Let me try to answer your questions. 1. Prevailing advice here is extreme focus on tax efficiency and I understand the concept. Bonds in tax advantaged is optimal. But in the real world, you have quick access to your taxable account first. So shouldn't you have some bonds in there for the sake of lower volatility? That was my logic for the high yield tax exempt fund. Do you feel any type of bond is appropriate for a taxable account?
Sure, there can be bond funds appropriate for taxable and your tax exempt fund can be one of them. However, you give up return. If you have an emergency fund you may not need bonds in taxable. If you want bonds, look at savings bonds. At treasurydirect.gov
you can buy up to $10k in I bonds which are inflation protected and also tax deferred since you are not taxed on gains until you redeem the bonds. You cannot redeem them for the first year so be careful how you do your purchases.2. For Total International vs. Developed + Emerging Market + FTSE ex-US small cap is there a huge difference besides the majesity of simplicity? Like tax efficiency consequences or something else? I ask this becuase pyschologically I like have more control over exact pieces of my portfolio. I am young and in a finance related field. I understand that index beat 90% of active management activity. But psychologically I do not think I can handle something like the three fund portfolio. It would feel too much like auto pilot and me not doing enough to take a hand in my retirement planning. Again this is just a psychological issue. So if you think the only benefit is simplicity than is it ok to dice this way?
You don't need to do a three fund portfolio but you also need to think about how you do this in a tax efficient manner. Holding all these separate funds in taxable may not be a wise idea. If a country moves from emerging markets to developed, for example, one fund will sell stock and the other will buy it. You end up with the tax bill. If you want to control the different pieces then do it in tax advantaged accounts and just overweight. So you could hold tax efficient Total Intl stock market in taxable and then add emerging markets in a roth to overweight if you believe you want to hold more than the market weight of that particular market.3. I will focus on building up a cash reserve of about $15k. No argument there.
Good4. It seems no one here likes to tout Extended Market as a core fund. Why is this? I checked with the small cap fund. Lower turnover rate, more stocks and both small/mid companies. It seems like at least an adequate choice vs small cap value, small cap growth or small cal index fund.
Extended market is one of my favorite funds to use when someone only has a low cost S&P 500 fund in their employer plan. This actually happens a lot and by using that combined with extended market people can hold the entire market. Again, you have the same problem with this meaning a company grows and graduates from a mid cap to a large cap and you hold this in taxable so you end up with a tax bill you can't avoid. It isn't a bad fund but there is a better way to hold the same companies in a total stock market fund in taxable. If you want more than market weighting on mid/small cap then use this fund.5. As for the Energy and Healthcare bets, I do not think I will ever be able to eradicate them completely from my portfolio. I have accepted buying individual stocks and playing with options is too time consuming and difficult to consistently make money. But I have to speculate somewhere at some time. And yes I know that past returns are no guarantee for future results, but the funds have comparatively done well in the past. And their ER is so low compared to other sector focused funds.
If you want to speculate, do it in your roth or 401k. In a few years if you decide that precious metals is better than health or energy you won't be able to sell these sector bets without incurring a tax liability. It is all about thinking ahead. Many people will hold 5% of their portfolio for this type of betting but do it where it won't cost you.
You are probably thinking that you don't have enough room in your tax advantaged accounts to do all of what I have suggested above and you are probably right today. That won't always be the case so you may need to wait and then add back in some of these other types of accounts once your portfolio grows. This happens to many of us and it isn't a problem.
I hope this answers your questions.