Aggressive portfolio diversification; VNQ vs VTSAX vs VMMXX;

[YoungStache]

So I'm looking to diversify my assets and basically just not keep too much money in cash as it loses to inflation.

I have 500K between VTSAX and VTIAX (60/40), have 100% equity in a rental duplex worth about 160K, and about 400K cash just sitting, but I estimate that I'll need to pay around 120K to the IRS come April.

I am thinking about putting the 120K for estimated taxes in VMRXX to collect 2% dividends, and liquidate come April to pay taxes.

For the rest of the cash, I'm thinking about investing 130K and holding the rest (about 150K for buying power), but should I put it in VTSAX or VNQ? It looks like VNQ is far from it's all time high on July 2016 at around $92. I could invest in more real estate rentals but I am starting a new job soon that will take up a lot of time, and I live on the West Coast and don't want any extra headaches working with out-of-state rentals for the time being. The next recession though I will be buying aggressively. I plan on refinancing the duplex I have in about 5-6 months and using leverage.

I am starting a new job, and will max out the 403(b) and 457 annually, which will be 37000 a year in index funds. After that, I should be able to save 70,000 ballpark annually after expenses. I am a bit hesitant to invest aggressively right now due to it being a 10-year bull market, so I am looking for the best option. I will have good cashflow though so I can work more overtime and buy during dips.

What do you think? VNQ vs VTSAX? other options?

[MustacheAndaHalf]

Not sure if you've heard the old joke: "Economists have predicted 9 of the past 5 recessions."  Meaning even the experts can get the timing correct.

If you're paying a $120k tax bill, I'm assuming your income is high enough that you should look into tax-exempt bond funds.  I've actually read "The Bond Book" mentioned in your other thread, but I came away thinking bonds are a bit too complicated for me to get right every time.  Does it have a sinking fund?  Does a government guarantee the bond?  And many other provisions I'd rather not decipher.  So instead I prefer to stick with bond funds.  The reasonable expense ratio means I don't have to read the fine print of bond offerings, and is also probably a better approach than trying to avoid tricky clauses myself.

Once you have US equities, international equities, and bonds I'd argue that's all the diversification you need.  Vanguard's Target Retirement funds also contain international bonds, so consider going with their advice.

[YoungStache]

So basically put the extra cash into some VBTLX in a taxable account, and that means the bond dividends are tax-free? It says 3.21% dividends, are they pretty stable? How does the holding period work or affect dividends?

What about REITS? Any reason I shouldn't go 100% stocks? I'm 28. Also thinking about putting in all my cash into VMRXX to protect vs inflation with the interest, while waiting for good "opportunities" (market dips, real estate property, business opportunities).

I had a good year with capital gains, so the 120K tax bill is an outlier, but I just got a new job so my income will be good.

Not sure if you've heard the old joke: "Economists have predicted 9 of the past 5 recessions."  Meaning even the experts can get the timing correct.

If you're paying a $120k tax bill, I'm assuming your income is high enough that you should look into tax-exempt bond funds.  I've actually read "The Bond Book" mentioned in your other thread, but I came away thinking bonds are a bit too complicated for me to get right every time.  Does it have a sinking fund?  Does a government guarantee the bond?  And many other provisions I'd rather not decipher.  So instead I prefer to stick with bond funds.  The reasonable expense ratio means I don't have to read the fine print of bond offerings, and is also probably a better approach than trying to avoid tricky clauses myself.

Once you have US equities, international equities, and bonds I'd argue that's all the diversification you need.  Vanguard's Target Retirement funds also contain international bonds, so consider going with their advice.

[YoungStache]

I ended up putting 130K into VTSAX and the 120K expected for taxes into VMMXX.