Porfolio Make-Over Guidance

[redduck]

I have recently decreased the number of funds and ETF’s that I own.
Below is what I am left with. Any suggestions of what makes sense to add or eliminate?
I do need to have enough mutual funds/etf’s to make this interesting for me. Not included in this list are 24 dividend stocks (in a portfolio of their own).

Here are the investments. Please hold your applause until all have been read. Thank you.

EQUITY FUNDS/ETF:

1. VEU: Van. All-World-exUS fund

2. VFX: Van. Extended Market (midcap and small cap-US fund)

3. VGELX: Van. Energy Fund (Admiral) (will sell if oil prices ever increase)

4. VGHAX: Van. Health Care Fund (Admiral)

5. XLU: Utility ETF (held in my dividend portfolio)

6. VUG: Van Growth ETF


BALANCED FUNDS


7. VWENX: Wellington (Admiral)

8. VWINX: Wellesley (largest holding)

9. OAKBX: Oakmark Equity and Income Fund



BOND FUNDS/ETF’s

10. TIP TIP

11. VFIIX Van GNMA

12. VWIUX Van Intermediate Tax-Exempt Admiral (2nd large holding)

13. VFSUX Van Short-Term Invest Grade Admiral (3rd large holding)

 

[Gotadimple]

And your asset allocation is what? And are these all in one account or split among brokerage, Roth, 401k?

You can add a gazillion more funds if you want to make it interesting, but will it fit in the asset allocation, and are you keeping your costs down?

- Rita

 

[redduck]

And your asset allocation is what? And are these all in one account or split among brokerage, Roth, 401k?

You can add a gazillion more funds if you want to make it interesting, but will it fit in the asset allocation, and are you keeping your costs down?

- Rita

1. At the moment the asset allocation is in flux because I have bunch of cash from the selling of assets.

2. The remaining assets are in four accounts. Two tax-advantaged, two not.

3. Yes, according to Vanguard, the costs are way down.

4. Not interested in a gazillion assets; it become less interesting and more confusing as I got older (and less smart).

 

[Murf2]

I don't know anything really. I have a mix pretty similar to yours. Lately, I have been thinking a simple 2 or 3 fund portfolio would be better for me. Have you given​ any thought to putting everything except your singles into Total Stock & Total Bond? It doesn't get any simpler.

Murf

 

[redduck]

I don't know anything really. I have a mix pretty similar to yours. Lately, I have been thinking a simple 2 or 3 fund portfolio would be better for me. Have you given​ any thought to putting everything except your singles into Total Stock & Total Bond? It doesn't get any simpler.

Murf

Actually, I have, but that's for a few years down the line. Even then, I probably need about four funds. I am aware that there are four fund portfolios are popular.

 

[Gotadimple]

1. At the moment the asset allocation is in flux because I have bunch of cash from the selling of assets.

2. The remaining assets are in four accounts. Two tax-advantaged, two not.

3. Yes, according to Vanguard, the costs are way down.

4. Not interested in a gazillion assets; it become less interesting and more confusing as I got older (and less smart).

So, do you have a perspective on what you would like your AA to be? 60/40 stocks/bonds? 50/50? You get 50/50 with Wellsley/Wellington. Adding or subtracting recommendations depend on how you want to slice and dice. Here's mine:

Overall 55/41/4 (stocks/bonds/cash), all are either MF Index or ETF funds. One brokerage, Traditional IRA, Roth IRA, but:

Equities is 45% US Stocks Large Cap 35% Small Cap 10%
International 10% World International 3%, Asia Pacific 3%, Emerging Stock 2%, World Small Cap 2%

Bonds is 41% Core Bonds/Treasuries 13.5% Hi Yield 2%, TIPS 7%, Short Term 18.5%
Core Bonds 5.6% Intermediate Treasuries, 7.9% Corporate
Hi Yield 2% one holding
TIPS 7% 2 holdings
Short Term 18.5% split evenly between Corporate Bonds and US Treasuries
Cash 4% split between paid dividends in sweep accounts 1% and 3% Hi Yield Savings

 

[redduck]

^^^
I am looking for an AA of 55/45. (stocks/bonds). I'm kind of sloppy with the cash thing. Before reorganizing my portfolio, I was 50/50 (stocks/bonds) and didn't include the cash.

I did slicing and dicing in my younger years. I didn't especially enjoy it and found (for me) that it didn't help improve my portfolio (hopefully, you are doing it better than I did it).

 

[RobLJ]

You might take a look at the Marketwatch Lazy Portfolios; one of them might work for you. Coffeehouse - Lazy Portfolios - MarketWatch.com
The Coffeehouse portfolio is pretty simple (7 Vanguard funds). I think the Bogle site also discusses these portfolios.


I've also been reducing, which was more difficult since DW had several rollover accounts and I was trying to keep each account somewhat balanced. I've consolidated them into 3 accounts and will combine two more to reduce her accounts to two rollover IRAs. In my own 403b I eliminated some stock and bond fund overlap, but I do want to keep the China and Pacific funds, as well as the biotech and general healthcare, even though these are smaller allocations.

^^^
I am looking for an AA of 55/45. (stocks/bonds). I'm kind of sloppy with the cash thing. Before reorganizing my portfolio, I was 50/50 (stocks/bonds) and didn't include the cash.

I did slicing and dicing in my younger years. I didn't especially enjoy it and found (for me) that it didn't help improve my portfolio (hopefully, you are doing it better than I did it).

 

[Sojourner]

Cash 4% split between paid dividends in sweep accounts 1% and 3% Hi Yield Savings

Would you mind sharing which bank (or brokerage or credit union, etc.) is giving you a 3% yield in a savings account? I looked just now and couldn't find a single one offering more than 1.2%.

 

[JOHNNIE36]

redduck, I am certainly not one to offer advice but have noticed two items of interest in your initial post. All of this is based on guidance I received from others on this forum:

1. I notice that in your balanced fund portfolio, you mention that your largest holding is Vanguard Wellesley VWINX. If that is the case, why not change to VWIAX Admiral fund for a lower expense ratio (minimum $50,000 investment).

I just googled Wellesley vs Wellington and all this was spelled out in detail.

EDITED: to eliminate my second response which had redduck's goal for stocks/bonds in reverse.

 

[OldShooter]

@redduck, you will get lots of advice here. A few thoughts from scanning your list:

• I'd ditch the sector funds. You have no way of knowing whether these will go up or down and no way of knowing whether they are the right sectors even if they happen to go up. Same comment on the growth fund. Just buy the total market funds and relax.
• Three balanced funds? Are they enough different to warrant having all three, including the relatively expensive OAKBX? Personally I prefer "pure" equity funds and to manage my AA myself. YMMV
• Unless you are working with tiny money, which I doubt, there is no reason to pay someone to manage TIPS. Just buy a ladder or whatever you want, sit back and relax. In general, IMO bond funds make sense only for short term money, like a short term govvie fund.
• Hopefully you have done the arithmetic on the tax exempt fund yield, non-tax-exempt alternatives, and your marginal tax rate.

You might take a look at the Marketwatch Lazy Portfolios; one of them might work for you. Coffeehouse - Lazy Portfolios - MarketWatch.com
The Coffeehouse portfolio is pretty simple (7 Vanguard funds). I think the Bogle site also discusses these portfolios. ...

+1 I have met Bill Schultheis, the author of the Coffeehouse Investor (The Coffeehouse Investor) and he is the real deal. Very thoughtful and very humble. It's hard for me to even believe that he was a Series 7 broker at one time. This thoughtful little book is worth a read, even for experienced investors. You will probably find yourself loaning it or recommending it to less experienced friends.

 

[redduck]

...1. I notice that in your balanced fund portfolio, you mention that your largest holding is Vanguard Wellesley VWINX. If that is the case, why not change to VWIAX Admiral fund for a lower expense ratio (minimum $50,000 investment).

A few years ago, I tried having Wellesley Index changed to Wellesley Admiral, but couldn't do it because I was with Schwab. I might have been able to do it with Schwab if I had a financial advisor connected to them, but, I don't. However, since you reminded me of this, I'll give Schwab a call next week as I will have a lot more money with them. Now, that I think about it, maybe it's Vanguard that I should call.

 

[redduck]

@redduck, you will get lots of advice here. A few thoughts from scanning your list:

• I'd ditch the sector funds. You have no way of knowing whether these will go up or down and no way of knowing whether they are the right sectors even if they happen to go up. Same comment on the growth fund. Just buy the total market funds and relax.

I know (or almost know) that the wise, prudent, efficient and effective thing to do is just be in the total market funds and be done with it. And, I'm heading in that directions--just not there yet.

• Three balanced funds? Are they enough different to warrant having all three, including the relatively expensive OAKBX? Personally I prefer "pure" equity funds and to manage my AA myself.

Darn, I was hoping nobody would notice that I had three balanced funds. Guess I will sell the OAKMARK fund (has the highest management fee).

Unless you are working with tiny money, which I doubt, there is no reason to pay someone to manage TIPS. Just buy a ladder or whatever you want, sit back and relax. In general, IMO bond funds make sense only for short term money, like a short term govvie fund.

The TIP fund (which I will be reducing) probably will stay. I have no idea how to do a ladder with bonds. This is a place where I'm willing to pay someone to do this for me.

Hopefully you have done the arithmetic on the tax exempt fund yield, non-tax-exempt alternatives, and your marginal tax rate.

I haven't done the arithmetic on this, but my CPA has. So, I do have some guidance concerning tax situations.

+1 I have met Bill Schultheis, the author of the Coffeehouse Investor (The Coffeehouse Investor) and he is the real deal. Very thoughtful and very humble. It's hard for me to even believe that he was a Series 7 broker at one time. This thoughtful little book is worth a read, even for experienced investors. You will probably find yourself loaning it or recommending it to less experienced friends.

I've heard about the Coffeehouse Investor for years. Thanks for the push. I'll get a copy. (I occasionally do read the blog).

 

[OldShooter]

... The TIP fund (which I will be reducing) probably will stay. I have no idea how to do a ladder with bonds. This is a place where I'm willing to pay someone to do this for me. ...

It's simple. You don't need help.

The basic theme of a ladder is to buy some bonds with staggered maturities, like one tranche maturing in a year, one in two years, etc. out as many years as you like. As the youngest tranche matures, take that money, keep as much as you need, and invest the rest out at the end of your current ladder. Thus moving the ladder forward a year.

The advantages are that your rate risk is mitigated and that you never lose any money because you never sell a bond -- unlike a bond fund, where you may well lose money.

Variations on the theme are used for expected future expenses like college tuition, buying a vacation home, buying a new car, or whatever. You can place lumps of cash wherever you want them in time.

In our case we bought TIPS in 2006 strictly as inflation insurance for our later retirement years. So we bought the longest we could, 2026, and the lowest coupon, 2%, to reduce reinvestment risk. So, no ladder. They have actually been a phenomenally good investment but that was not the point. We have enough money that only a bout of really high inflation could ruin our retirement, hence the TIPS as insurance.

YMMV, but don't be afraid of ladders. or black cats. Lots of info on the 'net, including better explanations than mine. https://www.fidelity.com/viewpoints/bond-ladder-strategy for example.

 

[redduck]

In our case we bought TIPS in 2006 strictly as inflation insurance for our later retirement years.
...YMMV, but don't be afraid of ladders. or black cats. Lots of info on the 'net, including better explanations than mine. https://www.fidelity.com/viewpoints/bond-ladder-strategy for example.

Geez, you're sending me all over the 'net. I just got back from Amazon (bought the book via Prime). Now, I'm gonna' do some reading at Fidelity.

It appears that I first bought TIPs (via a fund) in 2003.

 

[Blue Collar Guy]

Please become an active trader, i just learned my passive strategy is in danger if everyone indexes.

 

[OldShooter]

Geez, you're sending me all over the 'net. ...

Happy to be of service.

... I just learned my passive strategy is in danger if everyone indexes.

Chicken Little is alive and well, reincarnated as a huckster for the active management industry.

There will always be active management, just as there will always be casinos and lotteries. And for the same reason.

Plus, passive investors trade very little, so the active guys will always have most of the playpen in which to do their "price discovery" and to try to out-arbitrage each other.

Don't drink the Kool-Aid. There is no danger.

 

[JOHNNIE36]

A few years ago, I tried having Wellesley Index changed to Wellesley Admiral, but couldn't do it because I was with Schwab. I might have been able to do it with Schwab if I had a financial advisor connected to them, but, I don't. However, since you reminded me of this, I'll give Schwab a call next week as I will have a lot more money with them. Now, that I think about it, maybe it's Vanguard that I should call.

I talked to Vanguard a few days ago and a rep told me I should consider changing my Investor shares to the Admiral shares. Not a financial advisor but just a regular representative. I was in the midst of adding $$ to that fund anyway and then changing to Admiral. Thought it was great that the rep suggested it.

 

[Gotadimple]

Would you mind sharing which bank (or brokerage or credit union, etc.) is giving you a 3% yield in a savings account? I looked just now and couldn't find a single one offering more than 1.2%.

I did not say I was getting the yields you quoted, I said my 4% allocation in cash was divided as 1% of total assets from dividends and 3% of assets in high yield savings account.

Rita