For those who self-manage their nest egg - what funds do you use??

[OldShooter]

Why not? Morningstar allows a person (for free) plug in the symbol and it shows the breakdown.

Really? It shows total return for the equities and for the FI separately? So you can look at historical performance for each piece? That's pretty neat. Link or screen shot?

Thanks.

 

[OldShooter]

+1 on having benchmarks. I studied these Lazy Portfolios when I was constructing mine: https://tinyurl.com/y7csl5ym

Yes. Good. It is even more important to track against benchmarks going forward. I tpically use my home-made benchmark and also the All Country World Index (ACWI). The benchmark(s) and the portfolio have to be compared on a total return basis, not on a nominal (sans dividends) basis.

 

[RunningBum]

So why does one need to assess the performance of the equity part of Wellington or Wellesley? Why not just assess the overall performance? Vanguard's site shows the benchmark they compare the fund against, or you could create your own benchmark.

 

[MRSPOCK]

VWIAX, Long-term Gov't bonds , FNDF, CASH 30/30/30/10

 

[TexasPE]

VSMGX for us

100% VSMGX
60/40, self-balancing.
SS + pension covers our expenses

 

[samcat]

You can google "marotta gone fishing portfolio". This is a fee-only financial planner that offers-up specific funds based on where your assets already are. So he (actually "they" offer up...it's a family business) a portfolio that would be easy to construct if you were a Vanguard customer, if you were a Fidelity customer, etc.

My husband and I took a class from George Marotta (I'm assuming the father) way back in 1989. We weren't even engaged yet! 30 years later and we have never had any fights about money.

 

[ArmchairMillionaire23]

This is a followup of another thread I started last year ... "How many totally manage their own nest egg??"

For those who self-manage (do not use a FA service at all), what funds (or other investments) do you have your retirement nest egg invested in?

I am curious since, Vanguard and Fidelity Index funds seem to be highly popular. I am also curious about which index funds folks pick, and why.

Thanks.

As you can tell by my screen name, one of my favorite retirement planning books is The Armchair Millionaire by Lewis Schiff & Douglas Gerlach.
My previous employer switched our 401(k) into Vanguard right about the time I read that book so I set up my Vanguard account in accordance with the "Armchair Millionaire" portfolio which was:

33% Vanguard 500 Index Fund
33% Vanguard Small-Cap Index Fund
and 33% Vanguard International Growth Fund
(these were the funds available in my plan that were the closest match to the ideal Armchair Millionaire portfolio)

I kept it invested like that (100% stocks) for over 15 years. Then, as I'm getting closer to retiring, I've been adding Vanguard bond funds into the mix. For the next few years I switched to:

25% Vanguard Institutional Index Fund Institutional Shares
25% Vanguard Small-Cap Index Fund Institutional Shares
25% Vanguard International Growth Fund Admiral Shares
and 25% Vanguard Total Bond Market Index Fund Institutional Shares

(The institutional shares and Institutional Index Fund changes were from Vanguard. As my accounts increased in value I became eligible for and moved into lower-cost index funds)

At the beginning of 2020 I got to the point where I was about 5 years out from when I'd like to retire so according to my IPS (Investment Policy Statement) I switched it to:

20% Vanguard Institutional Index Fund Institutional Shares
20% Vanguard Small-Cap Index Fund Institutional Shares
20% Vanguard International Growth Fund Admiral Shares
and 40% Vanguard Total Bond Market Index Fund Institutional Shares for a 60/40 stock/bond mix.

That's what worked for me. Everything seems to be going to my plan from 20 years ago and I'm hoping to retire either shortly after my 55th B-day or January 1st of that year.

 

[The HalfBreed]

As one can see, the results are all over the map.
Some with a simple 3 fund portfolio, and others, with as many as 13+ funds.

To each their own I say. I've been retired since 2012, just turned 65.

I try to keep it simple, being mostly in the Federal Thrift Savings Plan
(60% TSP)

80% C fund
10% International fund
10% Small Cap fund.

Otherwise, The rest (~ 20%) is in Wellesley ROTH IRA
and Wellington taxable Fund (10%)
5% in taxable Dodge & Cox International (will dump soon)

plus 200K cash holdings in MM and Hi yield online savings accounts (~1%)

I'll address permanent issues when in 3-5 years when I turn 69'ish

 

[audreyh1]

After retired 21 years and self managed investments all that time, I can say simpler is better, IMO. Wish I’d started out way simpler.

Plus think how you want things to be when you are 85+ and no longer able to manage a complex portfolio?

 

[atmsmshr]

While working, put as much into Fidelity 401k as lifestyle would permit. Always a broad stock index fund. Mostly S&P500, and nearly 100% stocks until the end. Company match was NEE. Throttled back to a more balanced portfolio 18 months before retiring - and was 33/66 split NEE / Intermediate Treasuries (FUAMX) during IRA rollover last January.

Content this year to harvest capital gains from NEE (and the next few years). Looking for a 2021 correction to start an upward sloping glide path and buy back into S&P500/midcap/REIT index from intermediate treasury bond fund.

 

[OldShooter]

So why does one need to assess the performance of the equity part of Wellington or Wellesley? Why not just assess the overall performance? Vanguard's site shows the benchmark they compare the fund against, or you could create your own benchmark.

Sorry to be slow to answer. I thought I answered the day after you posted but apparently forgot to push the "Submit" button after editing. Try again:

There's probably little need to worry about Wellington or Wellesley and no need to worry about blended funds where the equity portion is indexed.

Probably the worst case where "assess overall performance" doesn’t work is with target date funds. The reason is that their AA varies all over the map. A target date fund that is heavy on equities might look good if the manager was lucky and might look terrible if he was not. No real way to tell that by comparing to other target date funds.

In general, I call this the "Kool-Aid problem." When the red and the green are poured into the same glass, it is pretty hard to be sure where the resulting color and flavor came from.

Re creating a benchmark, it is do-able but getting suitable components and getting good total return numbers would be a pain and you still have the Kool-Aid problem. Good equity performance and a conservative bond portfolio might look exactly the same as lousy equity results and a bond portfolio stuffed with junk.

I have never made a blanket recommendation against blended funds, though. The good ones like Wellington and Wellesley are very suitable for investors who want their AAs to be on autopilot. What I have said is that I will never buy a blended fund because I always want to be able to easily look in the box.

The same problem arises when looking at the overall performance of a brokerage account with both equities and fixed income. The performance numbers on the statements tell you nothing. I am on the investment committee of a nonprofit and recently maneuvered the FA into splitting our biggest account into two so we could see the equity performance and the bond performance separately. I'm already seeing signs that he is a little more conscious of how his performance compares to equity benchmarks like the ACWI. That's good. I really laughed (internally) at our last meeting when he justified a trade from one fund to another "because the fees are lower."

 

[meleana]

I use TRowe Price. No index funds just a mix of stock and bond funds with a little international and Treasury Money Market.

In my brokerage there I have ETF’s, other company mutual funds and one Fidelity fund and Vanguard Short Term Limited

 

[RunningBum]

Good equity performance and a conservative bond portfolio might look exactly the same as lousy equity results and a bond portfolio stuffed with junk.

That part in particular makes some sense to me. A fund might try to make up for bad equity performance with junk bonds, making for a more volatile and perhaps risky fund.

 

[OldShooter]

That part in particular makes some sense to me. A fund might try to make up for bad equity performance with junk bonds, making for a more volatile and perhaps risky fund.

Oh, the risk is not speculative at all. Check out this real-world example: https://www.reuters.com/article/us-...ers-on-risky-path-to-retirement-idUSKBN1GH1SI In this case Fido made up for bad equity performance by taking unbelievable risks.

One of the more interesting things about Fido's malfeasance is that it took four years for their customers to notice. Nobody was looking in the box! IMO benchmarking is about understanding and explaining results, good or bad. This is probably more true on the bond side, but as in this case if equities are outperforming it's important to know the reasons.

 

[Koolau]

I use boring index funds from Vanguard. DW has Wellesley and what used to be American funds. My speculative equity holding is my old Megacorp stock that I took with me when I left (dance with the girl you came with - or was it something about the mule you rode in on - wait, no.) I've sold a bunch of it in the past 15 years - my version of rebalancing - but it just keeps becoming a larger portion of my port. Good news/bad news?

Still, I keep my equities at less than 35%. The rest is in a fairly esoteric mix of more cash-like instruments: I-bonds, SPDAs (called something else now), GIF, cash value insurance , etc. Then there are PMs in a bank box and the remainder assets of a small business.

I don't spend much time "managing" my port. Sounds like w*rk! I THINK I've got some decent diversity with relatively overall low risk. I also depend to some extent on having "more than I need" so no longer need to swing for the fences. I sense that some folks will die unhappy if they leave any money not earning its keep. For me, if there's some left over when I leave, I'm basically happy. YMMV

 

[fritz]

For those who self-manage their nest egg - what funds do you use??

The majority of our nest egg is in two Vanguard funds: Wellesley and Wellington

OldShooter will be along shortly to explain the problem with my choices.

IRA - Big fan of Wellington and Wellesley also - keep 50/50 Wel/Wels in Rollover IRA for 50/50 stock/bond mix with no maintenance needed (rebalancing).


Roth - Wellington

Taxable account - Tax Managed Capital Apr. and Tax Managed Balanced. Most all dividends are qualified (muni's are not taxed federally, but are added back for taxing SS), and they throw off zero capital gains (so far). This is long term leave behind money - hopefully..


Retired early 58/57 (11 years now) and this portfolio is for DW who has zero interest in managing money. Told her when I go "Leave it alone, and don't let anyone change it".

 

[Davidz247]

Big Gamble

Over the years I have had various mix of funds and individual stocks. About 10yrs ago I transitioned to all all stocks.....80% FANG. March 2020 I made a 100%, 1m+ bet on Amazon. I plan on keeping this single stock gamble through 2nd quarter 2021 and then likely rediversify. Big gambel=Big rewards.....Remember the rule of 72.

 

[chassis]

Totally self manage 100% of my (our) net worth. Have done this for 30 years, and expect to continue this way.

Approx 45% of NW in Fidelity and Morgan Stanley large cap growth funds.
Approx 15% in cash
Balance in US equities, in other words, shares of stock positioned relatively aggressively.

 

[MasterBlaster]

From that, you really only need two or possibly just one equity fund. Our one-fund choice is VTWAX, which holds all the tradeable stocks in the world on a cap-weighted basis. That gives us roughly 45% international holdings.

There is an issue with the one-fund VTWAX approach. Since VTWAX foreign holdings are less than 50 PerCent of the total, That fund will not report foreign taxes paid (Box 7 on your 1099 form) even though they may be substantial.

Therefore you may not be eligible for getting credit on all those foreign taxes you paid using the foreign tax credit. If everything is in VTWAX the hit to you could be substantial.

However, should you instead have separate standalone domestic and foreign index funds, then the foreign fund would indeed report foreign taxes paid and you could get credit for them on your taxes.

 

[OldShooter]

There is an issue with the one-fund VTWAX approach. Since VTWAX foreign holdings are less than 50 PerCent of the total, That fund will not report foreign taxes paid (Box 7 on your 1099 form) even though they may be substantial.

Therefore you may not be eligible for getting credit on all those foreign taxes you paid using the foreign tax credit. If everything is in VTWAX the hit to you could be substantial.

However, should you instead have separate standalone domestic and foreign index funds, then the foreign fund would indeed report foreign taxes paid and you could get credit for them on your taxes.

Thank you. Yes, the foreign taxes can be a factor. I tend to forget that point because at this stage of life almost all of our assets and all of our VTWAX is in tax-sheltered accounts. But for those where the foreign tax situation is an issue/as you suggest, something like 55% VTSMX/45% VGTSX or similar should be an almost exact analog of VTWAX. Probably every year or three one should check/adjust the percentages but that certainly wouldn't be burdensome.

 

[LXEX55]

I have a traditional IRA composed of 2/3 Wellesley and 1/3 Wellington. That's it.

 

[psh84]

I will retire at 60 in 2022.

For now, I'm 82% in S&P 500 index funds split between TSP-C and Vanguard VTSAX/VTI. The 18% in fixed income is split between TSP-F, G, and Vanguard VBTLX/BND.

By my retirement date, I'll shift to ~75% VTSAX/VTI and the rest in TSP-F, G, and VBTLX/BND. I'll keep ~2 years of expenses in TSP-F and VBTLX/BND, 2 years in TSP-G and VMFXX, and move another year into VMFXX for monthly cash flow.

I anticipate moving fully out of TSP because of the greater control in managing transactions with Vanguard, although it will be a shame to give up TSP-G. I had thought about transferring a year's worth of $ into TSP-G every Fall, but TSP uses an archaic paper-process to move money in, and they currently split all withdrawals across all funds in the account.

As for ETF vs. mutual fund at Vanguard, when buying odd amounts, it's easy to put it into the mutual fund, then convert the full amount to ETF shares at no charge. Just takes a phone call to Vanguard to do that. I like the control I have with limit orders on ETFs when selling.

 

[WyomingLife]

I anticipate moving fully out of TSP because of the greater control in managing transactions with Vanguard, although it will be a shame to give up TSP-G. I had thought about transferring a year's worth of $ into TSP-G every Fall, but TSP uses an archaic paper-process to move money in, and they currently split all withdrawals across all funds in the account.

Thank you very much for this insight.

DW has been sitting on her TSP account for decades (she left federal service long ago). Everything else we have is with Vanguard.

Can you point me to a good source for information about the pros and cons of carrying a TSP into retirement? All things considered, I'd prefer to have everything with Vanguard.

 

[psh84]

Here's an old one... https://www.bogleheads.org/forum/viewtopic.php?t=191244

 

[Lawrence of Suburbia]

Vanguard Wellesley 60% (current income, from dividends only)
Vanguard Target Retirement 2015 18% (long term growth)
Dodge & Cox Balanced 6% (long term growth)
TIAA-CREF Guaranteed Retirement Account (3.5% annuity) 10%
Vanguard Prime Money Market 6% (cash reserve)

I sleep very well at night.