Advice for an Investment Newbie?

[tightwaddy]

MMM Community,

I need some advice on distributing my 403b holdings.  I've been advised badly for years and paid through the nose for that poor advice.  My advisor gave me a test, found me conservative and put me heavily in bonds that gave him a nice fat fee.  I started reading MMM, punched myself in the face a few times, and fired him.

My work uses TIAA-Cref and 40% of my funds are in TIAA traditional guaranteed.  There's not much I can do about that at this point, except move 10% a year into other holdings.  On the other hand, I do have some risk-averse tendencies, am 45 and want to reach FIRE in 5-7 years, and I'm getting 4% guaranteed compounded daily on those funds.

My Vanguard options are: VINIX, VIEIX, VTSNX, and VBTLX (bonds).  For the 60% I can move right now, I'm inclined towards:

VINIX (60%)
VIEIX (20%)
VTSNX (20%)

I don't see any reason to put any in bonds given the guaranteed TIAA.  Does the above seem like a good choice for the equities?

Thanks in advance!

[MustacheAndaHalf]

Essentially you're buying 80% US total stock market (with two funds) and 20% total international.  Those seem like really good choices.  You might gain more confidence reading about the "3 fund portfolio", where there's one US, one international, and one bond fund.  Don't be put off by the "3 fund" part - your S&P 500 plus extended market funds serve the same purpose as a US broad market index fund.

[NoStacheOhio]

Those are all good funds, I'm in them myself. If you want "Total market" and 20% international, ratios are 64/16/20.

[tightwaddy]

Thank you both for the confirmation & reading suggestions--very helpful.  It's good to know I'm slowing figuring this out.

[doggyfizzle]

Essentially you're buying 80% US total stock market (with two funds) and 20% total international.  Those seem like really good choices.  You might gain more confidence reading about the "3 fund portfolio", where there's one US, one international, and one bond fund.  Don't be put off by the "3 fund" part - your S&P 500 plus extended market funds serve the same purpose as a US broad market index fund.

Although aren't you then technically too "overweight" international when you take into account the nearly 40% of earnings derived from foreign operations by S&P 500 companies?

[JZinCO]

Essentially you're buying 80% US total stock market (with two funds) and 20% total international.  Those seem like really good choices.  You might gain more confidence reading about the "3 fund portfolio", where there's one US, one international, and one bond fund.  Don't be put off by the "3 fund" part - your S&P 500 plus extended market funds serve the same purpose as a US broad market index fund.

Although aren't you then technically too "overweight" international when you take into account the nearly 40% of earnings derived from foreign operations by S&P 500 companies?

1) I wouldn't assume the % earnings abroad are the same for sp500 as TSM
2) Assuming your figures are correct (which I don't agree with, figures have shown that foreign revenues have sank), that would mean a 80/20 split ends up becoming about 50 US/50 ex-US which would then result in weighting representative of of global market cap
3) And of course some ex-US companies derive earnings in the US. I don't know a good estimate for that, but it means the split is >50 US, <50 ex US so by that token exUS is underweighted.

Given all this, I wouldn't worry to much about matching global market cap given it's variability ( https://www.vanguard.com/pdf/ISGGEB.pdf ). As Vanguard says "According to this theory, then, U.S. investors would currently have 51% of their equity portfolio in non-U.S. equities, and this weight would fluctuate with market performance. However, few investors follow this approach to the letter; instead, they more often choose a set allocation and then periodically rebalance to that level." In this white paper, vanguard actually suggest that 20% ex-US is a-okay. Though a cap weight index approach should have up to 50% exUS, adding just 20% significantly adds diversification benefits in terms of risk/return while minimizing the higher frictional costs of owning foreign equities. Side note, 20% is my allocation which I feel is too low but yet I like it.