Turning 30, please help with my portfolio!

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

Turning 30, please help with my portfolio!

Postby letsmakesomething » Thu Dec 20, 2012 10:41 pm

Hello all,

I am new to the forum and look forward to hearing from and contributing to the community!

As I mentioned in the subject line, I am turning 30 at the end of the year and want to put myself in a position to reach a goal of accumulating a million dollars. I think I am ready to get off the sideline and get in the game. I am a heavy saver and conservative spender and live below my means. I feel the best plan to reach my goal is by using a portfolio of low cost, diversified, index funds/ETF's and through regular contributions and dollar cost averaging. I feel that my conservative holdings (as you will see below) have set me back and that inflation will continue to eat away at what I have thus far if I don't set up a better portfolio.

Here is some more info:

Looking to start this portfolio with abut low six figures
Emergency funds: I have more than enough on the sidelines as you will see if you continue to read (which is partly the reason I am posting as I have WAY too much money on the sideline, I need to get in the game so to speak and allow compound interest work its magic. I have very little fixed expenses aside from monthly rent.
Debt: No debt currently, might make a real estate purchase in the next couple years.
Tax Filing Status: Single
Tax Rate: 25% Federal, 9.3% State
State of Residence: Ca
Age: 30
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: % of stocks I’m open to input

Break down

Taxable
63% cash for investing (checking and high yield savings accounts)

My 401k
9.5%-Mutual Global Discovery A-TEDIX- Exp. 1.31%
2.5%-Franklin Flex Cap Growth A-FKCGX- .98%-
2.5%-Franklin Small-Mid Cap Growth A-.99%-FRSGX
9.5%-Mutual Quest A-TEQIX- 1.10%- $21,000
1.6%-Franklin US Government Secs A-FKUSX-.73% $3,100

Other options:
0%-Templeton Foreign A-TEMFX- 1.21%
0%-Franklin Real Estate Securities A-FREEX-1.14%

My Roth IRA at Wells Fargo (PMA Account)
10% Money Market fund
.3% American Express (AXP)
.1% Best Buy (BBY)
.4% Diagio (ADR)
.6% Netflix (NFLX)

New annual Contributions
$0 my 401k (no company match)
$4,000 his IRA/Roth IRA (I know the limit has increased)
Was contributing 13% of gross earning per paycheck to 401k, but I have since stopped and want to put these funds into my Roth with better investment options and lower expense ratios.


I was thinking about selling the stocks in my individual investment account and setting up a simple portfolio based off of the “Core Four” listed below:

Vanguard Total Stock Market Index Fund Investor Shares (VTSMX – fee 0.19%)
Vanguard FTSE All-World ex-US Index Fund (VFWIX – fee 0.40%)
Vanguard REIT Index Fund Investor Shares (VGSIX – fee 0.21%)
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX – fee 0.20%)

1. What do you think about convertining my portfolio to the core four? Doesn't seem ideal but seems much better than what I'm currently doing.
2. How should I tilt it?
3. What other advice/suggestions would you have for me as I formulate a better portfolio?
4. Is it okay to hold some of my portfolio in my IRA and the rest in the individual investment account (assuming I switch my assets over to Vanguard, currently with Wells Fargo PMA. What funds/ETF's should I hold in the IRA?

I am looking long term here and hope to get some further insight from like-minded folks. Thanks in advance. I am sure I am missing something here...

Cheers
letsmakesomething
 
Posts: 14
Joined: Mon Nov 05, 2012 1:32 am

Re: Turning 30, please help with my portfolio!

Postby nirvines88 » Fri Dec 21, 2012 6:42 am

letsmakesomething wrote:Tax Rate: 25% Federal, 9.3% State


Due to being in 25% federal bracket and being in a high tax state, I would recommend using a Traditional IRA instead of a Roth IRA (if possible). There's a decent chance you might be paying more taxes now than necessary. When you withdrawal from your 401k/Traditional IRA, there will likely still be the 0% bracket due to the personal exemption and standard deduction, and then you can fill up the lower brackets if you need to withdrawal more in a given year (as most of us will). If you are fairly certain taxes will rise in the future, then maybe do a combination of 401k and Roth IRA.

This link talks about the advantages of deferring taxes versus paying them now (it talks about a Roth 401k vs. traditional 401k, which is the same principle as Roth IRA vs. Traditional IRA): http://thefinancebuff.com/case-against-roth-401k.html

letsmakesomething wrote:Desired International allocation: % of stocks I’m open to input


Most people choose somewhere between 20% and 50% of their stock allocation. Much is personal preference and guesswork about the future. Some feel their best bet lies with the U.S. economy and thus keep a smaller percentage overseas, whereas some like to diversify more into foreign countries. 30% might be a good starting number if you're unsure.

letsmakesomething wrote:1. What do you think about convertining my portfolio to the core four? Doesn't seem ideal but seems much better than what I'm currently doing.


I think it's an excellent idea. Just make sure to place funds for tax efficiency: http://www.bogleheads.org/wiki/Principl ... _Placement

letsmakesomething wrote:2. How should I tilt it?


There's a plethora of ways. Here's an example without the 401k use, since you said you probably aren't going to use it:

IRA
Vanguard Total Bond Market
Vanguard REITs Index Fund

Taxable
Vanguard Total U.S. Stock Market
Vanguard Total International Stock Market

However, I strongly suggest that you max our your IRA AND use your 401k. A portfolio implementing both might look like this*:

401k
Mutual Global Discovery A - TEDIX - ER 1.31% <--- If the high expense ratio drives you crazy, then you could potentially use Vanguard Total Intl in a taxable account.
Franklin Flex Cap Growth A - FKCGX - ER 0.98% <--- Lowest ER for any stock fund offered. Focuses on large growth companies. You may want to add small or value.

IRA
Vanguard Total Bond Market
Vanguard REITs Index Fund

*As you've noticed, you don't have the best 401k choices. However, I think the options are definitely still worth it since you get to defer taxes by using the 401k. I'm sure others will chime in with what options are the best from your limited 401k choices. The small growth might be an okay choice too (too bad there's no small value!). It'd be great if your employer could add some low cost, total market index funds, but I wouldn't hold my breath.

letsmakesomething wrote:3. What other advice/suggestions would you have for me as I formulate a better portfolio?


See advice above on Traditional vs. Roth IRA. I would also try to contribute more on a yearly basis. First, contribute to your 401k up to the company match. Second, max out an IRA. Third, continue filling up that 401k - it's valuable space!

letsmakesomething wrote:Debt: No debt currently, might make a real estate purchase in the next couple years.


Don't buy more house than you need. Make sure you can afford it.

letsmakesomething wrote:.3% American Express (AXP)
.1% Best Buy (BBY)
.4% Diagio (ADR)
.6% Netflix (NFLX)


Ditch these and begin implementing your core four portfolio.

letsmakesomething wrote:4. Is it okay to hold some of my portfolio in my IRA and the rest in the individual investment account (assuming I switch my assets over to Vanguard, currently with Wells Fargo PMA. What funds/ETF's should I hold in the IRA?


See my sample asset allocations above. It is okay to hold some of your portfolio in multiple locations. Make sure you allocate your fund choices in a tax efficient manner (see link above).
"Beware of little expenses, a small leak will sink a great ship" - Poor Richard
User avatar
nirvines88
 
Posts: 387
Joined: Thu Dec 29, 2011 5:38 pm


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: AK2007, avenger, Investerguy, minesweep, MissMolly, tj, webcrawler, Workinghard and 81 guests