Untangling a mess of investments

[VasyaPupkin]

After years of being a pretty clueless investor, though a good saver, I've stumbled on this blog.
I've read through a bunch of posts, articles and books suggested and it appears taking advice of various brokers is not always a good idea :)
So here is my situation, in the hopes of getting a bit of help with the future direction. My main concern right now is a proper allocation for a new 401k plan as well as making sure it does not unbalance my overall portfolio.

I am in my mid-thirties, now making about 90k a year and  have the following assets and allocations:

Tax sheltered:
An old American Funds 401k rolled into an IRA at American funds -170k. about 80/20 mix with expenses from 0.6 to 0.9%. No new contributions
Roth Ira in American Balanced funds (ABALX) 72/28 mix, 0.63% ER but about 2% load  - 40k. Maxing out

Taxable
About 24k spread over three Frankling funds (TPINX, FKINX and FNYTX). All bond, with the first two very tax inefficient as I just found out
Newly opened Vanguard VTSMX Total stock market fund $3k
3k in Lending club as an experiment
about 25k in an online savings at 0.8% as an emergency pile

Just starting - a new 401k at work. There is no match and a pretty crappy selection of funds with high operating expenses in 2-3% range.
Even the basic target date funds are in 1.9% range. The only somewhat attractive option is a Blackrock SP500 index with 0.56% ER.
Their bond funds are NECXR, GOVCX and PSRCX

So here are my questions:
How much should I be contributing to 401k in the absence of matching and to what type of funds?
If I only select the stock index fund there, and also keep contributing to the taxable Vanguard fund, I'll end up tilting this part of my portfolio to stocks only. So then I need to somehow offset that with bonds. Do I do that by changing the mix of the American IRA to be more bond heavy, or do I pick one of the bond funds offered in the 401k?
And secondly, I am leaning towards getting rid of the two Franklin funds. I am thinking finding a tax exempt or tax managed bond fund, or alternatively just moving it to Vanguard's stock funds would be much more efficient

And of course moving everything eventually from American to Vanguard would be a good idea from many points, including my sanityas well, but taking small steps at the moment ;)

[grantmeaname]

How much should I be contributing to 401k in the absence of matching and to what type of funds?

If you don't have any high-interest debt, you should probably contribute as much as you can afford to your 401k, all the way up to the statutory limit (currently $17,500/yr). Just buy the Blackrock 500 index, because fees are the biggest predictor of performance and there's no reason to pay 1.83% for a mutual fund in 2013.

If I only select the stock index fund there, and also keep contributing to the taxable Vanguard fund, I'll end up tilting this part of my portfolio to stocks only. So then I need to somehow offset that with bonds. Do I do that by changing the mix of the American IRA to be more bond heavy, or do I pick one of the bond funds offered in the 401k?

Bond Fund of America is decently cheap, but it's still three times the price of Vanguard's bond funds. I'd move your IRA to Vanguard as soon as possible - it's less than an afternoon's work - and then hold your bond funds in the Vanguard IRA account.

[pom]

How much should I be contributing to 401k in the absence of matching and to what type of funds?

The max allowable, I don't see any reason to pay more taxes than needed.

If I only select the stock index fund there, and also keep contributing to the taxable Vanguard fund, I'll end up tilting this part of my portfolio to stocks only. So then I need to somehow offset that with bonds. Do I do that by changing the mix of the American IRA to be more bond heavy, or do I pick one of the bond funds offered in the 401k?

If you want to keep your current bond/stock ratio, do it outside of the 401(k), as you say through your IRA or, although I am not a big fan of Munis, you could do a Munis fund in a taxable account. Key is to keep overall fees as low as possible.

And secondly, I am leaning towards getting rid of the two Franklin funds. I am thinking finding a tax exempt or tax managed bond fund, or alternatively just moving it to Vanguard's stock funds would be much more efficient

Yes, definitely transfer to lower fee funds, as far as mix goes, I would say that it depends on your age and your other risk factors (employment risk, family situation, if you own your house or not... ). What do you believe a good stock-bond mix would be for your situation?

[VasyaPupkin]

Thank you for you comments!
I agree that SP500 is probably the best course of action, considering the lack of choices

My liabilities at this stage are :
75k left in a 5.25% mortgage
4k in a 2.9% car loan

Risk-wise, I can handle an 80/20 split at this stage.
Next step is probably getting rid of the taxable Templeton funds. They've been annoying me for a while with the constant taxable income, while the fund values kept dropping. Question is- considering that I paid load charges when buying into them, should I let them "recover" a bit or is that throwing good money after bad?

[grantmeaname]

Nope. The money is just gone, no sense doubling down.

[Riceman]

Thank you for you comments!
I agree that SP500 is probably the best course of action, considering the lack of choices

My liabilities at this stage are :
75k left in a 5.25% mortgage
4k in a 2.9% car loan

Risk-wise, I can handle an 80/20 split at this stage.
Next step is probably getting rid of the taxable Templeton funds. They've been annoying me for a while with the constant taxable income, while the fund values kept dropping. Question is- considering that I paid load charges when buying into them, should I let them "recover" a bit or is that throwing good money after bad?

The one thing to watch for, timing wise, is if liquidating the fund will cause a short term capital gain rather than a long term one.  If the load was upfront, you're not getting punished constantly, so avoiding excess taxes will probably be worth more than the comparative losses.

[aj_yooper]

You are a good saver and make good money so you are on your way.  You do have a mess so simplify it.  Move the taxable junk and your tax sheltered to Vanguard and figure it out there.  Call them up when you are online and the transfers are fairly easy; have Vanguard do the transfers, not your higher cost broker.  It was good you were saving, but WTF with those expenses and inappropriate placement of assets!  Read Bogleheads:  http://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

The tax sheltered American Funds are not too bad, but you can do better.  Taxable accounts, IMO, should not have taxable bonds or Lending Club money.  Taxable is more for for Total Stock Market Index or Total International, not income or dividend generating assets or funds that have more frequent trades as these all create taxable events.  Taxables are not to be disturbed by changes.

I think you should be doing a Roth too for flexibility, but only after you have some highly liquid money for an emergency fund. 

Keep your expenses down and you could be sailing.

[VasyaPupkin]

The one thing to watch for, timing wise, is if liquidating the fund will cause a short term capital gain rather than a long term one.  If the load was upfront, you're not getting punished constantly, so avoiding excess taxes will probably be worth more than the comparative losses.

I do wonder if I shouldn't be holding a given mutual fund for a year before liquidating for that reason.

Read Bogleheads:  http://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

Reading Boggleheads book as we speak ;)

I think you should be doing a Roth too for flexibility, but only after you have some highly liquid money for an emergency fund. 

I do have Roth as well, it's in the American Balanced funds at the moment. That's on top of about 25k or so in an easily accessible online savings acct. I am also thinking I-bonds may be a reasonably good liquid asset in taxable acct since they are tax deferred and only have one year waiting period before sale is allowed.

[Riceman]

The one thing to watch for, timing wise, is if liquidating the fund will cause a short term capital gain rather than a long term one.  If the load was upfront, you're not getting punished constantly, so avoiding excess taxes will probably be worth more than the comparative losses.

I do wonder if I shouldn't be holding a given mutual fund for a year before liquidating for that reason.

It looks like you're in the 25% or 28% tax bracket.  That means you're be paying 10 - 13% more on your earnings if you withdraw early. 

10 - 13% looks really big, but that's only on the gains, not on the total amount in the fund.  If the fund you want to sell has a 2% load and you just put the money in, it might still be better to move it (though you should do the math).  On the other hand, if you've held the fund for 6 months, only need to hold it for another 6 months, and the load is 1% (or front-loaded), you're probably better keeping it.

But I think the important thing isn't what you do this one time, but the habits you build of managing your fund for the long run.  In the long run, you want to pay attention to capital gains by: a) minimizing short term gains; b) harvesting capital losses if you're in the 25% tax bracket; and c) harvesting capital losses AND harvesting capital gains if you're in the 15% tax bracket (which is where I am--this year I'm harvesting gains, next year losses, hopefully gains the following year).

When the principal amounts get larger and you do this again and again over the years, that's when the savings add up.  So whatever you do, don't let the small stuff discourage you.

[VasyaPupkin]

A bit of an update on my progress (and thanks to everybody who helped with advice!)

1. Liquidated Franklin funds. Paid off my car loan with proceeds, then split the remaining 20k into  VTSMX (13k) and VWLTX (7k).
The funds had mostly short term losses and long term gains, so there is just a bit of long term gains to deal with.

2. Setup my 401k to put 15% of my income to  Blackrock SP500 at 0.53% ER.

3. While at it, got rid of my brokerage account which started charging me fees for inactivity. They really want you to trade all the time, don't they?!
I think I am done playing "guess which stock will go up game" :)

Still thinking about moving things from American funds. Meanwhile I've created an overall view of my assets and their distributions. It appears I am pretty close to 35/65 ratio, so 401k going into all stocks should keep things tilting towards the more aggressive ratio for a bit before I'll need to rebalance.

[aj_yooper]

If your AA is 80/20 and you are at 35/65 it is time to re-balance.  I don't see how the 401k contributions can do that for you.