Asset allocation question

[bigote2032]

Hello Mustachian Investors -

Yes, I know that allocations are very personal and specific to the goals of the individual but would like to get different points of views from all experience folks out there.

Before I got into FIRE and read "Simple Path to Wealth", I invested in index funds in 4 index funds (see distribution below).  This index funds are very low cost, but not as low as VTSAX.  I have been thinking a lot if this really makes sense or if I just invest everything in VTSAX from now onwards. I have been advocating the 1 index rule approach to all my friends that are starting to learn about investing.

Not sure if this mix would be worth the rebalancing and extra effort on distribution every time I have cash to invest.  I am in accumulation phase and don't hold any bonds right now.


Please let me know your thoughts. Thank you.

FUSVX (large blend domestic)       58%
VSMAX (small blend domestic)      17%
FSIVX (large blend international)   20%
VWO (international emerging)         5%

[Rob_bob]

Your allocation looks fine to me and it's good to have some international exposure, but only you can decide if the re-balancing and new contributions are too much hassle.

You don't have to be obsessive about re-balancing, do it once a year or even every two years, or do it if something gets 5% out of line if you like.

[MDM]

FUSVX (large blend domestic)       58%
VSMAX (small blend domestic)      17%
FSIVX (large blend international)   20%
VWO (international emerging)         5%

If this is in a traditional or Roth account, rebalancing to VTSAX and/or whatever would be fine.

If this a taxable account and you would have to pay capital gain tax for the privilege of replacing FUSVX+VSMAX with VTSAX, it may still be worthwhile but at least a semi-sharp pencil should be used to verify.

[bigote2032]

This is all in taxable brokerage accounts in Vanguard and Fidelity.  Regarding selling the funds to get everything in the Vanguard total stock market index fund, this is the big debate going on in my mind the last few days.

Below I pasted the fee % and the performance of the last 5 years for each fund, these are some of the variables I am using to come up with a conclusion.  If my numbers don't make sense, I will leave it as is and then invest all new money in VTSAX.  Thanks.


FUSVX (large blend domestic)       0.04% 13.18%
VSMAX (small blend domestic)      0.05% 12.18%
FSIVX (large blend international)   0.07     6.25%
VWO (international emerging)       0.14    4.19%
VTSAX                                         0.04   13.06

[MDM]

If my numbers don't make sense....

The numbers are very understandable.

The returns suffer, however, from being historic.  If you had future returns, those would be useful. ;)

Pick an asset allocation you can live with for at least ~10 years and stick with it.  Otherwise the chance of underperforming by chasing last year's hot sector is great.  E.g., see Callan periodic table of investment returns - Bogleheads.

[Radagast]

^ as MDM says, 5-year returns are useless in predicting the future. I thought your original allocation was fine, but up to you.

FUSVX and FSIVX distribute short and long term capital gains which cost you in taxes. Not much, but it is annoying and not helpful. You might consider the ETF or Vanguard equivalents.

[terran]

If I was starting from scratch I would be do something like VTI/ITOT and VXUS/IXUS, but end up with something very similar to what you have anyway (just with fewer funds since they're total market), and more tax efficient (as Radagast points out). Whether or not I would transition now would depend on your capital gains tax bracket and how much gains are in your portfolio. I probably wouldn't do anything unless your current capital gains rate is at least as low as it will be in retirement.