Best Fit for Core Funds

[mphilips]

Given the following fund choices (available in my core plan) what is the best 60/40 allocation?

Stock Investments

Large Cap

VANG GRTH INDEX INST
VANG VAL INDEX INST
VANGUARD INST INDEX

Mid-Cap

FID LOW PRICED STK K
FID MID CAP STOCK K
VANG MIDCAP IDX INST

Small Cap

ABF SM CAP VAL INST
VANG SM CAP IDX INST
WASATCH SM CAP GRTH

International

FID DIVERSIFD INTL K
VANG TOT INTL STK IS

Blended Fund Investments*

OAKMARK EQ & INC I
VANG TARGET RET 2010
VANG TARGET RET 2015
VANG TARGET RET 2020
VANG TARGET RET 2025
VANG TARGET RET 2030
VANG TARGET RET 2035
VANG TARGET RET 2040
VANG TARGET RET 2045
VANG TARGET RET 2050
VANG TARGET RET 2055
VANG TARGET RET 2060
* VANG TARGET RET INC

Bond Investments
Stable Value
FID MIP II CL 3
Income
PIM TOTAL RT INST
VANG TOT BD MKT INST

Short Term Investments
FID RETIRE MMKT


Also for a more conservative investment portfolio for someone who is 60 and retired which would you suggest:

VTINX which is 8% cash, 62% bonds (5% international bonds), and 30% stock (9% international stock) ER 0.17%

or

30% cash invested in FID MIP II CL 3 ER 0.24%
50% bonds split (41% PTTRX (Pimco Total Return) ER 0.46%, 9% VBTIX (Vanguard Total Bond) ER 0.07%), and
20% stock split
Fidelity Diversified International... FDIKX 2% ER 0.7 % (can also be VTSNX - VANG TOT INTL STK IS ER 0.13%)
Vanguard Value Index... VIVIX 6% ER 0.08%
Vanguard Growth Index... VIGIX 7% ER 0.08%
Fidelity Low-Priced Stock Fund;K FLPKX 2% ER 0.76% (can also be VMCIX - VANG MIDCAP IDX INST ER 0.08%)
Wasatch Small Cap Growth... WAAEX 3% ER 1.24% (can also be VSCIX - VANG SM CAP IDX INST ER 0.08%)

[Johm221122]

I would suggest ,you think of portfolio as one and post this way
viewtopic.php?f=1&t=6212
John

[livesoft]

If one didn't want to make any calculations or any rebalancing, then here is what I would do:

Pick a Vanguard Target Retirement fund that had the closest allocation to 60:40 that you could find. Look every year and make sure it was still the closest to 60:40 and if not exchange to the one that was closest to 60:40.

This link: https://advisors.vanguard.com/VGApp/iip ... undId=0682 has a graphic showing all the asset allocations of Vanguard Target Retirement funds

The reason to pick the TR fund rather than a mixture of funds is that many folks cannot seem to rebalance at market lows or market highs and this is critical to getting the best returns. TR funds seem to be able to do this with ease.

And I think it is a no brainer to go with the Vanguard fund rather than that mix of funds.

[grabiner]

Vanguard's small-cap index has some mid-caps by the usual definition; it's about the bottom 15% of the market. It doesn't overlap with the mid-cap index, which is about the next 15%. Thus, to get a total market allocation with the three funds you have, your US allocation would be 70% Institutional Index (which is the S&P 500), 15% Mid-Cap Index, 15% Small-Cap Index. Your international allocation can be Total International, and your bond allocation Total Bond Market. With institutional shares, you'll have extremely low expenses.

You want a 60/40 portfolio; you didn't specify an international allocation, so I'll assume 30% of the stock. Thus:

30% Institutional Index
6% Mid-Cap Index
6% Small-Cap Index
18% Total International
40% Total Bond Market Index

Rebalance annually to this allocation.

[mphilips]

Merry Christmas and Happy New Year... thanks for your input.

[mphilips]

Vanguard's small-cap index has some mid-caps by the usual definition; it's about the bottom 15% of the market. It doesn't overlap with the mid-cap index, which is about the next 15%. Thus, to get a total market allocation with the three funds you have, your US allocation would be 70% Institutional Index (which is the S&P 500), 15% Mid-Cap Index, 15% Small-Cap Index. Your international allocation can be Total International, and your bond allocation Total Bond Market. With institutional shares, you'll have extremely low expenses.

You want a 60/40 portfolio; you didn't specify an international allocation, so I'll assume 30% of the stock. Thus:

30% Institutional Index
6% Mid-Cap Index
6% Small-Cap Index
18% Total International
40% Total Bond Market Index

Rebalance annually to this allocation.

Why not use PTTRX for a portion of the bond allocation?

[mphilips]

One more question... if the target retirement funds don't offer the 40 / 60 allocation that I am looking for is there anything wrong with a mix of the target funds themselves. For example 60% VTENX and 40% VTINX creates an asset allocation that is very close to 40 / 60 ... It also includes 2 % in cash.

[dbr]

One more question... if the target retirement funds don't offer the 40 / 60 allocation that I am looking for is there anything wrong with a mix of the target funds themselves. For example 60% VTENX and 40% VTINX creates an asset allocation that is very close to 40 / 60 ... It also includes 2 % in cash.

No, nothing, except that if you are going to do that maybe a better idea is to go back to just assembling separate funds, starting with a simple three fund portfolio. Note that being "off" by as much as ten percentage points doesn't make that much difference.

I haven't seen in the thread so far whether or not we are talking about all of your porfolio or just part of it, and what the breakdown is between taxable and tax preferred accounts.

[mphilips]

In my 401K core account I have a number of Vanguard Index funds to choose from but they left out an important one VTSMX. Instead they offer a variety of index funds for different market caps which are listed above. So in order to have the 3 fund portfolio I have to use 5 funds. Another comment about re-balancing made me think that the target funds might be a better choice but none of them are allocated with 40% stock and 60% bonds. 60% VTENX and 40% VTINX comes close to a 40 / 60 allocation. Since I am 59 and 1/2 today I am going to look into an in-service rollover into a Vanguard 401K. Does anyone know if you have to quite contributing to your 401K to do this?

[dbr]

VTENX is 43% stocks. Surely that is close enough that one would not need to bother adding anything else.

The hooker is that being it is already after 2010, within the next four years this fund is supposed to become effectively VTINX, in which case you could just buy VTINX now, at 30% stocks.

One does sympathize over the absence of TSM in the plan.

Also, again, are we assuming all your investments are in this 401K?

[mphilips]

I am currently invested 100% in VTINX but I am interested in having more exposure to stocks. VTENX may be the answer.

[mphilips]

Vanguard's small-cap index has some mid-caps by the usual definition; it's about the bottom 15% of the market. It doesn't overlap with the mid-cap index, which is about the next 15%. Thus, to get a total market allocation with the three funds you have, your US allocation would be 70% Institutional Index (which is the S&P 500), 15% Mid-Cap Index, 15% Small-Cap Index. Your international allocation can be Total International, and your bond allocation Total Bond Market. With institutional shares, you'll have extremely low expenses.

You want a 60/40 portfolio; you didn't specify an international allocation, so I'll assume 30% of the stock. Thus:

30% Institutional Index
6% Mid-Cap Index
6% Small-Cap Index
18% Total International
40% Total Bond Market Index

Rebalance annually to this allocation.

When I enter a distribution of stocks using 70% VIIIX 15% VMCIX and 15% VSCIX - Vanguards portfolio analysis shows a discrepancy in a comparison with the total US stock market which is listed as 65% Large Cap 28% Mid Cap and 7% Small Cap. By contrast VTSAX lines up exactly with this 65/28/7 allocation. Please explain why the 70/15/15 allocation does not line up this way.




If this represents the Total US stock market shouldn't it match up?

[grabiner]

Vanguard's small-cap index has some mid-caps by the usual definition; it's about the bottom 15% of the market. It doesn't overlap with the mid-cap index, which is about the next 15%. Thus, to get a total market allocation with the three funds you have, your US allocation would be 70% Institutional Index (which is the S&P 500), 15% Mid-Cap Index, 15% Small-Cap Index.

When I enter a distribution of stocks using 70% VIIIX 15% VMCIX and 15% VSCIX - Vanguards portfolio analysis shows a discrepancy in a comparison with the total US stock market which is listed as 65% Large Cap 28% Mid Cap and 7% Small Cap. By contrast VTSAX lines up exactly with this 65/28/7 allocation. Please explain why the 70/15/15 allocation does not line up this way.

The problem is with Vanguard Portfolio Watch. Vanguard puts most funds 100% in one category, and that isn't correct for Small-Cap Index, which is not 100% small-cap by the definition of small-caps which makes them only 7% of Total Stock Market.

Here is the data from Morningstar, which divides the market as 70% large, 20% mid, 10% small.

Total Stock Market: 72/19/9
Intstitutional or 500 Index: 87/12/0 (adds to 99 because of rounding)
Mid-Cap Index: 16/83/0
Small-Cap Index: 0/42/58

70/15/15 portfolio: 64/28/8

So this has a slight overweight to mid-caps. However, the overweight is in the largest of the mid-caps, which behave more like small-caps, as the mid-caps in the S&P 500 are mostly the largest ones, while the mid-cap and small-cap indexes cover all the mid-caps. Thus this allocation should behave much like a total-market allocation. 80/5/15 would come closer to the percentages at 71/21/8, but the exact correct percentage will vary.

[mphilips]

Thanks for clearing this up. I did notice is that even though "market capitalization" displayed the discrepancy the "industry sectors" lined up very closely.