Ready to invest 10k in taxable account

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Topic Author
khalestorm
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Ready to invest 10k in taxable account

Post by khalestorm »

Hi all,
I'm ready to invest 10k in a taxable account with Vanguard. My 401k and RothIRA are maxed out yearly, emergency fund good for a year's worth of expenses. I can take on a good amount of risk as I won't need to access these funds for 10+ years. Looking to be pretty aggressive. Perhaps 90/10 stocks/bonds. I'm 31 years old.

Currently looking at:
VTSAX- Total Stock Market Index Admiral Shares (.05% ER) - considering investing $9000
VBTLX - Total Bond Market Index Admiral Shares (.10% ER) - considering investing $1000

How do these look? Any recommendations on other Vanguard funds?
Thanks
livesoft
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Re: Ready to invest 10k in taxable account

Post by livesoft »

I would put $10,000 into VTSAX, then shift $1,000 in your 401(k) from VTSAX there into VBTLX there.
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sscritic
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Re: Ready to invest 10k in taxable account

Post by sscritic »

In case you missed livesoft's point, many people don't put bonds in taxable because of the income tax on dividends. They keep their bonds in their 401(k), 403(b), IRA, or similar account.
WHL
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Re: Ready to invest 10k in taxable account

Post by WHL »

Wouldn't it be more prudent to put VTIAX in the taxable fund and move the tax-advantaged accounts to balance it out?
Grt2bOutdoors
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Re: Ready to invest 10k in taxable account

Post by Grt2bOutdoors »

Total Bond Market Investor or Admiral shares have higher minimum investment requirements ($3K for former, $10K for latter) - how do you plan on getting around that with an investment of $1K?

Vote for Total Stk Market Index. Either buy a muni bond fund and/or keep your money in cash.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
sscritic
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Re: Ready to invest 10k in taxable account

Post by sscritic »

WHL wrote:Wouldn't it be more prudent to put VTIAX in the taxable fund and move the tax-advantaged accounts to balance it out?
He doesn't want international. He wants US, stocks or bonds.
WHL
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Re: Ready to invest 10k in taxable account

Post by WHL »

sscritic wrote:
WHL wrote:Wouldn't it be more prudent to put VTIAX in the taxable fund and move the tax-advantaged accounts to balance it out?
He doesn't want international. He wants US, stocks or bonds.
I guess I pulled this out of midair, then?
How do these look? Any recommendations on other Vanguard funds?
sscritic
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Re: Ready to invest 10k in taxable account

Post by sscritic »

Grt2bOutdoors wrote:Total Bond Market Investor or Admiral shares have higher minimum investment requirements ($3K for former, $10K for latter) - how do you plan on getting around that with an investment of $1K?
Same for TSM: he can't get Admiral with the $9k. $10k in Admiral TSM is the correct answer, given by livesoft in the first response.
Grt2bOutdoors
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Re: Ready to invest 10k in taxable account

Post by Grt2bOutdoors »

sscritic wrote:
Grt2bOutdoors wrote:Total Bond Market Investor or Admiral shares have higher minimum investment requirements ($3K for former, $10K for latter) - how do you plan on getting around that with an investment of $1K?
Same for TSM: he can't get Admiral with the $9k. $10k in Admiral TSM is the correct answer, given by livesoft in the first response.
Exactly! Sometimes it takes a little more explaining as to why his plan isn't feasible.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
sscritic
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Re: Ready to invest 10k in taxable account

Post by sscritic »

WHL wrote:
sscritic wrote:
WHL wrote:Wouldn't it be more prudent to put VTIAX in the taxable fund and move the tax-advantaged accounts to balance it out?
He doesn't want international. He wants US, stocks or bonds.
I guess I pulled this out of midair, then?
How do these look? Any recommendations on other Vanguard funds?
So how is International "more prudent" than US, to use your words?
Topic Author
khalestorm
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Re: Ready to invest 10k in taxable account

Post by khalestorm »

I see that I need 10k in order to start with VTSAX. Looks like I'll just do all VTSAX and no bonds.
Topic Author
khalestorm
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Re: Ready to invest 10k in taxable account

Post by khalestorm »

livesoft wrote:I would put $10,000 into VTSAX, then shift $1,000 in your 401(k) from VTSAX there into VBTLX there.
Thanks, however my 401k is with Fidelity. My asset allocation in my 401k is appropriate. Looking to just do 10k in VTSAX for now.
Grt2bOutdoors
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Re: Ready to invest 10k in taxable account

Post by Grt2bOutdoors »

khalestorm wrote:
livesoft wrote:I would put $10,000 into VTSAX, then shift $1,000 in your 401(k) from VTSAX there into VBTLX there.
Thanks, however my 401k is with Fidelity. My asset allocation in my 401k is appropriate. Looking to just do 10k in VTSAX for now.
Sounds like a plan - more risk, less fixed income. I think I will rebalance before year-end, I'm seeing more of these let's jump on equities threads.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
livesoft
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Re: Ready to invest 10k in taxable account

Post by livesoft »

khalestorm wrote:Thanks, however my 401k is with Fidelity. My asset allocation in my 401k is appropriate. Looking to just do 10k in VTSAX for now.
So you are not considering your portfolio of 401(k), Roth, IRA, and taxable as a single portfolio?
Fidelity has equivalent funds to the ones you and I mentioned, so one doesn't need to use the exact same funds, but could use funds with the same assets.
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sscritic
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Re: Ready to invest 10k in taxable account

Post by sscritic »

khalestorm wrote:
livesoft wrote:I would put $10,000 into VTSAX, then shift $1,000 in your 401(k) from VTSAX there into VBTLX there.
Thanks, however my 401k is with Fidelity. My asset allocation in my 401k is appropriate. Looking to just do 10k in VTSAX for now.
You can still shift some stocks to bonds in your Fidelity account to balance out the new $10k in the taxable account if you want to stick to 90/10. Your money is all your money, so most people like to consider their money pot as one pot with one allocation, not a bunch of separate pots, all with separate allocations. Where your 401(k) is located doesn't matter with respect to the "one pot."
Topic Author
khalestorm
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Re: Ready to invest 10k in taxable account

Post by khalestorm »

livesoft wrote:
khalestorm wrote:Thanks, however my 401k is with Fidelity. My asset allocation in my 401k is appropriate. Looking to just do 10k in VTSAX for now.
So you are not considering your portfolio of 401(k), Roth, IRA, and taxable as a single portfolio?
Fidelity has equivalent funds to the ones you and I mentioned, so one doesn't need to use the exact same funds, but could use funds with the same assets.
I do consider all those a single portfolio, however, I want my taxable account to be much more aggressive than my 'retirement' 401k and RothIRA. This taxable account is essentially an 'early retirement' fund, meaning, if I retire early, I'll begin to pull from this fund. I'm hoping to have funds brew in this account for about 15 years, contributing 10k more annually if I'm able. If I were to mirror my 401k/RothIRA portfolio, I would need to have 70/30 stocks/bonds since I'm 31 years old. That would look something like 10k VTSAX and an additional 4k+ in VBTLX in the taxable account. I would really only like to put in 10k in VTSAX and not an additional 4k+ in VBTLX for bonds. It's a minimum of 10k to buy into VTSAX.

This is my 401k asset allocation:
Stock Investments LARGE CAP S&P 500 INDEX 40%
Stock Investments MID-CAP SMALL CAP INDEX 10%
Stock Investments INTERNATIONAL INTERNATIONAL INDEX 20%
Bond/Managed Income INCOME BOND INDEX 30%

Would you advise otherwise?
sscritic
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Re: Ready to invest 10k in taxable account

Post by sscritic »

If you think it's one pot, then you need one asset allocation. Is it 90/10 (first post) or 70/30 (last post)? Pick a number, any number, and then make your whole pot match. With your bonds in the 401(k) and stocks in your taxable account, the taxable account will be more "aggressive" automatically (assuming that you believe stocks are more aggressive than bonds).

The actual suggestion was to make your taxable account 100% stocks. Is that not aggressive enough for you?

P.S. Perhaps I see the problem. You think one pot means that all the separate pots need to mirror each other. That's not what one pot means. One pot means one pot. If you want 30% bonds, then you can put them anywhere in the one pot. We think the 401(k) corner of the one pot is the right place for your bonds.
Topic Author
khalestorm
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Re: Ready to invest 10k in taxable account

Post by khalestorm »

sscritic wrote:
P.S. Perhaps I see the problem. You think one pot means that all the separate pots need to mirror each other. That's not what one pot means. One pot means one pot. If you want 30% bonds, then you can put them anywhere in the one pot. We think the 401(k) corner of the one pot is the right place for your bonds.
Correct. And I see what you are saying now. I can increase the bonds in my 401k/RothIRA if I'm 100% stock in my taxable. All 401k/RothIRA/taxable accounts are one pot indeed. I'm just opting to be more aggressive with my taxable account.
placeholder
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Re: Ready to invest 10k in taxable account

Post by placeholder »

It's hardly unusual to have taxable accounts all stock.
Steadfast
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Re: Ready to invest 10k in taxable account

Post by Steadfast »

The principles of tax-aware asset allocation are extremely important and you should learn them before acting: http://www.bogleheads.org/wiki/Principl ... _placement.
We don't see things as they are, we see things as we are.
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Toons
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Re: Ready to invest 10k in taxable account

Post by Toons »

10k in Total Stock Market sounds like a great plan.Just make SURE that you have the ability to watch a decline of 20-40% in your portfolio ,albeit a slow steady decline,which is what we experienced in 2000-2002 and then again another dramatic drop in 2008.It is easy for most investors to say that they can withstand those deep declines but when it actually happens even the most steadfast are known to throw in the towel and take their losses.
The successful investors are the ones that are steadily buying when others are in panic mode.You will find very few here that recommend balanced funds in a taxable account( I am not one of them) ,but their decline is not as significant as an all stock index.Thoughts to consider. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Topic Author
khalestorm
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Re: Ready to invest 10k in taxable account

Post by khalestorm »

This maybe a bit of a noob question, but hey, I'm still learning. I'm still planning on purchasing 10k in VTSAX. Since the market is down today, would it be a good time to purchase now? I'm going to buy all at once and not DCA the funds.
Topic Author
khalestorm
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Re: Ready to invest 10k in taxable account

Post by khalestorm »

Steadfast wrote:The principles of tax-aware asset allocation are extremely important and you should learn them before acting: http://www.bogleheads.org/wiki/Principl ... _placement.
Thanks, i've read through that before. I'll consider increasing my bonds in my 401k due to their tax inefficiency.
sscritic
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Re: Ready to invest 10k in taxable account

Post by sscritic »

Too late for today. You have to get your order into Vanguard, the mutual fund company, before 4 pm Eastern, 1 pm Pacific.
Topic Author
khalestorm
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Re: Ready to invest 10k in taxable account

Post by khalestorm »

sscritic wrote:Too late for today. You have to get your order into Vanguard, the mutual fund company, before 4 pm Eastern, 1 pm Pacific.
That's what I thought. Any pros/cons to investing a lump sum of cash rather than DCA? Do I need to worry about whether the market is up or down when investing if I'm investing for the long haul?
Steadfast
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Re: Ready to invest 10k in taxable account

Post by Steadfast »

khalestorm wrote:
sscritic wrote:Too late for today. You have to get your order into Vanguard, the mutual fund company, before 4 pm Eastern, 1 pm Pacific.
That's what I thought. Any pros/cons to investing a lump sum of cash rather than DCA? Do I need to worry about whether the market is up or down when investing if I'm investing for the long haul?
According to a Vanguard study, a lump-sum investment will achieve better returns than dollar cost averaging, 2/3rds of the time. So if you are in for the long haul and can handle the emotional shock of an immediate drop in value, go ahead and lump sum. But if you invest the whole lump sum tomorrow and come Monday, the market tanks, will you panic and pull everything out, guaranteeing a loss? This happens to many people. If you think you might be susceptible to panic, as many investors are, then DCA may provide comfort.

Good luck.
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Toons
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Re: Ready to invest 10k in taxable account

Post by Toons »

Steadfast wrote:
khalestorm wrote:
sscritic wrote:Too late for today. You have to get your order into Vanguard, the mutual fund company, before 4 pm Eastern, 1 pm Pacific.
That's what I thought. Any pros/cons to investing a lump sum of cash rather than DCA? Do I need to worry about whether the market is up or down when investing if I'm investing for the long haul?
According to a Vanguard study, a lump-sum investment will achieve better returns than dollar cost averaging, 2/3rds of the time. So if you are in for the long haul and can handle the emotional shock of an immediate drop in value, go ahead and lump sum. But if you invest the whole lump sum tomorrow and come Monday, the market tanks, will you panic and pull everything out, guaranteeing a loss? This happens to many people. If you think you might be susceptible to panic, as many investors are, then DCA may provide comfort.

Good luck.
+3 :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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