We have agreed upon a moderate risk allocation:
1. US Market (50%)
2. International Market (20%)
3. Fixed Income (20%)
4. Cash- 10%
US equities- VFIAX
International market- VWIGX
1. Is the allocation appropriate for our objectives?
I think so. However, 70/30 is risky, not moderate, but that is a loosey-goosey area to assess. To me cash is not different from bonds/fixed income in general. I don't see any need for cash as such.
2. Should we invest in VFIAX or a tax-managed fund like VTCLX or VTGLX?
You want VTSAX, total stock market not VFIAX, S&P 500. You would have to look at the total tax cost of the trust. The only good answer is to run dummy tax returns for the alternatives.
3. With regards to the trust objectives, will VWIGX provide the appropriate allocation for developed market vs. emerging market or should it be more aggressive/less aggressive?
I think you want VTIAX, total international. VWIGX is a growth stock fund, which does not mean the fund grows but that it invests in growth as distinct from value asset class.
4. Should we be buying ETFs or mutual funds? I’m having a hard time figuring out which way will be more advantageous in regards to fees.
If you are investing strictly in Vanguard funds, you would probably be better off placing the account at Vanguard. You may not be able to buy the Admiral share class of everything at Schwab. ETF's are also fine.
5. Since this is a taxable account, is there any advantage to investing in REITs?
I wouldn't mess around with REITs in any account, which is not saying there is anything wrong with it either.
6. For bonds, should we only invest in municipal bonds, and not treasuries/TIPS? What about a bond ladder?
Muni's is are selected based on running tax costs. At 30% bonds you should simply select a low cost diversified bond fund and go away. If by some chance you are talking tens of millions of dollars, the considerations may be different.
7. Would it be reasonable to hold some I-bonds?
You can only buy $10,000 annually, so is that workable? I'm not sure I would mess around with a Treasury Direct account in this case.
8. Would Vanguard’s intermediate-term tax-exempt bond fund (VWITX) be a better choice than the VWSTX?
You still need to analyze tax costs to determine if tax exempt bonds are appropriate. For those listening in, be advised the tax cost in trusts are quite different from individual tax rates. As far as short term vs intermediate term, you pays yer money and you takes yer choice. Risk in a 70/30 portfolio is hugely dominated by stocks and I think long term stay the course investors will be rewarded overall by going to intermediate durations. Mostly it does not matter.
PS It took me a lot of time to look up exactly what all those tickers actually were. Posters are encouraged to post exact fund names and tickers.
We very much appreciate recommendations and advice!
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