Mr. CalFi and I would very much appreciate suggestions for simplifying our portfolio down to mostly or all index so we can manage it better. Up until this past year we were implementing pro bono suggestions from a family friend who is an independent investment advisor, but the suggestions have been managed funds. We have made some progress, but would very much appreciate a critique and suggestions from savvy investor Mustachians.
Our overall goal is to reach FI as soon as possible so we can work by choice. At a current savings rate of around 62% we are hoping for this within 7-9 years.
Below please find our portfolio snapshot.
We still have some active funds but are committed to exchanging these for index wherever it makes sense.
We have been with Schwab for eons, and at this point the only problem we're finding in our quest to simplify to index is the sketchy history of their total bond index fund (SWLBX). If we can find a solution without eating fees for VBMFX/BND or VBIIX/BIV, we'd be happy staying with Schwab.
Safety Net: $25k in cash, currently in Schwab High Yield Savings. We have additional cash across both taxable and tax-advantaged accounts. The plan is to fully invest these latter funds ASAP so that the Safety Net represents the 5% cash in our desired AA.
Debt: None
Tax Filing Status: MFJ
Tax Rate: 25% Fed, 9.3% State
State: CA
Ages: Mr. CalFI 53, Yours Truly 47
Desired Asset Allocation: 75/20/5 (currently have a mix of 80/20 and 70/30). Open to feedback on AA given our ages and goals.
Desired International Allocation: Negotiable
Current Portfolio Size: Around $350k
Current Retirement Assets
Taxable
29% Cash (currently sweeping all but $5k into SWTSX; up for another round)
54% Schwab Total Stock Market Index (SWTSX). Net ER 0.09%
17% Schwab S&P 500 Index (SWPPX). Net ER 0.09%
His 401k at Dimensional. Net ERs per company plan. 4% company match.
34% US Core Equity 1 (DFEOX). Net ER 0.19
28% World Ex US Core Equity (DFWIX). Net ER 0.47
18% Investment Grade Bond (DFAPX). Net ER 0.22
12% US Small Cap Value (DFSVX). Net ER 0.52
7% Real Estate Securities (DFREX). Net ER 0.18
1% Short Duration Real Return Portfolio Bond (DFAIX). Net ER 0.24
His Roth IRA at Schwab
45% Schwab Total Stock Market Index (SWTSX). Net ER 0.09%
14% Parnassus Endeavor Fund (PARWX). Net ER 0.95%
9% Doubleline Total Return Bond Fund Class N (DLTNX). Net ER 0.72%
8% Schwab Health Care Fund (SWHFX). Net ER 0.79%
8% Pimco Income CL D (PONDX). Net ER 0.79%
6% Tweedy Browne Global Value Fund (TBGVX). Net ER 1.37%
10% Cash to be invested
His tIRA at Schwab
No holdings – awaiting partial recharacterization of 2015 Roth IRA contribution and will serve as rollover for 401k upon retirement
Her 401k at Prudential
70% Vanguard 500 Index Adm (VFIAX). Net ER 0.05%.
30% Vanguard Intermediate-Term Bond Index Adm (VBILX). Net ER 0.10%
Her Roth IRA at Schwab
42% Schwab Total Stock Market Index (SWTSX). Net ER 0.09%
19% Parnassus Endeavor Fund (PARWX). Net ER 0.95%
9% Doubleline Total Return Bond Fund Class N (DLTNX). Net ER 0.72%
5% Schwab Health Care Fund (SWHFX). Net ER 0.79%
7% Pimco Income CL D (PONDX). Net ER 0.79%
3% Tweedy Browne Global Value Fund (TBGVX). Net ER 1.37%
15% Cash to be invested
Her tIRA at Schwab
80% Schwab Total Stock Market Index (SWTSX). Net ER 0.09%
20% Doubleline Total Return Bond Fund Class N (DLTNX). Net ER 0.72%
His HSA (family) at TD Ameritrade (via HSA Bank). 30% employer contribution.
100% Vanguard Total Stock Market Index ETF (VTI) Net ER 0.05%
Total Percentages of Current Portfolio
Taxable account @ Schwab 18%
His 401k @ Dimensional 15%
His Roth IRA @ Schwab 39%
His tIRA @ Schwab 0%
Her 401k @ Prudential 2%
Her Roth IRA @ Schwab 23%
Her tIRA @ Schwab 1%
His HSA (family) @ TD Ameritrade (via HSA Bank) 2%
TOTAL = 100%
Contributions
New Annual Contributions
$24k to his 401k. 4% employer match. Fully funded for 2016.
$18k to her 401k. No employer match. Will be fully funded by end of 2016.
$6,500 to his Roth IRA. Fully funded for 2016. Will not qualify for tIRA deduction, partial or full.
$5,500 to her Roth IRA. Fully funded for 2016. Will not qualify for tIRA deduction, partial or full.
$6750 to HSA (family). 30% employer match. Will be fully funded by end of 2016.
$6,600 to taxable (conservative estimate)
Available Funds
Funds available in His 401k @ Dimensional
US Core Equity 1 (DFEOX). Net ER 0.19
World Ex US Core Equity (DFWIX). Net ER 0.47
Investment Grade Bond (DFAPX). Net ER 0.22
US Small Cap Value (DFSVX). Net ER 0.52
Real Estate Securities (DFREX). Net ER 0.18
Short Duration Real Return Portfolio Bond (DFAIX). Net ER 0.24
Funds available in His Roth IRA @ Schwab
All available/appropriate funds at Schwab
Funds available in His tIRA @ Schwab
All available/appropriate funds at Schwab
Funds available in Her 401k @ Prudential
Fixed Income - Intermediate Bond:
Vanguard Interm-Term Bond Index Adm (VBILX) ER 0.10%
Prudential Total Return Bond Z (PDBZX) ER 0.62%
Fixed Income - Multisector:
PIMCO Income A (PONAX) ER 0.85%
Fixed Income - Global/International:
Templeton Global Bond A (TPINX) ER 0.91%
Fixed Income - Specialty:
PIMCO Real Return Instl (PRRIX) ER 0.50%
Large Cap Stock - Value
Hotchkis & Wiley Value Opps A (HWAAX) ER 1.22%
Large Cap Stock - Blend:
Vanguard 500 Index Admiral (VFIAX) ER 0.05%
Large Cap Stock - Growth:
ClearBridge Aggressive Growth I (SAGYX) ER 0.82%
Mid Cap Stock - Value:
JHancock Disciplined Value Mid Cap R6 (JVMRX) ER 0.77%
Mid Cap Stock - Blend:
Vanguard Mid Cap Index Adm (VIMAX) ER 0.09%
Mid Cap Stock - Growth:
Hartford MidCap Y (HMDYX) ER 0.76%
Small Cap Stock - Value:
Victory Integrity Small-Cap Value Y (VSVIX) ER 1.20%
Small Cap Stock - Blend:
Vanguard Small Cap Index Adm (VSMAX) ER 0.09%
Small Cap Stock - Growth:
AB Small Cap Growth (QUAIX) ER 0.91%
International Stock - Blend:
Vanguard Total Intl Stock Index Admiral (VTIAX) ER 0.12%
International Stock - Growth:
American Funds Europacific Growth R5 (RERFX) ER 0.53%
Oppenheimer International Small-Mid Co (OSCIX) ER 0.77%
International Stock - Emerging Markets:
Oppenheimer Developing Markets Y (ODVYX) ER 1.06%
Specialty - Natural Resources:
Dreyfus Natural Resources (DLDRX) ER 1.17%
Specialty - Real Estate:
Fidelity Advisor Real Estate (FHEIX) ER 0.85%
Funds available in Her Roth IRA @ Schwab
All available/appropriate funds at Schwab
Funds available in Her tIRA @ Schwab
All available/appropriate funds at Schwab
Funds available in His HSA (family) @ TD Ameritrade
All available/appropriate funds at TD Ameritrade
Questions:
1. We are cash heavy and need to bump up the bond side. In keeping with our simplification and lower-fees goal, we would like to add a solid bond index fund instead of increasing the higher fee/actively managed bond funds we already have. After that, we could work on systematically exchanging the leftover active bond funds for index. Our questions are what and where. Given our preference to be both tax efficient and simple, in taxable we've been holding stock index exclusively, even though we know muni’s and TIPS are an option there. In tax-advantaged, we have limited access to Vanguard index - the main 401k is at Dimensional, and our IRAs are currently at Schwab. Given that we can't do anything about the 401k except look into paring it down (please see question 2 below), it seems best to look at increasing bond index holdings within the IRAs - but then we face continued mixed reviews on Schwab Total Bond (SWLBX) and fees for VBMFX/BND or VBIIX/BIV. Of course, we could move the IRAs to Vanguard, but might there be another option? Trying to adhere to KISS.
2. For those familiar with Dimensional, any suggestions for the 401k? Leave it, pare it down - and if pare it down, how might you go about that?
3. Any other comments on our portfolio vis a vis our goals?
Thank you so much for your time. Much appreciated!
