Portfolio Simplification

[NotJen]

I got great advice here a year ago, and I am very happy with my asset allocation and index funds. But I was looking at my portfolio today trying to decide if I can simplify it even more.

Emergency Funds: 1 year

Debt: Mortgage $110k, 4.0%, 15 yrs ($60k balance remaining)

Tax Filing Status: Single

Tax Rate: 25% Federal, 5% State (AL)

Age: 33

Desired Asset Allocation: 90 Stocks/10 Bonds

Intl Allocation: 30% of Stocks


Current Portfolio (150k range)

Taxable: None

Roth at Vanguard
10% Vanguard Extended Market Index Fund (VEXAX, 0.14)
9% Vanguard Total Stock Market Index Fund (VTSAX, 0.06)
9% Vanguard Total Bond Market Index Fund (VBTLX, 0.10)

SEP IRA at Vanguard
25% Vanguard Total Stock Market Index Fund (VTSAX, 0.06)
9% Vanguard Total International Stock Index Fund (VTIAX, 0.16)

401k
20% Vanguard Index 500 (VFINX, 0.17)
10% Vanguard Developed Markets Index (VDMIX, 0.20)
8% Vanguard Emerging Markets Index (VERSX, 0.18)

Total of All Accounts Together: 100%


New Annual Contributions
$14,000 401k (estimate, depends on company contribution)
$ 5,500 Roth at Vanguard


Funds Available in Roth/SEP IRA
All Vanguard funds

Funds Available in 401k
MetLife SV 25053 CL III 0 (--)
Vanguard Emerging Mkts Stock Idx Sg (0.18)
American Century Balanced Inv (0.90)
Fidelity Select Gold (0.89)
Vanguard Developed Mkts Index (0.20)
Fidelity Select Health Care (0.80)
Vanguard High-Yield Corporate (0.23)
DFA Inflation-Protected Sec I (0.13)
Vanguard Index 500 (0.17)
Vanguard PRIMECAP (0.45)
Vanguard Morgan Growth (0.40)
Vanguard Windsor II (0.35)
Vanguard Long-Term Bond Index (0.22)
Vanguard Mid Cap Index (0.24)
Fidelity Select Energy (0.83)
Vanguard REIT Index (0.24)
Vanguard Small Cap Index (0.24)
Fidelity Select Technology (0.82)
American Funds Cap Inc Builder R4 (0.66)
Vanguard Target Retirement Income (0.16)
Vanguard Target Retirement 2010 (0.16)
Vanguard Target Retirement 2015 (0.16)
Vanguard Target Retirement 2020 (0.16)
Vanguard Target Retirement 2025 (0.17)
Vanguard Target Retirement 2030 (0.17)
Vanguard Target Retirement 2035 (0.18)
Vanguard Target Retirement 2040 (0.18)
Vanguard Target Retirement 2045 (0.18)
Vanguard Target Retirement 2050 (0.18)


Questions:

1. I’m considering the following portfolio instead:

Roth at Vanguard
22% Vanguard Total Stock Market Index Fund (VTSAX, 0.06)
6% Vanguard Total Bond Market Index Fund (VBTLX, 0.10)

SEP IRA at Vanguard
17% Vanguard Total Stock Market Index Fund (VTSAX, 0.06)
17% Vanguard Total International Stock Index Fund (VTIAX, 0.16)

401k
38% Vanguard Target Retirement 2050 (VFIFX, 0.18)

I was avoiding the Target Retirement funds because I can get lower ERs by buying the individual funds, but I can’t do that in my 401k. Overall, I think my new plan will cost me less, although my fees are already pretty low, so I’m sure it’s not a big difference.

The 2050 meets my desired asset allocation, so I will only have to rebalance within my Vanguard accounts as needed. New money in the Roth will go to Total Bond or Total Stock depending on which is lower in my asset allocation percentage. I will trade Total Stock for Total International in the SEP when I’m 5% off my allocation.

Thoughts? Is there anything I'm missing?

[BrandonBogle]

With all these threads of people thinking about breaking up their Target Retirement XXX fund into the core holdings, I think you've stumbled across a good reason to go the other way. The only thing I would mention is to periodically check the 401k and see if they started offering Signal shares at some point (Signal shares have same ER as Admiral shares). If that's the case, then unwind the Target Retirement 2050 fund into the core pieces.

Depending on the details of the MetLife Stable Value fund, you may want to consider have some of your bond allocation in there. Depends on the what the SV is investing in and it's payout rate though.

[NotJen]

I will keep an eye on the 401k offerings - I'm going to try to suggest adding the core funds. I should have gotten in with the group selecting the funds when we started it up a few years ago, but I didn't know what I was doing back then.

[YDNAL]

Age: 33

Desired Asset Allocation: 90 Stocks/10 Bonds

Intl Allocation: 30% of Stocks

New Annual Contributions
$14,000 401k (estimate, depends on company contribution)
$ 5,500 Roth at Vanguard

Questions:

1. I’m considering the following portfolio instead:

Roth at Vanguard
22% Vanguard Total Stock Market Index Fund (VTSAX, 0.06)
6% Vanguard Total Bond Market Index Fund (VBTLX, 0.10)

SEP IRA at Vanguard
17% Vanguard Total Stock Market Index Fund (VTSAX, 0.06)
17% Vanguard Total International Stock Index Fund (VTIAX, 0.16)

401k
38% Vanguard Target Retirement 2050 (VFIFX, 0.18)

NotJen,

You like to tinker!... don't you? You are 33yo with likely 30+ years to retirement. In these 30+ years, personal circumstances will change that will require changes in your approach and Asset Allocation. Think "big picture" and forget all the little stuff.

IF what you seek is "portfolio simplification" as the subject of your thread says, use TR 2050 VFIFX in all 3 accounts. The miniscule difference in ER doesn't matter.

2¢

[NotJen]

You like to tinker!... don't you?

Is re-evaluating your portfolio once a year tinkering? If so, then I guess I do. I just didn't see this combo when I did my big change-up last year, I guess because I'd been averse to the Target Retirement funds.

I don't want to simplify as far as the Target Retirement for everything. Yet. Maybe next year .