Author Topic: What funds would you add for balance  (Read 4057 times)

Siobhan

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What funds would you add for balance
« on: November 12, 2014, 12:08:08 PM »
Have about 15k coming in on Friday and I want to finish setting up/opening up the last Vanguard funds to try and create a more balanced approach.

Breakdown

342k in Schwab individual stocks.  Almost all in large cap, and a couple of tech stocks....will hopefully be  winding this down in coming years to put into indexes but this is going to be slow going.  The current holdings look a lot like Vanguards Windsor Fund at the moment.
48k in TSP:
52% C
5% G
20% I
23% S
47k in 401k:
62% Large Cap (I know, I need to rebalance),
9% Bond,
10% International,
19% Small Cap
25k in Cash/CDs.
Roth 1: 12.5k in VDIGX
Roth 2: 12.5k VFIAX
Taxable Vanguard:
3k in VQNPX,
3k in VEIPX
6.5k in VHDYX

We are already maxed on all retirement accounts for the year, and set for our Roths to be maxed January 1st, leaving us with about 4-5k cash a month that will be going into taxable accounts (401ks will be contributed to the max on top of this) staring on January 15th. 

I'm just not sure what other funds we should open within Vanguard, I don't want to have a million different index funds.  I think we are going to put the REIT fund into our Roths in January so I was thinking of opening up VFIAX in the taxable.  I also know we are low on bond allocation, but I'm not sure if that's the way to go with the current bond situation and us having a 10 year horizon?

I think we are outsized on the Large Caps, but everything else has had pretty sad returns over 10 years.  Long and short I just don't know what else to open to balance everything?  I'd like to use the 15k to finish opening whatever funds need to be opened, then next year just rotate putting in the taxable income to each one.  Any recommendations from people more familiar with Vanguard?

*PS we also have a good chunk of equity in a rental property and in our primary house, so outside of next years REITs, not sure how much more real estate exposure would be healthy?


Cheddar Stacker

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Re: What funds would you add for balance
« Reply #1 on: November 12, 2014, 01:44:15 PM »
I'm not familiar with the TSP letters. What is C G I S?

I asked an asset allocation here in August and got a lot of great advice. Here's the thread:
http://forum.mrmoneymustache.com/investor-alley/new-t-ira-from-rollover-please-review-my-agressive-allocation-plan/

My portfolio ended up looking something like this after all that discussion, split between 401k and IRA:
VSMAX 29%
VIMAX 21%
VBTLX 17%
VFIAX 17%
VGSLX 8%
VTSAX 8%

I also have some dividend stocks, RE investments and cash, but the above allocation covers roughly 66% of our net worth. It's heavy on small and mid cap, and has virtually no international unfortunately since the ones offered in my 401k are crap. I think I need to swap out the VTSAX with an international fund in the IRA, so I'm glad you posted this to remind me.

In regards to your allocation and placement, putting the REIT in the Roth is a solid move since the dividends aren't qualified. Same goes for bond funds, and I think between Bonds and REIT's 15-25% is a good amount but it's a personal choice. From my recollection, small and mid cap have superior returns compared to large cap so I'd add some exposure there. But as someone told me in my thread on this, don't chase returns. Buying a fund that has underperformed recently could result in superior returns as well.

Siobhan

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Re: What funds would you add for balance
« Reply #2 on: November 12, 2014, 02:27:30 PM »
I'm not familiar with the TSP letters. What is C G I S?

I asked an asset allocation here in August and got a lot of great advice. Here's the thread:
http://forum.mrmoneymustache.com/investor-alley/new-t-ira-from-rollover-please-review-my-agressive-allocation-plan/

My portfolio ended up looking something like this after all that discussion, split between 401k and IRA:
VSMAX 29%
VIMAX 21%
VBTLX 17%
VFIAX 17%
VGSLX 8%
VTSAX 8%

I also have some dividend stocks, RE investments and cash, but the above allocation covers roughly 66% of our net worth. It's heavy on small and mid cap, and has virtually no international unfortunately since the ones offered in my 401k are crap. I think I need to swap out the VTSAX with an international fund in the IRA, so I'm glad you posted this to remind me.

In regards to your allocation and placement, putting the REIT in the Roth is a solid move since the dividends aren't qualified. Same goes for bond funds, and I think between Bonds and REIT's 15-25% is a good amount but it's a personal choice. From my recollection, small and mid cap have superior returns compared to large cap so I'd add some exposure there. But as someone told me in my thread on this, don't chase returns. Buying a fund that has underperformed recently could result in superior returns as well.

C is Common Stock
G is Government Bonds
I is International
S is Small Cap

Thanks!  I'll take a look at that thread

wtjbatman

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Re: What funds would you add for balance
« Reply #3 on: November 12, 2014, 05:01:31 PM »
That's a fairly complicated portfolio. Have you tried using Personal Capital to give a view of your current total AA?

Also, large cap stocks are something like 80% of the U.S. stock market (depends on what your fund classifies as large cap, but the S&P 500 is just about 80%), so you're actually over-weighted small caps in your 401k. Overall I don't know, because I'm not going to spend an hour deciphering the rest of your portfolio and determining what your true AA is.

Siobhan

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Re: What funds would you add for balance
« Reply #4 on: November 12, 2014, 05:56:10 PM »
I deal in ap sec for a living now,I won't use Aggregators like Personal Capital or Mint due to exploitable security vulnerabilities I"ve seen in the past.  Call me paranoid, many do, but in this day in age I prefer more segregation. 

Yes it is INSANELY complicated!!! We recently found FIRE and MMM and such.  I am CLUELESS on the easiest way to simplify this all!

Cheddar Stacker

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Re: What funds would you add for balance
« Reply #5 on: November 12, 2014, 06:41:18 PM »
You really shouldn't be adding as your title suggests. You should be simplifying until you learn a bit more. Go with vanguard total stock market in your taxable, a bond and or Reit fund in your Roth. That's enough diversification until you do more reading. Read the jlcollins stock series on his blog, read MMM's old post called how to make money in the stock market, and read the boggleheads wiki. After that, tweak it if you want.

Siobhan

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Re: What funds would you add for balance
« Reply #6 on: November 12, 2014, 06:52:57 PM »
Appreciated Cheddar!  I have read all (literally from start to finish of MMM), and most of Bogleheads forums, and pretty much most major finance books recommended like Millionare next door etc.  The part I am having problems with is how to apply it to our situation.  The Schwab account is prior to reading all of these blogs (27, clueless, lets buy individual stocks, it seemed like a good idea at the time etc).  It's worked out well enough to result in large capital gains...large enough to significantly influence year to year taxes as we transition.  I think the problem is I have read SO much conflicting advise, from multiple sources, and I'm trying to straighten out so many mistakes/paths, that I've literally run myself in a loop of information.

Cheddar Stacker

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Re: What funds would you add for balance
« Reply #7 on: November 12, 2014, 07:52:02 PM »
Gotcha. Ok good, you have a solid base.

Here's what I'd do:

Simplify. You have 27 individual stocks. slowly transition that capital to vanguard total market index as your taxable fund, and maybe add in a small or mid cap, or intl, but you don't need 5 different growth and dividend large cap funds which is roughly what your choices looked like.

The good news is you have a ton in taxable investments so you have quick access without jumping through hoops. Bad news, you don't have a ton in deferred accounts so you either paid too much in taxes or you make too much to defer a big chunk.

Scale back into 3 or four diverse funds. A lot of good ones were recommended in the thread I linked. Just simplify. Don't overthink it.

Siobhan

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Re: What funds would you add for balance
« Reply #8 on: November 13, 2014, 11:41:50 AM »
Wow that was painful, just dissected all of the accounts (and found a nifty tool in Schwab that did it for me...after the fact, lesson learned) the current AA across all accounts is 68% Large, 11% Small, 12% I and 9 in bonds/cash.  Tossing up adding mid cap or boosting small with the money that just came in, then the rest of the year is going to a larger cash position to take advantage of any dip next year

Scandium

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Re: What funds would you add for balance
« Reply #9 on: November 14, 2014, 09:25:19 AM »
..then the rest of the year is going to a larger cash position to take advantage of any dip next year
Why? How do you know there will be a dip next year?

Siobhan

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Re: What funds would you add for balance
« Reply #10 on: November 14, 2014, 11:28:36 AM »
..then the rest of the year is going to a larger cash position to take advantage of any dip next year
Why? How do you know there will be a dip next year?

I don't, however, I feel my cash/bond position is a bit low, and I do feel the market a bit "frothy" so I don't see an issue with holding an additional 6-7k for a couple of months in cash.  Doesn't mean we won't max our Roths out Jan 1st, or that we won't start the contributions to our 401ks Jan 1st, simply that we are taking some "extra" money to be able to take advantage of an opportunity should it present itself in the near future.