Author Topic: Looking for long-term allocation ideas for 50k.  (Read 1153 times)

kcore2000

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Looking for long-term allocation ideas for 50k.
« on: May 05, 2020, 09:35:30 AM »
Hey all ... I have started a traditional individual brokerage account and looking for ideas on what to allocate 50k long term to. I already have a Roth IRA contributing yearly to VTSAX/VTIAX that has been going well, so feel like with that and my 401(k) I'm pretty heavy on Vanguard Index Funds. I'm 37 and have 18-23 years before retirement.


Employee 401(k)
I'm currently contributing 8% while employer only matches up to $900 + $300 contribution yearly.

2050 Portfolio
Vanguard Total Stock Market Index Fund / 54.22%
Vanguard Total International Stock Index Fund / 35.36%
Vanguard Total Bond Market II Index Fund / 7.39%
Vanguard Total International Bond Index Fund / 3.03%


Vanguard Roth IRA
Max out $6,000 yearly

Vanguard Total Stock Market Index Fund (VTSAX) / 80%
Vanguard Total International Stock Index Fund (VTIAX) / 20%


Vanguard Individual Account
$50,000 to invest long term ... how would you allocate?

MustacheAndaHalf

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Re: Looking for long-term allocation ideas for 50k.
« Reply #1 on: May 05, 2020, 10:55:58 AM »
You might also want to compare tax-exempt bond funds to taxable, in case it's worth holding tax-exempt bonds in your individual account.

Looking at Yahoo Finance for the yields on U.S. versus international gives me:
VTI (U.S.) yields 2.1%
VXUS (int'l) yields 3.9%

You can look up the exact dividend, but I'd assume it's close to the yield.  Because the gap is so large, international is currently less tax efficient than U.S. stocks.  I would put Vanguard Total Stock Market in your individual account, and allocate some extra international in tax-advantaged accounts.

Some will point out international has foreign tax credits, but those credits are small in comparison to the differences shown above.  If you have $50k with 2% dividends, that's $1,000 taxed at... say 15%.  So $150 tax.  With international and 4% dividends, that $2,000 might incur $300 in taxes.  There will be tax credits to offset some of that tax, but it won't be enough to close the gap.

I'd favor U.S. stocks in taxable. 

Villanelle

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Re: Looking for long-term allocation ideas for 50k.
« Reply #2 on: May 05, 2020, 11:09:00 AM »
You say you are heavy on "Vanguard Index funds".  I'm not sure what that means.  Vanguard is just the company that handles the administration of the grouping of stocks you own.  They are the people who package those stocks into bundles--aka mutual funds--and deliver them to you.  There is no reason to go outside Vanguard, just because every thing you own is currently Vanguard, unless they don't bundle the product you want to own.  It's a bit like saying your groceries are Publix heavy so you need to shop somewhere else when you go to purchase flour and ground beef. (Maybe I misunderstood your question and that comment?) 

I would continue to invest in Vanguard funds as it's easier to have everything with one broker, and they offer everything a typical investor needs. Your portfolio seems light on bonds (you don't give $ amounts, but probably less than 7% of your total so you might consider increasing that.  This makes your portfolio more stable.  Less risk, but of course the corresponding decrease in possible reward (but also in possible loss).   

So really, the question you should be asking is what your asset allocation should be, and that depends on your goals, your risk tolerance, your timeline, your job security, and more.  I'd start with a google search of "common portfolio allocations" and tweak from there as needed. 

kcore2000

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Re: Looking for long-term allocation ideas for 50k.
« Reply #3 on: May 05, 2020, 01:49:19 PM »
You say you are heavy on "Vanguard Index funds".  I'm not sure what that means.  Vanguard is just the company that handles the administration of the grouping of stocks you own.  They are the people who package those stocks into bundles--aka mutual funds--and deliver them to you.  There is no reason to go outside Vanguard, just because every thing you own is currently Vanguard, unless they don't bundle the product you want to own.  It's a bit like saying your groceries are Publix heavy so you need to shop somewhere else when you go to purchase flour and ground beef. (Maybe I misunderstood your question and that comment?) 

I would continue to invest in Vanguard funds as it's easier to have everything with one broker, and they offer everything a typical investor needs. Your portfolio seems light on bonds (you don't give $ amounts, but probably less than 7% of your total so you might consider increasing that.  This makes your portfolio more stable.  Less risk, but of course the corresponding decrease in possible reward (but also in possible loss).   

So really, the question you should be asking is what your asset allocation should be, and that depends on your goals, your risk tolerance, your timeline, your job security, and more.  I'd start with a google search of "common portfolio allocations" and tweak from there as needed.

@Villanelle,

In regards to heavy on "Vanguard Index Funds", I meant heavy on large blend total stock and total international stock funds. I was wondering within my Individual account if I should mix in other Vanguard small/mid-cap funds IE; Intl Large Growth (VWINX), Small-Cap (VB), Mid-Cap (VMVAX), Healthcare (VGHCX) or even Real Estate (VGSLX) just to name a few ... Thoughts

Wintergreen78

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Re: Looking for long-term allocation ideas for 50k.
« Reply #4 on: May 05, 2020, 03:11:53 PM »
You say you are heavy on "Vanguard Index funds".  I'm not sure what that means.  Vanguard is just the company that handles the administration of the grouping of stocks you own.  They are the people who package those stocks into bundles--aka mutual funds--and deliver them to you.  There is no reason to go outside Vanguard, just because every thing you own is currently Vanguard, unless they don't bundle the product you want to own.  It's a bit like saying your groceries are Publix heavy so you need to shop somewhere else when you go to purchase flour and ground beef. (Maybe I misunderstood your question and that comment?) 

I would continue to invest in Vanguard funds as it's easier to have everything with one broker, and they offer everything a typical investor needs. Your portfolio seems light on bonds (you don't give $ amounts, but probably less than 7% of your total so you might consider increasing that.  This makes your portfolio more stable.  Less risk, but of course the corresponding decrease in possible reward (but also in possible loss).   

So really, the question you should be asking is what your asset allocation should be, and that depends on your goals, your risk tolerance, your timeline, your job security, and more.  I'd start with a google search of "common portfolio allocations" and tweak from there as needed.

@Villanelle,

In regards to heavy on "Vanguard Index Funds", I meant heavy on large blend total stock and total international stock funds. I was wondering within my Individual account if I should mix in other Vanguard small/mid-cap funds IE; Intl Large Growth (VWINX), Small-Cap (VB), Mid-Cap (VMVAX), Healthcare (VGHCX) or even Real Estate (VGSLX) just to name a few ... Thoughts

Whenever I’ve thought about stuff like this scale always keeps me from doing anything exotic. Let’s say you have $500,000 in your “regular” investment accounts. If they have a 10% return and your $50,000 investment does twice as well, then you get $50,000 return from you regular investments and $10,000 from your “special investment. That is nice, but only works out to 10.9% overall return. And, any concentrated investment with the potential for higher returns also has a risk for bigger losses.

Basically, you aren’t going to make a noticeable difference in your overall performance unless you risk a significant chunk of your total investable assets. Every time I go through that thought exercise I end up at the conclusion I should just invest any extra money according to my existing asset allocation.

kcore2000

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Re: Looking for long-term allocation ideas for 50k.
« Reply #5 on: May 06, 2020, 04:34:13 PM »
All 3 of these accounts would have right around the same amount of assets. So you are saying that just having the same allocations in my IRA and Individual might be an idea? Don’t worry about a mix of small, mid, and large or even REIT or Healthcare funds  in the individual?

Villanelle

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Re: Looking for long-term allocation ideas for 50k.
« Reply #6 on: May 06, 2020, 04:54:41 PM »
All 3 of these accounts would have right around the same amount of assets. So you are saying that just having the same allocations in my IRA and Individual might be an idea? Don’t worry about a mix of small, mid, and large or even REIT or Healthcare funds  in the individual?

In an incomplete nutshell, yes.

You could attempt to optimize by putting accounts likely to grow the most in your post tax accounts, and things like that.  They do make a difference, but it's a small difference and if you aren't interested in the minutia, the return is likely not worth it. (In this scenario, I would still keep the same simple 3 or 4 or 5 fund portfolio, but you wouldn't have the same asset allocation across accounts, with bonds in your taxable accounts and stocks in the IRA.) Similarly, further diversifying *might* increase (or decrease) your returns.  If you want to do a lot of research, go ahead.  But the amount of difference it is doing to make is not huge, on average.  So take the advice of those who have already done the work and stick with one of those 3-5 fund allocations,

Alternatively, you can give yourself maybe 3-5% of your investment dollars and consider that high risk or even play money.  Only do this is you are willing to lose it.  And with that, you can find healthcare and small cap and REITs and international emerging market and whatever other stuff you want.  Make decisions however you want--companies you like and use, dart throwing, a gut feeling that healthcare stocks are going to soar, whatever.  Buy mutual funds or individual stocks or bars of gold.  But know that this is the "high risk" portion of your profile.  Put the rest in one of those recommended portfolios.