New Member: Portfolio Comments/Suggestions

[Chicago60]

I have been lurking a few months and wanted to thank all members, and in particular the ones who post many times a day. Your insights and comments on a far range of finance topics are so very much appreciated by so many who probably never comment at all. You are to be commended. I have read a great deal and have made adjustments I am currently comfortable with. Putting together the expense ratios and allocations has in and of itself been a helpful experience. I am seeking comments, as critical as you dare, to help me better appreciate and understand if my current allocation and portfolio best suits my needs.

Married couple in 50's. 35%+ Federal and 5% Ill. Kids' college fully funded in 529. No mortgage (house at 500K) and no debt. Portfolio valued seven figures. You will note a heavy weight in very safe investments--due to being at or close to "the number" (if I could ever feel comfortable knowing what that number truly is) and therefore I may be at a place where the game has been won and additional risk is not necessary.

Seeking critical commentary on the below. Also intend on adding all new money to Vanguard International ETF (new money defined by his salary....intend on using savings only to fund 2013 expenditures which will force cash reduction and increase Int'l exposure) and welcome thoughts. Also welcome thoughts on how to invest anything pretax.

Taxable

FIXED
40%--CD's (mostly 5 year type laddering though some short term maturing this year) and Savings
16% I-Bonds and EE bonds (dating back to 2000)
3.5% Cash value after tax Whole Life
2.5% I-shares Muni

EQUITY
1.2% Vanguard Total Stock ETF
1.2% Vanguard Int'l Stock ETF
.7% I-shares 3000 (.20%)
2.4% I-shares S&P100 ETF (.2%)
.6% Misc individual stocks....generally high dividend
2.3% I-shares Dividend ETF (.4%)
2.8% DIA (.17%)
1.4% I-shares 2000 (.2%)
2.5% QQQ
3.4% SPY (.09)
.5% Schwab 1000 (.34%)
4.0% Schwab 500 (.1%)

Tax Favored

HisIRA

7.4% I-shares Dividend (.4%)
7.1% SPY (.09%)

His IRA was a rollover in 2012 from employer which closed its profit sharing plan so no longer able to shelter pre-tax salary.

His Roth (through backdoor Roths until 2012 and IRA conversion in 2010)

.8% Schwab 500

Her Roth (backdoo Roths and IRA conversion)

.8% Schwab 500

[linuxuser]

I am not that familiar with ETF symbols, but that's too many funds.
Many here have the 3-funds "lazy" portfolio. http://www.bogleheads.org/wiki/Three-fu ... uard_funds

[Grt2bOutdoors]

Hello and welcome to the forum!

How significant if any are the gains in the taxable account?
You have overlap by holding SPY,QQQ,1000,VTI. - why not consolidate and hold VTI only for domestic exposure?

[Chicago60]

Thanks for the inquiry Gr8t, but the Vanguard Total Stock (domestic and international) purchases are the only recent ones. The other stock and ETFs have been purchased over a 13 year period and therefore any sales would generate capital gains taxes. I recognize the portfolio contains some overlap, particularly in the large cap arena, but I (thankfully) have no losses I could offset any gains if I chose to sell.

[Chicago60]

No other comments or suggestions?

[nydad]

One thing that would be useful would be to put all of your equities into the morningstar instant x-ray, which will give you a sense of your total equities exposure (do domestic and international separately). You can compare this to the style box for VTSAX, which is the total market. Then you can see whether you are overweight or underweight certain sectors of the market.

I agree with others, you have a lot of seemingly duplicated index funds - consolidation going forward should be your goal - so that all new investments go into 3 or 4 funds (bonds + 2 or 3 stock funds). But you may be right, with high capital gains it might not be worth selling any of those funds at this point unless you find yourself in a year with low enough income to have 0% cap gains tax.

You may also consider gifting some of the appreciated funds or stocks to a donor advised fund (such as Fidelity or Vanguard or Schwab) - this will give you a tax discount, you don't have to pay cap gains taxes, and then your gift money will grow tax free until you distribute it to your desired charities. Minimums for Fidelity are around $5k. This might be an easy way to clean up some of the duplicate funds if you want to take a longer-term view for charitable giving. The charitable deduction could also offset any sales to consolidate the portfolio.

Continue adding funds to your Roths via the backdoor if you can - I would consider adding some bond funds there (VFITX or Vanguard total bond) once the CDs mature, so that you get that income tax protected.

[Postmon]

What's your reasoning for each of those funds? Seems like you just have a mish mosh of equity. Do you have an investment plan? Do those funds fit into your plan? If you want to keep it simple, I'd look at the tax consequences and then try to consolidate your equity to VTI and VXUS. I don't know how much your cap gains tax would be but VTI's expenses are only 0.06 so the payback period may be faster than you think. Also, 15% is in the IRA so no cap gains tax on those. That leaves only about 20% of the funds in your portfolio subject to the tax.