Author Topic: Help with AA - vanguard based.  (Read 4118 times)

MEJG

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Help with AA - vanguard based.
« on: July 22, 2015, 11:11:04 AM »
Hi Everyone,

Please help me asses my asset allocation. We've got a Roth IRA and a TIRA at Vanguard, and soon there will be a taxable account as well.

I've been using YaleU's unconventional Lazy portfolio since mid 2011 and Vanguard tells me my ROI over that time frame was 11.9% So not bad at all!  But after doing more research this year I feel it is to heavy in bonds for me.  Now that we've got the debt under control I want to work on optimising out investments.

We're definitely buy and hold style investors, rebalance 2-3x year, should probably stop that and only do it once.  Currently saving ~50% and looking to FIR(e) in 15 years 

Current Asset Allocation is:
VTSMX: Vanguard total stock Market index find: 30%
VGSIX: Vanguard Reit index fund: 20%
VGTSX: Vanguard total international stock market index fund: 15%
VUSTX: Vanguard Long term treasury fund: 15%
VIPSX: Vanguard inflation protected securities fund: 15%
VEIEX: Vanguard emerging markets index fund - 5%

My gut is saying I should drop VUSTX and VIPSX and increase percentage of VTSMX.  All thoughts, comments and links welcome (I've recently read the JLcollins stock series- every informative).

Thanks!


MDM

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Re: Help with AA - vanguard based.
« Reply #1 on: July 22, 2015, 12:52:32 PM »
We're definitely buy and hold style investors, rebalance 2-3x year, should probably stop that and only do it once.  Currently saving ~50% and looking to FIR(e) in 15 years 

My gut is saying I should drop VUSTX and VIPSX and increase percentage of VTSMX.  All thoughts, comments and links welcome (I've recently read the JLcollins stock series- every informative).
Do you have an asset allocation strategy?  The word rebalance implies that you do, so just checking....

Assuming you do, are you planning a change to that strategy?  For how long do you plan to stick with the new allocation targets?

MEJG

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Re: Help with AA - vanguard based.
« Reply #2 on: July 22, 2015, 01:12:26 PM »
Do you have an asset allocation strategy?  The word rebalance implies that you do, so just checking....

Assuming you do, are you planning a change to that strategy?  For how long do you plan to stick with the new allocation targets?

Since 2011 I have been using the YaleU's unconventional lazy portfolio allocations.  After doing some research this year I feel that it is not heavy enough in stocks.  I am leaning towards 90% stocks, 10% bonds and working on figuring out my US vs international percentages. I would like to stick with my new targets until FIRE or possibly even in FIRE depending on nest egg size.

MDM

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Re: Help with AA - vanguard based.
« Reply #3 on: July 22, 2015, 01:30:13 PM »
I am leaning towards 90% stocks, 10% bonds and working on figuring out my US vs international percentages. I would like to stick with my new targets until FIRE or possibly even in FIRE depending on nest egg size.
In that case, and with no tax consequences because all this is in an IRA, have at it!

forummm

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Re: Help with AA - vanguard based.
« Reply #4 on: July 22, 2015, 02:29:21 PM »
I've been using YaleU's unconventional Lazy portfolio since mid 2011 and Vanguard tells me my ROI over that time frame was 11.9% So not bad at all! 

The percent gain for your portfolio by itself is not very meaningful. The market was great during that time period. For comparison, VTSAX returned about 70% the past 4 years (Aug '11-today)--so over 14% CAGR. You have bonds in your portfolio, and VTSAX is the biggest single component. Just saying that you shouldn't look at the number in a vacuum.
« Last Edit: July 22, 2015, 02:35:44 PM by forummm »

DavidAnnArbor

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Re: Help with AA - vanguard based.
« Reply #5 on: July 23, 2015, 10:03:08 PM »
I also started off several years ago with the Yale University's portfolio advisor, David Swensen's recommendations, but since then I have also increased my stock percentage higher than the 70% because of the cfiresim calculations

MEJG

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Re: Help with AA - vanguard based.
« Reply #6 on: July 24, 2015, 06:10:45 AM »
I also started off several years ago with the Yale University's portfolio advisor, David Swensen's recommendations, but since then I have also increased my stock percentage higher than the 70% because of the cfiresim calculations

Thanks DavidAnneArbor! Would you mind sharing what hold now? I like the basis of this lazy portfolio but have to decide how to shift it now that I've decided I need a higher stock percentage.

DavidAnnArbor

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Re: Help with AA - vanguard based.
« Reply #7 on: July 24, 2015, 08:22:42 AM »
I went with 15% international developed market, 5% emerging market, 7% reits (lower because I own a house which is real estate), 20% bonds divided up into inflation protection and treasury index, and the rest US stock market index. I don't think there's any one right answer, and as my thinking and reading on this issue evolves so will the asset allocation. Also the science of investing will come up with new ideas and I want to remain open to those.  My international stock index funds are mainly a mix of total international index, and some emerging market index.

a1smith

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Re: Help with AA - vanguard based.
« Reply #8 on: July 25, 2015, 10:37:13 AM »
Do you have an asset allocation strategy?  The word rebalance implies that you do, so just checking....

Assuming you do, are you planning a change to that strategy?  For how long do you plan to stick with the new allocation targets?

Since 2011 I have been using the YaleU's unconventional lazy portfolio allocations.  After doing some research this year I feel that it is not heavy enough in stocks.  I am leaning towards 90% stocks, 10% bonds and working on figuring out my US vs international percentages. I would like to stick with my new targets until FIRE or possibly even in FIRE depending on nest egg size.

Right now I am 70/30 stock/bond and 5-8 years from retirement.  In a few years, I plan on going from 70/30 to 60/40 and then will either stay there or drop to 50/50 once retired.

I think 90/10 is fine for where you are time wise but IMHO you should dial it down as you get closer to retirement.  At some point, you have to switch from capital appreciation to capital preservation.  :-)  Although cFIREsim says you need 90/10 to hit your goals it doesn't know when the next 20-30% drop in the stock market will be.  If that happens 2-3 years before you retire and you are still at 90/10 you are not going to like what cFIREsim tells you then.

ysette9

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Re: Help with AA - vanguard based.
« Reply #9 on: July 25, 2015, 02:50:20 PM »
We just worked out our AA with the help of a vanguard advisor. For reference, we are in our early 30s and hope to FIRE in about 5 years.
We are 90/10 stocks/bonds and the goal is 40% of our stocks will be international. I haven't quite pulled the trigger to make it happen yet but that is the plan.
Also, don't make the mistake we did. At our tax bracket at least we were advised to hold all bonds in tax-advantaged accounts and have all stock in the taxable vanguard accounts.

a1smith

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Re: Help with AA - vanguard based.
« Reply #10 on: July 25, 2015, 04:16:04 PM »
We just worked out our AA with the help of a vanguard advisor. For reference, we are in our early 30s and hope to FIRE in about 5 years.
We are 90/10 stocks/bonds and the goal is 40% of our stocks will be international. I haven't quite pulled the trigger to make it happen yet but that is the plan.
Also, don't make the mistake we did. At our tax bracket at least we were advised to hold all bonds in tax-advantaged accounts and have all stock in the taxable vanguard accounts.

Not sure if the advisor told you this but Vanguard's online asset allocator does 60/40 US/Intl for stocks and 70/30 US/Intl for bonds.  It doesn't always come out exactly like that but their Lifestrategy and Target Retirement funds are moving to that allocation, they updated the targets this year.  Maybe since the international bond allocation would only be 3% for you it doesn't make much difference to leave it out for simplicity.

a1smith

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Re: Help with AA - vanguard based.
« Reply #11 on: July 25, 2015, 04:22:32 PM »
Hi Everyone,

Please help me asses my asset allocation. We've got a Roth IRA and a TIRA at Vanguard, and soon there will be a taxable account as well.

I've been using YaleU's unconventional Lazy portfolio since mid 2011 and Vanguard tells me my ROI over that time frame was 11.9% So not bad at all!  But after doing more research this year I feel it is to heavy in bonds for me.  Now that we've got the debt under control I want to work on optimising out investments.

We're definitely buy and hold style investors, rebalance 2-3x year, should probably stop that and only do it once.  Currently saving ~50% and looking to FIR(e) in 15 years 

Current Asset Allocation is:
VTSMX: Vanguard total stock Market index find: 30%
VGSIX: Vanguard Reit index fund: 20%
VGTSX: Vanguard total international stock market index fund: 15%
VUSTX: Vanguard Long term treasury fund: 15%
VIPSX: Vanguard inflation protected securities fund: 15%
VEIEX: Vanguard emerging markets index fund - 5%

My gut is saying I should drop VUSTX and VIPSX and increase percentage of VTSMX.  All thoughts, comments and links welcome (I've recently read the JLcollins stock series- every informative).

Thanks!

If you are otherwise happy with David Swensen's AA (except 70/30 stock/bond) you can scale the stock portion by 9/7 and the bond portion by 1/3 to get these allocations:

VTSMX: Vanguard total stock Market index find: 38.6%
VGSIX: Vanguard Reit index fund: 25.7%
VGTSX: Vanguard total international stock market index fund: 19.3%
VEIEX: Vanguard emerging markets index fund: 6.4%

VUSTX: Vanguard Long term treasury fund: 5%
VIPSX: Vanguard inflation protected securities fund: 5%

forummm

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Re: Help with AA - vanguard based.
« Reply #12 on: July 25, 2015, 05:11:58 PM »
We just worked out our AA with the help of a vanguard advisor. For reference, we are in our early 30s and hope to FIRE in about 5 years.
We are 90/10 stocks/bonds and the goal is 40% of our stocks will be international. I haven't quite pulled the trigger to make it happen yet but that is the plan.
Also, don't make the mistake we did. At our tax bracket at least we were advised to hold all bonds in tax-advantaged accounts and have all stock in the taxable vanguard accounts.


Sounds like a good plan. This is pretty standard advice. You should be comfortable with it. If you will be able to stick with it when the market drops 50% (which it will on occasion), it's a good way to go.

MEJG

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Re: Help with AA - vanguard based.
« Reply #13 on: July 25, 2015, 07:41:52 PM »
What I've been playing it is changing our allocation to:

VTSMX: Vanguard total stock Market index find: 50%
VGTSX: Vanguard total international stock market index fund: 25%
VEIEX: Vanguard emerging markets index fund - 5%
VGSIX: Vanguard Reit index fund: 10%

VUSTX: Vanguard Long term treasury fund: 5%
VIPSX: Vanguard inflation protected securities fund: 5%

Right now everything is in tax advantaged accounts.  Looking to start funding a taxable account late this year or after front loading the my tIRA next year.

a1smith

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Re: Help with AA - vanguard based.
« Reply #14 on: July 25, 2015, 10:51:15 PM »
What I've been playing it is changing our allocation to:

VTSMX: Vanguard total stock Market index find: 50%
VGTSX: Vanguard total international stock market index fund: 25%
VEIEX: Vanguard emerging markets index fund - 5%
VGSIX: Vanguard Reit index fund: 10%

VUSTX: Vanguard Long term treasury fund: 5%
VIPSX: Vanguard inflation protected securities fund: 5%

Right now everything is in tax advantaged accounts.  Looking to start funding a taxable account late this year or after front loading the my tIRA next year.

Seems reasonable.  You have 2/3 US stock (including REIT) and 1/3 International.  Most people recommend around 60-70% US; I have seen people go as low as 50% US.

forummm

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Re: Help with AA - vanguard based.
« Reply #15 on: July 26, 2015, 06:47:32 AM »
This looks fine as long as you'll stick with it. I'm close to 50/50 US/Intl--as is the global market cap.