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Which Vanguard Funds
Old 03-25-2014, 02:59 PM   #1
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Which Vanguard Funds

Have approximately 75k currently in Vanguard Money Market representing about 15% of our investable funds (the rest is in Federal TSP)

Do not expect to be needing any of this money for 10 to 20 years (hopefully) and we have our cash emergency fund separate at our credit union.

Was recently reading an article that suggested the following allocation:
  • 50%: Vanguard 500 Index Fund Admiral Shares (VFIAX)
  • 20%: Vanguard Mid-Cap Index Admiral Shares (VIMAX)
  • 10%: Vanguard FTSE All-World ex-US Small-Cap ETF (VSS)
  • 10%: Vanguard Short-Term Government Bond ETF (VGSH)
  • 10%: Vanguard Consumer Staples ETF (VDC)

What think the esteemed members of this forum of this allocation & opinions on whether to move this all at once or to DCA ... and if DCA what schedule?

I will also be looking to re-allocate in a complementary manner my TSP monies (currently in the G & C funds) among different TSP funds.

Situation: I receive a healthy Federal pension with health insurance through FEHBP and take 72t life-expectancy withdrawals from TSP. Own home, zero debt & 1 child who is paying her own college through two full academic scholarships. Neither self nor DW are employed and hope not to ever be again. No major illnesses or disabilities. Moderate cost-of-living area.

Thanks in advance for anyone's thoughts.
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Old 03-25-2014, 04:11 PM   #2
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A 90:10 AA alone is pretty aggressive, but you have many years and your asking about only 15% of your portfolio. But with knowing your TSP AA, I'm not sure how anyone could provide meaningful suggestions.

The first four funds are decent though I wonder if they'd outperform TSM and Total Intl, however VDC is sure out of left field. I'd expect the article would make a case for that odd ball. And since VDC would be 1.5% of your total porfolio, it's so trivial it won't make any real difference in your total net return (which is the goal).

As for DCA, there have been many threads and many studies. There is no way to predict whether lump sum or DCA will perform better, even knowing current market conditions. Either approach is defensible, and most people decide based on emotion their individual comfort level. If you're not comfortable investing a lump sum, then there's nothing wrong with DCA'ing in over the course of weeks, months or a year.
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Old 03-25-2014, 05:07 PM   #3
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BLUF: those five funds are probably fine, but you can go simpler and get similar return, likely with less risk.

Instead of the suggested allocation, I'm not sure why you wouldn't take 70% into Total Stock Market, 20% into Total Int'l, and 10% into Total Bond. It's essentially the same thing, but lowers your risk to small cap international. I don't have a problem with being 90/10 for this portion, but I would even go 100/0 toward equity in my taxable account (that's what I've done) and use one or two simple index funds (Total and Total Intl), and call it a day. Just track your overall AA including your TSP portion.

I am also a Fed (well, Mil), with roughly 1/3 of my invested assets in TSP. I use TSP for my fixed income allocation (mostly G, a little F), and also for my international allocation (via the I fund). I then use our Vanguard accounts (IRAs and taxable) for Total Stock Market and what little individual stock we own.
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Old 03-25-2014, 06:23 PM   #4
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A 90:10 AA alone is pretty aggressive, but you have many years and your asking about only 15% of your portfolio. But with knowing your TSP AA, I'm not sure how anyone could provide meaningful suggestions.
The TSP allocation (50/50 G/C) is subject to a total revamp at this time.
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Old 03-25-2014, 06:26 PM   #5
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BLUF: those five funds are probably fine, but you can go simpler and get similar return, likely with less risk.
I am a big fan of KISS. I'd like to set it & forget it - maybe take a look once a year.

Thanks to both for your input, I'll be taking all under consideration in my thought process on this.

(Forgot to mention .... our personal risk tolerance, btw, is somewhere on the lower end of moderate.)
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Old 03-25-2014, 09:55 PM   #6
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I'm guessing with a federal pension that taxes are a consideration. Since you are essentially redoing your AA, then also consider tax efficient placement (fixed income allocation in tax-deferred accounts and tax advantaged investments in taxable accounts).

See Principles of tax-efficient fund placement - Bogleheads

Hence, I would probably lean to 70% Total Stock and 30% Total International Stock in this taxable account. A high percentage of the dividends would be qualified and either 0% or 15% depending on your overall income and you would also get a foreign tax credit.

The use the TSP to get to your target AA.
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Old 03-26-2014, 04:32 AM   #7
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i like pb4uski's advice. Normally one would have an asset allocation plan for one's entire portfolio consisting of all of one's accounts and assets. So one would just follow that plan in a tax-efficient way.

There is no need to have each account and especially a taxable account to have it's own separate asset allocation. Instead consider that you really have one single portfolio.

So it appears that this money could be invested in at most one or two funds while the TSP be adjusted to get your desired asset allocation. Lots of folks like that G fund in the TSP, so one could use the funds pb4uski suggested while shifting equities in the TSP to the G fund. Once set up, all rebalancing could be done in the TSP.

The G fund would be better than that Vanguard short-term government bond fund.

As for DCA, here's a thread to read on that: http://www.bogleheads.org/forum/view...2098&p=1945576
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Old 03-26-2014, 01:02 PM   #8
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Well, that really clears things up!
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Old 03-26-2014, 03:28 PM   #9
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Overall, I agree with pb4uski: *I* would go 70/30 TSM/International and use TSP for your bond allocation to get your 90/10. As I said in my first post, I use TSP for my bond AND my international allocation, then my IRAs and taxable are just TSM. Though as my portfolio grows, I may need to buy some Total Int'l in my taxable as well.
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