Help with Portfolio

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Help with Portfolio

Postby holycow2013 » Wed Jan 23, 2013 9:50 pm

First of all thanks to everyone for their contribution. I wish I had exposure to boglehead's philosophy earlier in my life but here I am. Hopefully not late. Please help with my portfolio allocation

Current retirement assets

Taxable
6.68% cash (for investing – do not include emergency funds)
1.47% fund name (VGSTX) (0.34%)

His 401k
1.47% Fixed interest/Cash NA NA
4.41% PM core fund Babson (MCBYX) (0.85%)
8.82% Select PIMCO total return (MSPGX) (0.85%)
3.68% Eaton Vance (EHSTX.lw) (0.98%)
3.68% Columbia Diversified Equity Income R4 (IDQYX) (0.93%)
8.82% MM S&P 500 Index Fund (MIEYX) (0.50%)
8.82% Oppenheimer Equity (OEQYX) (0.81%)
6.62% American Funds Growth Fund of Amer R4 (RGAEX) (0.68%)
1.47% Columbia Mid Cap Value Opportunity R4 (RMCVX) (1.08%)
4.41% Fidelity Advisor Leveraged Co Stk T (FLSTX) (1.35%)
1.47% Invesco Mid Cap Gr A Load Waived (VGRAX.lw) (1.31%)
1.47% Invesco SmallCapValue A Load Waived (VSCAX.lw) (1.17%)
4.41% Small Cap Index (Northern) (NSIDX) (0.85%)
1.47% Select Small Cap Growth Fund (MSCYX) (1.16%)
2.21% American Funds Capital World G/I R4 (RWIEX) (0.80%)
3.68% American Funds EuroPacific Gr R4 (REREX) (0.85%)
3.68% Thornburg International Value R5 (TIVRX) (1.04%)
2.94% Premier OFI Global (MGFYX) (1.07%)

Company match? Yes

His Roth IRA at Vanguard
18.32% Target 2045 retirement (VTIVX) (0.19%)

Total of All Accounts Together - 100%

Contributions

New annual Contributions
$20000 his 401k of which 4K is employer match
$5500 his IRA/Roth IRA
$1700 taxable

Available funds

Funds available in his 401(k)
Fixed interest/Cash NA NA
PM core fund Babson (MCBYX) (0.85%)
Select PIMCO total return (MSPGX) (0.85%)
Eaton Vance (EHSTX.lw) (0.98%)
Columbia Diversified Equity Income R4 (IDQYX) (0.93%)
MM S&P 500 Index Fund (MIEYX) (0.50%)
Oppenheimer Equity (OEQYX) (0.81%)
American Funds Growth Fund of Amer R4 (RGAEX) (0.68%)
Columbia Mid Cap Value Opportunity R4 (RMCVX) (1.08%)
Fidelity Advisor Leveraged Co Stk T (FLSTX) (1.35%)
Invesco Mid Cap Gr A Load Waived (VGRAX.lw) (1.31%)
Invesco SmallCapValue A Load Waived (VSCAX.lw) (1.17%)
Small Cap Index (Northern) (NSIDX) (0.85%)
Select Small Cap Growth Fund (MSCYX) (1.16%)
American Funds Capital World G/I R4 (RWIEX) (0.80%)
American Funds EuroPacific Gr R4 (REREX) (0.85%)
Thornburg International Value R5 (TIVRX) (1.04%)
Premier OFI Global (MGFYX) (1.07%)
RetireSMART Conservative Fund (MRCLX) (0.82%)
RetireSMART Moderate Fund (MRMLX) (0.92%)
RetireSMART Moderate Growth Fund (MRSLX) (1.01%)
RetireSMART Growth Fund (MRGLX) (1.18%)
American Funds American Balanced R4 (RLBEX) (0.65%)
Select Sands/Delaware Growth Opportunities Fund (MAGYX) (1.10%)

Questions:

1. I have lot of complexity in my 401K chasing past returns and acting in a hasty fashion.
I would like to simplify it so that my total portfolio is with a total of 68% stocks and 32 % bonds (my age) with a 30% international exposure (I suppose this is usually recommended in stocks but I am not sure) that allows me to change the bonds/stocks mix as I get wiser
There is a feature called cruise control in my 401K which I suppose does the act of rebalancing each quarter that I plan to turn on once I finalize the mix.
What would be boglehead’s recommendations?

thanks in advance
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Re: Help with Portfolio

Postby DaveS » Thu Jan 24, 2013 2:21 am

The problem with the 401 is high costs. The only decently priced fund is the 500 index. I think there now is a cost analyzer somewhere on the Vanguard site. Run it at say a 8% return, with one fund costing .5 and another 1.3% say, over 30 years, and you will be staggered by how much appreciation you loose to costs. It's not just the .8 percent a year, it's that much, plus compounding times the 30 years. That makes me want to own the 500 fund in the 401, and use the Roth as much as possible for bonds, such as Vanguard total bond, or intermediate term investment grade. You can also get inexpensive bonds there by something like the 2015 target fund instead of the 2040. Then you use the taxable account for part of your international which is tax efficient because of the foreign tax credit which is wasted in a tax free account. The 500 fund performs almost identically to the Vanguard total stock market fund, even though most bogleheads prefer the latter. So that gets me to 8% total int in taxable, 19% bonds in the Roth and 50% 500 index in the 401. The remaining 23% is divided between bonds and international in the 401 or you lower your suggested allocation to international. I don't know what the American Funds Balanced holds but it might be a combination of bonds, and US and international stocks, and that is a lower cost fund of the choices.
It may seem odd to you to make so much of costs, but I will tell you all the authors agree costs are important, and costs are about the only thing you can control. Dave
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Re: Help with Portfolio

Postby dbr » Thu Jan 24, 2013 11:14 am

Don't forget that actively managed funds, as most in this 401K, will also be trading investments much more frequently than a good index fund and that trading costs which are not in the ER can be as large as the ER costs. The damage to this portfolio is much more than appears at first.

The S&P fund is indeed the only one obviously close to acceptable and maybe in a pinch the PIMCO fund and one could check out the American Funds for international, if that is what that is down there.
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Re: Help with Portfolio

Postby holycow2013 » Thu Jan 24, 2013 8:40 pm

thanks Guys for the input

I will use the S&P and the PIMCO funds and review the international part
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Re: Help with Portfolio

Postby Duckie » Thu Jan 24, 2013 8:43 pm

holycow2013, you want an AA of 68% stocks, 32% bonds, with 30% of stocks in international. That breaks down to 48% US stocks, 20% international stocks, and 32% bonds. Here is a possible retirement portfolio:

Taxable at Vanguard -- 8%
8% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.18%)

401k -- 74%
40% (MIEYX) MassMutual S&P 500 Index Fund (0.50%)
2% (NSIDX) Northern Small Cap Index Fund (0.85%)
32% (MSPGX) MassMutual Select PIMCO Total Return Fund (0.85%)

Roth IRA at Vanguard -- 18%
6% (VEXAX) Vanguard Extended Market Index Fund Admiral Shares (0.14%) <-- Roughly 80% large caps (500 Index) plus 20% mid/small caps (Small Cap Index & Extended Market) makes up the total US stock market.
12% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.18%)

-- This has TISM in taxable to take advantage of the 
Foreign tax credit and at Vanguard because it's a much better (and cheaper) international fund than your 401k options.
-- The problem with "cruise control" is that it doesn't know what you hold outside the 401k. It would be just as easy for you to rebalance all three accounts manually once or twice a year.
-- You wrote:
New annual Contributions
$20000 his 401k of which 4K is employer match
$5500 his IRA/Roth IRA
$1700 taxable
That means you are only contributing $16K to the 401k plus $1.7K to taxable. The 401k limit for 2013 is $17.5K. Unless the taxable amount is for your emergency fund or a short-term needs fund (new car, fancy vacation, house down-payment, etc.) it is better off in your tax-sheltered 401k (even with its high expense ratios).

Something to think about.
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Re: Help with Portfolio

Postby holycow2013 » Thu Jan 24, 2013 9:18 pm

Duckie,

thanks very much..I just started reading this and getting close to what you recommend on the 401k. You made my job easier!

http://www.bogleheads.org/wiki/Principl ... _Placement

I will maximize the 401K the next quarter when I get a chance to change my contributions and rebalance manually. I am planning to buy a house 3 years down the lane after getting some advice here. I will contribute to 401K to get to max once my debt except mortgage is zeroed in June while keeping the taxable invest going at current rate.
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Re: Help with Portfolio

Postby holycow2013 » Thu Jan 24, 2013 11:03 pm

I was looking at possibility of Duckie strategy and I do not have the minimum required to get the international exposure in the taxable account (minimum investment of 10K)

Would you guys advice getting the desired international exposure in Roth and thereby end up at the desired allocation or wait until taxable accounts get to that level when i can invest in international?
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Re: Help with Portfolio

Postby wilked » Thu Jan 24, 2013 11:16 pm

I would suggest you diversify your holdings in your 401k a bit more
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Re: Help with Portfolio

Postby wilked » Thu Jan 24, 2013 11:16 pm

Yes I am joking...
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Re: Help with Portfolio

Postby holycow2013 » Fri Jan 25, 2013 12:05 am

:D..glad I could make you laugh
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Re: Help with Portfolio

Postby Duckie » Fri Jan 25, 2013 12:20 am

holycow2013 wrote:I do not have the minimum required to get the international exposure in the taxable account (minimum investment of 10K).

You can buy the investor shares with a $3K fund minimum (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.22%).
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Re: Help with Portfolio

Postby Peter Foley » Fri Jan 25, 2013 1:04 am

I don't disagree with what has been proposed as it makes the best of your high fee situation in your 401K. Do you have more information about your "fixed interest/cash" option in your 401k? Is it by chance a stable value fund with a guarranteed interest rate? If yes, that could be a better option for a portion of your bond AA.
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Re: Help with Portfolio

Postby holycow2013 » Sat Jan 26, 2013 1:57 am

The fixed interest is a guaranteed 2.45%

MassMutual Core SAGIC1
Asset Category: Stable Value
Inception: January 1999
Total Portfolio Assets: $2,223 million
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Re: Help with Portfolio

Postby Peter Foley » Sat Jan 26, 2013 2:45 pm

That is not a great interest rate - it about keeps up with inflation. If you want to protect yourself against unforseen inflation (inflation that would negatively impact bond funds) you might consider putting 5% to 10% of your bond allocation in your fixed interest fund if the costs for the fund are low.
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Re: Help with Portfolio

Postby holycow2013 » Sat Jan 26, 2013 9:03 pm

thanks Peter

Guys, Need your helpful insight again!

The 401K is a easy adjustment between the index and bond funds as Duckie suggested

However I would like to use the taxable account for downpayment saving on a house. I get lumpsums of 10K every 6 months due to ESPP and would like to put them here for the downpayment saving for the next 2.5 to 3 years.

The VTIAX which should be ideally placed in taxable part of the portfolio is a high risk and high reward type fund. So against conventional wisdom, it would make sense to convert a portion of the Roth to VTIAX to get the international stock exposure since the time horizon on this account is longer.

What is your take? If this is not insane, can you suggest recommendations for the taxable account that are better suited for the down payment saving?

thanks again in advance
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Re: Help with Portfolio

Postby Duckie » Sun Jan 27, 2013 8:38 pm

holycow2013 wrote:I would like to use the taxable account for downpayment saving on a house. I get lumpsums of 10K every 6 months due to ESPP and would like to put them here for the downpayment saving for the next 2.5 to 3 years.

If the 8% taxable account is for a house down-payment then it needs to be removed from the retirement portfolio and the percentages refigured. The AA is still 48/20/32.

401k -- 80%
38% (MIEYX) MassMutual S&P 500 Index Fund (0.50%)
10% (NSIDX) Northern Small Cap Index Fund (0.85%)
32% (MSPGX) MassMutual Select PIMCO Total Return Fund (0.85%)

Roth IRA at Vanguard -- 20%
20% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.22%)

For the taxable house down-payment funds use savings accounts, CDs, money market accounts, 
I Savings Bonds through Treasury Direct, and possibly a short-term bond fund.
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Re: Help with Portfolio

Postby holycow2013 » Tue Jan 29, 2013 10:34 pm

thanks again Duckie!
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Re: Help with Portfolio

Postby holycow2013 » Fri Feb 22, 2013 8:56 pm

Bogleheads

Need your advice again. I have maxed out at 401K for 2013. I became aware of the spousal IRA recently and want to get your advice regarding it. I can contribute it for my wife but have to reduce my 401K contribution by 7300 to enable the 5500 contribution to Spousal IRA (25% tax bracket) at this moment since we are saving for house in future. We have a 2 yr old child that we would like to save some money for education but the general wisdom is not to spoil the retirement for that. However from what I see it appears that parent can withdraw from Roth for child education.

Considering the expenses in 401K what would you suggest?

401k -- 80%
38% (MIEYX) MassMutual S&P 500 Index Fund (0.50%)
10% (NSIDX) Northern Small Cap Index Fund (0.85%)
32% (MSPGX) MassMutual Select PIMCO Total Return Fund (0.85%)

Roth IRA at Vanguard -- 20%
20% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.22%)
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Re: Help with Portfolio

Postby wilked » Sat Feb 23, 2013 2:05 pm

holycow2013 wrote:Bogleheads

Need your advice again. I have maxed out at 401K for 2013.

In 6 weeks?
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Re: Help with Portfolio

Postby Grt2bOutdoors » Sat Feb 23, 2013 2:15 pm

Holy Cow - any chance you are a Phil Rizzuto fan? :wink:
"Luck is not a strategy" Asking Portfolio Questions
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Re: Help with Portfolio

Postby holycow2013 » Sat Feb 23, 2013 3:52 pm

wilked wrote:
holycow2013 wrote:Bogleheads

Need your advice again. I have maxed out at 401K for 2013.

In 6 weeks?


sorry..I meant the percentage :)

Grt2boutddors :D
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Re: Help with Portfolio

Postby wilked » Sat Feb 23, 2013 10:12 pm

holycow2013 wrote:Bogleheads

Need your advice again. I have maxed out at 401K for 2013. I became aware of the spousal IRA recently and want to get your advice regarding it. I can contribute it for my wife but have to reduce my 401K contribution by 7300 to enable the 5500 contribution to Spousal IRA (25% tax bracket) at this moment since we are saving for house in future. We have a 2 yr old child that we would like to save some money for education but the general wisdom is not to spoil the retirement for that. However from what I see it appears that parent can withdraw from Roth for child education.

Considering the expenses in 401K what would you suggest?

401k -- 80%
38% (MIEYX) MassMutual S&P 500 Index Fund (0.50%)
10% (NSIDX) Northern Small Cap Index Fund (0.85%)
32% (MSPGX) MassMutual Select PIMCO Total Return Fund (0.85%)

Roth IRA at Vanguard -- 20%
20% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.22%)

1. 401k in order to maximize match dollars.
2. His and her Roth IRA max ($5500 each)
3. Continue 401K until you hit max
4. Come see us again if you hit that point
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