New Boglehead, Portfolio hopefully not off track

[BrandonBogle]

FYI, been a number of changes in my financial life. Left previous Op in tact. New info further below at viewtopic.php?f=1&t=110026#p1690543

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Recently started a thread to get some advice on getting my Mom on track with her portfolio, and thought I should probably look at mine too. There is a lot to go consolidate here, so hopefully I provide meaningful info to everyone. There has GOT to be an easier way to manage future contributions to my accounts so I don't get buried in trade confirmations!


Emergency funds: Yes, 3 months
Debt:
- Auto 1, 1.99%, would take 6% of assets to pay off
- Auto 2, 1.49% (Cashed out equity to pay off 6.8% student loans), would take 7% of assets to pay off
- Auto 3, 2.49% (GF's car, she's paying but if anything every happens, I need to consider this my debt), would take 4% of assets to pay off
- Mortgage, 2.75% (28 years remaining), would take 45% of assets to pay off
- Student Loans, 4.5%, would take 3% of assets to pay off

Expenses:
- $2,700/month

Tax Filing Status: Single
Tax Rate: 25% Federal, 7.75% State (marginal)
State of Residence: NC
Age: 30
Portfolio size: low six figure
Desired Asset allocation:
11% Large-Cap Individual Stocks (In taxable, mostly to avoid taxes)
3% Vanguard US REIT
42% Total Stock Market
24% Total International Stock Market
20% Total Bond Market

Current Asset Allocation
Taxable (16%)
- 13% Large Cap individual stocks (like MMM, XOM, JNJ, KRFT, etc.)
- 3% Vanguard Total International Stock ETF (VXUS)

Roth IRA (17%)
- 2.9% Vanguard REIT ETF (VNQ)
- 14% Vanguard Total International Stock ETF (VXUS)

Traditional 401k at Vanguard - Previous Employer (7%)
- 7% Vanguard Total International Stock Index Fund Investor (VGTSX)

Traditional 401k at Current Employer (61%)
- 19.2% SSgA U.S. Bond Index, 0.06% ER
- 35.4% SSgA S&P 500 Index, 0.02% ER
- 5.9% SSgA Russell 2000 Small Cap Index, 0.06% ER
- 0.1% SSgA International Index, 0.09% ER
- 0.5% Company ESOP (100% of employer match paid in here, but free to move it around to other offerings in 401k)

Contributions
New Annual Contributions
- Max Roth IRA ($5,500)
- Max Traditional 401k ($17,500) + Employer Contribution ($4,500)

Available Funds in 401k - Current Employer
Stable Value, 0.20% ER, 2.5% Blended Yield, 2.2 year duration, 41% turnover
Dow Jones Target Funds (Various up to 2055 = WFQUX)
100% Treasury MMKT, 0.30% ER
SSgA S&P 500 Index, 0.02% ER
SSgA U.S. Bond Index, 0.06% ER
SSgA PIMCO Global Advantage Strategy Bond I, 0.70% ER
SSgA S&P Mid Cap Index, 0.06% ER
SSgA Russell 2000 Small Cap Index, 0.06% ER
SSgA International Index, 0.09% ER
SSgA NASDAQ 100 Index, 0.07% ER
Large Cap Value, 0.40% ER, Underlying = Dodge & Cox Stock, T.Rowe Equity Income, MFS Large Cap
Large Cap Growth, 0.50% ER, Underlying = T.Rowe Blue Chip Growth, Neuberger Berman Disciplined Large Cap Growth, Winslow Large Cap Growth
Small Cap, 0.59% ER, Underlying = Wellington Select Small Cap Growth, Wellington Small Cap Value
Intl Equity, Undisclosed ER (Fact sheet will be provided late-Feb, 2013), Underlying = Amnerican Funds EuroPacific Growth, Harbot Intl Fund
Lazard/Wilmington Emerging Markets Equity, 0.90% ER
Company ESOP

Available Funds in 401k at Vanguard - Previous Employer
Vanguard 500 Index Fund Signal (VIFSX)
Vanguard Extended Market Index Fund Signal (VEMSX)
Vanguard Prime Money Market Fund Institutional (VMRXX)
Vanguard Total International Stock Index Fund Investor (VGTSX)
Vanguard Wellington Fund Investor (VWELX)
Vanguard Windsor Fund Investor (VWNDX)
Vanguard Target Retirement Income (VTINX)
Vanguard Target Retirement (Various years up to 2060 = VTTSX)
Vanguard Retirement Savings Trust (SEC Yield 1.91%, 0.31 ER)
Janus Flexible Bond I (JFLEX)
Vanguard Inflation-Protect Sec Investor (VIPSX)
Vanguard Total Bond Mkt Index Institutional (VBTIX)
Vanguard PRIMECAP Fund Investor (VPMCX)
Vanguard International Growth Investor (VWIGX)
Vanguard International Value Fund (VTRIX)

Available Funds in Taxable and Roth
Brokerage account without trading fees. Vanguard funds and ETFs are available, amongst others.

Key Points
- #1 I'd like to make future investments easier, but essentially I'm on auto-pilot right now, buying more of what I already have.
- NOT re-investing dividends from taxable at this time (about 3k/year) (paying down debts)
- MUCH prefer changing AA by new contributions rather than selling any existing holdings
- Each category of holdings has recovered since market crash, but some individual lots do have losses if tax loss harvesting is employed

Questions
1. Would it be reasonable to ignore everything except the large-caps in my Taxable and Roth since they represent a few percentage points at most?
2. At 30 years old, is 80/20 (s/b) and 66/33 (US/Intl) a good mix? Vanguard's tool for my questions came to 56% TSM, 24% TIS, 20% TBM
3. Since buying the house two years ago, I have used the dividends in my taxable to make updates/fixes to the house so I can work on rebuilding my emergency fund. The emergency fund is at 3 months, but I'd like to get it to 6 months. I have not contributed to my taxable in the past 4 years and have kept the dividends for the past two. Is not reinvesting the dividends still a good idea or am I shooting myself in the foot long-term (note, I'm still maxing out all tax-advantaged accounts).
4. Any other thoughts/suggestions?

[damjam]

Even if it's been said before Welcome to the forum.

Recently started a thread to get some advice on getting my Mom on track with her portfolio, and thought I should probably look at mine too. There is a lot to go consolidate here, so hopefully I provide meaningful info to everyone. There has GOT to be an easier way to manage future contributions to my accounts so I don't get buried in trade confirmations!


Emergency funds: Yes, 3 months
Debt:
- Auto 1, 1.99%
- Auto 2, 1.49% (Cashed out equity to pay off 7% student loans)
- Auto 3, 2.49% (GF's car, she's paying but if anything every happens, I need to consider this my debt)
- Mortgage, 2.75% (28 years remaining)
- Student Loans, 4.5%

Expenses:
- $2,700/month

Tax Filing Status: Single
Tax Rate: xx% Federal, xx% State (will update these once I find my forms, but I know I'm on the lower end)
State of Residence: NC
Age: 30
Portfolio size: low six figure
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 33% of stocks



Current Retirement Assets
%s is of total assets
Taxable (17%)
Almost missed these, I don't hold individual stocks, too much risk. However there are tax considerations to selling.
Between this your Roth and your company stock, over 37% of you portfolio is in individual stocks, not very Bogleheadish.
- 14.4% Large Cap individual stocks (like MMM, XOM, JNJ, KRFT, etc.)
I would reconsider all of the following. See Below.
- 0.03% Commonwealth REIT (CWH)
- 0.06% Vanguard Mid Cap ETF (VO)
- 0.04% Vanguard MSCI EAFE ETF (VEA)
- 0.09% Vanguard MSCI EMRG ETF (VWO)
- 0.02% Vanguard Small Cap ETF (VB)
- 0.02% Vanguard Health Care ETF (VHT) <-- Your taking a sector bet. Would not be my choice.
- 0.01% Vanguard High Dividend Yield ETF (VYM) <-- I can't see a reason for this either.

Roth IRA (19%)
- 13.6% Large Cap individual stocks (like MMM, XOM, JNJ, KRFT, etc.)
Again I would reconsider the following.
- 0.06% SPDR S&P Intl Small ETF (GWX)
- 0.14% SPDR SER Trust ETF (PSK)
- 0.06% Commonwealth REIT (CWH)
- 0.06% Vanguard REIT ETF (VNQ)
- 0.1% Vanguard Small Cap ETF (VB)
- 0.49% Vanguard MSCI EAFE ETF (VEA)
- 0.001% Vanguard Health Care ETF (VHT)
- 0.32% Vanguard Mid Cap ETF (VO)
- 0.25% Vanguard MSCI EMRG ETF (VWO)

Traditional 401k at Vanguard - Previous Employer (7%)
- 2.52% Vanguard 500 Index Fund Signal (VIFSX)
- 0.81% Vanguard Extended Market Index Fund Signal (VEMSX)
- 0.001% Vanguard Prime Money Market Fund Institutional (VMRXX)
- 0.81% Vanguard Total International Stock Index Fund Investor (VGTSX)

The following two funds, while good, are only going to make determining your AA more of an annoyance.
- 1.07% Vanguard Wellington Fund Investor (VWELX)
- 1.74% Vanguard Windsor Fund Investor (VWNDX)


Traditional 401k at Current Employer (57%)
- 4.56% Stable Value, 0.20% ER, 2.5% Blended Yield, 2.2 year duration, 41% turnover

Why do you have all three of the following funds? They completely overlap each other. I would simply hold - 3.42% SSgA S&P 500 Index, 0.02% ER.
- 9.69% Large Cap Value, 0.40% ER, Underlying = Dodge & Cox Stock, T.Rowe Equity Income, MFS Large Cap
- 3.42% SSgA S&P 500 Index, 0.02% ER
- 6.84% Large Cap Growth, 0.50% ER, Underlying = T.Rowe Blue Chip Growth, Neuberger Berman Disciplined Large Cap Growth, Winslow Large Cap Growth

No comment on the following.
- 6.84% SSgA S&P Mid Cap Index, 0.06% ER

Instead of the following fund I would hold SSgA Russell Small Cap Index, 0.06% ER.
- 4.56% Small Cap, 0.59% ER, Underlying = Wellington Select Small Cap Growth, Wellington Small Cap Value

Instead of the following fund I would hold SSgA International Index, 0.09% ER.
- 6.84% Intl Equity, Undisclosed ER (Fact sheet will be provided late-Feb, 2013), Underlying = Amnerican Funds EuroPacific Growth, Harbot Intl Fund

No comment on the following.
- 4.56% Lazard/Wilmington Emerging Markets Equity, 0.90% ER

Can you sell any of this following position or must you hold it? I wouldn't hold more than 5% of my portfolio in my company's stock.
- 9.69% Company Stock (100% of employer match paid in company stock)


Contributions
New Annual Contributions
- Max Roth IRA ($5,500)
- Max Traditional 401k ($17,500)

Available Funds in 401k
Dow Jones Target Funds (2055 = WFQUX)
100% Treasury MMKT, 0.30% ER
SSgA U.S. Bond Index, 0.06% ER
SSgA PIMCO Global Advantage Strategy Bond I, 0.70% ER
SSgA Russell Small Cap Index, 0.06% ER
SSgA International Index, 0.09% ER
SSgA NASDAQ 100 Index, 0.07% ER

Available Funds in Taxable and Roth
Brokerage account without trading fees. Vanguard funds and ETFs are available, amongst others.

Key Points
- #1 I'd like to make future investments easier, but essentially I'm on auto-pilot right now, buying more of what I already have.
- NOT re-investing dividends from taxable at this time (about 3k/year)
- MUCH prefer changing AA by new contributions rather than selling any existing holdings
- Each category of holdings has recovered since market crash, but some individual lots do have losses if tax loss harvesting is employed

Questions
1. Would it be reasonable to ignore everything except the large-caps in my Taxable and Roth since they represent a few percentage points at most?
Yes. I would suggest that any holding less than 5% of the portfolio in any one position is so insignificant in its effect, that it is not worth the hassle maintaining it.

2. At 30 years old, is 80/20 (s/b) and 66/33 (US/Intl) a good mix? Vanguard's tool for my questions came to 56% TSM, 24% TIS, 20% TBM
This is fine.

3. Since buying the house two years ago, I have used the dividends in my taxable to make updates/fixes to the house so I can work on rebuilding my emergency fund. The emergency fund is at 3 months, but I'd like to get it to 6 months. I have not contributed to my taxable in the past 4 years and have kept the dividends for the past two. Is not reinvesting the dividends still a good idea or am I shooting myself in the foot long-term (note, I'm still maxing out all tax-advantaged accounts).
You may not want to reinvest dividends anyway. It interferes with Tax Loss Harvesting.

4. Any other thoughts/suggestions?

I would prefer a simpler portfolio, much easier to maintain. Have you looked at the Three-fund portfolio? You may not be able to implement it in its purist form but it is perfect for the "core" of your portfolio.

If you are interested in reorganizing your portfolio according to the Three-fund Portfolio model, I would be happy to help or if you have questions just say the word.

[BrandonBogle]

Thanks damjam!

I concur that I want to simplify my portfolio. All the ETFs in my taxable and Roth have paid themselves off already (only the REIT hasn't) hence my thoughts of not adding to them, but just leaving them alone. Its comforting to get the dividend payments to out towards other holdings. That said, if it ends up being worthwhile to sell them versus just letting hem sit and pay dividends (no new investment), so be it.

As for the individual holdings, I'm hoping to not add to them either. But while I'd be open to killing off the above, these I'd like to hold these for the long run. They almost all have significant capital appreciation and are all dividend payers. If the share price were to hold steady and I never drop another dollar in and their dividends don't go down (I know, a pipe dream), I'd bank about 8% a year from my cost basis. Those payments were what kept me investing so heavily in my 401k through the crash years. These were investments from years back, so as you also mentioned, there would lots of capital gains taxes on these.

Prior to 2013 though, I would keep buying more of these in my Roth. That needs to stop for a simpler approach. I am perfectly on-board with approximating the three-fund portfolio based on my offerings in my 401k.

I'll make a note to plan to sell off the overlapping assets in my 401k. As for the company stock, I'm free to sell anytime. It was only in the past month that the dividends from our compan stock and the reinvestment and subsequent appreciation that has brought me above my cost basis again. I'm happy to report that I'm starting 2013 completely in the green after all the concerns since 2008. As such, I can kill off half my company stock holdings. I'd have to check, but I believe the dividend on them is around 2%.

As you can tell, I have previously been a dividend investor (hopefully not a chaser though!). I'll have to work on overcoming that, especially in any future taxable investments.

[damjam]

Just some questions:
1. Have you figured out your tax rate yet?

2. I'm a little confused with the following:

Taxable (17%)
- 14.4% Large Cap individual stocks (like MMM, XOM, JNJ, KRFT, etc.)
- 0.03% Commonwealth REIT (CWH)
- 0.06% Vanguard Mid Cap ETF (VO)
- 0.04% Vanguard MSCI EAFE ETF (VEA)
- 0.09% Vanguard MSCI EMRG ETF (VWO)
- 0.02% Vanguard Small Cap ETF (VB)
- 0.02% Vanguard Health Care ETF (VHT)
- 0.01% Vanguard High Dividend Yield ETF (VYM)

Something doesn't add up here.
Your total for the account is 17%
but when I add up the parts I get 14.67%
?

Roth IRA (19%)
- 13.6% Large Cap individual stocks (like MMM, XOM, JNJ, KRFT, etc.)
- 0.06% SPDR S&P Intl Small ETF (GWX)
- 0.14% SPDR SER Trust ETF (PSK)
- 0.06% Commonwealth REIT (CWH)
- 0.06% Vanguard REIT ETF (VNQ)
- 0.1% Vanguard Small Cap ETF (VB)
- 0.49% Vanguard MSCI EAFE ETF (VEA)
- 0.001% Vanguard Health Care ETF (VHT)
- 0.32% Vanguard Mid Cap ETF (VO)
- 0.25% Vanguard MSCI EMRG ETF (VWO)

Again this doesn't add up.

The other two accounts appear to be correct.



Assuming the overall totals for each account are correct even if the individual ETF %s are incorrect, this is what I came up with:

As a global strategy I would suggest:
14% Individual Stocks (In taxable, mostly to avoid taxes)
42% Total Stock Market
24% Total International Stock Market
20% Total Bond Market

I've kept the individual stocks in your taxable but I would sell all other individual stocks immediately, since there are no tax consequences. I would look to eliminate individual stock positions in the taxable account in a tax efficient manner. Why? Because of company-specific risk.
The Risk and return: an introduction WIKI article says:

Risk can be reduced through diversification.

The risk of investing in a single risky security, such as a stock or corporate bond, is very high due to the company-specific risks. Any number of unfortunate events could impact the rate of return. In the worst possible case, the company could go bankrupt, and the investor could lose the entire value of the investment. Company-specific risk is generally referred to as unsystematic risk or nonsystematic risk. Other names are unique-risk, firm-specific risk, or diversifiable risk.

Unsystematic risk can be eliminated by holding a broad portfolio of risky assets; e.g., many different securities in many different industries. This is easy to accomplish by owning a total market stock or bond index fund. Unsystematic risk is risk that can be "diversified away."

Not to be preachy, but the Boglehead Philosophy is:
Develop a workable plan
Invest early and often
Never bear too much or too little risk
Never try to time the market
Use index funds when possible
Keep costs low
Diversify
Minimize taxes
Keep it simple
Stay the course


Over the long term, if you must keep individual stocks try to get it to 10% of your portfolio or less.

To implement your portfolio plan you can use ETFs in your Taxable and Roth.
you can create a three-fund portfolio using:
Vanguard Total Stock ETF (VTI)
Vanguard Total International Stock ETF (VXUS)
Vanguard Total Bond Market ETF (BND)

For your 401k at Vanguard I would put the entire balance into Vanguard Total International Stock Index Fund Investor (VGTSX). So that would take care of 7% of the 24% you need of Total International.

For your current 401k I would use a combination of:
SSgA S&P 500 Index, 0.02% ER*
SSgA Russell Small Cap Index, 0.06% ER*
SSgA International Index, 0.09% ER
SSgA U.S. Bond Index, 0.06% ER

*S&P 500 + Russell Small Cap will be combined to approximate Total Stock Market.
Investment ratio approximately: 86% S&P 500/14% Russell Small Cap



So to sum up your current portfolio should look like this:

Taxable(17%)
14% Individual Stocks
3% Vanguard Total International Stock ETF (VXUS)

Roth(19%)
14 % Vanguard Total International Stock ETF (VXUS)
5 % Vanguard Total Stock ETF (VTI)

401k at Vanguard(7%)
7 % Vanguard Total International Stock ETF (VXUS)

Current 401k(57%)
30 % SSgA S&P 500 Index
7 % SSgA Russell Small Cap Index*
20 % SSgA U.S. Bond Index

*I've counted the individual large cap stocks as S&P 500 and put more into Russell Small Cap to true up the approximation of Total Stock Market.



For new contributions:

Roth ($5,500)
$5,500 Vanguard Total International Stock ETF (VXUS)


Current 401k ($17,500)
$11,000 SSgA S&P 500 Index
$ 1,900 SSgA Russell Small Cap Index
$ 4,600 SSgA U.S. Bond Index

I hope that helps.

[BrandonBogle]

Somehow I had the decimal point mixed up on half of my entries. Punching them into Excel helped fix that. I've updated the original entries to correct this oversight. I pulled out 2011's tax return and used my values for the marginal rates. I should mention that my effective rate was 15% though.

And preach away. That's why I'm here and that's how we learn! This portfolio has done me good, but it could be that I was just lucky in risk and in the right asset classes rather than having a truly properly set up portfolio. And my investments in everything but the newest 401k never changed in all these years. I just let them sit and grow/recover. The newest 401k was a teammate who had similar feelings as me and had an advisor steer him that way 5 years ago. I've kept the same "future contribution distribution" ever since. I knew it was time to really have a plan I could have confidence in rather than just luck/faith.

I like the global strategy you have of:
14% Individual Stocks (In taxable, mostly to avoid taxes)
42% Total Stock Market
24% Total International Stock Market
20% Total Bond Market

Of course, that would be "mostly" because of our company stock . I will take a look at preparing the sells in the Taxable and Roth first thing in February (heading out of town Friday and don't want to rush through this tomorrow). I'll rebalance the current 401k at the same time.

In the Taxable and Roth, I have Vanguard Fund choices as well. The ETFs are because my previous brokerage didn't have Vanguard Funds available, this one does. Would there be a preference either way, when my brokerage accounts are trade commission fee and I'm a long-term investor? I am not worried about spreads -- what day of the week I do the buy on would likely make more of a difference and trying to time that would be market timing!

I totally forgot to list the funds available in my old 401k at Vanguard. That's in there now if that makes a difference on which fund to put there. I do have access to some Signal shares to help with keeping ER down. For instance, I have Vanguard Total Bond Mkt Index Institutional (VBTIX) with 0.07% ER as an option.


Thank you so much so far damjam! You are being a great help!

[bdpb]

- Student Loans, 4.5%

Tax Rate: 25% Federal, 7% State (marginal)

Taxable (17%)
- 14.25% Large Cap individual stocks (like MMM, XOM, JNJ, KRFT, etc.)
- 0.31% Commonwealth REIT (CWH)
- 0.64% Vanguard Mid Cap ETF (VO)
- 0.36% Vanguard MSCI EAFE ETF (VEA)
- 0.89% Vanguard MSCI EMRG ETF (VWO)
- 0.16% Vanguard Small Cap ETF (VB)
- 0.14% Vanguard Health Care ETF (VHT)
- 0.10% Vanguard High Dividend Yield ETF (VYM)

- NOT re-investing dividends from taxable at this time (about 3k/year)

- Each category of holdings has recovered since market crash, but some individual lots do have losses if tax loss harvesting is employed

Its comforting to get the dividend payments to out towards other holdings.

Is it comfortable paying income taxes on your taxable holdings? Probably not. Sell your taxable holdings and pay off your school loan. The cost of your school loan is higher than the yield on any of your bonds. At least use any dividends this way.

Next time the market crashes don't wait for the holdings to come back. Tax Loss Harvest instead. If you have losses, TLH now.

[BrandonBogle]

Is it comfortable paying income taxes on your taxable holdings? Probably not. Sell your taxable holdings and pay off your school loan. The cost of your school loan is higher than the yield on any of your bonds. At least use any dividends this way.

Next time the market crashes don't wait for the holdings to come back. Tax Loss Harvest instead. If you have losses, TLH now.

Part of not tax loss harvesting before was that I knew that in 2011 and later I'd be in a higher tax bracket. I was at 15% and no state taxes before that. I've put in sells for all the ETFs, which, because of CWH, will give me a very small capital loss. In my large caps though, I do have a few lots that are in the red enough to give me a couple years of carryover. Guess it's time to start harvesting those.

[damjam]

Is it comfortable paying income taxes on your taxable holdings? Probably not. Sell your taxable holdings and pay off your school loan. The cost of your school loan is higher than the yield on any of your bonds. At least use any dividends this way.

Next time the market crashes don't wait for the holdings to come back. Tax Loss Harvest instead. If you have losses, TLH now.

bdph makes a very good point, that can be implemented with no conflict with anything I have recommended.

I like the global strategy you have of:
14% Individual Stocks (In taxable, mostly to avoid taxes)
42% Total Stock Market
24% Total International Stock Market
20% Total Bond Market

Of course, that would be "mostly" because of our company stock . I will take a look at preparing the sells in the Taxable and Roth first thing in February (heading out of town Friday and don't want to rush through this tomorrow). I'll rebalance the current 401k at the same time.

When I said "mostly," I meant: the only reason I'm even considering keeping some individual stocks is because you have tax considerations. If there were not tax considerations I would have you go to 0% individual stock. Also, the stock I most want you to get rid of is your company stock. Why?, because it's company-specific risk two times over. Not only is all of your human capital tied up in this company (assuming this is your only job), but some of your investment capital is tied up in it as well. What if the company hits a rough patch and you get fired and the stock tanks at the same time? Happens more often than you think. Sorry I wasn't more clear.

In the Taxable and Roth, I have Vanguard Fund choices as well. The ETFs are because my previous brokerage didn't have Vanguard Funds available, this one does. Would there be a preference either way, when my brokerage accounts are trade commission fee and I'm a long-term investor? I am not worried about spreads -- what day of the week I do the buy on would likely make more of a difference and trying to time that would be market timing!

The funds/ETF question is somewhat a matter of personal taste. The big reasons people prefer mutual funds are fear of trading spreads and trading costs. Since these don't apply to you, go with ETFs. In some cases ETFs have lower expense ratios and Bogleheads love low expense ratios. Also see this thread.

I totally forgot to list the funds available in my old 401k at Vanguard. That's in there now if that makes a difference on which fund to put there. I do have access to some Signal shares to help with keeping ER down. For instance, I have Vanguard Total Bond Mkt Index Institutional (VBTIX) with 0.07% ER as an option.

I have a preference for Vanguard Total International Stock ETF (VXUS) over SSgA International Index ( Because VXUS is more diversified) so I would rather keep Vanguard Total International Stock ETF (VXUS) in your old 401k. IF there are Signal Class shares for Total International then choose them. (Why a 401k would have two share classes of the same fund is a question for the ages, but I have seen it.)
Since SSgA U.S. Bond Index has a 0.06% ER, I feel no reason to favor Vanguard Total Bond Mkt Index Institutional (VBTIX) with 0.07% ER.

Enjoy your trip.

[BrandonBogle]

Thank you bdpd and damjam!

I killed off the ETFs and sold off any lots in the red to repurchase in March. I am not comfortable selling off the other large-caps. Most of them have significant capital appreciation to wipe out the losses I just got. Most of the holdings have at least a 50% increase over original cost, some of them 2x or 3x over original cost. That said, I will continue with my current plan of using the dividends to shore up my emergency fund (and after that's done, to pay down student loans).

I didn't get a chance to do the rebalancing in my 401ks, but will do so next week.

I haven't read too much about the SSgA International Index, but I am definitely a Vanguard fan and am on board with using the old 401k for part of my Int'l holdings

As for bringing the holdings into balance, should I DCA or just jump right in?

damjam, Thanks for the link. Looks like someone else basically had the exact same question

[damjam]

As for bringing the holdings into balance, should I DCA or just jump right in?

Read this article by Larry Swedroe for his opinion. And this study by Vanguard.
Personally I don't DCA for the reasons sited in the above links. Also I like to keep things simple. "Invest it and be done with it" is my motto.

[goodoboy]

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 33% of stocks

The 80% stocks includes the allocation of international stocks as well.n

So you can mix it like this:

80% stocks / 20% bonds

60% -Total Stock Market Index
20% - International Stocks
20% - Bonds

[goodoboy]

Taxable (17%)
- 14.25% Large Cap individual stocks (like MMM, XOM, JNJ, KRFT, etc.)
- 0.31% Commonwealth REIT (CWH)
- 0.64% Vanguard Mid Cap ETF (VO)
- 0.36% Vanguard MSCI EAFE ETF (VEA)
- 0.89% Vanguard MSCI EMRG ETF (VWO)
- 0.16% Vanguard Small Cap ETF (VB)
- 0.14% Vanguard Health Care ETF (VHT)
- 0.10% Vanguard High Dividend Yield ETF (VYM)

You should consider taking money from taxable accounts and paying off debt at an early age. I just sold all stocks and paid off my 5.5% student loan. This will free up more cash flow to either:

1. pay more towards mortgage to pay off in 15 year
2. Contribute more to 401K
3. Pay off more debt.

This will let you focus more on your Roth and 401k allocation and makes things easier for you.

[BrandonBogle]

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 33% of stocks

The 80% stocks includes the allocation of international stocks as well.n

So you can mix it like this:

80% stocks / 20% bonds

60% -Total Stock Market Index
20% - International Stocks
20% - Bonds

Thanks goodoboy. I updated the original post with the new asset allocation target.

You should consider taking money from taxable accounts and paying off debt at an early age. I just sold all stocks and paid off my 5.5% student loan. This will free up more cash flow to either:

1. pay more towards mortgage to pay off in 15 year
2. Contribute more to 401K
3. Pay off more debt.

This will let you focus more on your Roth and 401k allocation and makes things easier for you.

I don't know if that will work for me, though I'd agree with that in general. After today's selloff of capital losses (to effectively harvest in March), my other taxable holds would take a significant tax hit. Atop that, I'm already maxing the 401k and Roth annually, so any savings would go towards debts and/or taxable accounts. I could see the argument for a 15 year mortgage, but at this time, I am paying aggressively on my other debts. My student loans will be paid off in 6 years max, though likely less if no unexpected expenses -- I'm using taxable dividends and living frugally to to pay another 6x of my student loan payment each month, and any raises and/or bonuses with be split 50/50 to COL increases and debt paydown. Once all that is done, I would consider paying off the house sooner. Right now though, the mortgage balance and rate help me focus my efforts elsewhere. Ideally, in two-three years, I want to be debt-free except for mortgage. I'm considering getting rid of Auto 1 to free up cash flow to even make things go faster. That will be a decision later in the year though around April or so.

[goodoboy]

Hello,

Consider this:

1. Sell your taxable account. No sense in having this playing with the market with student loan debt.

2. Take your previous job 401K and rollover to Vanguard IRA. Consider a target fund that meets your allocation, I think the 2030 will work. I am using 2035 with a 80/20 allocation as well.

3. Now we down to building one portfolio with current 401K and Roth IRA with the best options.

Let me know if this sounds easy before continue forward.

[goodoboy]

I don't know if that will work for me, though I'd agree with that in general. After today's selloff of capital losses (to effectively harvest in March), my other taxable holds would take a significant tax hit. Atop that, I'm already maxing the 401k and Roth annually, so any savings would go towards debts and/or taxable accounts. I could see the argument for a 15 year mortgage, but at this time, I am paying aggressively on my other debts. My student loans will be paid off in 6 years max, though likely less if no unexpected expenses -- I'm using taxable dividends and living frugally to to pay another 6x of my student loan payment each month, and any raises and/or bonuses with be split 50/50 to COL increases and debt paydown. Once all that is done, I would consider paying off the house sooner. Right now though, the mortgage balance and rate help me focus my efforts elsewhere. Ideally, in two-three years, I want to be debt-free except for mortgage. I'm considering getting rid of Auto 1 to free up cash flow to even make things go faster. That will be a decision later in the year though around April or so.

Why wait 6 years and you can pay off now? use some of the gains to pay off the capital gain taxes. How much is your student loan remaining balance and how much money in taxable account? If enough to pay off student loan, I will pay this off. I was in a similar situation like you, I recently sold off all my stocks, including the one that was paying $3000 a year in dividends. Some of it went to savings as well. Dave Ramsey say pay off all debt, besides mortgage, before contributing more to 401k.

You don't have to contribute max to 401K yet. This is just my opinon. Many here will tell you to pay off the student loan first before maxing out anything. Its a guarnteed return.

[BrandonBogle]

Why wait 6 years and you can pay off now? use some of the gains to pay off the capital gain taxes. How much is your student loan remaining balance and how much money in taxable account? If enough to pay off student loan, I will pay this off. I was in a similar situation like you, I recently sold off all my stocks, including the one that was paying $3000 a year in dividends. Some of it went to savings as well. Dave Ramsey say pay off all debt, besides mortgage, before contributing more to 401k.

You don't have to contribute max to 401K yet. This is just my opinon. Many here will tell you to pay off the student loan first before maxing out anything. Its a guarnteed return.

The student loan is tax-deductible and would be paid off in 2 (aggressive) - 6 (conservative) years on the 20 year left of 25 year loan. The taxable dividends, even after taxes (8% @ 22% effective tax rate = 6.24% after taxes), are beating the rate on my student loan (4.5% @ 22% effective tax rate = 3.51% after taxes). To me, it makes greater sense to keep the taxable account and continue to pay down the student loans with my excess funds and the earnings from the taxable. Don't I come out ahead that way?

[goodoboy]

Why wait 6 years and you can pay off now? use some of the gains to pay off the capital gain taxes. How much is your student loan remaining balance and how much money in taxable account? If enough to pay off student loan, I will pay this off. I was in a similar situation like you, I recently sold off all my stocks, including the one that was paying $3000 a year in dividends. Some of it went to savings as well. Dave Ramsey say pay off all debt, besides mortgage, before contributing more to 401k.

You don't have to contribute max to 401K yet. This is just my opinon. Many here will tell you to pay off the student loan first before maxing out anything. Its a guarnteed return.

The student loan is tax-deductible and would be paid off in 2 (aggressive) - 6 (conservative) years on the 20 year left of 25 year loan. The taxable dividends, even after taxes (8% @ 22% effective tax rate = 6.24% after taxes), are beating the rate on my student loan (4.5% @ 22% effective tax rate = 3.51% after taxes). To me, it makes greater sense to keep the taxable account and continue to pay down the student loans with my excess funds and the earnings from the taxable. Don't I come out
ahead that way?

That's just my opinion. I like keeping things very very simple. You can keep the student loan if needed. I just belive in following a systematic approach, pay debt, max out tax sheltered accounts and then play in the stocks market if you have extra money and time.

Most people would say no debt is the best debt beside mortage.

[BrandonBogle]

That's just my opinion. I like keeping things very very simple. You can keep the student loan if needed. I just belive in following a systematic approach, pay debt, max out tax sheltered accounts and then play in the stocks market if you have extra money and time.

Most people would say no debt is the best debt beside mortage.

Thanks goodoboy. I can understand and agree with the premise and for many that would be the right thing to do. In my case though, it's not a tax-effective move, doesn't affect my cash flow (loan isn't putting pressure on my cash flow). Had the loan not had a low interest, tax advantaged rate, I'd be willing to consider killing it off.

[goodoboy]

That's just my opinion. I like keeping things very very simple. You can keep the student loan if needed. I just belive in following a systematic approach, pay debt, max out tax sheltered accounts and then play in the stocks market if you have extra money and time.

Most people would say no debt is the best debt beside mortage.

Thanks goodoboy. I can understand and agree with the premise and for many that would be the right thing to do. In my case though, it's not a tax-effective move, doesn't affect my cash flow (loan isn't putting pressure on my cash flow). Had the loan not had a low interest, tax advantaged rate, I'd be willing to consider killing it off.

Sounds good to me. As long as you have the option to pay it off, its fine. Good to see your taking action on your fiances. Are you ok with your other portfolios now?

[BrandonBogle]

At the moment yes. I'm sure I'll have some questions next week after the dust settles, but I've got some steps ahead of me at least to starting making happen. The fun part is likely going to be with rebalancing the 401ks. Thank goodness it's all tax-deferred or there would be lots of heart burn!

[goodoboy]

At the moment yes. I'm sure I'll have some questions next week after the dust settles, but I've got some steps ahead of me at least to starting making happen. The fun part is likely going to be with rebalancing the 401ks. Thank goodness it's all tax-deferred or there would be lots of heart burn!

You should consider moving your previous 401K to Vanguard via roll-over for less confusion. Put it in the target fund and let it go. Then all you have is this roth IRA
, put it in a target fund and let it go. Then all you have is your 401K, allocate it accordingly and let it go.

This leaves you simplified to only your current 401k and this becomes easier.

[FinancialDave]

I agree with the relatively few themes above that say you need to pay OFF your debt now!

Beyond the obvious that they are generating a negative return for you while you are putting money in bond funds that are not likely to pay you more in the near future.

The market is at a current 5 year high, so now is a very appropriate time to pay off those debts. I have not studied all your assets in enough detail to recommend exactly which funds to use, but if it was me I would probably do a combination of:

1. Stopping all new funds that are going into any bond allocation, even though it means you won't do the max to your retirement accounts -- pay off the student loans first.

2. Use a portion of your taxable account to pay off the student loans and 3 car loans as well.

3. Make a plan to get all loans paid off by the end of the year, if at all possible, if not cut back on retirement investments. Remember, you can regain your Roth allocation up until Apr 15th of next year, so use this to your advantage to still max it out but ONLY after you pay off your loans.

fd

[goodoboy]

I agree with the relatively few themes above that say you need to pay OFF your debt now!

Beyond the obvious that they are generating a negative return for you while you are putting money in bond funds that are not likely to pay you more in the near future.

The market is at a current 5 year high, so now is a very appropriate time to pay off those debts. I have not studied all your assets in enough detail to recommend exactly which funds to use, but if it was me I would probably do a combination of:

1. Stopping all new funds that are going into any bond allocation, even though it means you won't do the max to your retirement accounts -- pay off the student loans first.

2. Use a portion of your taxable account to pay off the student loans and 3 car loans as well.

3. Make a plan to get all loans paid off by the end of the year, if at all possible, if not cut back on retirement investments. Remember, you can regain your Roth allocation up until Apr 15th of next year, so use this to your advantage to still max it out but ONLY after you pay off your loans.

fd

Good post. There is reason we all are saying paying your loan all first. It removes all risk from the equation and guarantees a return no matter how you spin it. Once debt is paid off, the brain can relax and think better. It does not make sense to hold taxable investments and still owe a bank money. You are just 30 right now, so there is no need to fully max out 401K if you still have student loan, why not pay this off and then get back to maxing out 401K and ROTH IRA. I am 34 now, and I am to the point where I don't want to owe nobody nothing.

[damjam]

As to whether you should pay your debt now or keep paying over time, I need to ask whether you understand the risk of continuing to hold your stocks.

You did say earlier that your stocks that you have held for years have increased in value 50% or more.
Have you held those stocks since before the 2008/09 crash?
Are you prepared for MMM to fall to $45.46 per share as it did on 2/27/2009 and stay there for months or even years?
I could go through the list of stocks you gave but I hope you get the idea, what goes up can and will go down.
Paying off debt is a sure thing. Holding stock is not.
Having said that however, I wouldn't make myself completely illiquid by spending down my entire taxable account to pay down debt.

I just had to put that out there. It's completely your choice of course.

[BrandonBogle]

As to whether you should pay your debt now or keep paying over time, I need to ask whether you understand the risk of continuing to hold your stocks.

You did say earlier that your stocks that you have held for years have increased in value 50% or more.
Have you held those stocks since before the 2008/09 crash?
Are you prepared for MMM to fall to $45.46 per share as it did on 2/27/2009 and stay there for months or even years?
I could go through the list of stocks you gave but I hope you get the idea, what goes up can and will go down.
Paying off debt is a sure thing. Holding stock is not.
Having said that however, I wouldn't make myself completely illiquid by spending down my entire taxable account to pay down debt.

I just had to put that out there. It's completely your choice of course.

Personally, I'm of the opinion that its better to have low interest debts and money in the bank than no debts but little leftover funds.

The taxable holdings all have market values between 50%-300% of their cost. I'm in it for the long-haul, so regardless of how far they'd drop, I would hold on to them. Maybe I'm being penny-wise and dollar-foolish, but I am strongly against paying off the debts now as opposed to my plan to have them all (except mortgage) paid off in 4-6 years. Auto loans will be done on 3 more years, student loans in 2-3 years. I say 4-6 to give a buffer in case plans change.



As for bond investments, I just started those with today's paycheck, so it's nothing lost to change my contributions if the bond investment is not the right move to make at this time.

[FinancialDave]

As I said before, take what ever allocation you were going to put towards the bonds and use it to pay down the debts. This is a GUARANTEED return at whatever the interest rate is - you won't get this from the bonds. When the debt is paid off, you have an income increase that can now go to pay down the next debt, a very simple way to get your debts paid off in a hurry.

I don't understand the logic to give up a guarantee, when the alternative is you are taking a negative return on all the interest you are paying. It is just dragging you down the whole time. The sooner the debt is paid off the sooner you will have a pay increase that allows you to put more money away for retirement.

fd

[BrandonBogle]

As I said before, take what ever allocation you were going to put towards the bonds and use it to pay down the debts. This is a GUARANTEED return at whatever the interest rate is - you won't get this from the bonds. When the debt is paid off, you have an income increase that can now go to pay down the next debt, a very simple way to get your debts paid off in a hurry.

I don't understand the logic to give up a guarantee, when the alternative is you are taking a negative return on all the interest you are paying. It is just dragging you down the whole time. The sooner the debt is paid off the sooner you will have a pay increase that allows you to put more money away for retirement.

fd

I guess it just doesn't make sense to me to sell something paying me 8% dividends and would have significant capital gains taxes (50%-300% increase in value to cost basis) to use the proceeds to pay off a 1.49% debt and a 1.99% debt. I know it's not guaranteed, but the risk is very low as these are consistent dividend and have been for years. Even if the dividends dropped in half, that's still a 4% yield dividend vs a 1.99% loan.



Edit to add: I misread your post fd. I thought you meant to sell off holdings to pay off the other debts. To do the above, I'd have to reduce my 401k by enough to cover that extra payment and the 32% marginal tax it will take. Wouldn't it be more prudent to go back to my 100% equities instead of 80/20 mix and continue to aggressively pay down the debts?

[FinancialDave]

My recommendation would be to keep the 80/20, but use the 20% bond exposure to accelerate the paying off the debts. Because you have already decided that the 80/20 seems about right for you, I don't want to go against that.

It's all about the risk. Why buy stocks and bonds at what are right now 5 year highs, and maybe going higher. Why not get your debts paid off, and buy more of them later when they are one sale!

fd

[BrandonBogle]

Got a new wrinkle. I was putting in the transfers of holdings inside my current 401k and came across the following. Sounds like since I was invested in the ESOP, I'd be able to take out the funds (at 59 1/2 I presume) as company stock WITH cost-basis from the original purchases. Right now, the value of the company stock is 96% cost-basis, meaning I've only had 4% growth (I carried through the market collapse and buildup). So while I carry risk holding the company stock and it represents 9.6% of my total portfolio, should I still hold onto it to avoid paying taxes on the original cost basis?

Employer Stock or Securities. There is a special rule for a payment from the Plan that includes employer stock (or other employer securities). To use this special rule, 1) the payment must qualify as a lump sum distribution, as described above, except that you do not need five years of plan participation, or 2) the employer stock included in the payment must be attributable to “after-tax” employee contributions, if any. Under this special rule, you may have the option of not paying tax on the “net unrealized appreciation” of the stock until you sell the stock. Net unrealized appreciation generally is the increase in the value of the employer stock while it was held by the Plan. For example, if employer stock was contributed to your Plan account when the stock was worth $1,000 but the stock was worth $1,200 when you received it, you would not have to pay tax on the $200 increase in value until you later sold the stock.

You may instead elect not to have the special rule apply to the net unrealized appreciation. In this case, your net unrealized appreciation will be taxed in the year you receive the stock, unless you roll over the stock. The stock (including any net unrealized appreciation) can be rolled over to a traditional IRA or another eligible employer plan, either in a direct rollover or a rollover that you make yourself. Generally, you will no longer be eligible to use the special rule for net unrealized appreciation if you roll the stock over to a traditional IRA or another eligible employer plan.

[dbr]

Got a new wrinkle. I was putting in the transfers of holdings inside my current 401k and came across the following. Sounds like since I was invested in the ESOP, I'd be able to take out the funds (at 59 1/2 I presume) as company stock WITH cost-basis from the original purchases. Right now, the value of the company stock is 96% cost-basis, meaning I've only had 4% growth (I carried through the market collapse and buildup). So while I carry risk holding the company stock and it represents 9.6% of my total portfolio, should I still hold onto it to avoid paying taxes on the original cost basis?

This NUA tax consideration is the one example where investment changes inside a 401K actually do have tax consequences.

A general answer to your question is that risk in single company stock is so large that tax considerations should not cause you to hold an investment like that. However, it is a trade-off of unlike things and can't be compared as cost against cost. If you are a long way from taking the funds and the allocation is large (10% is large in my book), then the advice would be to diversify the investment and move on. Own company stock has the unique combination of risks that if the company is not successful both the stock and one's personal capital are in danger.

[BrandonBogle]

Got a new wrinkle. I was putting in the transfers of holdings inside my current 401k and came across the following. Sounds like since I was invested in the ESOP, I'd be able to take out the funds (at 59 1/2 I presume) as company stock WITH cost-basis from the original purchases. Right now, the value of the company stock is 96% cost-basis, meaning I've only had 4% growth (I carried through the market collapse and buildup). So while I carry risk holding the company stock and it represents 9.6% of my total portfolio, should I still hold onto it to avoid paying taxes on the original cost basis?

This NUA tax consideration is the one example where investment changes inside a 401K actually do have tax consequences.

A general answer to your question is that risk in single company stock is so large that tax considerations should not cause you to hold an investment like that. However, it is a trade-off of unlike things and can't be compared as cost against cost. If you are a long way from taking the funds and the allocation is large (10% is large in my book), then the advice would be to diversify the investment and move on. Own company stock has the unique combination of risks that if the company is not successful both the stock and one's personal capital are in danger.

This is also why I don't rush into decisions. Last night, somehow I managed to completely misunderstand and think they meant that the 'ONLY taxes would be captical gains on the 4% growth', not 'taxes on the 4% gains would be only capital gains instead of marginal taxes". Basically, I thought I would avoid taxes on the 96% original cost. I don't know how I managed to think that. But even if I was 100% sure that was indeed the case, I would not rush into the decision to take action.

Thankfully, today I realize the error and the difference in taxes on the 4% growth is NOT worth carrying the extra risk. Thanks!

[BrandonBogle]

I updated my original post with the rebalancing progress I've made and some corrections (I totally forgot to include my employer match in the contributions).

I used damjam's recommendations as my main guideline, but have already strayed. For one, I couldn't bring myself to lose the REITs in my Roth IRA. I sold them off in my Taxable though. And when damjam outlined a recommendation about where my current 401k should be, I somehow missed something. You have this at first:

For your current 401k I would use a combination of:
SSgA S&P 500 Index, 0.02% ER*
SSgA Russell Small Cap Index, 0.06% ER*
SSgA International Index, 0.09% ER
SSgA U.S. Bond Index, 0.06% ER

*S&P 500 + Russell Small Cap will be combined to approximate Total Stock Market.
Investment ratio approximately: 86% S&P 500/14% Russell Small Cap

But then this:

So to sum up your current portfolio should look like this:

Current 401k(57%)
30 % SSgA S&P 500 Index
7 % SSgA Russell Small Cap Index*
20 % SSgA U.S. Bond Index

*I've counted the individual large cap stocks as S&P 500 and put more into Russell Small Cap to true up the approximation of Total Stock Market.

So using the Current 401k's 86% S&P500 + 14% Russell Small Cap = TSM and using my overall totals as I guideline, I tried to rebalance how I thought you meant I should be set up. But as you can see (in my updated original post), that gives me a 65% US / 25% Intl / 10% Bond (counting REIT as Bond).

Based on the discussions others have had with me, I don't know if I'm ready to jump in from 0% Bonds to 20% Bonds. One of the recommendations was to forego contributing that 20% and use that to pay down my debts first. I've decided against that. My estimates put me close crossing over to the next marginal tax rate. If I take that 20% out of the tax-defered 401k, then I will cross into the next bracket for most, if not all, of that 20% I did not contribute. Not worth it in my book and I will stay the course. In the meantime, I will continue to put all raises and bonuses into 50% student loans and 50% COL increases. Meanwhile, I'm also seriously considering getting rid of Auto #1 in April to then move all of those funds towards the student loans.

Also, when rebalancing I remembered that I have some After-Tax contributions (1% of portfolio) in my 401k. I'm going to roll those over to my Roth IRA. I also have Employer-Contributed Discretionary Profit Sharing I could move out there. I posted a question about there in http://www.bogleheads.org/forum/viewtopic.php?f=10&t=109070#p1606718.

So with all that, I'm confused as to where to go next. Keep the rebalancing train going or should I let future contributions to my 401k increase my bond exposure from 10% to 20% gradually (and with next year's rebalancing). I'm also using these thread to build my investment policy statement and ingraining it into my head as the rules to guide future portfolio decisions. As such, I wonder with all the other "tweaks" I've made, do you still recommend something like this for future contributions?

For new contributions:

Roth ($5,500)
$5,500 Vanguard Total International Stock ETF (VXUS)

Current 401k ($22,000)
$11,000 SSgA S&P 500 Index
$ 1,900 SSgA Russell Small Cap Index
$ 4,600 SSgA U.S. Bond Index
$ 4,500 Company ESOP (to then be used for rebalancing)

[damjam]

BandonBogle,
I think you may need to take a moment to step back.
Let's remember that the portfolio I suggested was based on this:

As a global strategy I would suggest:
14% Individual Stocks (In taxable, [keeping] mostly to avoid taxes)
42% Total Stock Market
24% Total International Stock Market
20% Total Bond Market

If you are not comfortable with that then some of my later conclusions about the potential makeup of your portfolio are not going to work.

If you want to have REIT, Okay. You need to decide how much REIT you want. However,I must point something out. REIT is not Bond. REIT is equity and I believe the REIT fund you hold is US equity. So you would need to reduce the percentage attributed to Total Stock Market and/or Individual Stocks.

The funds that you should use remain the same and are the following: [additions]

To implement your portfolio plan you can use ETFs [or Mutual Funds] in your Taxable and Roth.
you can create a three-fund [plus REIT] portfolio using:
Vanguard Total Stock ETF (VTI)
Vanguard Total International Stock ETF (VXUS)
Vanguard Total Bond Market ETF (BND)
[ Vanguard REIT ETF (VNQ) ] [In Roth only, not tax efficient]

For your 401k at Vanguard I would put the entire balance into:
Vanguard Total International Stock Index Fund Investor (VGTSX).

For your current 401k I would use a combination of:
SSgA S&P 500 Index, 0.02% ER*
SSgA Russell Small Cap Index, 0.06% ER*
SSgA International Index, 0.09% ER
SSgA U.S. Bond Index, 0.06% ER

*S&P 500 + Russell Small Cap will be combined to approximate Total Stock Market.
Investment ratio approximately: 86% S&P 500/14% Russell Small Cap

You also seemed to have ignored a very important part of my earlier advice:

Over the long term, if you must keep individual stocks try to get it to 10% of your portfolio or less.

In reading that again I realize I wasn't clear, so here it is:
IMHO, you need to dispose of your individual stock positions in your Roth IRA ASAP. There are no tax considerations to hold you back and you need to diversify. Over time (depending on the tax considerations), in your taxable account, you need to get your allocation to individual stocks down to no more than 10% of your portfolio. You are taking on too much risk with individual stocks.

Based on the discussions others have had with me, I don't know if I'm ready to jump in from 0% Bonds to 20% Bonds

You need to decide on this question before building your global portfolio and by extension your game plan.
I still highly recommend at least 20% bonds, but it's your choice. Maybe you should search around and read some more threads on 100% stock portfolios and then make up your mind. Like this one: Charlie Ellis & Burton Malkiel say 0% bonds OK under 50.

I won't make any further suggestions until you decide on the REIT and Bond questions. You also need to commit to reducing your individual stock exposure.

[BrandonBogle]

If you are not comfortable with that then some of my later conclusions about the potential makeup of your portfolio are not going to work.

If you want to have REIT, Okay. You need to decide how much REIT you want. However,I must point something out. REIT is not Bond. REIT is equity and I believe the REIT fund you hold is US equity. So you would need to reduce the percentage attributed to Total Stock Market and/or Individual Stocks.

Somehow when I read the Wiki on REITs, I missed that line. I will count them as US equity and take out a portion of my TSM (and/or TSM-like) holdings to account for that. I'm not looking to have a big position in REITs. At this time, I am not planning to reinvest any distributions or add any new funds to my current holdings of 2.6%. That could be changed if it's in line with how future contributions are aligned or if the general consensus is to grow that portion. While it's less than the 5% number some throw out, I am not interested in getting rid of this position. I'll live with a little bit more complexity in my portfolio, but will sleep a little more comfortably with it in there.

You also seemed to have ignored a very important part of my earlier advice:

Over the long term, if you must keep individual stocks try to get it to 10% of your portfolio or less.

In reading that again I realize I wasn't clear, so here it is:
IMHO, you need to dispose of your individual stock positions in your Roth IRA ASAP. There are no tax considerations to hold you back and you need to diversify. Over time (depending on the tax considerations), in your taxable account, you need to get your allocation to individual stocks down to no more than 10% of your portfolio. You are taking on too much risk with individual stocks.

Somehow the light bulb didn't go off to kill these off in the Roth IRA. I've begun putting in sell orders. I'll explain below about the proceeds.

For your 401k at Vanguard I would put the entire balance into:
Vanguard Total International Stock Index Fund Investor (VGTSX).

Done.

For your current 401k I would use a combination of:
SSgA S&P 500 Index, 0.02% ER*
SSgA Russell Small Cap Index, 0.06% ER*
SSgA International Index, 0.09% ER
SSgA U.S. Bond Index, 0.06% ER

*S&P 500 + Russell Small Cap will be combined to approximate Total Stock Market.
Investment ratio approximately: 86% S&P 500/14% Russell Small Cap

Done as much as I'm going to be able to. I'll update the original post with the new percentages tomorrow as I'm on the road today. I was unable to sell off all the company ESOP. Every individual sell order in there can only be 95% of the existing balance. That brought me down to 0.4% overall and once my 3/31 deposit of company match in there is done, I'll get it back down to less than 1% again.

The funds that you should use remain the same and are the following: [additions]

To implement your portfolio plan you can use ETFs [or Mutual Funds] in your Taxable and Roth.
you can create a three-fund [plus REIT] portfolio using:
Vanguard Total Stock ETF (VTI)
Vanguard Total International Stock ETF (VXUS)
Vanguard Total Bond Market ETF (BND)
[ Vanguard REIT ETF (VNQ) ] [In Roth only, not tax efficient]

Basically done. Just need to put in the proceeds from the individual stock sales as the fit in to maintain my overall AA. My plan is to use the proceeds in the Roth IRA from my sales to increase my VXUS holding. I would then move the same dollar amount in the Current 401k since the Roth has access to a better International Fund. I have 0 TBM/BND in my taxable and Roth. So far all my bonds are in my Current 401k so that the Roth IRA (minus REIT balance) and previous 401k can take their full balances in VXUS. I've also realized I hold zero TSM/VTI itself, just the current 401k approximation.

Based on the discussions others have had with me, I don't know if I'm ready to jump in from 0% Bonds to 20% Bonds

You need to decide on this question before building your global portfolio and by extension your game plan.
I still highly recommend at least 20% bonds, but it's your choice. Maybe you should search around and read some more threads on 100% stock portfolios and then make up your mind. Like this one: Charlie Ellis & Burton Malkiel say 0% bonds OK under 50.

I won't make any further suggestions until you decide on the REIT and Bond questions. You also need to commit to reducing your individual stock exposure.

Going back over where I started from a couple weeks ago, I realized I did have some bonds. After continued reading, I am going to stick with a 80/20 split. I'm going to be at 18% as this dust settles and will tweak some more rebalancing so that I get to 20% in Bonds shortly.

As a global strategy I would suggest:
14% Individual Stocks (In taxable, [keeping] mostly to avoid taxes)
42% Total Stock Market
24% Total International Stock Market
20% Total Bond Market

With the above changes, and rebalancing with current sales proceeds, I should be looking at the following:
11% Individual Stocks (Taxable)
3% US REIT (Roth IRA)
42% Total Stock Market/TSM approximation (Current 401k)
24% Total International Stock Market/Tint substitute in Current 401k (All accounts)
20% Total Bond Market (Current 401k)


Note, sometime next week the percentages in the first post will be tweaked once my buys go in and my After-Tax Rollover from Current 401k -> Roth IRA is complete. That rollover is about 1% of total assets. I'll finally have a much clearer report every time I pull up my consolidated portfolio!!

[BrandonBogle]

My 401k Plan allows me to take an In-Service rollover of PRE-TAX Employer Contributed Profit Sharing. This is currently to the tune of 2% of my total assets. Would it be worthwhile to roll it over to a Traditional IRA at Vanguard to gain access to Tint Investor Shares? It would be my only Traditional IRA holding (my old 401k at Vanguard is still in the Employer-Sponsored Plan). Unless there is a serious change to my life, even with the below income, since I'm maxing out my Traditional 401k each year, my MAGI is low enough to contribute the max to my Roth IRA.

Also, if I take it as a direct rollover and it's going pre-tax -> pre-tax, I am under the belief there would be no taxes or penalties due. Each year on top of my salary, 401k match, and taxable bonus, we get a profit sharing bonus pre-tax in our Company ESOP, which I can then rollover.

Other than to gain access to offers outside my Current 401k, I do not see a reason to do this.

[BrandonBogle]

I think we've done it!!! Thank you soooooo much!!!!!!!!

With a small margin of error of that will smooth over over the next couple pay cycles as new contributions go in, I am at my desired target allocation. Based on damjam's numbers, I'm overweighting new contributions towards TBM so that I will remain basically in key to do Bonds = My age - 10. I will adjust every once in a while to make sure my new contributions are aligned like that.

If this looks good, I'm going to start planning my long-term investment strategy that will outline how my percentages change in the years to come and how I should invest future contributions. After that, it's set it and forget it barring any emergencies or other life changing events! For this long-term investment strategy, what's the general consensus on how often you should rebalance? I will, at a minimum, rebalance yearly. Should I be checking in on things semi-annually or quarterly instead?

[BrandonBogle]

Been a whirlwind of a couple months and many changes in my financial life (promotion, bonus, selling one of the cars, etc.), so I thought I would update this post with a refresher. Didn't edit the Op so that the conversation could still be followed.

Emergency funds: Yes, 5 months
Debt:
- Auto 1 - $0 - sold the car for more than owed on loan and paid off student loans
- Auto 2, 1.49% (Cashed out equity to pay off 6.8% student loans), would take 7% of assets to pay off
- Auto 3, 2.49% (GF's car, she's paying but if anything every happens, I need to consider this my debt), would take 4% of assets to pay off
- Mortgage, 2.75% (28 years remaining), would take 42% of assets to pay off
- Student Loans - $0 - proceeds from selling Auto 1 paid this off

Expenses:
- $2,200/month

Tax Filing Status: Single
Tax Rate: 25% Federal, 7.75% State (marginal)
State of Residence: NC
Age: 30
Portfolio size: low-mid six figure
Desired Asset allocation:
11% Large-Cap Individual Stocks (In taxable, mostly to avoid taxes)
3% Vanguard US REIT (5% of US Equities once TSMs portion taken into account)
38% Total Stock Market
23% Total International Stock Market
25% Fixed Income = Equal Parts Total Bond Market/Stable Value/(Intermediate Investment-Grade + "Intermediate" Muni)

Current Asset Allocation
Taxable (34%)
- 11.5% Large Cap individual stocks (MMM, MO, AAPL, JNJ, KRFT, PM, PG, TGT, WMT)
- 5.0% Vanguard Total Stock Market Index Fund Signal (VTSSX)
- 16.6% Vanguard Total International Stock ETF (VXUS)
- 1.4% Vanguard Long-Term Tax-Exempt Fund Admiral (VWLUX)

Roth IRA (10%)
- 1.4% Vanguard REIT ETF (VNQ)
- 1.9% Vanguard Small Cap Value ETF (VBR) (86% Indiv Stocks/14% Small Cap Value)
- 3.5% Vanguard Total Stock Market ETF (VTI)
- 3.2% Vanguard Intermediate-Term Investment-Grade Fund Admiral (VFIDX)

Traditional 401k at Vanguard - Previous Employer (7%)
- 7% Vanguard Total International Stock Index Fund Investor (VGTSX)

Traditional 401k at Current Employer (49%)
- 11.3% Stable Value, 0.20% ER, 2.5% Blended Yield, 2.2 year duration, 41% turnover
- 6.4% SSgA U.S. Bond Index, 0.06% ER
- 27.0% SSgA S&P 500 Index, 0.02% ER
- 4.4% SSgA Russell 2000 Small Cap Index, 0.06% ER (86% S&P 500/14% Russel 2000)

Contributions
New Annual Contributions
- Max Roth IRA ($5,500)
- Max Traditional 401k ($17,500) + Employer Contribution ($7,500)
- Taxable ($3,000)

[damjam]

Current Asset Allocation
Taxable (34%)
- 11.5% Large Cap individual stocks (MMM, MO, AAPL, JNJ, KRFT, PM, PG, TGT, WMT)
- 5.0% Vanguard Total Stock Market Index Fund Signal (VTSSX)
- 16.6% Vanguard Total International Stock ETF (VXUS)
- 1.4% Vanguard Long-Term Tax-Exempt Fund Admiral (VWLUX)

Roth IRA (10%)
- 1.4% Vanguard REIT ETF (VNQ)
- 1.9% Vanguard Small Cap Value ETF (VBR)
- 3.5% Vanguard Total Stock Market ETF (VTI)
- 3.2% Vanguard Intermediate-Term Investment-Grade Fund Admiral (VFIDX)

Traditional 401k at Vanguard - Previous Employer (7%)
- 7% Vanguard Total International Stock Index Fund Investor (VGTSX)

Traditional 401k at Current Employer (49%)
- 11.3% Stable Value, 0.20% ER, 2.5% Blended Yield, 2.2 year duration, 41% turnover
- 6.4% SSgA U.S. Bond Index, 0.06% ER
- 27.0% SSgA S&P 500 Index, 0.02% ER
- 4.4% SSgA Russell 2000 Small Cap Index, 0.06% ER (86% S&P 500/14% Russel 2000)

I highlighted two pairs of funds that may trigger wash sales. If you need you can read an explanation, see: Wash sale.
To avoid wash sales you can either: change one of the funds to be not substantially identical to the fund in the taxable account, or ensure that you don't trade in both funds within the 61 day limit. (In my opinion these funds are substantially identical, others may disagree)

For the Total Stock Market conflict I would change - 3.5% Vanguard Total Stock Market ETF (VTI) in the ROTH IRA to - Vanguard 500 Index (either mutual fund or ETF). You are already holding - Vanguard Small Cap Value ETF (VBR) - so that will allow you to Approximate Total Stock Market with a combination of the two.

For the Vanguard Total International Stock Index conflict, you can substitute Vanguard FTSE All-World ex-US Index Fund and Vanguard FTSE All-World ex-US Small-Cap Index Fund in your old 401k .

As an alternative you could stop automatic investment of distributions in your duplicate funds to avoid an inadvertent wash sale. Dump the distributions into a MM or Bond fund and only periodically rebalance, making sure not to conflict with taxable trades. In all cases, you should stop automatic investments in all the funds in the taxable account for the same reason.

Sorry for the extra work, but we have to keep the IRS happy. Otherwise your portfolio looks good, you've made a great deal of progress.

[BrandonBogle]

DamJam,

Thanks for the heads up!

For the International Holding, I plan to exchange it in the old 401k as I free up funds for future contributions other than my current 401k. My plan is to hold 100% of Total Int'l in my taxable. But until then, I will have to watch for it to avoid wash sales. Basically, as I buy in taxable each month, I will buy into VXUS and exchange VGTSX for another fund. I plan to have that done by year-end. Sadly, neither of your suggested funds are available in the old 401k and I do not want to convert it over to a Traditional IRA at this time.

I was using VTI since I needed more Total US Stock, but I hadn't thought about the sell aspect for Wash sales like I did for Total Int'l. Before I bought VBR, I thought about just using Vanguard's Extended Market completion index from my old 401k. I didn't want to complicate things too much because I'm balancing S&P 500 with Russel 2000 in my 401k and don't have to worry about adding in balances from other accounts to reach equilibrium (KISS). I could always use VBR for that purpose though based on the holdings in the Roth IRA + Taxable.

Given the above considerations you are turning on the light bulb above my head, I will need to make some changes to be able to get to the point of not worrying about the tax man! I will take a serious look about maybe swapping out Total International in the old 401k with another fund and buying your suggested alternates in the Roth IRA.

The taxable and Roth have zero automatic rebalancing or reinvesting. My current 401k, since it uses private funds, doesn't distribute dividends, but instead lifts the NAV price. Only my old 401k reinvests. Don't see where on Vanguard's screens to redirect that to the Prime MM or else that would be the easiest solution given the current configuration.