Author Topic: balanced 3 fund or admiral shares of VTSAX?  (Read 1816 times)

trailrated

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balanced 3 fund or admiral shares of VTSAX?
« on: May 21, 2014, 05:41:09 PM »
A friend asked the question and I was not sure how to answer.

They said they will have $10,000 to invest by the end of the year and wanted to know if they should go into a standard 3 fund (bogleheads approach) according to their AA or put it all into VTSAX for admiral shares with the lower ER. They are in their mid 20's so the risk of 100% in stock is not a big deal for them at this point in time.

Thanks!

Mustache Police

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Re: balanced 3 fund or admiral shares of VTSAX?
« Reply #1 on: May 21, 2014, 05:57:20 PM »
As long as 100% equity is in line with their risk tolerance, meaning that they will not panic and sell if their assets lose 50% of their value in a short time frame, I would go with VTSAX.

A third option would be to go with a three fund portfolio of commission free vanguard ETFs from a brokerage like TD Ameritrade.  Long term there will be no difference between VTSAX and VTI either in expense ratio or performance.

MP

Grateful Stache

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Re: balanced 3 fund or admiral shares of VTSAX?
« Reply #2 on: May 21, 2014, 06:01:17 PM »
I'm sure that others will weigh in here, but here are my two cents.

I would say it depends on their willingness to re-balance and otherwise maintain their 3-fund. If they will be contributing more in the future, then they will have to re-examine the proportions of each fund with each purchase. To some folks this is no big deal (I think it's fun!), to others it's a pain in the ass. If they are of the latter, then a single fund might be the best choice for them.   

Since they are young, another approach may be the two-fund approach (total domestic + total international), or even a Target Date fund. These might give them a little more diversity. 

Cheers.

LowER

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Re: balanced 3 fund or admiral shares of VTSAX?
« Reply #3 on: May 21, 2014, 06:09:47 PM »
I think either option is great.  I would weakly favor the VTSAX because of my particular circumstances that allow for a bit greater risk than others might tolerate, i.e.; I could lose 50% and not sweat it much.  If they are comfortable with that possibility, then VTSAX makes sense, but again, the 3-fund is an excellent option too.  The difference in basis points/costs would be quite small.