Portfolio Checkup. Time to adjust?

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Portfolio Checkup. Time to adjust?

Postby guitarguy » Wed Jan 30, 2013 1:57 pm

Hello all, about 6 months ago I got some great advice here http://www.bogleheads.org/forum/viewtopic.php?f=1&t=98314 on my asset allocation, and I implemented the strategy you guys helped me lay out. Now as I look at where things stand, I think another adjustment may be in order as my bond allocation is a little low and VG Total International is a little high. New money contributions will only continue to push things further out of whack, and even more-so now that the Roth IRA limit has increased to $5500...which we're planning on maxing...and currently my Roth is made up of 100% international. Here are the numbers:

CURRENT ALLOCATIONS

His 401k at Prudential:
SP500 Index (ER 0.17): $11257.32 (26.6%)
SV Kennedy Fund (ER 0.90): $8666.75 (20.5%)
Bond Index Fund (ER 0.22): $5427.44 (12.8%)

Her 401k at Mass Mutual:
Select Index Equity Fund (SP500) (ER 0.43): $4424.30 (10.4%)

His Roth IRA at Vanguard:
Vanguard Total International (ER 0.32): $12578.60 (29.7%)

Overall: 57.5/29.7/12.8 US/Int/Bonds
Stocks: 66/34 US/Int
US Stocks: 64/36 Large/SCV

NEW MONEY CONTRIBUTIONS

His 401k:
SP500 Index (ER 0.17): $3074.24 (21.3%)
SV Kennedy Fund (ER 0.90): $2235.81 (15.5%)
Bond Index Fund (ER 0.22): $1676.86 (11.6%)

Her 401k:
Select Index Equity Fund (SP500) (ER 0.43): $1980.00 (13.7%)

His Roth IRA:
Vanguard Total International (ER 0.32): $5500 (38.0%)

Overall: 58.4/38.0/11.6 US/Int/Bonds
Stocks: 57/43 US/Int
US Stocks: 69/31 Large/SCV

So our new money contributions will push high on international and low on bonds, which will only push things further away from where we want them (85/15 stocks/bonds with stocks 70/30 US/Int). So easy solution...add more bonds and pare back on international. I'm looking for recommendations on exactly how to do this...what funds to add and where to add them. The bond fund in His 401k is pretty decent so maybe there will be a way to add SCV into my Roth and add more of His 401k bond fund? I don't think that things are so out of whack that I need to fully rebalance...but perhaps just an adjustment to new money contributions is needed?

If there are any other considerations or anything I need to look at please let me know.

Thanks in advance for the advice!!
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Re: Portfolio Checkup. Time to adjust?

Postby bertilak » Wed Jan 30, 2013 5:27 pm

Can you not redirect new money to even things out?
No-one really listens to anyone else, and if you try it sometime you will see why. | -- Mignon McLaughlin
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Re: Portfolio Checkup. Time to adjust?

Postby guitarguy » Wed Jan 30, 2013 5:51 pm

bertilak wrote:Can you not redirect new money to even things out?


Well that's what I want to do, but I'm not exactly sure how to do it. My Roth IRA contribution is fixed at $5500, which is 100% international. So in order to redirect new money to have less in international and more in bonds, the way I have it set up now would essentially require less Roth contributions and more 401k contributions (to bonds). But I want to max my Roth, so there has to be a better way to do it.
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Re: Portfolio Checkup. Time to adjust?

Postby fcox85 » Wed Jan 30, 2013 5:55 pm

Couldn't you simply buy a bond fund in your Roth? Or, couldn't you also simply re-balance in the 401(k)?
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Re: Portfolio Checkup. Time to adjust?

Postby guitarguy » Wed Jan 30, 2013 6:19 pm

fcox85 wrote:Couldn't you simply buy a bond fund in your Roth? Or, couldn't you also simply re-balance in the 401(k)?


I don't think I can simply re-balance the 401k because the allocation will pull from US stocks to supplement the bonds rather than International. Plus it doesn't solve the new money problem.

Buying a bond fund in the Roth is the easiest solution of course...but I don't know which bond fund I should be looking at. Total Bond Market??

The other solution, which would be a little more complicated but would help me with ERs would be to re-balance the 401k into more bonds and less of the SCV fund that has the high ER at 0.9, and then buy some sort of equivalent SCV fund in the Roth...pulling from Total Int. Again, not sure if this would be worth it or which fund to consider.

I realize this is probably a mundane question for you guys...but even after a couple years at this...I'm still a newb. :|
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Re: Portfolio Checkup. Time to adjust?

Postby bertilak » Wed Jan 30, 2013 6:34 pm

guitarguy wrote:I realize this is probably a mundane question for you guys...but even after a couple years at this...I'm still a newb. :|

In order:

  1. Decide what overall allocation of asset classes you want.
  2. Determine what assets are available in each of your many accounts.
  3. Do a whole bunch of head-scratching, possibly involving a spreadsheet to come up with a fit.
  4. Learn the "mechanics" of investing with each of accounts you have. This might involve phone calls to account managers and/or your HR departments for 401(k)s. Pay attention to any automation they can provide. For example when I was contributing to a 401(k) I just had to tell them the AA I wanted in the 401(k) and they did everything needed.
  5. Do it, in the manner(s) determined with number 4.

If you have questions about the appropriateness of each of your choices or about your overall AA, come back with more specific questions. A new topic with a more focused title for each question will get you better answers.
No-one really listens to anyone else, and if you try it sometime you will see why. | -- Mignon McLaughlin
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Re: Portfolio Checkup. Time to adjust?

Postby linuxuser » Wed Jan 30, 2013 6:51 pm

I would sell most of the SV and buy bonds index fund. This will give you 30% bonds.
Then allocate some of the His 401K SP500 Index into MidCap and Small Cap such that His 401K S&P500 + Her 401K S&P500 + His 401K Mid Cap + His 401K Small Cap = Total Market Index.
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Re: Portfolio Checkup. Time to adjust?

Postby guitarguy » Wed Jan 30, 2013 8:45 pm

linuxuser wrote:I would sell most of the SV and buy bonds index fund. This will give you 30% bonds.
Then allocate some of the His 401K SP500 Index into MidCap and Small Cap such that His 401K S&P500 + Her 401K S&P500 + His 401K Mid Cap + His 401K Small Cap = Total Market Index.


All of the Small Cap and Mid Cap funds in the 401ks are very expensive (ERs mostly > 1).
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Re: Portfolio Checkup. Time to adjust?

Postby guitarguy » Wed Jan 30, 2013 8:50 pm

bertilak wrote:
guitarguy wrote:I realize this is probably a mundane question for you guys...but even after a couple years at this...I'm still a newb. :|

In order:

  1. Decide what overall allocation of asset classes you want.
  2. Determine what assets are available in each of your many accounts.
  3. Do a whole bunch of head-scratching, possibly involving a spreadsheet to come up with a fit.
  4. Learn the "mechanics" of investing with each of accounts you have. This might involve phone calls to account managers and/or your HR departments for 401(k)s. Pay attention to any automation they can provide. For example when I was contributing to a 401(k) I just had to tell them the AA I wanted in the 401(k) and they did everything needed.
  5. Do it, in the manner(s) determined with number 4.

If you have questions about the appropriateness of each of your choices or about your overall AA, come back with more specific questions. A new topic with a more focused title for each question will get you better answers.


I see your point about the specific questions part, but I feel like I've already done 1-4. I know how to implement the changes I decide to make...that's not a concern. I think my above post lies out 2 pretty good solutions...either buy bonds in the Roth or buy a SC fund in the Roth and convert some SCV to bonds in the 401k. I know how to do either one. What I don't know is which option is smarter, and which funds to consider.
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Re: Portfolio Checkup. Time to adjust?

Postby linuxuser » Wed Jan 30, 2013 10:40 pm

guitarguy wrote:
linuxuser wrote:I would sell most of the SV and buy bonds index fund. This will give you 30% bonds.
Then allocate some of the His 401K SP500 Index into MidCap and Small Cap such that His 401K S&P500 + Her 401K S&P500 + His 401K Mid Cap + His 401K Small Cap = Total Market Index.


All of the Small Cap and Mid Cap funds in the 401ks are very expensive (ERs mostly > 1).


you posted:
Mid Cap Value (sub-advised by Wellington Management) Fund (0.67%)
Mid Cap Growth/Artisan Partners Fund (0.66%)
Small Cap Value/Kennedy Capital Fund (0.90%)
Small Cap Growth/ The Boston Co. Fund (0.90%)

I don't see the problem.
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Re: Portfolio Checkup. Time to adjust?

Postby guitarguy » Thu Jan 31, 2013 8:30 am

linuxuser wrote:
guitarguy wrote:
linuxuser wrote:I would sell most of the SV and buy bonds index fund. This will give you 30% bonds.
Then allocate some of the His 401K SP500 Index into MidCap and Small Cap such that His 401K S&P500 + Her 401K S&P500 + His 401K Mid Cap + His 401K Small Cap = Total Market Index.


All of the Small Cap and Mid Cap funds in the 401ks are very expensive (ERs mostly > 1).


you posted:
Mid Cap Value (sub-advised by Wellington Management) Fund (0.67%)
Mid Cap Growth/Artisan Partners Fund (0.66%)
Small Cap Value/Kennedy Capital Fund (0.90%)
Small Cap Growth/ The Boston Co. Fund (0.90%)

I don't see the problem.


I guess I should've double checked the ERs...they are less than I remember. But this is getting a little over-complicated for me I think. From what others have said, Mid Caps and the SP 500 index has a large amount of overlap...and that mid caps aren't really "necessary".

Buying a bond fund with $3k in my Roth would move me to 20% bonds, but then new money contributions would be lined up better and would be aimed toward evening things out.

However, maybe it's best to just wait until the Roth balance is a bit higher and then buy a bond fund so things don't get so far out of whack? We need more $$ to make the adjustments maybe. :oops:

EDIT: Per bertilak's advice...I do more research on my own and formulate a better plan and then come back with specific questions.

Thank you all for the advice. :sharebeer
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