Portfolio Check: 32 yrs old, going to rebalance to 78/22

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Topic Author
durazno

Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by durazno »

I've broken down my portfolio and future contributions below. My current AA is 81/19. I've been thinking of exchanging some stocks to bonds in my old 401k to shift to 78/22. This would be in line with age-10 = bonds. I've been sticking to 81% stocks for the past 12m -- it was an impulse to get a little more aggressive -- but I think it's time to get a reality check.

Any advice on my holdings? I keep it pretty simple but I like it that way.

I don't have any debt. I rent. I don't own a car or home. I don't have a wife or children.

Current Portfolio:

Taxable (Vanguard)
FTSE All World Ex-US (VFWAX): 4%
Total Intl Index Admiral (VTIAX): 18%
Total Stock Index Admiral (VTSAX): 35%

Rollover IRA (Vanguard)
Total Bond Index Admiral (VBTLX): 8%

Roth IRA (Vanguard)
Total Stock Index Admiral (VTSAX): 10.5%
Total Intl Index Admiral (VTIAX): 3%
Total Bond Index Admiral (VBTLX): 5%

401k 1 (JP Morgan) - old employer
BlackRock US Debt Index Fund: 4%
BlackRock Russell 1000 Index: 6%
BlackRock Russell 2000 Index: 4%

401k 2 (Fidelity) - current employer
Spartan Total Market Index (FSTVX): 0.5%
Fidelity Intermediate Bond (FTHRX): 0.001%

Other fixed income (online savings, I-Bonds, EE Treasury Bonds): 2%

Future Contributions

I'm investing regularly in my 401k and will max it again this year. The current balance is low because I just got access to the 401k last month. I've already maxed my Roth for the year. Extra savings from paychecks are funneled into my taxable account on a monthly basis.

Iced Tea
Last edited by durazno on Tue Apr 22, 2014 8:48 pm, edited 1 time in total.
gvsucavie03
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Re: Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by gvsucavie03 »

Please post using the suggested format... we need to know what percentages you allocate to each account (not just current holdings), your tax rate, etc.

First glance - you have a ton of your portfolio in taxable (including International which isn't recommended on this forum). You might want to bump up future contributions to your current 401(k).
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BL
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Re: Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by BL »

I hope you are not selling in taxable to get to the exact decimal amount you want! Unless you go down to 75/25, it won't make much difference, anyway. Bands of + or - 5% are common here. How about gradually increasing your bonds in your 401k?

Are you filling up your tax-advantaged accounts before taxable? We don't have enough information, look at format in Asking Questions, at top of this forum.
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retiredjg
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Re: Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by retiredjg »

If your question is only about your holdings, they are fine.

If your question is about changing from about 81% stocks to 78% stocks, that's not really a change. Since the stock market fluctuates every day, they are essentially the same number. A portfolio should be an approximation - there is no reason to think in terms of 1 percentage point or decimals.

Things could be simplified a bit if you want. You could roll the old 401k into the Rollover IRA. You also don't need to hold so many funds in each account. But there is nothing wrong with leaving it just like it is if it suits you. :happy

I hope you are filling your tax-advantaged accounts (401k and IRA/Roth IRA) before putting money for retirement in your taxable account.
livesoft
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Re: Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by livesoft »

Everything looks great to me. Your idea to exchange from equities to bonds in your old 401(k) is fine as well.

There may be an advantage to having the two 401(k)s. First, they will not interfere with a backdoor Roth IRA if you happen to need to do Roth contributions that way. Second, if you make an exchange in one of the 401(k)s that you want to "undo" or "rethink", then you can use the other 401(k) to effect the change and avoid any frequent trading restrictions or early redemption fees.

Also, I found that slight increase in bond fund allocation made all the difference in the world to me, so a change for you going from 19% to 22% could also be meaningful to you.
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Buddtholomew
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Re: Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by Buddtholomew »

It is easy to understand why investors are so focused on precision as we are in fact dealing with dollars and cents. Thankfully, we are not required to manage our allocation with such rigor. Drop the decimal points from your analysis and internalize that a +/- 3% allocation shift is immaterial, especially if held in taxable. Age-10 in bonds is a guide only.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
mickens16
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Re: Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by mickens16 »

If you're that set on moving to 78/22, why don't you up your contribution amount into the Fidelity Intermediate Bond until you reach the allocation you desire.
Topic Author
durazno

Re: Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by durazno »

gvsucavie03 wrote:Please post using the suggested format... we need to know what percentages you allocate to each account (not just current holdings), your tax rate, etc.

First glance - you have a ton of your portfolio in taxable (including International which isn't recommended on this forum). You might want to bump up future contributions to your current 401(k).
I've updated my original post with rounded percentages and info on future contributions.

International stock funds are highly efficient. Why would you not recommend them in a taxable account? I've never heard such a thing on this forum.

Iced Tea (OP)
Topic Author
durazno

Re: Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by durazno »

mickens16 wrote:If you're that set on moving to 78/22, why don't you up your contribution amount into the Fidelity Intermediate Bond until you reach the allocation you desire.
Right, that's another way to do it. When it comes down to it, is it just a matter of personal preference? I mean, between making a conversion now to get to 78/22 immediately or gradually getting to 78/22 by investing new money in bonds. Given the limits on 401k contributions, it'll be a while before I reach 78/22 if I go the latter route. I suppose I could do a mix of the two (ie. convert 10k from stocks to bonds in my old 401k now and then contribute 100% to bonds in my current 401k moving forward until I reach my target AA).

Iced Tea
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retiredjg
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Re: Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by retiredjg »

I think it is a matter of personal preference.

If you want to be at 78/22 now, then make the adjustment in your current portfolio and continue on as planned. If you want to get there in the next _______ , just change your contribution to all bonds till it is where you want it. If you want something in between, do some of both. All of these are the right way to get it done.

From your posts, it sounds like you want to get it done now. I see nothing at all wrong with your plan or your current portfolio.
gvsucavie03
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Joined: Sat Feb 16, 2013 7:30 am

Re: Portfolio Check: 32 yrs old, going to rebalance to 78/22

Post by gvsucavie03 »

icedtea wrote:
gvsucavie03 wrote:Please post using the suggested format... we need to know what percentages you allocate to each account (not just current holdings), your tax rate, etc.

First glance - you have a ton of your portfolio in taxable (including International which isn't recommended on this forum). You might want to bump up future contributions to your current 401(k).
I've updated my original post with rounded percentages and info on future contributions.

International stock funds are highly efficient. Why would you not recommend them in a taxable account? I've never heard such a thing on this forum.

Iced Tea (OP)
Read it in "Boglehead's Guide to Investing." If it's efficient, then that's probably fine.
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