Please review my portfolio

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Please review my portfolio

Postby Bacchus01 » Mon Dec 24, 2012 10:43 pm

Looking for a review of my portfolio. We've done well, in my mind, but much of that has been by luck and we've ended up with a muddled jumble of stuff. Thank you in advance!

Emergency funds: 6 months
Debt: 2.25% on 5/1 ARM (6 mos. in) on first home; 2.5% on 15 year fixed on second home, just started – both with Wells Fargo
Tax Filing Status: Married Filing Jointly
Effective Tax Rate: 25% Federal, 6% State
State of Residence: WI
Age: Me 39, Wife 43
Desired Asset allocation: 75% stocks / 25% bonds
Desired International allocation: 40% of stocks

Current portfolio is over $1M
Current household income is over $250K/annually


Current retirement/other assets
Real Estate Equity – 15%
86% main home
14% second home - plan to sell in about 15 years

Taxable – 47%
45% cash – Ally Bank
1% Motorola Stock (MOT) - SmithBarney
2% Textron Stock (TXT) - SmithBarney
43% Rexnord Stock (RXN) – SmithBarney
9% Vested Unexercised Stock Options – SmithBarney

His 401k Former Employer – Fidelity – 23%
29% Textron Stock (TXT)
15.9% Fidelity Low Priced Stock K (FLPKX) - .76%
13.6% Vanguard Institutional Index Plus (VIIIX) - .02%
13.1% Pimco Total Return Institutional (PTTRX) - .46%
11.5% Vanguard Target 2030 - .083%
9.55% Fidelity Diversified International K (FDIKX) - .73%
7.2% Fidelity Contrafund K (FCNKX) - .69%

His Former Employer Retirement Account – Fidelity – 1%
29% Textron Stock (TXT)
15.9% Fidelity Low Priced Stock K (FLPKX) - .76%
13.6% Vanguard Institutional Index Plus (VIIIX) - .02%
13.1% Pimco Total Return Institutional (PTTRX) - .46%
11.5% Vanguard Target 2030 - .083%
9.55% Fidelity Diversified International K (FDIKX) - .73%
7.2% Fidelity Contrafund K (FCNKX) - .69%

Her 401k Former Employer – 6%
29% Balanced Fund - .048%
64% Large U.S. Equity NT S&P 500 - .034%
8% Motorola Stock - .084%

His 401K Current Employer – Wells Fargo – 8%
48% WF Dow Jones Target 2030 (I) WFOOX .51%
48% WF Dow Jones Target 2040 (I) WFOSX .52%
2% Wells Fargo Advantage Emerging Gr Instl WEMIX .9%

529 Plans – TIAA Craf – 1%
~$9K for each of our 3 sons, 7-15 yrs from college expenses

Contributions

New annual Contributions
401k - $17,500 his 401k ~$15K in employer match - 45% Target 2030, 45% Target 2040, 10% Emerging Market
$50K-$100K taxable additional investment/year depending on bonus/short-term expenses

Available funds

Funds available in his former employer 401(k)
Textron Stock (TXT)
Fidelity Low Priced Stock K (FLPKX) - .76%
Vanguard Institutional Index Plus (VIIIX) - .02%
Pimco Total Return Institutional (PTTRX) - .46%
Vanguard Target 2030 (a bunch of these from 2020 through 2060)- .083%
Fidelity Diversified International K (FDIKX) - .73%
Fidelity Contrafund K (FCNKX) - .69%

Funds available in his current employer 401(k)
Wells Fargo Stable Return Fund N25
Artio Total Return Bond I JBGIX .44%
Fidelity Capital & Income FAGIX .77%
Wells Fargo Advantage DJ Target Today WOTDX .45%
WF Dow Jones Target 2010 (I) WFOAX .48%
WF Dow Jones Target 2020 (I) WFOBX .5%
WF Dow Jones Target 2030 (I) WFOOX .51%
WF Dow Jones Target 2040 (I) WFOSX .52%
WF Dow Jones Target 2050 (I) WFQFX .52%
Columbia Acorn/Z ACRNX .76%
Columbia Mid Cap Value Opportunity R5 RSCMX .82%
Hartford Growth Opportunities HAGOX .66%
T. Rowe Price Equity Income PRFDX .68%
Wells Fargo Advantage Emerging Gr Instl WEMIX .9%
Wells Fargo S&P 500 Index Fund N5 .102%
American EuroPacific Growth RERFX .56%
Oppenheimer Developing Markets Y ODVYX 1.03%
Cohen & Steers Realty Shares CSRSX .96%
Prudential High-Yield Z PHYZX .62%
Waddell & Reed Core Investment A UNCMX 1.12%
Goldman Sachs Smcap Inst GSSIX 1.01%
T. Rowe Price Blue Chp Gwth TRBCX .77%
PIMCO Total Return P PTTPX .56%

Funds available in her former employer 401(k)
NT Collective Aggregate Bond Index Fund – Lending - .035%
Motorola Solutions Short Term Bond Fund - .041%
Motorola Solutions Balanced Fund I - .048%
Motorola Solutions Balanced Fund II - .051%
NT Collective S&P 500 Index Fund – Lending - .034%
NT Collective S&P MidCap 400 Index Fund – Lending - .036%
NT Collective EAFE Index Fund – Lending - .137%
NT Collective Russell 2000 Index Fund – Lending - .045%
Motorola Solutions Stock Fund - .084%


Comments
Long Term: Looking to retire in about 10 years. Would like to grow net worth, including new adds by 15-25% a year.

Short Term:
- Looking to move former 401k plans into Rollover IRA plans.
- Would like to consolidate accounts over time and simplify the management of the portfolio.

Would like to keep more conservative “lazy portfolio” investments in retirement plans and more aggressive investment mix in taxable accounts.

Rexnord holdings were bought at the IPO and I need to hold them until at least May of 2013.

As we worked through relocation and some other issues, as well as buying my wife’s parents home as a second-home/estate planning, we are carrying too much cash.

Questions:
1. What investment profile should I balance the pre-post tax balance and insure best tax situation over long term?

2. What would be a good investment profile for the Rollover IRA accounts? I will most likely go to Vanguard.

3. What would be the best investment profile given to move about $225K in cash into the market? This probably would also be with Vanguard.

4. What would be the best investment profile in my current 401k plan given all the other items listed?

5. If you want to have some money aside for “active trading,” what’s a reasonable amount? By active, I mean buying individual equities or narrow ETFs. Not daytrading. Not derivatives or commodities.

6. Since I do not have a traditional IRA today, should I avoid converting the current former 401(k) plans to IRA plans so that I can so some back-door Roth conversions?

.
Last edited by Bacchus01 on Fri Dec 28, 2012 1:10 pm, edited 3 times in total.
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Re: Please review my portfolio

Postby 1530jesup » Tue Dec 25, 2012 12:35 am

bump to get you some attention

good luck, have a great holiday, Rich
efficiency is not all its cracked up to be, do you want to live your life in half the time it takes the average person? Rhymes With Orange | Rich
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Re: Please review my portfolio

Postby Bacchus01 » Tue Dec 25, 2012 1:25 am

1530jesup wrote:bump to get you some attention

good luck, have a great holiday, Rich


Thank you. Good holiday to you as well!
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Re: Please review my portfolio

Postby Johm221122 » Tue Dec 25, 2012 1:26 am

How much gains in taxable?
Almost 25% in IPO is risky, sell ASAP(may)
try 3 fund portfolio
http://www.bogleheads.org/wiki/Three-fund_portfolio
Use 500 index and Artio total return bond
Use total international index ,municipal bonds,i bonds and total market index in taxable
use extended market index in ira 's
Here is wiki tax placement
http://www.bogleheads.org/wiki/Principl ... _Placement
If you want to actively trade 5-10%
Your goal of 15-25% (incluing 67-117k new money)is kind of high 10%-15% probably safer assumption
john
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Re: Please review my portfolio

Postby Bacchus01 » Tue Dec 25, 2012 10:06 am

Thanks for the quick reply. Please see some of my comments below.

Johm221122 wrote:How much gains in taxable?
Almost 25% in IPO is risky, sell ASAP(may)
Yes, this was a pre-IPO opportunity to buy in. I'm holding for 1 year to avoid short term gains. Right now it's doing well but at 20% of portfolio, I need to move out of it. I also have a bunch of options that will come available and as such my RXN position will approach more than 30%. I will exit nearly all of this IPO buy at 1 year.

try 3 fund portfolio
http://www.bogleheads.org/wiki/Three-fund_portfolio
Great. Learned a lot already. I'm going to see how best to allocate across some IRA conversion, taxable investment, and current 401(k) allocation.


Use 500 index and Artio total return bond
Out of curiousity, why did you make this reccomendation over others?

Use total international index ,municipal bonds,i bonds and total market index in taxable
use extended market index in ira 's
How do you recommend geting muni bonds? Through a specific ETF? Specific bonds? Any thoughts?

Here is wiki tax placement
http://www.bogleheads.org/wiki/Principl ... _Placement
Learning even more! Thanks. I had read this, but didn't understand it in context. You're giving me better context. If I were to think across the portfolio, should I put all of my tax advantaged (401K/rollver IRAs) into mostly total market bond accounts and all of my taxable into mostly international index and such?


If you want to actively trade 5-10%

Your goal of 15-25% (incluing 67-117k new money)is kind of high 10%-15% probably safer assumption
john
Actuall new money is more like $82 - $132K as my 401(k) is about $32K including employer match. Additionally, I include my equity position in my two homes as part of net worth, and I am adding to equity at about $1K/mo, or $12K a year. For rounding, it's about $95K - $145K. That's ~7.5% to 13% additional input each year. I then need to earn anywhere from 2% to 17.5% on the balance to hit my ideal range of 15% to 25% growth/year. Not easy to do, but doable. I hit almost exactly 25% this year by pure chance. A good market tailwind helped for sure.

Thanks again for the input. Looking forward to more. Great advice!



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Re: Please review my portfolio

Postby Johm221122 » Tue Dec 25, 2012 10:48 am

As far as 401
Artio total bond is an index fund with good ER
500 index because international index is better for taxable

Municipal bond fund for municipal bonds

Most 401 should be fixed income
International is best for taxable
2%-8% very doable but 9% to 17.5% is pushing it
It seems you have a good idea on things hopefully some one else will comment
John
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Re: Please review my portfolio

Postby retiredjg » Tue Dec 25, 2012 1:27 pm

Welcome to the forum!

Effective Tax Rate: 25% Federal, 6% State

With a household income over $250k, it seems unlikely that you are in the 25% federal tax bracket. Please compare your taxable income (line 43 on form 1040) with this chart.

Real Estate Equity – 15%

I have removed your real estate equity from the portfolio. Real estate is part of your total wealth, but not really part of a portfolio because it is not liquid. Some people don't even consider real estate an investment, but rather a place to live. Regardless of how you look at it, real estate can't be rebalanced, so we leave it out of the calculations. I've also removed the 529 plans since that money needs to be invested differently. So here is what you have now (recalculated)

Taxable – 55.3%
45% cash – Ally Bank
1% Motorola Stock (MOT) - SmithBarney
2% Textron Stock (TXT) - SmithBarney
43% Rexnord Stock (RXN) – SmithBarney
9% Vested Unexercised Stock Options – SmithBarney

His 401k Former Employer – Fidelity – 27.1%
(looking to move this entirely)

His Former Employer Retirement Account – Fidelity – 1.2%
(looking to move this entirely)

Her 401k Former Employer – 7.1%
(looking to move this entirely)

His 401K Current Employer – Wells Fargo – 9.4%
48% WF Dow Jones Target 2030 (I) WFOOX .51%
48% WF Dow Jones Target 2040 (I) WFOSX .52%
2% Wells Fargo Advantage Emerging Gr Instl WEMIX .9%




Taxable
45% cash – Ally Bank
1% Motorola Stock (MOT) - SmithBarney
2% Textron Stock (TXT) - SmithBarney
43% Rexnord Stock (RXN) – SmithBarney
9% Vested Unexercised Stock Options – SmithBarney

This account is a concern. You have 30% of your portfolio invested in individual stock, 24% of the portfolio invested in 1 stock. That's risky. Ordinarily, we suggest 5%, maybe 10%, of your portfolio to be in individual stock, if you choose to have any at all. I understand the Rexnord stock is being held to avoid short term capital gains, but you need to get rid of most or all of this as soon as you can.



New annual Contributions
401k - $17,500 his 401k ~$15K in employer match - 45% Target 2030, 45% Target 2040, 10% Emerging Market
$50K-$100K taxable additional investment/year depending on bonus/short-term expenses

You list no active accounts for your wife and no contributions. Is that correct?


Looking to move former 401k plans into Rollover IRA plans.

This is possible, but it may not be your best option since it would prevent back door contributions to Roth IRA for each of you. Do you know if you can roll your old plans into your current 401k? What is the lowest cost stock fund and lowest cost bond fund in Her old 401k?


6. Since I do not have a traditional IRA today, should I avoid converting the current former 401(k) plans to IRA plans so that I can so some back-door Roth conversions?

Probably. Let's assume for the time being that your current 401k will take them (it is quite likely). Here's an idea to consider. You would change your current investments to what is below - for now, I'm leaving the stocks as is.

Taxable – 55.3%
24.9% Vanguard Total International Index
30.4% 1% Motorola Stock (MOT), 2% Textron Stock (TXT), 43% Rexnord Stock (RXN), and 9% Vested Unexercised Stock Options

His 401K Current Employer – Wells Fargo – 38.9%
21% Wells Fargo S&P 500 Index Fund N5
17.9% Artio Total Return Bond I JBGIX .44%

Her 401k Former Employer – 7.1%
7.1% bonds

This is just one of several possible ideas. It is 75% stocks, 25% bonds, with 33% (24.9% of portfolio) of stocks in international. As you get rid of things in your taxable account, you can build the international up to the 40% of stocks (30% of portfolio) that you desire. What the portfolio is missing is some mid and small cap US stocks. Those can be put in the Roth IRAs that you open. Since there are no tIRAs in the way, you can get about $21k into Roth IRA quite soon ($5k a year for each for 2012 and $5.5k for each for 2013.

I'm not familiar with the Artio fund, but I don't believe it is a bond index fund. It appears to me to be a "core plus" bond fund like the PIMCO Total Return. I picked Artio because of the lower cost and the fact it has been around awhile. If you prefer the PIMCO fund, that would be fine too.

If you wish to use I bonds in your taxable account for some of your bond allocation, that would be fine as well.

Let me know if you have any questions.
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Re: Please review my portfolio

Postby stan1 » Tue Dec 25, 2012 1:53 pm

I would recommend mentally separating your savings rate and the rate of return on your investments into two components of building net worth. Savings rate is tied to how much you earn from non-investment income sources and how much you spend. Rate of return is tied to your asset allocation (which you do have control over) and market conditions (which you don't have control over).

Making this separation will help you determine whether growing net worth by 15-25% per year is realistic.
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Re: Please review my portfolio

Postby Bacchus01 » Thu Dec 27, 2012 2:03 pm

stan1 wrote:I would recommend mentally separating your savings rate and the rate of return on your investments into two components of building net worth. Savings rate is tied to how much you earn from non-investment income sources and how much you spend. Rate of return is tied to your asset allocation (which you do have control over) and market conditions (which you don't have control over).

Making this separation will help you determine whether growing net worth by 15-25% per year is realistic.



That's fair. I think rate of return therefore looks like 7-10% targeted range.
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Re: Please review my portfolio

Postby Bacchus01 » Thu Dec 27, 2012 2:19 pm

Thanks for the feedback so far.

As it appears I should not move my former employer 401(k) to a Rollover IRA so that I can do some back-door Roth conversions, I have a couple more questions.

I updated my former employer 401(k) account balances as well as available accounts. I would like some recommendations across the various accounts now.

Would I be better off keeping it at Fidelity, or rolling it over to my current employer's funds?

What should I hold in my Rollover Roth's? Looks like I can do about $21K right after the first of the year. However, my wife has to have earned income, right? She has no earned income. She is currently staying at home with the kids. Do we have any ability to investment in tax advantaged accounts in here name?

Learning a lot. Thanks!
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Re: Please review my portfolio

Postby retiredjg » Thu Dec 27, 2012 3:36 pm

Here's one way it could be done.

Taxable – 55.3%
24.9% Vanguard Total International Index
30.4% 1% Motorola Stock (MOT), 2% Textron Stock (TXT), 43% Rexnord Stock (RXN), and 9% Vested Unexercised Stock Options

His 401K Current Employer – Wells Fargo – 9.4%
4.4% Wells Fargo S&P 500 Index Fund N5
5% Artio Total Return Bond I JBGIX .44%

His 401k Former Employer – Fidelity – 27.1%
15.4% Vanguard Institutional Index Plus (VIIIX) - .02%
11.7% Pimco Total Return Institutional (PTTRX) - .46%

His Former Employer Retirement Account – Fidelity – 1.2%
1.2% Pimco Total Return Institutional (PTTRX) - .46%

Her 401k Former Employer – 7.1%
7.1% Bonds

You have not specified an expense ratio on the 500 index in your current 401k, so there is no way to determine if your old 401k plan is better or worse than your current one. It appears the bonds are about the same price - giving no advantage to keeping the old plan. But the relative costs of the 500 index are unknown. See what you can find out (make sure it applies to your plan, not just a number off the internet).



What should I hold in my Rollover Roth's? Looks like I can do about $21K right after the first of the year. However, my wife has to have earned income, right? She has no earned income. She is currently staying at home with the kids. Do we have any ability to investment in tax advantaged accounts in here name?

For the Roth IRA accounts, I would use Vanguard's Extended Market Index Fund. This fund supplies the mid and small cap funds needed to "complete" your 500 Index funds.

Yes, she can have IRAs or Roth IRAs based on your income.
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Re: Please review my portfolio

Postby retiredjg » Thu Dec 27, 2012 3:42 pm

Bacchus01 wrote:Effective Tax Rate: 25% Federal, 6% State
Current household income is over $250K/annually

I don't believe your income was in your original post. If so, I missed it.

To determine your federal tax bracket, you should compare your taxable income (line 43 on Form 1040) to this chart.. You'll see that you are in at least the 28% bracket, possibly in the 33% bracket. It is your marginal tax bracket, not your effective tax rate, that you need to know to make decisions.
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Re: Please review my portfolio

Postby Bacchus01 » Thu Dec 27, 2012 3:44 pm

retiredjg wrote:
Bacchus01 wrote:Effective Tax Rate: 25% Federal, 6% State
Current household income is over $250K/annually

I don't believe your income was in your original post. If so, I missed it.

To determine your federal tax bracket, you should compare your taxable income (line 43 on Form 1040) to this chart.. You'll see that you are in at least the 28% bracket, possibly in the 33% bracket. It is your marginal tax bracket, not your effective tax rate, that you need to know to make decisions.

I wasn't sure what was being asked, so I put effective tax bracket. The guide for posting should include that.

Yes, we are most likely in the 33% marginal bracket.
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Re: Please review my portfolio

Postby Bacchus01 » Thu Dec 27, 2012 3:47 pm

I updated the ER on the Wells S&P 500 in my current employer 401(k). Thanks!
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Re: Please review my portfolio

Postby retiredjg » Thu Dec 27, 2012 5:16 pm

Funds available in his former employer 401(k)
Vanguard Institutional Index Plus (VIIIX) - .02%
Pimco Total Return Institutional (PTTRX) - .46%

Funds available in his current employer 401(k)
Wells Fargo S&P 500 Index Fund N5 .102%
Artio Total Return Bond I JBGIX .44%

Hmmm. Your former employer's 401k plan is slightly cheaper for the 500 Index. So if you keep the old one, I'd fill it with the 500 Index and not use the Pimco return at all or use it only as much as necessary. This will reduce your overall portfolio cost slightly. Whether it is worth that slight cost savings to keep an extra account, I'm not sure. I'd probably rather have 1 fewer account. A savings of .082% would equal $82 on a $100k investment. Not much.

The other thing you'd have to be sure is that there are no hidden or extra costs in that old plan.



Taxable – 55.3%
24.9% Vanguard Total International Index
30.4% 1% Motorola Stock (MOT), 2% Textron Stock (TXT), 43% Rexnord Stock (RXN), and 9% Vested Unexercised Stock Options

His 401K Current Employer – Wells Fargo – 9.4%
0% Wells Fargo S&P 500 Index Fund .105%
9.4% Artio Total Return Bond I JBGIX .44%

His 401k Former Employer – Fidelity – 27.1%
18.6% Vanguard Institutional Index Plus (VIIIX) - .02%
8.5% Pimco Total Return Institutional (PTTRX) - .46% <--- over time, you can rebalance this fund all into the Institutional 500 Index, eventually having only 1 fund in this account

His Former Employer Retirement Account – Fidelity – 1.2%
1.2% Vanguard Institutional Index Plus (VIIIX) - .02%

Her 401k Former Employer – 7.1%
7.1% Bonds

If you want to pick a similar small nit, you could see if it would be beneficial cost wise to use stocks in Her 401k instead of bonds, adjusting elsewhere to achieve your 75/25.
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Re: Please review my portfolio

Postby Bacchus01 » Fri Dec 28, 2012 1:13 pm

Updated some stuff including Her 401K allocation and available funds as well as His Former 401K allocation as a starting point.

I don't like the bond funds in Her Former 401K, so will probably move all of hers to the NTS&P 500 account and put bonds somewhere else.
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Re: Please review my portfolio

Postby retiredjg » Fri Dec 28, 2012 1:21 pm

You don't like Total Bond Market Index that is practically free?

    NT Collective Aggregate Bond Index Fund – Lending - .035%

I don't know what else got updated, but I can't see how that would change anything. Do you have a specific question?
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Re: Please review my portfolio

Postby Bacchus01 » Fri Dec 28, 2012 1:40 pm

retiredjg wrote:You don't like Total Bond Market Index that is practically free?

    NT Collective Aggregate Bond Index Fund – Lending - .035%

I don't know what else got updated, but I can't see how that would change anything. Do you have a specific question?


Well, I was looking at past performance (I know) and it's performance relative to PIMCO has been pretty subpar, so I thought I'd put it in PIMCO in another account.
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Re: Please review my portfolio

Postby retiredjg » Fri Dec 28, 2012 6:55 pm

Well, nothing wrong with that as long as you realize that comparing a total return ("core plus") fund with a total bond index is apples and oranges. The PIMCO fund is a fine fund if you want active management, more risk, and higher expenses.

Darn, that sounded like a slam and it isn't supposed to be. I'm just saying it is a fine choice if you know what you are choosing. But if you think it is just a better total bond market index, you would be mistaken.
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