A reasonable 3-fund portfolio?

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A reasonable 3-fund portfolio?

Postby pfb3326 » Tue Jul 02, 2013 11:03 am

Hi,

Would you consider the following to be a reasonable, simple 3-fund portfolio for a 56-year old single male with little investment experience? Total to be invested is about 2.5 million.

50% Total Stock Market Index Admiral
25% Total International Stock Index Admiral
25% Short-Term Tax Exempt Bonds Admiral (to be changed to Intermediate-Term at a future date when things settle down)

Everything is in taxable accounts. The bond income is expempted from Federal taxes but subject to prox 5% state tax.

Using a reasonable withdrawal rate, it seems to me this should provide a good lifetime income.

Thanks in advance for any suggestions.
Last edited by pfb3326 on Tue Jul 02, 2013 11:42 am, edited 2 times in total.
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Re: A reasonable 3-fund portfolio?

Postby bertilak » Tue Jul 02, 2013 11:07 am

How much is in tax advantaged accounts? Point being tax exempt bonds not needed there.
Otherwise seems OK.
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Re: A reasonable 3-fund portfolio?

Postby Call_Me_Op » Tue Jul 02, 2013 11:12 am

pfb3326 wrote:Using a reasonable withdrawal rate, it seems to me this should provide a good lifetime income.


I would replace "should" above with "is expected to (based upon past performance)." There are no guarantees with stocks, and you should be able to stomach a worst-case scenario (which I could not at 75% equities).
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Need more information

Postby Taylor Larimore » Tue Jul 02, 2013 11:21 am

pfb3326 wrote:Hi,

Would you consider the following to be a reasonable, simple 3-fund portfolio for a 56-year old single male with little investment experience? Total to be invested is about 2.5 million.

50% Total Stock Market Index Admiral
25% Total International Stock Index Admiral
25% Short-Term Tax Exempt Admiral (to be changed to Intermediate-Term at a future date when things settle down)

Using a reasonable withdrawal rate, it seems to me this should provide a good lifetime income.

Thanks in advance for any suggestions.

pfb:

Your proposed 3-fund portfolio might be improved but you could easily do a lot worse.

It is impossible to evaluate a portfolio without more information. I suggest you use Laura's format to get informed advice:

ASKING PORTFOLIO QUESTIONS

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: A reasonable 3-fund portfolio?

Postby Calm Man » Tue Jul 02, 2013 12:41 pm

I like the proposal with 4 suggestions:
1. The 75/25 is too risky. I would go to 60/40. The 60% in stocks according to your 2/1 ratio would be 40% US.
2. I would not presume that you have the skills (nobody does) to know when to switch from short to intermediate bonds. I would just go with intermediate. Frankly, the yield or the long term tax exempt is quite a bit more than intermediate and the duration is only 1 year more. Larry Swedroe or Rick Ferri, I don't remember who, believe that a 0.2% increment in yield for a year is worth going long for. It is about 3/4% now.
3. I would consider a single state muni fund if Vanguard has the one you want. (I do this with New Jersey)
4. VERY IMPORTANT-- if you are mostly cash now, I worry that you might panic if you go all in now.I was in a similar situation a year and a half ago and elected a 4-5 year averaging in period. I am glad I did as I might have gotten nervous now.

So here goes:
Total stock index admiral: 40$
Total international stock index admiral: 20%
Intermediate term (or long term or state specific long term) muni fund: 40%

Divide it up into 16 pieces and do it quarterly over 4 years.
Or 12 pieces and quarterly over 3 years.

Last, prepare for a discussion on dollar cost averaging vs lump sum investing unless you tell others to avoid it !!!

Good luck.
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