Author Topic: Portfolio Case Study : Rollover Cleared, What Next?  (Read 2575 times)

2Birds1Stone

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Portfolio Case Study : Rollover Cleared, What Next?
« on: March 06, 2015, 08:54:33 AM »
I want to preface this by saying thank you to the community here in general. You guys have been a solid voice of reason when it comes to making speculative and emotional investing decisions.

I switched careers in December and recently put in for a rollover of my old workplace 401k into a Vanguard IRA.

The funds cleared this morning and have been deposited into a Money Market Fund till I figure out what to do.

Background, I am turning 28 and have been working full time for almost 5 years. I have slowly increased my savings rate and have been learning about investing. I would like to FIRE in the next 10-12 years. My savings rate is 50% as of this year. I make $47,000 gross salary, plus another $3-4k from side hustles. $0 debt, and no dependents.

Currently my stock/bond portfolio includes

Roth IRA
VASGX LifeStrategy Growth Fund - $21,000
VGPMX Mining Fund - $4,600
VGENX Energy Fund - $3,000

401k
VITSX Total Stock Fund - $1,400
VTSNX Total International Stock Fund - $400
VBTIX Total Bond Fund - $300

Rollover tIRA
VMMXX - Prime Money Market Fund - $21,600

I would like to invest the Rollover IRA $$ into a mix of stocks/bonds. I can stomach some volatility so I was thinking about shooting for an overall 70/30 - 80/20 AA.

I have been doing a ton of reading both here and on the Bogleheads forum. Here are a few idea's I have come up with.

Do ~$17k into Vanguard Total Stock Index, ~4,600 into Vanguard Total Bond Index.

Do all $21,600 into LifeStrategy Growth Fund (Much more international exposure, not sure if good or bad?)

Do all $21,600 into a Vanguard 2035 or 2040 Target Date Fund.

Any other options you guys would suggest based on my situation?

If there is any additional info, I would be happy to provide. If it makes any difference, I do have 6 months of living expenses in E-fund in cold hard cash, I also have a sizable chunk of my net worth in physical metals.



Jack

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Re: Portfolio Case Study : Rollover Cleared, What Next?
« Reply #1 on: March 06, 2015, 09:26:41 AM »
I have been doing a ton of reading both here and on the Bogleheads forum. Here are a few idea's I have come up with.

If that's the truth, then you already know what we're going to tell you: go read your Investment Policy Statement and do what it says.

Also, you had your money allocated appropriately in your 401k (... right?). Since nothing's actually changed except the container your investments are in, there's no reason to re-think the allocation just because it's labeled "IRA" instead of "401k."

2Birds1Stone

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Re: Portfolio Case Study : Rollover Cleared, What Next?
« Reply #2 on: March 06, 2015, 11:27:15 AM »

If that's the truth, then you already know what we're going to tell you: go read your Investment Policy Statement and do what it says.

Also, you had your money allocated appropriately in your 401k (... right?). Since nothing's actually changed except the container your investments are in, there's no reason to re-think the allocation just because it's labeled "IRA" instead of "401k."
 

My previous 401k offered some poor choices so it was not allocated appropriately.

2Birds1Stone

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Re: Portfolio Case Study : Rollover Cleared, What Next?
« Reply #3 on: March 06, 2015, 12:47:20 PM »
Pulled the trigger.

58% - Vanguard Total Stock Market Index Fund Admiral Shares
14% - Vanguard Total World Stock Index Fund Investor Shares
14% - Vanguard Total Bond Market Index Fund Investor Shares
14% - Vanguard LifeStrategy Growth Fund

~80/20 AA

skyrefuge

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Re: Portfolio Case Study : Rollover Cleared, What Next?
« Reply #4 on: March 06, 2015, 01:10:00 PM »
58% - Vanguard Total Stock Market Index Fund Admiral Shares
14% - Vanguard Total World Stock Index Fund Investor Shares
14% - Vanguard Total Bond Market Index Fund Investor Shares
14% - Vanguard LifeStrategy Growth Fund

This doesn't make sense. The first three seem fine, but why the LifeStrategy Growth Fund? That's just a fund that holds (essentially) the three other funds you're invested in. It really only makes sense to hold a LifeStrategy Fund if its your only investment. If you're creating a mix of funds on your own, then just do that completely.

EDIT: Oh, and I noticed your second fund was Total World Stock, not Total International Stock. This also is a duplication of what you already have (half of it is invested in the same US stocks of Total Stock Market), and like mixing in the LifeStrategy fund, all it does is make it more difficult to figure out what you actually own.

On top of that, it sounds like you just ignored Jack's advice to create and follow your Investment Policy Statement. Because it also doesn't make a lot of sense to have different allocations based on your different accounts. It's generally better to determine what you want your overall allocation to be, and then figure out how to achieve that allocation across all of your accounts. This can be done either by duplicating the same allocation in all of your accounts, or, more-efficiently, choosing the best location for each asset type (so maybe your Roth IRA is mostly bonds, and your taxable account is all US stocks, etc, but when you add it all up it comes to the ratio that's defined in your IPS.)
« Last Edit: March 06, 2015, 01:39:23 PM by skyrefuge »

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Re: Portfolio Case Study : Rollover Cleared, What Next?
« Reply #5 on: March 07, 2015, 11:29:59 AM »
... Background, I am turning 28 and have been working full time for almost 5 years. I have slowly increased my savings rate and have been learning about investing. I would like to FIRE in the next 10-12 years. My savings rate is 50% as of this year. I make $47,000 gross salary, plus another $3-4k from side hustles. $0 debt, and no dependents...

Any other options you guys would suggest based on my situation?

If there is any additional info, I would be happy to provide. If it makes any difference, I do have 6 months of living expenses in E-fund in cold hard cash, I also have a sizable chunk of my net worth in physical metals.


Two suggestions.  (1) Build up your Emergency Reserve Fund to cover one year of you BASIC living expenses.  (2) If it isn't already so, convert your "physical metals" stash into silver coinage (which is what I have), so that if push should ever come to shove you will have an asset that is much more liquid, transportable and tradeable.

And (3) I would also probably liquidate enough of that phyisical metal so that you have "a modest chunk" of your net worth in it and not a "sizable" one.  That stuff does not earn you anything and should probably be viewed more as part of an Emergency Reserve than as part of an investment portfolio.  ;)