Author Topic: New to site - Please evaluate portfolio  (Read 4076 times)

Daniel1973

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New to site - Please evaluate portfolio
« on: April 24, 2015, 07:48:55 PM »
Hello,
I am new to the site and would value comments on my portfolio.

Emergency Fund:  Yes, six months
Tax rate:  25% Federal, 4.24% State
State of residence:  Az
Age: 41
Desired asset allocation:  80% stocks, 20% bonds
Desired international allocation:  30% stocks

Total portfolio is mid-six figures.  I have included my invetments below, indicating the expense ratio of each fund as well as what percentage each is of my total portfolio.
Current Retirement Assets:      
Taxable                                              Expense Ratio            Percentage
VTI - Vanguard Total Stock Market ETF   0.05%            1.744076085%
VTI - Vanguard Total Stock Market ETF   0.05%            0.383221225%
VTI - Vanguard Total Stock Market ETF   0.05%            0.08079392%
      
His 401K      
Bond Market Index Fund                           0.06%            1.47587969%
S&P 500 Index Fund                           0.05%          38.34614997%
International Index Fund                           0.13%            9.734240504%
Russell 200 Index Fund                           0.07%          26.31360376%
      
His Roth at Vanguard      
VBTLX - Vanguard Total Bond Market Index Fund Admiral Shares    0.08%   3.624320429%
VTIAX - Vanguard Total International Stock Index Admiral Fund    0.14%   4.362618428%
VTSAX - Vanguard Total Stock Market Index Fund Admiral Shares    0.05%   10.37146651%
      
Her Roth at Vanguard      
VBMFX - Vanguard Total Bond Market Index Fund Investor Shares                   0.20%   0.710367719%
VGTSX - Vanguard Total International Stock Index Fund Investor Shares   0.22%   0.855387827%
VTSAX - Vanguard Total Stock Market Index Fund Investor Shares             0.05%   1.997873936%
      
Contributions      
New Annual Contributions      
$18000 his 401K (Employer match of 6%)      
$5500 His Roth IRA      
$5500 Her Roth IRA      
      
Available Funds      
Funds available in his 401K      
Lifecycle Funds:      
Fund                                          Expense Ratio      
Lifecycle Retirement Fund           .32%      
Lifecycle 2020 Fund                    .35%      
Lifecycle 2025 Fund                    .36%      
Lifecycle 2030 Fund                    .37%      
Lifecycle 2035 Fund                    .38%      
Lifecycle 2040 Fund                    .38%      
Lifecycle 2045 Fund                    .38%      
Lifecycle 2050 Fund                    .39%      
Lifecycle 2055 Fund                    .40%      
      
Index Funds:      
Fund                                                 Expense Ratio      
Bond Market Index Fund                    .06%      
Balanced Index Fund                         .07%      
S&P 500 Index Fund                          .05%      
International Index Fund                   .13%      
Russell 2000 Index Fund                    .07%      
      
Actively Managed Funds:      
Fund                                                           Expense Ratio      
Stable Value Fund                                        .29%      
Global Bond Fund                                         .36%      
Diversified Real Asset Fund                          .72%      
U.S. Large Companies Fund                         .31%      
Global Equity Fund                                      .68%      
International Companies Fund                     .63%      
U.S. Small/Mid Companies Fund                  .69%      
Science and Technology Fund                      .65%      

Questions:
Prior to a few days ago and finding this forum, my wife and I were 100% in Vanguards VTI fund.  I just reallocated to the three portfolio fund allocation of 56% Total Stock Market, 24% International Stock market, and 20% Total Bond Market.
I am also in the process of moving money in my 401K into the Bond Market Index Fund.  I was formerly 34% S&P 500 Index Fund, 33% International Index Fund and 33% Russell 200 Index fund.
I am doing the right thing moving into bonds with current low interest rates in order to diversify my portfolio to include bonds?

I have a taxable account for each of my two children, as well as a taxable account for my wife and I.  I also have two 529 accounts I recently opened for my two children.  I have read both sides about including bonds in my taxable accounts and am looking for advice on fund selection and allocation for my taxable accounts.

All comments are welcome regarding my current portfolio and asset allocations, as well as advice on how to add to my taxable accounts when I have income available, as I do not have $3000 to add to them at this time to meet the Vanguard Investor Share minimums for all funds, so that is why I am currently in VTI in them as it allowed me to open them with a lower initial contribution.

Thank you
« Last Edit: May 21, 2015, 12:03:36 PM by Daniel1973 »

MDM

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Re: New to site - Please evaluate portfolio
« Reply #1 on: April 24, 2015, 08:19:10 PM »
Questions:
Prior to a few days ago and finding this forum, my wife and I were 100% in Vanguards VTI fund.  I just reallocated to the three portfolio fund allocation of 56% Total Stock Market, 24% International Stock market, and 20% Total Bond Market.
I am also in the process of moving money in my 401K into the Bond Market Index Fund.  I was formerly 34% S&P 500 Index Fund, 33% International Index Fund and 33% Russell 200 Index fund.
I am doing the right thing moving into bonds with current low interest rates in order to diversify my portfolio to include bonds?

I have a taxable account for each of my two children, as well as a taxable account for my wife and I.  I also have two 529 accounts I recently opened for my two children.  I have read both sides about including bonds in my taxable accounts and am looking for advice on fund selection and allocation for my taxable accounts.

All comments are welcome regarding my current portfolio and asset allocations, as well as advice on how to add to my taxable accounts when I have income available, as I do not have $3000 to add to them at this time to meet the Vanguard Investor Share minimums for all funds, so that is why I am currently in VTI in them as it allowed me to open them with a lower initial contribution.
General comment: 1 (even 0) decimal place is sufficient when presenting allocations. ;)

Won't know until hindsight occurs whether the bond move was good or not.

You could use one of the Target Date (e.g., VFIFX) funds with a $1K minimum if desired, but small amounts of VTI are fine too.

The main thing is to pick an overall asset allocation and stick with it.  Don't worry (other than for occasional rebalancing purposes) if it's not exactly the 80/20 you have chosen - close is good enough.

Overall, it appears you are doing well - keep up the good work.


Daniel1973

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Re: New to site - Please evaluate portfolio
« Reply #2 on: April 25, 2015, 05:11:35 PM »
Thank you for the comments.  I appreciate you taking the time to review my portfolio.  Any other opinions on getting my bond allocation to where I want it at this time although interest rates are so low?  I know this may fall under the market timing issue?

Thank you!

Dodge

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Re: New to site - Please evaluate portfolio
« Reply #3 on: April 25, 2015, 05:28:20 PM »
Questions:
I am doing the right thing moving into bonds with current low interest rates in order to diversify my portfolio to include bonds?

I have a taxable account for each of my two children, as well as a taxable account for my wife and I.  I also have two 529 accounts I recently opened for my two children.  I have read both sides about including bonds in my taxable accounts and am looking for advice on fund selection and allocation for my taxable accounts.

All comments are welcome regarding my current portfolio and asset allocations, as well as advice on how to add to my taxable accounts when I have income available, as I do not have $3000 to add to them at this time to meet the Vanguard Investor Share minimums for all funds, so that is why I am currently in VTI in them as it allowed me to open them with a lower initial contribution.

Thank you

I agree, you're in great shape!  The low rates are irrelevant, you're making a great move to include bonds in your portfolio.  All portfolios should have bonds in my opinion.

Regarding the taxable accounts, going with ETFs are a great option.  So is going with a LifeStrategy fund, which only has a $1,000 minimum.  I think you aren't getting many responses here, because there isn't much to say.  You're doing great :-P

Daniel1973

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Re: New to site - Please evaluate portfolio
« Reply #4 on: April 25, 2015, 09:55:20 PM »
Dodge,

Thank you very much!

Daniel1973

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Re: New to site - Please evaluate portfolio
« Reply #5 on: April 30, 2015, 07:31:46 PM »
With respect to my taxable accounts, it seems the majority opinion is to avoid bonds in them. I have three taxable accounts in my name. Two are designed to be saving for my two children, and the other is an investment account I have allocated for my wife and I. Right now all three taxable accounts are 100% in VTI (Vanguard Total Stock Market ETF (ER 0.05%)).

One account has a little over 12k, one has a couple thousand and one has less than $1k (recently opened). I would like to have the convenience of a something like an index fund where I could put the accounts on auto-pilot with a monthly contribution, but I don't have enough in the accounts (except for one) currently to meet the minimum for most Vanguard funds ($3000), and only one account has enough for Admiral shares ($10000). I currently use a three fund portfolio with Vanguard funds (seen above) for my Roth accounts and I am fond of the automatic nature and convenience.

I have thought about one of the Vanguard Target Retirement Funds, or one of the Vanguard LifeStrategy Funds, but both have a bond component that seems to not be optimal for a taxable account.

I am looking for opinions on recommended funds for taxable accounts, and also opinions on whether I should sell the VTI ETFs and take the tax hit (Fed Tax rate of 25%, but some have been held for over a year), and put them into some fund that I can put on autopilot as I don't plan on using the money for over 10 years for two of them, and the other would be intended to let grow as an investment account for my wife and I.

Thank you in advance.

Dodge

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Re: New to site - Please evaluate portfolio
« Reply #6 on: May 01, 2015, 08:07:57 PM »
With respect to my taxable accounts, it seems the majority opinion is to avoid bonds in them. I have three taxable accounts in my name. Two are designed to be saving for my two children, and the other is an investment account I have allocated for my wife and I. Right now all three taxable accounts are 100% in VTI (Vanguard Total Stock Market ETF (ER 0.05%)).

One account has a little over 12k, one has a couple thousand and one has less than $1k (recently opened). I would like to have the convenience of a something like an index fund where I could put the accounts on auto-pilot with a monthly contribution, but I don't have enough in the accounts (except for one) currently to meet the minimum for most Vanguard funds ($3000), and only one account has enough for Admiral shares ($10000). I currently use a three fund portfolio with Vanguard funds (seen above) for my Roth accounts and I am fond of the automatic nature and convenience.

I have thought about one of the Vanguard Target Retirement Funds, or one of the Vanguard LifeStrategy Funds, but both have a bond component that seems to not be optimal for a taxable account.

I am looking for opinions on recommended funds for taxable accounts, and also opinions on whether I should sell the VTI ETFs and take the tax hit (Fed Tax rate of 25%, but some have been held for over a year), and put them into some fund that I can put on autopilot as I don't plan on using the money for over 10 years for two of them, and the other would be intended to let grow as an investment account for my wife and I.

Thank you in advance.

If you're considering these accounts to be isolated from one another (one for son, one for daughter...etc), and you want bonds, then do it.  Your tax bracket is too low for municipal bonds to matter, so it doesn't matter what type of bonds you hold (in other words, municipal tax-free bonds won't give you any advantage).  So just go with a LifeStrategy or Target Retirement fund.  Don't over-think this :)

Regarding the second question, it's a personal decision that we can't make for you.  Let's say the tax hit will cost you $500.  Here are your choices, you can have a portfolio with:

VTI
LifeStrategy Fund

Which will end up being weighted a bit towards stocks, or you can have a a portfolio with:

LifeStrategy Fund

Without being slightly weighted towards stocks, but with $500 less starting value.  The reason we can't answer this for you, is because we can't tell you how to value those two options.  We can't even tell you how we would value them, because we don't know the specific numbers (how weighted would it be? How much would you lose in taxes? ...etc)

Daniel1973

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Re: New to site - Please evaluate portfolio
« Reply #7 on: May 21, 2015, 08:58:32 AM »
My wife is a teacher and has a 403B or 457B available to her. With our current financial position, should we also contribute to one of these two options for her as well as my 401K, my Roth and her Roth? I am looking more into her options, but I do not believe she receives any type of employer match. If I do not contribute to one of these options for her, my thoughts would be to put more money into the 529s accounts for my children, or, invest it in a taxable account.

Thank you

MDM

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Re: New to site - Please evaluate portfolio
« Reply #8 on: May 21, 2015, 09:21:47 AM »
My wife is a teacher and has a 403B or 457B available to her. With our current financial position, should we also contribute to one of these two options for her as well as my 401K, my Roth and her Roth?
Tax rate:  28% Federal, 4.24% State
In that tax bracket (and even if you drop to the 25%), the rule of thumb is that you put every dollar you can into your tax-deferred options.  That's $36K for your wife ($18K for the 403b and $18K for the 457b), $18K for your 401k, and $5.5K for each Roth.  Of course, every situation is different but...how does that look to you?

Daniel1973

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Re: New to site - Please evaluate portfolio
« Reply #9 on: May 21, 2015, 10:09:17 AM »
MDM,
Thank you for your response.  My wife and I have been doing Roth IRAs for several years, and I recently switched my 401K contributions to Roth as well.  I have read numerous articles on Roth vs Traditional, and I hope I am making the correct choice for my situation, based on my age, 41, and the long time frame until my retirement.  If you have an opinion on this due to my age and income, I am very open to hearing your thoughts.

Also, I did not know my wife could contribute to both a 403b as well as a 457b?    I will have to look into this.  It looks like for her 403b options, she does have some Fidelity finds available.  The 457b only has one authorized provider available.  The list of authorized providers for her are listed here

For the 457B, the available investment options are listed here

Thank you again

forummm

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Re: New to site - Please evaluate portfolio
« Reply #10 on: May 21, 2015, 10:45:43 AM »
MDM,
Thank you for your response.  My wife and I have been doing Roth IRAs for several years, and I recently switched my 401K contributions to Roth as well.  I have read numerous articles on Roth vs Traditional, and I hope I am making the correct choice for my situation, based on my age, 41, and the long time frame until my retirement.  If you have an opinion on this due to my age and income, I am very open to hearing your thoughts.

Also, I did not know my wife could contribute to both a 403b as well as a 457b?    I will have to look into this.  It looks like for her 403b options, she does have some Fidelity finds available.  The 457b only has one authorized provider available.  The list of authorized providers for her are listed here

For the 457B, the available investment options are listed here

Thank you again

The choice of Roth vs traditional doesn't really have much to do with how long you have until retirement. It's about what your current marginal tax rate is vs what you expect it to be when retired.

Many employers with both a 403b and 457b allow full participation in both. But I'm not sure that all do. Just make sure hers does (signing up for both might be enough to find out if it works or not).

forummm

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Re: New to site - Please evaluate portfolio
« Reply #11 on: May 21, 2015, 06:24:51 PM »
The choice of Roth vs traditional doesn't really have much to do with how long you have until retirement. It's about what your current marginal tax rate is vs what you expect it to be when retired.

To help illustrate this point, I quickly threw together a spreadsheet that you can play around with to see for yourself. When the tax rates are the same, there's essentially no difference (money runs out around the same time). When the tax rate in retirement is lower, traditional lasts longer. I didn't spend the time to make it fancy so you could change the length of the working period with a single cell change, but you can add new rows and drag formulas to simulate that if desired.