Inheritance and 3 fund portfolio

[bltkmt]

My mother recently passed and I am about to inherit about $1 million. Prior to the inheritance, I have approximately $3 million of securities at Raymond James being managed by prior work colleagues at a fair fee rate. I would like to take this new $1 million into my Vanguard brokerage account and invest it fairly simply using a form of the 3 fund portfolio. My age is 61 and DW is turning 60 soon. My other portfolio had approximately 60/40 asset mix.

Looking for fund suggestions/mix that are available at Vanguard. Thanks.

 

[qwerty3656]

Here is a good resource, I'm sure you can find what you are looking for.

https://www.bogleheads.org/wiki/Lazy_portfolios

 

[bltkmt]

Here is a good resource, I'm sure you can find what you are looking for.

https://www.bogleheads.org/wiki/Lazy_portfolios

Thank you.

 

[pb4uski]

Vanguard Wellington (VWELX) is 65/34/1, pretty close to the 60/40 that you desire, and would be a good one-stop candidate.

https://investor.vanguard.com/investment-products/mutual-funds/profile/vwelx#portfolio-composition

 

[bltkmt]

Vanguard Wellington (VWELX) is 65/34/1 and would be a good one-stop candidate.

https://investor.vanguard.com/investment-products/mutual-funds/profile/vwelx#portfolio-composition

I own that currently. It throws off a lot of taxable income distributions however.

 

[pb4uski]

^^^ That's a new constraint. You could consider Berkshire Hathaway (BRK.B or 2 shares of BRK.A at $541,160/share)

Or if you like the investments in the EJ account just mirror some of those.

 

[target2019]

You should consider tax optimization before investing this $1m in addition to another 3m.

 

[pb4uski]

^^^ Fair point but from what the OP wrote it appears that both are taxable accounts. If the $3m is a mix of taxable, tax-deferred and tax-free then I agree.

 

[Stormy Kromer]

I am sorry for your loss.

I also have a portfolio with a FA that I started 30 years ago, about 15 years ago I started an account at Vanguard and invested all new money there.

For the equity portion in my taxable account I like VTCLX, their tax managed fund. I also like VTSA, their Total stock fund. Both perform comparably to the SP 500 index fund but with less taxable dividends each year.

For bond exposure I use VBIAX, their balanced fund. (If I had it over I wouldn't use a balanced fund for my bond exposure, I'd have a dedicated bond fund instead. It gives you more direct control if you keep equities and bonds separate.) The balanced fund does kick out a lot of taxable dividends each year.

For cash, Vanguard's Federal Money Market is yielding about 5%. Not bad at all.

You have good options at Vanguard for a very low cost.

 

[bltkmt]

^^^ Fair point but from what the OP wrote it appears that both are taxable accounts. If the $3m is a mix of taxable, tax-deferred and tax-free then I agree.

Good point. The $3 million is approximately 50/50 taxable vs pre-tax.

 

[bltkmt]

You should consider tax optimization before investing this $1m in addition to another 3m.

Could you elaborate a bit?

 

[target2019]

Could you elaborate a bit?

When I saw your reference to 3-fund portfolio, which includes a taxable intermediate bond fund, I thought it worth mentioning taxes. This link explains tax efficiency of various asset classes https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

Another thread here that will help you is this one:
https://www.early-retirement.org/forums/f28/tax-efficient-asset-allocation-120459.html

If it were me, I would analyze the results I'm getting from the FA's 60/40 approach. That results in x taxes per year. My self-management effort will result in y taxes. I have to be careful about stepping into the next tax bracket. For that evaluation, I speak with my tax CPA after running numbers.

VTCLX (Stormy Kromer's post) or similar fund(s) would be the simplest approach. That would set you up with 70% equity investments overall. That new level of risk is something to contemplate.

If you don't want 70% equity, then think of muni bonds to keep you at 60%.

Just some musings from me. YMMV.

 

[RetireBy90]

I recently helped my brother set up a simple AA, split between S&P 500 (SPY) and Russel 2000 (IWM) and an intermediate treasury fund.

 

[bltkmt]

For bond exposure I use VBIAX, their balanced fund. (If I had it over I wouldn't use a balanced fund for my bond exposure, I'd have a dedicated bond fund instead. It gives you more direct control if you keep equities and bonds separate.) The balanced fund does kick out a lot of taxable dividends each year.

Thank you. Which Vanguard bond fund would you choose in hindsight?

 

[Stormy Kromer]

VBTLX Vanguard Total Bond Market Index Fund.

 

[NanoSour]

I like the VBIAX for a 60/40 portfolio. I'll sacrifice a bit of tax efficiency for account simplicity.

I am curious about your "fair fee" and how well you RJ 60/40 account has done if you care to share.

 

[bltkmt]

I am curious about your "fair fee" and how well you RJ 60/40 account has done if you care to share.

Fee is 40 basis points, and the account was up about 13% in 2023.