Trying to copy VTSAX with my 457(b)

[MrMike]

So I have a 457(b) and I got tired of using the target funds and decided to self-manage.  I was trying to get the equivalent of what I would have if I was using VTSAX.  Here is what I came up with with (80/20 split with stocks/bonds).

60% -Vanguard Institutional Index - Large Cap (VINIX) .04 expense ratio
05% -Vanguard Mid Cap Index Ins - Mid Cap (VMCIX) .04 expense ratio
15% -Vanguard Small Cap Index Instl - Small Cap (VSCIX) .04 expense ratio
20% -Metropolitan West Total Return Bond I - Bond (MWTIX) .45 expense ratio

I've been checking my rate of return against my fund's target date options.  They seem pretty comparable but the expense ratio on all the funds are .18. 

Does this mix seem to match the VTSAX or should I change the percentages some?  I sometimes kick around going back to the target fund for simplicity sake.  However I will have a decent stable  pension when I retire so my risk tolerance is pretty high.

[terran]

According to https://www.bogleheads.org/wiki/Approximating_total_stock_market 81% Vanguard 500 Index Fund, 4% Vanguard Mid-Cap Index Fund, 15% Vanguard Small-Cap Index Fund would get you there. Looks like you're 75% Vanguard 500 Index Fund, 6.25% Vanguard Mid-Cap Index Fund, 18.75% Vanguard Small-Cap Index Fund, so you're definitely in the right neighborhood with a slight extended market weighting. Of course, the Bogleheads allocation is as of almost a year ago, so you'd have to refigure it to see how you actually stack up. I'd probably shoot for 80/5/15 just for round numbers, but not worry too much about drift.

Do you have an IRA? Given that you have excellent stock funds and a not so excellent bond fund in your 457(b) you might consider skipping that bond fund and putting your bond allocation elsewhere.

[MrMike]

I do have an IRA through Betterment that I have at a more aggressive setting that is at 90/10 stocks/bonds.  It's a small amount (under 10K) that I just let Betterment manage. 

I have never thought about using that as my bond allocation.  I have read elsewhere that perhaps I should just consider my anticipated pension as my bonds and go 100% stocks.

With the recent drops, this might be a good time to switch over since prices are lower now.

[FIREball567]

I do have an IRA through Betterment that I have at a more aggressive setting that is at 90/10 stocks/bonds.  It's a small amount (under 10K) that I just let Betterment manage. 

I have never thought about using that as my bond allocation.  I have read elsewhere that perhaps I should just consider my anticipated pension as my bonds and go 100% stocks.

With the recent drops, this might be a good time to switch over since prices are lower now.

Why not do VTSAX at Vanguard for your IRA?


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[terran]

I do have an IRA through Betterment that I have at a more aggressive setting that is at 90/10 stocks/bonds.  It's a small amount (under 10K) that I just let Betterment manage. 

I have never thought about using that as my bond allocation.  I have read elsewhere that perhaps I should just consider my anticipated pension as my bonds and go 100% stocks.

With the recent drops, this might be a good time to switch over since prices are lower now.

Going 100% stock is a viable option, depending mostly on how squeamish you are about volatility. If you're going to hold bonds I would consider doing it in your IRA where you can get a much lower expense ratio than 0.45%.

Regardless of what you do with your asset allocation I tend to agree with @degrom7 -- leave betterment for Vanguard, Fidelity, or Schwab and pick a low cost index fund that fits with your desired asset allocation.

[MrMike]

Are the fees really that big a difference?  Or is there another reason for swapping?

[dandarc]

Are the fees really that big a difference?  Or is there another reason for swapping?

I've seen a better calculator but couldn't find it. Look at how much more you pay in fees on this page (shows a .5% difference in fees in an account compounding at 6% annually):

https://investor.vanguard.com/mutual-funds/low-cost

.01% difference in fees probably doesn't matter that much, but .40% does.