newbie portfolio evaluation

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newbie portfolio evaluation

Postby toblerone » Fri Mar 08, 2013 1:00 am

(edited/updated again - thanks for all the advice so far)

Hi all, first post here, love this community - thank you all very much.
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Emergency funds: 4 months of expenses
Debt:, None, other than mortgage.
Mortgage = Currently refinancing to 15 yr fixed @ ~3%. Equity = 24% of 220k value

Tax Filing Status: Head of Household
Tax Rate: 27% Federal, 0% State
State of Residence: WA
Age: 43
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 30% of stocks
Desired Small/Mid cap allocation: 30%-50% of domestic stocks
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Current retirement assets: appx 300k

Scottrade Taxable - 9.6%
6.3% Vanguard Total International Stock Index ETF (VXUS) (.16)
3.3% cash

Schwab 401k - 84.9%
32.6% Fidelity Spartan Intermediate Term Treasury Bond Index Advantage Class (FIBAX) (.10)
12.6% Fidelity Spartan International Index Advantage Class (FSIVX) (.12)
14.3% Schwab Small-Cap Index (SWSSX) (.17)
25.3% Schwab Total Stock Market Index (SWTSX) (.09)
0.2% cash

Scottrade Roth - 5.5%
5.4% Vanguard Total Stock Market ETF (VTI) (.06)
0.1% cash
----------------

New annual Contributions
$17500 401k (+ $10-$20K employer match)
$5500 Roth
$5000 Taxable
----------------

Available funds: Both the Schwab and Scottrade accounts have a large selection of ETFs and mutual funds. Here are a few options I was looking at for the Schwab 401k:

Fidelity Spartan Total Market Index Advantage Class (FSTVS) (.06)
Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) (.18)
Fidelity Spartan US Bond Index Fund Fidelity Advantage Class (FSITX) (.10)
Schwab International Index (SWISX) (.19)
Vanguard Short-Term Inflation-Protected Securities Index Fund Investor Shares (VTIPX) (.20)
Vanguard Total Bond Market Index Investor Shares (VBMFX) (.22)
Schwab Total Bond Market (SWLBX) (.29)

Questions (updated):
1. In the Schwab account, most non-Schwab funds have a transaction fee up to $50. If I'm paying that much to re-balance the Fidelity funds once or twice a year, is it worth it for the expense ratio difference? My hunch is that it is worth it for the bond fund, but maybe not (yet) for the international.
2. Should I have more bond exposure other than intermediate term treasuries?

Thanks all for the advice so far, any more is appreciated!
Last edited by toblerone on Thu Mar 14, 2013 2:15 am, edited 4 times in total.
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Re: new Boglehead portfolio evaluation

Postby Johm221122 » Fri Mar 08, 2013 11:08 am

I'm confused, is the bottom what you are going to add using cash, because it adds up to 69%? Could you just give us what portfolio that you are going to implement?
Welcome to forum
John
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Re: new Boglehead portfolio evaluation

Postby toblerone » Fri Mar 08, 2013 12:28 pm

I'm confused, is the bottom what you are going to add using cash, because it adds up to 69%? Could you just give us what portfolio that you are going to implement?

Yes, well it adds up to 77% which is the total cash position I have in all 3 accounts. Putting both halves together:

Scottrade Taxable
(7%) Vanguard Total International Stock Index ETF (VXUS) (.16)

Schwab 401k
(13%) Fidelity Spartan Intermediate Term Treasury Bond Index Advantage Class (FIBAX) (.10)
(8%) Fidelity Spartan Short Term Treasury Bond Index Advantage Class (FSBAX) (.10)
(14%) Fidelity Spartan International Index Advantage Class (FSIVX) (.12)
(10%) RidgeWorth High Income Fund (STHTX) (.77)
(15%) Schwab Small-Cap Index SWSSX (.17)
(27%) Schwab Total Stock Market Index SWTSX (.09)

Scottrade Roth
(6%) Vanguard Total Stock Market ETF (VTI) (.06)

The RidgeWorth fund is just a placeholder until I find something better to put there... like TIPS?

Thanks,
Mike
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Re: newbie portfolio evaluation

Postby Johm221122 » Sat Mar 09, 2013 10:40 pm

I would use only one bond fund, either intermediate or short term.You can replace high income fund with one of these
John
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Re: newbie portfolio evaluation

Postby toblerone » Mon Mar 11, 2013 12:42 am

Ok I will use just the intermediate fund and combine it all, thanks John.
Mike
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Re: newbie portfolio evaluation

Postby ruralavalon » Mon Mar 11, 2013 8:16 pm

Welcome to the forum :) .

Its good to see you have no other debt than the mortgage, and Its good to see that you are refinancing to a 15 year fixed mortgage.


toblerone wrote:Age: 43
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 30% of stocks
Desired Small/Mid cap allocation: 30%-50% of domestic stocks <-- worthwhile?
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In my opinion your proposed asset allocation is within the range of what is reasonable. I do think that mid/small caps should be included, at least as part of a total market fund and perhaps more if you wish.

In order to comment on new or better fund selection, would need to know what the other investment offerings (fund name, ticker, expense ratio) are in the 401k.

Please add any additional information to your original post using the "edit" button; it helps a lot to have all of your information in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Re: newbie portfolio evaluation

Postby toblerone » Thu Mar 14, 2013 2:00 am

Thank you for the positive feedback on the allocation, very encouraging.
I've edited the original post to update my current allocation, and listed some investment offerings.
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Re: newbie portfolio evaluation

Postby ruralavalon » Thu Mar 14, 2013 3:21 pm

Desired asset alloction is 70/30, with 30% of equities in international (that is int'l at ~ 20% overall). Portfolio size about $300k.

The idea is to select funds which combine broad diversification (to decrease your risk) and low expenses (to increase your net gain). You start by selecting the best available choices in the 4o1k ( where the choices are always somewhat limited), and then complete the asset allocation using the nearly unlimited choices in the taxable and IRA accounts. In your large 401k, the best choices are the very low cost Fidelity Spartan funds.

I prefer the Vanguard Total International fund over the Spartan Int'l fund, since the Vanguard fund is more widely diversified covering developed markets including Canada, emerging markets, and both large and small cap stocks. The Fidelity international fund omits small caps, emerging markets and Canada, so I suggest using the non-41k accounts for the more diversified Vanguard Total International fund. I don't know how strongly you like Scottrade, but I will just note that you have enough money in those accounts that you could move both to Vanguard and use Vanguard's inexpensive Admiral class shares at about the same expense ratio as the ETFs.

Here is a simple 4 fund portfolio idea you could consider, using your desired asset allocation, giving broad diversification with very low expense ratios, with tax efficient fund placement. All percentages are rounded off.

Scottrade Taxable (~ 07%; ~ $30k; add $5k/yr)
07% Vanguard Total International Stock Index ETF (VXUS) (.16), <=very tax efficient

Schwab 401k (~ 87%; ~ $255k; add $17.5k/yr + $10-$20K employer match)
50%, Fidelity Spartan Total Market Index Advantage Class (FSTVS) (.06)
30%, Fidelity Spartan US Bond Index Fund Fidelity Advantage Class (FSITX) (.10), <= uses Barclays® U.S. Aggregate Bond Index a total market type index including Treasury securities, Government agency bonds, Mortgage-backed bonds, and Corporate bonds .
07%, Fidelity Spartan International Index Advantage Class (FSIVX) (.12), <= uses EAFE index, not a total market index

Scottrade Roth (~ 06%; ~ $15k; add $5.5k/yr)
06% Vanguard Total International Stock Index ETF (VXUS) (.16)

This should be very easy to manage and rebalance going forward, wth all rebalancing done inside the 401k.

Finally, I suggest that you read one or two books from the General Investing section of this reading list :
http://www.bogleheads.org/readbooks.htm .

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Re: newbie portfolio evaluation

Postby toblerone » Fri Mar 15, 2013 1:15 am

I didn't mention it before but I would like to stay away from ETFs in the Schwab 401k (for now) if there are good mutual fund alternatives, and the Vanguard Total Intl mutual fund (VGTSX) seems pretty expensive at 0.22% (but it does have 6X the holdings of the Fidelity fund). I agree I would like to have EM, small caps, and Canada in the 401k international fund, although I do have some in the taxable (VXUS). The bond fund change looks good. I think I might wait until the next planned re-allocation to switch those around, and learn more about investing in the meantime. Good plan? Also at that time I might switch the Roth and taxable to Vanguard. No, I'm not particularly attached to Scottrade but it seems ok for now.
Thanks for the advice ruralavalon, much appreciated! :happy
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Re: newbie portfolio evaluation

Postby ruralavalon » Fri Mar 15, 2013 3:52 pm

toblerone wrote:I didn't mention it before but I would like to stay away from ETFs in the Schwab 401k (for now) if there are good mutual fund alternatives, and the Vanguard Total Intl mutual fund (VGTSX) seems pretty expensive at 0.22% (but it does have 6X the holdings of the Fidelity fund). I agree I would like to have EM, small caps, and Canada in the 401k international fund

If the 401k offeres Spartan® Global ex U.S. Index Fund - Fidelity Advantage Class, (FSGDX), er = 0.18%, that fund is more diversified, it covers Canada and emerging markets (but not small caps), and you could look at that as a substitute for the other Spartan International fund (FSIVX) in the 401k.


toblerone wrote:The bond fund change looks good. I think I might wait until the next planned re-allocation to switch those around, and learn more about investing in the meantime. Good plan? Also at that time I might switch the Roth and taxable to Vanguard.

I see nothing dangerous in your current portfolio that cries out for an immediate change, so I see nothing wrong in waiting while you learn more. Just don't get yourself caught up in "analysis paralysis" seaching for the perfect plan
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Re: newbie portfolio evaluation

Postby toblerone » Sat Mar 16, 2013 4:07 am

ruralavalon wrote:I see nothing dangerous in your current portfolio that cries out for an immediate change, so I see nothing wrong in waiting while you learn more. Just don't get yourself caught up in "analysis paralysis" seaching for the perfect plan

No paralysis anymore, I'm fully invested with good AA (thanks to everyone here), so the stress level is down :) To summarize, next reallocation I'm looking at the following for the Schwab 401k:

Bond
Fidelity Spartan US Bond Index Fund Fidelity Advantage Class (FSITX) (0.10)

Intl
Fidelity Spartan Global ex U.S. Index Fund Fidelity Adv. Cl. (FSGDX) (0.18)
Vanguard Total International Stock Index Fund Investor Shares (VGTSX) (0.22)

I'll also take another look at the ETF offerings, and consider moving the other accounts from Scottrade.

Thanks
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