Portfolio: Smart or Stupid?
Portfolio: Smart or Stupid?
(edited as suggested below)
Roth IRA
15%. Total Stock Market Index (7.5% of Total)
15%. Small Cap Index (7.5% of Total)
15%. Total International Stock Index (7.5% of Total)
15%. Small Cap International Index (VSS) (7.5% of Total)
20%. Total Bond Index (10% of Total)
20%. Short Term Corporate Bonds (VCSH) (10% of Total)
Thrift savings
20%. Index 500 (10% of Total)
20%. "Small"/Extended Market Index (10% of Total)
20%. International (Developed Markets) Index (10% of Total)
40%. G Fund (Short term Treasuries w/intermediate-like yield) (20% of Total)
--------When I add it all up----------------
17.5% Large Cap US
10% Mid Cap US
7.5% Small Cap US
17.5% Large International
7.5% Small International
10% Total Bond Index
10% Short-Term Corp
20% G Fund
-----------------------------------------------
45 years old
I am particularly interested in what you think of the bond portion, but all comments are welcome. Thanks.
Roth IRA
15%. Total Stock Market Index (7.5% of Total)
15%. Small Cap Index (7.5% of Total)
15%. Total International Stock Index (7.5% of Total)
15%. Small Cap International Index (VSS) (7.5% of Total)
20%. Total Bond Index (10% of Total)
20%. Short Term Corporate Bonds (VCSH) (10% of Total)
Thrift savings
20%. Index 500 (10% of Total)
20%. "Small"/Extended Market Index (10% of Total)
20%. International (Developed Markets) Index (10% of Total)
40%. G Fund (Short term Treasuries w/intermediate-like yield) (20% of Total)
--------When I add it all up----------------
17.5% Large Cap US
10% Mid Cap US
7.5% Small Cap US
17.5% Large International
7.5% Small International
10% Total Bond Index
10% Short-Term Corp
20% G Fund
-----------------------------------------------
45 years old
I am particularly interested in what you think of the bond portion, but all comments are welcome. Thanks.
Last edited by Jagman on Sun Dec 23, 2012 1:56 pm, edited 1 time in total.
Re: Portfolio: Smart or Stupid?
Looks good to me. 60/40 stock/bond portfolio diversified internationally is a good idea for just about anyone.
Good portfolio. Good stuff in it. I like it. No reason to change.
Smart.
Good portfolio. Good stuff in it. I like it. No reason to change.
Smart.
A fool and his money are good for business.
Re: Portfolio: Smart or Stupid?
I have to like it because it is not dissimilar from my portfolio though I use small-cap value index instead of small-cap.
Re: Portfolio: Smart or Stupid?
This is similar to the portfolio that Larry Swedroe was recommending in his early books. I.e. have a total market fund then tilt to small or value. However whether it is smart depends on the individual investor. The one way (stupid) that is certain to cause you a loss is to panic, sell out at a low, and miss a recovery. If your likely to do that, you need more bonds and less small cap. If your not likely to do that then the portfolio you plan is quite aggressive, but not out of line. Dave
Re: Portfolio: Smart or Stupid?
I would prefer to think of everything as one portfolio, rather than using the same allocation in both (which you don't quite have, with 20% international in the TSP and 30% in the Roth). This allows you to take advantage of the best options in each plan.
Start with an allocation. I think this is what you are trying to do, and if you are, it's an excellent allocation for a 45-year-old investor. (If this isn't your target allocation, you can adjust accordingly.)
20% US large
20% US small
10% foreign large
10% foreign small
40% bonds
Now, consider what is best in the TSP. The TSP G fund is much better than any bond fund you can get anywhere else (or the F fund in the TSP), because it has no risk; if interest rates rise, any bond fund in your IRA will lose value but the G fund will lose nothing and will have its yield increase. Vanguard has equivalents to thestock funds, and the I fund equivalent has the highest cost (Developed Markets at 0.12%), then the S fund (treating the S as 30% large, 70% small, gives an expense ratio of 0.08% for 40% Total Stock Market, 60% Small-Cap Index, after adjusting the expenses for Business Development Companies), then the C fund (0.05%). Thus you should fill the TSP in the order G/I/S/C.
If you divide the market as large/small, the total-market funds have about 20% small-caps, so you don't want quite half your portfolio in a small-cap fund if you use a total-market fund.
40% bonds in G Fund (or Total Bond Market if TSP is less than 40% of total)
20% international (may use 8% of portfolio in TSP)
...If using TSP: 40% I Fund, 10% Emerging Markets Index, 50% VSS
...If using Vanguard: 60% Total International, 40% VSS
40% US (may use 26% of portfolio in TSP)
...If using TSP: 35% Total Stock Market Index, 65% S Fund
...If using Vanguard: 60% Total Stock Market Index, 40% Small-Cap Index.
Start with an allocation. I think this is what you are trying to do, and if you are, it's an excellent allocation for a 45-year-old investor. (If this isn't your target allocation, you can adjust accordingly.)
20% US large
20% US small
10% foreign large
10% foreign small
40% bonds
Now, consider what is best in the TSP. The TSP G fund is much better than any bond fund you can get anywhere else (or the F fund in the TSP), because it has no risk; if interest rates rise, any bond fund in your IRA will lose value but the G fund will lose nothing and will have its yield increase. Vanguard has equivalents to thestock funds, and the I fund equivalent has the highest cost (Developed Markets at 0.12%), then the S fund (treating the S as 30% large, 70% small, gives an expense ratio of 0.08% for 40% Total Stock Market, 60% Small-Cap Index, after adjusting the expenses for Business Development Companies), then the C fund (0.05%). Thus you should fill the TSP in the order G/I/S/C.
If you divide the market as large/small, the total-market funds have about 20% small-caps, so you don't want quite half your portfolio in a small-cap fund if you use a total-market fund.
40% bonds in G Fund (or Total Bond Market if TSP is less than 40% of total)
20% international (may use 8% of portfolio in TSP)
...If using TSP: 40% I Fund, 10% Emerging Markets Index, 50% VSS
...If using Vanguard: 60% Total International, 40% VSS
40% US (may use 26% of portfolio in TSP)
...If using TSP: 35% Total Stock Market Index, 65% S Fund
...If using Vanguard: 60% Total Stock Market Index, 40% Small-Cap Index.
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Re: Portfolio: Smart or Stupid?
No way to tell, as we do not know the relative values of the TSP and IRA.
Re: Portfolio: Smart or Stupid?
Looks good. My only conceren is why you would even think it was stupid. If you are that unsure you may need to do more reading to put your doubts aside. If you are not confident then that could lead to panic when the market drops.
Re: Portfolio: Smart or Stupid?
You may be limited in your TSP choices, nothing you can do about that so I'd say you're likely doing pretty well in there.
I think you're under-diversified in your Roth, where you likely have endless choices. Specifically, your exposure to alternative classes is zero.
I think you're under-diversified in your Roth, where you likely have endless choices. Specifically, your exposure to alternative classes is zero.
Re: Portfolio: Smart or Stupid?
The portfolio idea is a long way from stupid.
But I think you can make better use of the "best" in each account - as already suggested by Grabiner. The "best" in the TSP is the G Fund. The worst in the TSP is the international since it holds no Canada, no small caps, and no emerging markets. Everything else is even steven. So I'd hold more bonds in the TSP (in the form of the G Fund) and more international in the Roth IRA (in the form of Vanguard's Total International) to get the best that each account has to offer.
But I think you can make better use of the "best" in each account - as already suggested by Grabiner. The "best" in the TSP is the G Fund. The worst in the TSP is the international since it holds no Canada, no small caps, and no emerging markets. Everything else is even steven. So I'd hold more bonds in the TSP (in the form of the G Fund) and more international in the Roth IRA (in the form of Vanguard's Total International) to get the best that each account has to offer.
Link to Asking Portfolio Questions
- Taylor Larimore
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Need percentages in total portfolio.
Jagman:
It would be helpful if you would use the "Edit" button to show the percentage of each fund in your total portfolio. Your funds as shown total 200% ?
Thank you and best wishes.
Taylor
It would be helpful if you would use the "Edit" button to show the percentage of each fund in your total portfolio. Your funds as shown total 200% ?
Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: Portfolio: Smart or Stupid?
Roth at 100% LifeStrategy Mod. Growth, would eliminate rebalancing, which takes courage when the market crashes. Less Int., of course. Or 60% Tot. World and 40% Tot. Bnd. is about as simple as it gets and you don't have to try and beat the market with custom asset allocations.
Re: Portfolio: Smart or Stupid?
There might be something to be said for having all those separate funds early in one's investing life. One will see what goes up and down and not have the volatility hidden inside a balanced fund. One will learn "I shoulda rebalanced into equities in March 2009" and other lessons. It is easier to learn these lessons in a $20,000 Roth IRA. It makes it easier to apply these lessons in a $2,000,000 portfolio later on.
Re: Portfolio: Smart or Stupid?
My own recommendations allow for this. The I fund is slightly better than the C or S for the part of international which it can replace, because it has the most expensive alternative; you still need Emerging Markets Index for the emerging large-caps, and VSS for the small-caps. If you use Total International, you don't need a separate emerging-markets fund, and you don't need as much VSS because Total International includes small-caps.retiredjg wrote:But I think you can make better use of the "best" in each account - as already suggested by Grabiner. The "best" in the TSP is the G Fund. The worst in the TSP is the international since it holds no Canada, no small caps, and no emerging markets.
Re: Portfolio: Smart or Stupid?
Many thanks for the thoughtful advice!