Author Topic: Investment Strategy - VTI - VTSAX  (Read 1700 times)

InvestIngInMe

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Investment Strategy - VTI - VTSAX
« on: August 26, 2018, 11:59:54 PM »
Hello,

First time in this forum and have read great things about MMM from JL Collins.  Tried searching, but did not find something related to the topic I'm going to ask. 

I'm currently contributing the annual maximum amount of $18,500 to my employer 401K.  I also have a traditional IRA in Vanguard's VTSAX index fund that I'm contributing the annual maximum.  I can contribute another $13K-$15K annually. I like these two as their expense ratios are the same - %0.04.

I've been looking at the following:

Option 1:
Contribute $13K-$15K to the Vanguard VTI as I won't have a limit on contributions.

Option 2:
Open another VTSAX account and have it as a general investing and contribute the $13K-$15K and not be limited in annual contributions.

If there are other recommendations and guidance that my fellow MMM's can provide it'd be wholeheartedly appreciated.


nkt0

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Re: Investment Strategy - VTI - VTSAX
« Reply #1 on: August 27, 2018, 06:01:16 AM »
Welcome!

Do you have access to a Health Savings Account? If you do, you could sock away another $3450/year tax-free there.

hendrickj

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Re: Investment Strategy - VTI - VTSAX
« Reply #2 on: August 27, 2018, 11:31:34 AM »
The Health Savings Account is a good suggestion if you want to maximize your tax-advantaged accounts.
Note that you have to be covered by a High Deductible Health Plan.

For a taxable account, you might also want to take a look at Vanguard's LifeStrategy funds, they will provide a more diversified portfolio as opposed to one only invested in US stocks.
https://investor.vanguard.com/mutual-funds/lifestrategy/#/

chasesfish

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Re: Investment Strategy - VTI - VTSAX
« Reply #3 on: August 27, 2018, 05:42:42 PM »
If I'm reading this right, its about what do you want to do with the "extra".

If it were me, I'd open the account with Vanguard and split it between VTI, VO, and VB.   VTI/VTSAX is heavily weighted towards some of the largest companies, I like the additional diversity and potential for slightly better returns when you include more small/mid-cap companies.  VO and VB also throw off less taxable income in dividends per year.

InvestIngInMe

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Re: Investment Strategy - VTI - VTSAX
« Reply #4 on: August 27, 2018, 08:16:49 PM »
Welcome!

Do you have access to a Health Savings Account? If you do, you could sock away another $3450/year tax-free there.

Thanks for the advice nkt0. I do have access to an HSA with my current employer. From my time with my last employer (U.S. Air Force), I still have healthcare with Tricare and only paying a reasonable premium.  I guess I can still put the money into an HSA to lower my overall taxable income. 

InvestIngInMe

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Re: Investment Strategy - VTI - VTSAX
« Reply #5 on: August 27, 2018, 09:08:22 PM »
If I'm reading this right, its about what do you want to do with the "extra".

If it were me, I'd open the account with Vanguard and split it between VTI, VO, and VB.   VTI/VTSAX is heavily weighted towards some of the largest companies, I like the additional diversity and potential for slightly better returns when you include more small/mid-cap companies.  VO and VB also throw off less taxable income in dividends per year.

chasesfish, thanks for the recommendations on diversifying across the large, mid-cap and small companies plus the ER isn't bad at 0.04%, 0.05%, and 0.05% respectively. 

MustacheAndaHalf

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Re: Investment Strategy - VTI - VTSAX
« Reply #6 on: August 28, 2018, 01:00:30 AM »
VTI already holds the market weight for large, mid and small cap.

There's also different claims about small caps: that there's a small cap premium shown in historical data, and that small caps should offer a higher return for their greater risk.  And a contrary view, that the risk premium is gone - small caps are easy to purchase on the cheap, and aren't risky.  The one decade where small caps outperformed is gone, and without it small caps don't offer a higher return.

I'd say wait to make your own decision about diverging from VTI  / VTSAX.  Read up about the risk/reward of small caps before you decide if you want to commit to them.
« Last Edit: August 28, 2018, 01:02:18 AM by MustacheAndaHalf »

InvestIngInMe

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Re: Investment Strategy - VTI - VTSAX
« Reply #7 on: August 29, 2018, 08:56:57 AM »
VTI already holds the market weight for large, mid and small cap.

There's also different claims about small caps: that there's a small cap premium shown in historical data, and that small caps should offer a higher return for their greater risk.  And a contrary view, that the risk premium is gone - small caps are easy to purchase on the cheap, and aren't risky.  The one decade where small caps outperformed is gone, and without it small caps don't offer a higher return.

I'd say wait to make your own decision about diverging from VTI  / VTSAX.  Read up about the risk/reward of small caps before you decide if you want to commit to them.

Thanks, MustacheAndaHalf. I'll research and look into the risk and rewards of small caps. 

chasesfish

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Re: Investment Strategy - VTI - VTSAX
« Reply #8 on: August 29, 2018, 03:27:49 PM »
One other note - This stuff is the final one half of one percent.  Its all about having a good savings rate, keeping your fees low, and time.  Folks will debate allocation forever and straight VTSAX ain't a bad way to go