General Portfolio Management Questions

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General Portfolio Management Questions

Postby gtwhitegold » Thu Dec 27, 2012 7:55 am

I am active duty military and the majority of my investment funds are in the TSP and I can afford to contribute to the maximum in the Roth TSP and a Roth IRA, but not much taxable. I am trying to come close to balancing my portfolio to my desired allocation, but certain areas in international (such as Canada) will be underweighted. (Due to only having an EAFE index fund in the TSP.) My question is, Should I try to overweight EAFE in order to get a larger international allocation, or should I just reduce my international holdings in order to try to balance my international exposure? Thanks in advance.

Allen
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Re: General Portfolio Management Questions

Postby livesoft » Thu Dec 27, 2012 8:20 am

An answer might be to stop contributing to the Roth TSP, but instead contribute to the TSP. Take the tax savings you get by doing that and open a regular taxable account and invest in a total international fund in it. Adjust asset allocation in your other accounts appropriately.

If you are asking "Is it OK to have EAFE-only International or do I really need EAFE+emerging+Canada+small-caps?", then I can say that the latter is preferred, but it is OK to just go with the former. After all, that's what many people did for years and years.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: General Portfolio Management Questions

Postby NYBoglehead » Thu Dec 27, 2012 9:01 am

livesoft,

The Roth vs. Traditional option is much different for military members. Most of the time servicemen are in the lower brackets and some of the income comes from non-taxable allowances such as BAH and BAS. If they plan on making a career out of it and will be receiving a pension, the Roth makes even more sense since the pension will fill the lower brackets in retirement.

I did not contribute to the TSP when I was in the service because my effective tax rate was very low. I chose to max out Roth IRAs instead, as the Roth TSP was not an option. I didn't think it made sense to tax-defer income when I was only in the 15% bracket and allowances (BAH and BAS) made up a large part of my take home pay.

While we don't know what bracket the OP is in or other particulars of his situation, these things need to be taken into account when making recommendations to military posters.
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Re: General Portfolio Management Questions

Postby livesoft » Thu Dec 27, 2012 9:05 am

Yep, I agree which is why I used the words "might be", but it is true I assumed a certain amount of income to cover those maximum after-tax contributions.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: General Portfolio Management Questions

Postby gtwhitegold » Thu Dec 27, 2012 9:15 am

I am regularly in the 15% tax bracket and am stationed overseas, so about 40% of my income is not taxable when I am in a taxable status and I normally spend several months of the year in a tax-free zone. This and my deductions normally only have me paying a small amount in state taxes and none or very little in federal each year. This is why I am only contributing to Roth accounts at this time.
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Re: General Portfolio Management Questions

Postby NYBoglehead » Thu Dec 27, 2012 9:47 am

gtwhitegold wrote:I am regularly in the 15% tax bracket and am stationed overseas, so about 40% of my income is not taxable when I am in a taxable status and I normally spend several months of the year in a tax-free zone. This and my deductions normally only have me paying a small amount in state taxes and none or very little in federal each year. This is why I am only contributing to Roth accounts at this time.


Then keep up the good work! It looks like you are doing awesome right now.
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