Asset Allocation

[JSMustachian]

I was hoping to get some opinions on my asset allocation for all my investments. I am leaning very heavy in large cap because my 401k does not have many good options other than large cap funds. It does have VINIX, VSMPX, and VTIAX so my future contributions are going to those funds for my 401k.

I plan to use my IRA's and my wife's newly setup 401k to help balance it out. We both max out our 401k's and IRA's.

Here is my breakdown:

Large Cap:
American Growth- AGTHX (before I found out about low cost index funds)- $37,254.31 (Roth IRA)         
Vanguard Total Stock- VTSAX- $12,408.25 (Traditional IRA)
Vanguard Total Stock Institutional- VSMPX- $37,250.90 (401k)      
S&P 500 EFT- VOO   $674.58 (Taxable Vanguard Account)         
Vanguard Institutional Index- VINIX- $1,220.40 (401k)   
         
Mid Cap         
Vanguard Mid Cap Index- VIMSX- $5,335.92 (Roth IRA)
            
Small Cap      
Vanguard Small Cap Index- NAESX- $9,135.68 (Roth IRA)         
                     
Vanguard Healthcare Inv- VGHCX- $9,410.29 (Traditional IRA)
-I work for a healthcare company so I like owning a healthcare mutual fund and I've made excellent returns.      

Bonds      
Vanguard Long-Term Investment-Grade Inv- VWESX- $6,026.06

International
Vanguard Total Stock International- VTIAX- $986.36

Cash- $15,000.00 (Emergency Fund- 6 months expenses)

I was thinking of bumping up my international with my 401k by splitting it 50/50 on VTIAX and VINIX and splitting my wife's 401k 50/50 with NAESX and VIMSX for a few years. Does this sound like a good plan or should I stick more to the Vanguard S&P500 and Total Stock funds?

We are both 32 and plan to retire at 45 or 50 if everything goes according to plan.

Thank you
      

[FrugalFisherman10]

Percentages of total Portfolio would have been very helpful here

[JSMustachian]

Sorry about that. Here are percentages.

Large:74%
Mid:4%
Small:8%
Health:8%
Bond:5%
International:1%

I just started investing in international with my 401k which is why the percentage is so low.

[Radagast]

I was thinking of bumping up my international with my 401k by splitting it 50/50 on VTIAX and VINIX and splitting my wife's 401k 50/50 with NAESX and VIMSX for a few years. Does this sound like a good plan or should I stick more to the Vanguard S&P500 and Total Stock funds?

We are both 32 and plan to retire at 45 or 50 if everything goes according to plan.

Thank you

I like that plan more than what you currently have. Make sure you pick a broad allocation that includes all of your funds and accounts and stick with it. Sell anything that doesn't fit, like the American Growth fund. If you use 25% VINIX, 25% NAESX, 25% VTIAX, and 25% bonds (total bond or intermediate term government) across all accounts you will have Bernstein's "No-Brainer" portfolio which I think is a pretty decent choice.

[triangle]

Like @L.A.S. I like the simplicity and exposure provided through VTSAX as a core holding. Then add VOO or a some mid/small cap index in order to tilt between large/small as you see fit, but that addition(s) is not necessary. And be sure to include some VTIAX or some broad intentional fund in a smaller bucket to get exposure to growth in other parts of the world. 

I agree with the comment to not invest into a specific Healthcare index since you already have high exposure through your job and because healthcare (insurance) is a Washington D.C. pinata. But to contradict this statement somewhat, I might encourage you to allocate a small percentage of your savings towards investing into specific companies in the health space. Since you will have better first hand knowledge than the average investor you should be able to gain some small advantage and also better satisfy your desire to engage within your own industry. But I would not over do it, as you will only have more insight into external things which should have future value, and little-to-no insight about what is going on inside a publicly traded company.

[TomTX]

Way, way too complicated. Just dump it in VTSAX (or equivalent) and be done with it.

[Bicycle_B]

I am currently guessing that some international is an advantage.  Some of my own portfolio is in Vanguard VTMGX (Developed Markets Index, mostly European stocks) and VEMAX (Vanguard Emerging Markets Index).  My thought when making the investment was to balance over time between the two for my international portion, but possibly for convenience and nearly equal returns the VTIAX that you already have is better. 

However you do it, here's one person's thinking (if you can call it that) on international:
1. Balancing some international vs some domestic allows some benefit when US markets and international ones vary from each other.
2. In other words, if one is overvalued/undervalued and the other is not, rebalancing to maintain a fixed international/domestic ratio causes some selling of the high priced one and purchasing of the low priced one. 
3. One way of finding the right ratio might be to compare your portfolio to the international distribution of stock market value.  US' market is about the half the value of the world's markets, so a US resident would presumably want at least 50% in US.  Other developed markets are roughly 35%.  My own distribution is at a point between 100% US and 50% US. 
4. We're all supposed to hate market timing but it's hard to resist.  Fwiw, US stocks appear closer to historic valuation highs than international ones, so to me it seems like a good time to add or at least have some international in the mix, just to mitigate the US valuation risk.  I might be wrong, though - not an expert.

[TomTX]

OP is barely above my minimum for diversifying beyond VTSAX  (or target date fund) to a second broad fund ($50k total, and no rush on that number. $250k is fine too) - and any diversification should have at least $10k in the lowest balance fund.

He's got three funds that are around $1k (actually, the mean of his lowest 3 funds is below $1k)

It's pointless, causes confusion and can too easily lead to trying to shift around funds to time the market.

Now, if he consolidated everything else and just split between VTSAX and whatever flavor of international (again, min $10k) with a determined asset allocation and rebalancing plan (Say, 70/30 split, rebalance when more than 5% out of whack) - I have no objections.

[dcunitedfan]

The stock/bond weighting should be decided first.  Basically deciding how much risk reduction you want by putting money into bonds/cash.  After that, consider the various stock choices (cap size, market, etc) as sub-slices of the stock slice.  IMO if one weighs say bonds and small cap stocks as equal peers in an allocation formula, that is fuzzing over the more important distinction of the weighing of stocks vs fixed income.   An AA example : 80% stock, 20% bond.  Within stock, 80% US, 20% World.  Within US stock, 70% large cap, 20% midcap, 10% smallcap.  Within world stock, 60% developed market, 40% emerging market.  Within bond, 30% short term, 60% mid term, 10% cash.  (Just picking some somewhat reasonable numbers out of the air to illustrate the method - your percentages may be different) 

Otherwise the exact numbers you determine have so much to do with your personal risk tolerance, age, income and income growth potential, etc its difficult to offer specifics.  I did agree with others that you probably want to raise your international stock % over the current 1% and also low compared to the US stock percentages given. 

[JSMustachian]

The stock/bond weighting should be decided first.  Basically deciding how much risk reduction you want by putting money into bonds/cash.  After that, consider the various stock choices (cap size, market, etc) as sub-slices of the stock slice.  IMO if one weighs say bonds and small cap stocks as equal peers in an allocation formula, that is fuzzing over the more important distinction of the weighing of stocks vs fixed income.   An AA example : 80% stock, 20% bond.  Within stock, 80% US, 20% World.  Within US stock, 70% large cap, 20% midcap, 10% smallcap.  Within world stock, 60% developed market, 40% emerging market.  Within bond, 30% short term, 60% mid term, 10% cash.  (Just picking some somewhat reasonable numbers out of the air to illustrate the method - your percentages may be different) 

Otherwise the exact numbers you determine have so much to do with your personal risk tolerance, age, income and income growth potential, etc its difficult to offer specifics.  I did agree with others that you probably want to raise your international stock % over the current 1% and also low compared to the US stock percentages given.

This is what I was trying to do with a 95% stock/5% bond allocation since Im still young. I was using my future contributions to build up my small/medium/international.

Ty for the advice everyone. I am going to simply everything a bit and exchange a few of my large cap funds that are at record highs for some international.