guide and buy the %'s of each individually and save some money on the expense ratio's with admiral share on my taxable acct. Thoughts on making the exchange?
I think that would be a good way to proceed, if you are happy with a 90% stock allocation (at your age, it's probably fine). I've tilted my portfolio a little toward "small" and (esp) "value", if you want to do that it would be easy to do with just one or two additional Vanguard funds. But there's nothing at all wrong with the Target Date fund as-is, you'll likely be well ahead of most investors if you do that.


Just so you consider it, though it does complicate things considerably: From a tax perspective, it can be useful to hold the bonds in your IRA or 401K rather than in your taxable account, and preferentially put your stock holdings in your taxable account. The interest paid by the bonds is taxable income taxed at the earned income rate if held in your taxable account. The gains on your stocks will (likely, primarily) be capital gains, and these are taxed at lower rates than earned income. So to take full advantage of this, you couldn't use the Target Date funds, but would be back to using individual funds for the components. On the whole, an optimization like this is not nearly as important as building a good plan and sticking with it, and the Target Date funds make that easy.
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Old 05-20-2018, 01:48 PM   #8
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Simple is good!! I would just go to the target date fund if I wanted to be hands off. Some people, including me, are not big fans of foreign bonds. Vanguard feels they add diversity to the investment portfolio and I respect their opinion. For tax purposes, you would be better off to keep the stock indexes in your taxable and buy bonds in your 401K. This would lead to lower expense ratios also, but you will have to re-balance the assets when they get too far from your desired asset allocation. If you put any bonds in your taxable, you might consider tax-exempt bond funds.
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Old 05-20-2018, 02:09 PM   #9
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Personally, I do not use target date funds due to having a complete lack of control over assets purchased, asset allocation, etc. That said, they do a wonderful job of making investing properly boring and are a good choice for many people.

One thing to consider: The target date for the fund need have nothing to do with your planned retirement date. Think of the target date instead as a control on how aggressive your AA will be. Earlier target dates = less aggressive (because of lower equity AA). Later target dates = more aggressive.

Frankly, at 32YO with a good understanding of investing I don't think you're likely to panic and sell into a downturn. Unless you are afraid of doing that, I would recommend 100% equities. IOW not a target date fund. (We were nearly 100% equities until very close to retirement and, having ridden out all the storms including 1987 without selling, ended up with more money than we will ever need. YMMV, of course.)

A lazy 32YO man's portfolio might be 100% Vanguard Total World Stock Index (VTWSX).
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Old 05-20-2018, 07:05 PM   #10
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Quote:
Originally Posted by ChaseThatDream View Post
Hello all,

I'm 32 years old who enjoys work. I really dont't know when my plan is to retire. I'm married with no children and we don't intend on having any. I have 80k in an IRA with Vanguard, 390k in a taxable acct with Vanguard, 8k in a 401(k) with empower retirement, and 80k in cash. We rent in a HCOL area. No debt of any kind. My income is to high for her to have an IRA. Please let me know how my asset mix looks and where I should allocate future contributions. Thanks!

Taxable Acct:
24% Vanguard U.S. Growth Fund Admiral Shares $93K
16% Vanguard Total Stock Market Index Fund Admiral Shares $63K
24% Vanguard Star Fund Investor Shares $93K
13% Vanguard Small-Cap Growth Index Fund Admiral Shares $50K
17% Vanguard International Growth Fund Admiral Shares $65
5% Vanguard Global Minimum Volatility Fund Investor Shares 21K
1% Vanguard Emerging Markets Bond Fund Investor Shares 4K

IRA: (no longer contributing)
64% Vanguard U.S. Growth Fund Admiral Shares 51k
18% Vanguard Small-Cap Growth Index Fund Admiral Shares 15k
18 % Vanguard International Growth Fund Investor Shares 15k

Empower Ret 401(k) (just became eligible and maxing out)
40% future contribution - Vanguard Index Trust -Total Stock Market 4k
24% future contribution - Vanguard Small Cap Index Fund 2k
36% future contribution - Vanguard FTSE All-World ex-US Index Inv 2k
You have much overlap of companies within those funds. There is probably a way to whittle those 13 funds down to 9, and then you would have a clearer picture, and less overlap.
To start to analyze, it helps to break out things as I've done below. You should go to each fund description at Vanguard, and look at the composition of fund, and see if it it worth slicing this into duplicate funds.
- Bonds shouldn't be in taxable
- Growth funds have more cap gains, I think, so don't belong in taxable.
You will get plenty of ideas I'm sure. Remember that if you sell taxable, there is a tax to be paid, or a loss.
Perhaps sell the EM Bond FD and put that into one of your Int'l Funds.
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Old 05-20-2018, 09:41 PM   #11
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Quote:
Originally Posted by ChaseThatDream View Post
I had a feeling this would be the general consensus. I've been thinking of just using Vanguard Target Retirement - 2050 for all three accounts which right now consists of:

Vanguard Total Stock Market Index Fund Investor Shares 53.8%
Vanguard Total International Stock Index Fund Investor Shares 36.1%
Vanguard Total Bond Market II Index Fund Investor Shares 7.1%
Vanguard Total International Bond Index Fund Investor Shares 3%

Or I can just use this guide and buy the %'s of each individually and save some money on the expense ratio's with admiral share on my taxable acct. Thoughts on making the exchange?
Ideally, you would want Total International Stock and Total Stock only in your taxable account, but the cost of restructuring might be a constraint. What are your unrealized gains or losses for each lot in your taxable account?
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Old 05-21-2018, 05:18 AM   #12
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Originally Posted by ChaseThatDream View Post

Vanguard Total Stock Market Index Fund Investor Shares 53.8%
Vanguard Total International Stock Index Fund Investor Shares 36.1%
Vanguard Total Bond Market II Index Fund Investor Shares 7.1%
Vanguard Total International Bond Index Fund Investor Shares 3%

Or I can just use this guide and buy the %'s of each individually and save some money on the expense ratio's with admiral share on my taxable acct. Thoughts on making the exchange?
I would do something more like this and control the AA myself. Just watch out for the tax implications of making the switch. Maybo do onot do it all the same year. Also, I would suggest the IRA be a Roth.
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Old 05-21-2018, 07:42 AM   #13
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I would do something more like this and control the AA myself. Just watch out for the tax implications of making the switch. Maybo do onot do it all the same year. Also, I would suggest the IRA be a Roth.
I make 480k and my wife makes 100k. I don't qualify for much. I can't have a roth. We can't deduct for her IRA. We don't have much in terms of deductions anymore either. Any other options out there?
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Old 05-21-2018, 08:38 AM   #14
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I make 480k and my wife makes 100k. I don't qualify for much. I can't have a roth. We can't deduct for her IRA. We don't have much in terms of deductions anymore either. Any other options out there?
Oh.
Well, since you are probably getting hammered in taxes on your earned income, it is even more important to get any bonds you hold into the tax-advantaged space you've got.
I'm assuming you are an employee and don't have access to solo 401k's and other tax savings available to business owners.

At the level you are probably being taxed, it may make sense to consider more proactive steps to reduce taxes: active participation in RE investments, partnerships, etc. OTOH, there's something to be said for not letting the tax tail wag the dog. A lot of people in your income range chase esoteric tax minimization strategies and wind up with poor investments, a tangled mess of expensive arrangements, and ongoing bills from lawyers and accountants that swamp any tax benefits they gained. Sometimes it's better to do as you seem to be doing now: attend to the obvious steps you can take by yourself, but otherwise take the tax hit and drive on.
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Old 05-21-2018, 08:58 AM   #15
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I agree with others here, that looks way too complicated for me, but I'm 54 years old.



I have all of my IRA in the Vanguard VBIAX index fund for a roughly 60/40 mix. If I was younger and wanted a higher percentage of stocks I might add some VTSAX stock index funds.



That's about as complicated as I care to get, though I do have a small cash savings in Discovers 1.5% online savings, and a small 30K 1 year Discover CD at 2%.


By the way, the Vanguard web site has an asset mix tab on your account page that would let you see what your total mix was.
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Old 05-21-2018, 09:11 AM   #16
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Put your 10% fixed income into muni funds/ETFs in your taxable account, then fill rest of taxable account with international equity funds/ETFs (foreign tax credit) and domestic equity funds/ETFs (preferential tax rates).
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Old 05-21-2018, 09:15 AM   #17
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Here is how I rebalanced as of now.

Taxable Acct:
Vanguard U.S. Growth Fund Admiral Shares $93K
Vanguard Total Stock Market Index Fund Admiral Shares $63K Now has 156k
Vanguard Star Fund Investor Shares $93K Exchanged to Total Stock Market
Vanguard Small-Cap Growth Index Fund Admiral Shares $50K
Vanguard International Growth Fund Admiral Shares $65 Now has 69k
Vanguard Global Minimum Volatility Fund Investor Shares 21K
Vanguard Emerging Markets Bond Fund $4K Exchanged to Int Growth


That kicks both funds that had bonds (Star and Emerging Mark Bond) and I'm down to 5. I plan to add Vanguard Total International Stock Index (now at 6) and pump future money into that fund and Total Stock Market at 60% US 40% Int ratio while letting the other's just ride. Perhaps dump Global Min Vol fund into Total Int Stock and be back down to 5 and have my two core holdings be Total Stock Market and Total Int Stock Market while having the other 3 (Small Cap growth, US Growth, and Int Growth) let ride for the long haul. Those three will have 212k of my taxable assets which will be a small percentage in the coming years as I plan to pump ~250k after taxes a year into the market regardless of market conditions.


As far as the IRA and 401(k) I'm just going to keep them the same as of now and may switch them both to the target Ret 2050 fund in the future. Thanks in advance for the feedback on these adjustments.
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Old 05-21-2018, 09:27 AM   #18
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Here is what I would suggest:

Taxable:
Vanguard Intermediate-Term Tax-Exempt.... 48k
Vanguard International Growth Fund Admiral Shares..... 69k
Vanguard Global Minimum Volatility Fund Investor Shares..... 21K
Vanguard Total International Stock..... 82k
Vanguard U.S. Growth Fund Admiral Shares... 93K
Vanguard Small-Cap Growth Index Fund Admiral Shares.... 50k
Vanguard Total Stock Market Index Fund Admiral Shares... 23k

Or if you want to really go simple, then:

Vanguard Intermediate-Term Tax-Exempt.... 48k
Vanguard Total International Stock..... 172k
Vanguard Total Stock Market Index Fund Admiral Shares... 166k

Then Vanguard Total Stock for your IRA and 401k.

Either would result in an overall AA of 90% equities (54% domestic and 36% international) and 10% fixed income (the munis) (if I did the math right).
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Old 05-21-2018, 10:29 AM   #19
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Here is what I would suggest:

Taxable:
Vanguard Intermediate-Term Tax-Exempt.... 48k
Vanguard International Growth Fund Admiral Shares..... 69k
Vanguard Global Minimum Volatility Fund Investor Shares..... 21K
Vanguard Total International Stock..... 82k
Vanguard U.S. Growth Fund Admiral Shares... 93K
Vanguard Small-Cap Growth Index Fund Admiral Shares.... 50k
Vanguard Total Stock Market Index Fund Admiral Shares... 23k

Or if you want to really go simple, then:

Vanguard Intermediate-Term Tax-Exempt.... 48k
Vanguard Total International Stock..... 172k
Vanguard Total Stock Market Index Fund Admiral Shares... 166k

Then Vanguard Total Stock for your IRA and 401k.

Either would result in an overall AA of 90% equities (54% domestic and 36% international) and 10% fixed income (the munis) (if I did the math right).
Your plan you posted just after I submitted my revised plan are very similar. I'm going to move 50k out of cash and get into Vanguard Intermediate-Term Tax-Exempt. Thanks for that! I'm also heavy on US with the mix so for a few months I'll dump earned income into Int to get them better balanced.
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Old 05-21-2018, 11:20 AM   #20
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...

Or if you want to really go simple, then:

Vanguard Intermediate-Term Tax-Exempt.... 48k
Vanguard Total International Stock..... 172k
Vanguard Total Stock Market Index Fund Admiral Shares... 166k

...
Or if you really, really, want to go simple then substitute VTWSX for the two equity funds.

Portfolio Visualizer shows them to be essentially neck and neck, under 25bps difference in CAGR over the several periods I checked. And given that backtesting does not actually predict the future I would say that they are equivalent investments.

Or if you really, really, really want to go simple then ditch the bonds entirely. At such a small fraction of the portfolio they really aren't having much of an effect on volatility and they will (probably) put a small drag on return. You are only 32 for chrissake; you can take volatility for another 20 years at least.
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