Author Topic: Re-allocation in the New Year  (Read 4970 times)

Pooperman

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Re-allocation in the New Year
« on: December 25, 2014, 05:26:36 AM »
So I made a bit of allocation and it was kinda random to be honest, so I'd like to start fresh in 2015. I have a ROTH IRA with one year's contributions in it, and I will have a Traditional IRA next year with one year's contributions in it. These are with TD because of free ETF trades (vanguard and others). I also have a 401k with about $400 in it that I will be maxing next year (I'll put the available funds further down the post). Thing is, I'm kindof new to asset allocation and there are three things I want to be able to do:

1) Minimize feed

2) Be able to rebalance

3) Minimize tax future implications

I'm not sure how to accomplish these since I have more than one account and they are different types, etc.

Short Bonds/Stable/MMkt Expense Ratio
Stable Value
Transamerica Stable Value Account      N/A

Interm./Long-Term Bond    Expense Ratio
Intermediate-Term Bonds
PIMCO Total Return Ret Acct   0.85
SSgA U.S. Bond Index Ret Acct   0.31

Large-Cap Stocks   Expense Ratio
Large-Cap Value Stocks
RidgeWorth Large Cap Value Equity Ret Acct   0.97
Russell 1000 Value   
Large-Cap Blend Stocks
Transamerica Partners Stock Index Ret Acct   0.27
Russell 1000   
Large-Cap Growth Stocks
Morgan Stanley Growth Ret Acct   0.55
Russell 1000 Growth
   
Small/Mid-Cap Stocks  Expense Ratio
Mid-Cap Value Stocks
American Century Mid Cap Value Ret Acct 1.01
Russell Mid Cap Value
Mid-Cap Blend Stocks
SSgA S&P Mid Cap Index Ret Acct  0.33
S&P Midcap 400
Mid-Cap Growth Stocks
Goldman Sachs Mid-Cap Opportunities Ret Acct   0.85
Russell Mid Cap Growth
Small-Cap Value Stocks
Franklin Small Cap Value Ret Acct   0.90
Russell 2000 Value
Small-Cap Blend Stocks
SSgA Russell Small Cap Index Ret Acct   0.33
Russell 2000
Small-Cap Growth Stocks
Janus Triton Ret Acct (Perf. Incp.: 02/24/2005)   0.93
Russell 2000 Growth   
Real Estate
Vanguard REIT Index Ret Acct      0.35
S&P United States REIT

International Stocks    Expense Ratio
World/Foreign Stocks
American Funds New Perspective Ret Acct   0.70
MSCI ACWI
Invesco International Growth Ret Acct   0.90
MSCI ACWI Ex USA Growth
SSgA International Index Ret Acct   0.40
MSCI ACWI Ex USA   
Thornburg International Value Ret Acct   0.99
MSCI ACWI Ex USA Growth
   
Multi-Asset/Other   Expense Ratio
Vanguard Target Retirement Income Ret Acct   0.41
Vanguard Target Retirement 2010 Ret Acct (Perf. Incp.: 06/06/2006)   0.41
Vanguard Target Retirement 2015 Ret Acct   0.41   
Vanguard Target Retirement 2020 Ret Acct (Perf. Incp.: 06/06/2006)   0.41
Vanguard Target Retirement 2025 Ret Acct   0.42
Vanguard Target Retirement 2030 Ret Acct (Perf. Incp.: 06/06/2006)   0.42   
Vanguard Target Retirement 2035 Ret Acct   0.43
Vanguard Target Retirement 2040 Ret Acct (Perf. Incp.: 06/06/2006)   0.43
Vanguard Target Retirement 2045 Ret Acct   0.43   
Vanguard Target Retirement 2050 Ret Acct (Perf. Incp.: 06/06/2006)   0.43
Vanguard Target Retirement 2055 Ret Acct (Perf. Incp.: 08/17/2010)   0.43

Pooperman

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Re: Re-allocation in the New Year
« Reply #1 on: December 26, 2014, 10:55:49 AM »
No one can help?

MarcherLady

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Re: Re-allocation in the New Year
« Reply #2 on: December 26, 2014, 11:34:56 AM »
I'll try.

Pooperman, that is a whole wall of information, but I'm not sure it's the right information for your question.  In fact I'm not quite sure what your question is.  This is an asset allocation: 50% bonds, 50% stock.   If you are looking for advice on constructing a breakdown like that then this is always good.  Once you've answered that first question then next you should think about what funds, and finally which asset types work best in which investment vehicles for tax purposes etc. Does that help any?

pbkmaine

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Re-allocation in the New Year
« Reply #3 on: December 26, 2014, 12:05:57 PM »
Edited post:

Not sure why the Vanguard target dates are so high. Through Vanguard they are only 18 or 19 basis points. That's where I put my friends and family. Broadly diversified index funds at low cost. Fix it and forget it.
« Last Edit: December 26, 2014, 12:10:50 PM by pbkmaine »

Philociraptor

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Re: Re-allocation in the New Year
« Reply #4 on: December 26, 2014, 12:11:07 PM »
Do a bit of reading and click some of the links here: http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit

After that come back with questions.

Pooperman

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Re: Re-allocation in the New Year
« Reply #5 on: December 26, 2014, 12:18:24 PM »
Yeah, that helps. I was thinking 75/25 split. I want exposure to world markets in some amount, a small amount of property exposure, and for bonds I also want to have some internationally as well. Thing is, the fees on the 401k are terrible, but at the same time, I don't want to just have all my money in equities in the 401k and be unable to reallocate. The cheapest fund is the Transamerica at 0.27 that follows the Russel 1000. This isn't total US market (which I'd have to replicate by adding stuff in the IRA). Then the question becomes, how do I make this all work without preventing me from reallocating when things get out of whack? How do I minimize the fees?

pbkmaine

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Re: Re-allocation in the New Year
« Reply #6 on: December 26, 2014, 12:25:43 PM »
Is the 401(k) through Transamerica?

Philociraptor

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Re: Re-allocation in the New Year
« Reply #7 on: December 26, 2014, 12:26:21 PM »
If it were me with your 401(k), I'd use the target retirement fund that most closely replicates my allocation.

Target Retirement 2030 is very close to 75/25 stocks/bonds, so I would do that. Takes care of rebalancing for you, though the stock/bond ratio will shift over time (as 2030 gets closer), so you'll have to move to a later date fund (say, the 2035 in 5 years)  if you want to keep 75/25.

Eric

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Re: Re-allocation in the New Year
« Reply #8 on: December 26, 2014, 12:35:14 PM »
Yeah, that helps. I was thinking 75/25 split. I want exposure to world markets in some amount, a small amount of property exposure, and for bonds I also want to have some internationally as well. Thing is, the fees on the 401k are terrible, but at the same time, I don't want to just have all my money in equities in the 401k and be unable to reallocate. The cheapest fund is the Transamerica at 0.27 that follows the Russel 1000. This isn't total US market (which I'd have to replicate by adding stuff in the IRA). Then the question becomes, how do I make this all work without preventing me from reallocating when things get out of whack? How do I minimize the fees?

You should be able to adjust your 401k allocation at any point.  There should be an option that asks whether you want the new allocation applied to current balances or just future contributions.  So you'll have the option of balancing all at once or just through future contributions.  Neither option should cost you anything extra.  Also, the term you're looking for is rebalance, not re-allocate.  You'll rebalance your portfolio on a yearly or every other year basis.

MarcherLady

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Re: Re-allocation in the New Year
« Reply #9 on: December 26, 2014, 01:34:09 PM »
When it comes to the fees, that will be determined by the product(s) you use as the investment vehicles, and I'm in the wrong continent to help there.  But, (generalisation coming up) I use my monthly investments to rebalance, so I'm never selling, only flexing what I buy each month, this reduces fees.    IE I start out with a 75/25 split, bonds drop during month one , so my portfolio is now 80/20.   My next month's purchase goes 100% into bonds to bring it back to 75/25.  (Or whatever works to make the numbers work) Of course this only works while your stache is small enough that one month's investment can rebalance it, but it will get you started and you can develop more complex solutions as you get more confident.

Start by ignoring what account everything is in and working out if your ratios are correct overall.  Then determine which accounts you are going to be actively adding cash to going forward.  I would prioritise tax advantaged accounts that have low charges and low transaction fees.  Then simply DCA into your target accounts, but keeping the total portfolio allocation in mind, rather than just that of the account.  If you must sell to rebalance, KIV that transaction costs could eat into any potential benefit from rebalancing, I believe once a year is the maximum recommended frequency.

wtjbatman

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Re: Re-allocation in the New Year
« Reply #10 on: December 26, 2014, 04:05:43 PM »
What a goofy variety of funds in your 401k. I think I'd just take Philo's advice and put all of your 401k contributions into one of the Target Date Funds. The two funds that most closely match your desired asset allocation of 75/25 are the 2025 (70/30) fund and 2030 (80/20) fund.

In your IRA's, since they are with TD Ameritrade and you can trade 100+ ETFs commission free (including many of the best Vanguard index funds), they should be fairly easy to rebalance to what you want.

Just remember to KISS. They say sometimes less is more, that could definitely apply to when you're investing in diversified and low cost index funds.

Pooperman

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Re: Re-allocation in the New Year
« Reply #11 on: December 26, 2014, 04:21:19 PM »
Thanks guys. I'll take the 80/20 fund and split the IRA 50/50 for an overall approx 75/25. The question is what ETFs to stick the money into given the allocation I've got to take to hit the 75/25 target. For stocks, there's VTI, VXUS. For bonds, there's BND, BNDX. And others of course. Recommendations welcome.

wtjbatman

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Re: Re-allocation in the New Year
« Reply #12 on: December 26, 2014, 04:45:09 PM »
Thanks guys. I'll take the 80/20 fund and split the IRA 50/50 for an overall approx 75/25. The question is what ETFs to stick the money into given the allocation I've got to take to hit the 75/25 target. For stocks, there's VTI, VXUS. For bonds, there's BND, BNDX. And others of course. Recommendations welcome.

Just use those Vanguard's ETFs when creating your portfolio. Do the math on how much to invest in each fund and you're good to go.

BooksAreNerdy

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Re: Re-allocation in the New Year
« Reply #13 on: December 28, 2014, 12:03:22 PM »
Well, we have REITs in our Roth, as they pay higher dividends.

We do muni bonds (tax advantaged with vanguard) in a taxable.

VTSAX in trad IRA. And Hewitt's total stock market in the 401k.

For our AA, its 5% bonds, 10% REIT, 85% total stock index.

We do not have any international stock yet, I need to do research on that still.

We hope to be FI in 6-8 years, so will probably increase bonds by 5% per year.

https://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement