Suggestions on portfolio please

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Topic Author
CherylHall
Posts: 62
Joined: Fri Jul 06, 2012 8:33 pm

Suggestions on portfolio please

Post by CherylHall »

Hi all, long time lurker here, wanted to thank everyone, I have learned so much from reading this forum. Would like thoughts on my proposed portfolio and plans.


Emergency funds: Yes
Debt: Mortgage ($202K, 29 years left @ 3.9%)
Second Mortgage (25K at 6.75)
Student loan (23K at 3.5%)
Credit cards – pay off every month
Car-paid off

Tax Filing Status: Single
Tax Rate: 25%
State of Residence: OH
Age: 50
Desired Asset allocation: 80/20 (I think…)
Desired International allocation: 20-25% (I think…)

Current total portfolio: just over mid six figures

401k from work - Fidelity
4.4% Spartan 500 Index Fund - Institutional Class (FXSIX) 0.05%

401K (from previous employer) at Vanguard:
32.8% Vanguard PRIMECAP Fund Admiral Shares (VPMAX) .36%
20.2% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) .18%
9.3% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) .10%
33.2% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) .06%

Available fund options in 401K with current employer Fidelity:
Large cap:
Dodge & Cox Stock (DODGX) Large Value .52%
Fidelity Blue Chip Growth Fund - Class K (FBGKX) Value Blend growth .77%
Fidelity Fund - Class K (FFDKX) Value Blend growth .43%
Fidelity Growth Company Fund - Class K (FGCKX) Value Blend growth .70%
Spartan 500 Index Fund - Institutional Class (FXSIX) Value Blend growth .05%
Vanguard Capital Opportunity Fund Admiral Share (VHCAX) Value Blend growth .41%
Vanguard PrimeCap Core Inv CL (VPCCX) Value Blend growth .51%

Mid-Cap:
Fidelity Low-Priced Stock Fund - Class K (FLPKX) Mid - Value Blend growth .71%

Small Cap:
T. Rowe Price New Horizons (PRNHX) –Small Value Blend growth .81%
Vanguard Small-Cap Value Index Fund Institutional Shares (VSIIX) Value Blend growth .19%

International:
American Funds EuroPacific Growth Fund Class R-5 (RERFX) Value Blend growth .55%
American Funds New Perspective Fund Class R-5 (RNPFX) Value Blend growth .51%
Fidelity Diversified International Fund - Class K (FDIKX) .73%

Specialty
Vanguard REIT Index Fund Institutional Shares (VGSNX) .08%

Blended fund investments – Specialty:
Fidelity Asset Manager 50% (FASMX) .71%
Vanguard Target Retirement 2010 Trust II .13% (can’t find ticker for these)
Vanguard Target Retirement 2015 Trust II .13%
Vanguard Target Retirement 2020 Trust II .13%
Vanguard Target Retirement 2025 Trust II .13%
Vanguard Target Retirement 2030 Trust II .13%
Vanguard Target Retirement 2035 Trust II .13%
Vanguard Target Retirement 2040 Trust II .13%
Vanguard Target Retirement 2045 Trust II .13%
Vanguard Target Retirement 2050 Trust II .13%
Vanguard Target Retirement 2055 Trust II .13%
Vanguard Target Retirement Income Trust II .13%

Bond/Managed Income
Stable value
Managed Income Portfolio II Class 3 .24%

Income:
PIMCO Total Return Fund Institutional Class (PTTRX) .46%Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX) .05%

Other:
Vanguard Inflation-Protected Securities Fund Institutional Shares (VIPIX) .07%


Annual Contributions
$8000 total includes match to my employer 401k from Fidelity. Match is 50% on first 6% and I am contributing to get the full match. Last year the match was 25% = $1,300. This year I will be at 50% (tiered match based on seniority).

Proposed Portfolio
401k from work - Fidelity
4.4% Spartan 500 Index Fund - Institutional Class (FXSIX) 0.05%

401K at Vanguard:
10% Vanguard PRIMECAP Fund Admiral Shares (VPMAX) .36%
20.2% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) .18%
12% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) .10%
47.4% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) .06%
6% Vanguard REIT Index Fund Investor Shares (VGSIX) .24

Questions:
A) I’ve finally come around to the Bogleheads style of investing and just want to make certain I’m on the right path. Do folks see any issues with my proposed portfolio? Is there something I should tweak to be better diversified?
B) Should I pay off the second mortgage and then student loan in that order or contribute more to my 401K? I can likely refi part of the second mortgage to 4% but will need to expend some of my cash savings to do that. Or I can contribute the max to my 401K. I would like to move to a less stressful job in 5-8 years that will likely pay less, and less expenses will make me sleep better at night.
C) Any thoughts on Roth vs contributing to my 401K after contributing enough to get company match?

I appreciate any & all replies
Last edited by CherylHall on Sat Oct 20, 2012 3:10 pm, edited 3 times in total.
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Suggestions on portfolio please

Post by ruralavalon »

I'm a bit confused about the terminology, and have a few questions --

1. I take it that "401k from work - Fidelity" is a 401k with your current employer? Correct?

2. Are you currently contributing enough to get the full match? How much is the full match in dollars?

3. Is "401K at Vanguard" an old 401k left with a former employer? An old 401k now rolled over to an IRA at Vanguard? Or something else?

You can add this new info to your original post using the "edit" button; it helps a lot to have all of your information in one place.



Here are some general observations --

1. Your 80/20 stock/bond allocation is very aggressive for someone 50 years old, in my opinion. Please see -- Wiki article link: Asset Allocation ; http://www.bogleheads.org/forum/viewtop ... 0&t=101010 ; and http://www.bogleheads.org/forum/viewtop ... 3#p1217243 . Think about 60/40 instead.

2. Your desired international allocation at 20 -25% of total equities is within the range of what is reasonable, in my opinion.

3. If you want a REIT fund, using "Vanguard REIT Index Fund Institutional Shares (VGSNX) .08%" in the Fidelity 401k would be less expensive.

4. Using "Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX) .05%" in the Fidelity 401k would be less expensive.

5. I think I would not use the PRIMECAP fund in light of the other much less expensive choices.

6. The Vanguard Target Retirement Trusts in the Fidelity 401k at er = 0.13% are very attractively priced, and you might want to consider them.

7. Yes, I think it very wise to accelerate pay off of the 2nd mortgage @ 6.75%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Suggestions on portfolio please

Post by ruralavalon »

CherylHall wrote:Questions:
A) I’ve finally come around to the Bogleheads style of investing and just want to make certain I’m on the right path. Do folks see any issues with my proposed portfolio? Is there something I should tweak to be better diversified?
I will make a suggestion for a portfolio "tweak" with a 60/40 stock/bond asset allocation, and with 25% of equities in int'l, and with the same REIT allocation you proposed, for you to consider. This portfolio is very broadly diversified and should be both less expensive and simpler than either what you now have or what you propose:

401k from current work - Fidelity (4.4%; add $8k/yr including match)
4.4%, Spartan 500 Index Fund - Institutional Class (FXSIX) 0.05%
00%, Vanguard REIT Index Fund Institutional Shares (VGSNX) .08%, <= add 1/8 of new contributions until this reaches 06% of portfolio
00%, Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX) .05%, <= add 7/8 of new contribiutions until this reaches 40% of portfolio.

old 401K (from previous employer) at Vanguard (95.6%)
32.8% Vanguard PRIMECAP Fund Admiral Shares (VPMAX) .36%
15% 20.2% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) .18%, <= 25% of total equities
40.0% 9.3% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) .10%, <= decrease as same fund in Fidelity account moves to 40%, & move that money to VTSAX & VTIAX
40.6% 32.2% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) .06%

CherylHall wrote:Debt: Mortgage ($202K, 29 years left @ 3.9%)
Second Mortgage (25K at 6.75)
Student loan (23K at 3.5%)
. . . . .
B) Should I pay off the second mortgage and then student loan in that order or contribute more to my 401K? I can likely refi part of the second mortgage to 4% but will need to expend some of my cash savings to do that. Or I can contribute the max to my 401K. I would like to move to a less stressful job in 5-8 years that will likely pays less, and less expenses will make me sleep better at night.
Make sure you get the full employer match each year. Its free money; never turn down free money.

Your investing priority after making sure to contribute enough each year that you get the full employer match in your current 401k should be to accelerate the pay off of the 2nd mortgage at 6.75% and then the student loan at 3.5%. Paying off those loans is a good "investment. 6.75% or even 3.5% is better than any guaranteed investment you could get anywhere else. Please see -- Wiki article link: Paying down loans versus investing . I would not look at fully maxing out the current 401k until after paying off those loans.

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
wilked
Posts: 2427
Joined: Thu Mar 24, 2011 1:50 pm

Re: Suggestions on portfolio please

Post by wilked »

Good advice above. For your age I would highly suggest moving to a higher percentage of bonds. I would use 30% as a minimum, and perhaps revisit a year later (if you are thinking 20% now, it might be tough for me to convince you to go 40% or higher).

I would use a strategy of 401K to the limit of maximizing employer match, then aggressively pay down that second mortgage, and thereafter max Roth IRA, then consider paying down student loans.

I will not dwell on the rebalancing to be done as others have already done a good job of that. But I do agree, lose the PRIMECAP fund
Timcom99
Posts: 103
Joined: Sat Mar 19, 2011 10:34 am

Re: Suggestions on portfolio please

Post by Timcom99 »

IMHO

Use the Fidelity Spartan 500 fund at 0.05%, Vanguard Total Bond at 0.05% and Vanguard REIT at 0.08% in your 401K and max it if possible. Then in a Vanguard ROTH max it with Vanguard Total International.
Bob's not my name
Posts: 7417
Joined: Sun Nov 15, 2009 8:24 am

Re: Suggestions on portfolio please

Post by Bob's not my name »

Your 401k number suggests your salary is $89,000. Assuming that, your numbers would look like this:

$89,000 gross income
- $2,000 pre-tax health, dental, and disability insurance premiums deducted from your pay
- $1,000 FSA contributions?
- $5,500 401k employee contributions
----------
$80,500 AGI --> too high for your student loan interest to be deductible
- $3,800 personal exemption
- $10,700 itemized deductions (wild guess based on mortgage)
----------
$66,000 taxable income

Since your combined federal + state marginal rate is almost 30%, deductible traditional 401k contributions are the way to go.

Your second mortgage is effectively about 5%, so it's higher than the student loan rate even though it's deductible, so I agree with the others that your priorities should be (1) 401k to get the match, (2) second mortgage, (3) student loan, (4) max 401k.
Topic Author
CherylHall
Posts: 62
Joined: Fri Jul 06, 2012 8:33 pm

Re: Suggestions on portfolio please

Post by CherylHall »

Great suggestions, thanks all!
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