How to go about our messy portfolio?

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Topic Author
lkp007
Posts: 12
Joined: Tue Sep 16, 2014 6:36 pm

How to go about our messy portfolio?

Post by lkp007 »

New to boglehead. Been interviewing financial advisors and stumbled upon boglehead website more than a month ago. I have watched the boglehead 10 rules in investing however feeling pretty stuck as to how to proceed. Portfolio was overweight with bluechip stocks (90% stocks) until recently. The advisors made me realized that our household portfolio was highly risky in the event of a correction. Sold half of the portfolio and here are the current holdings:

OVERVIEW:
Emergency fund: 8 months, saving account; separate from taxable account below.
Debt: $500K remaining on 15 year mortgage at 3%. Market Value of home: $1.5M
Tax Filing Status: Married Filing Jointly
Marginal Tax Rate: 28% Federal, 9.3% State
State of Residency: California
Age: Him 43, Her 53 (No children)
Desired Asset Allocation: 70% Stocks / 30% bonds

RETIREMENT ASSETS:
Total retirement portfolio is just over$1.2M

Taxable Account -- 10% of Retirement Assets
Brokerage: 5% in 6 individual stocks
His ESPP & RSU: 5% in company stocks

Tax-Deferred Accounts (still too many even after the 1st attempt of consolidation) -- 90% of Retirement Assets
CASH - 52% (sold a bunch of stocks in August 2014)
EQUITIES
**13 US STOCKS - 38%
**4 MUTUAL FUNDS - GLOBAL 1% FOREIGN 4%
BOND FUNDS
**HIGH YIELD - 2%
**GLOBAL - 1%
**INTERMEDIATE - 2%
:oops: Yes, it is a mess from all the rollover from different companies and invested in a bunch of stocks

DETAILS OF TAX-DEFERRED ACCOUNTS
His SEP IRA - 25% of Retirement Assets
**6 US stocks - 33%
**MFS GLOBAL EQUITY FD CL A - 2%
**WELLS FARGO ADVTG CORE BOND FD CL A - 2%
**OPPENHEIMER INTL GRWTH CL A - 7%
**Cash - 55%

His IRA - 23% of Retirement Assets
**6 US Stocks - 34%
**MFS GLOBAL EQUITY FD CL A - 2.5%
**OPPENHEIMER DEVELPG MKT CL A - 15%
**PUTNAM GLOBAL INCOME TRUST-A - 4%
**PUTNAM HIGH YIELD TRUST A - 7.5%
**Cash - 37%

Her IRA - 48% of Retirement Assets
**5 US Stocks - 30%
**Cash 70%

Her SEP IRA - 3% of Retirement Assets
**2 US Stocks - 100%

Her Roth IRA - 1% of Retirement Assets
**1 US Stocks - 100%

He has a company 401K with a small amount in it and she will be setting up an individual 401K plan this year with Vanguard to maximize contribution and tax deduction.

:shock: My head is spinning! My questions are the following:
1. How to re-invest the $600K cash in all these different accounts? Do we invest the whole lump sum or dollar cost averaging?
2. Should I hold onto some cash and take advantage of correction to invest the appropriate index fund?
3. Since cash is in several accounts what is the best way to go about the asset allocation? Should I allocate on the account basis or putting different asset category in certain accounts as long as they add up the target asset allocation.
4. What else to do with the rest of the portfolio beside cash? Should I sell these first and then tackle the whole portfolio?

I read about the bucket approach. Seem simple but I couldn't figure out how to get started with questions above playing in my head constantly. Any help (with some clear steps) will be much appreciated.
red5
Posts: 798
Joined: Sun Apr 01, 2012 4:42 pm

Re: How to go about our messy portfolio?

Post by red5 »

Okay this is what I would personally do (I actually did do this a few years ago). There are many smarter investors on here who will give you some good advice too.

- Make sure you are comfortable with a 70% / 30% allocation (imagine your portfolio going down to $800,000 in a correction/crash, can you handle that?)

- Consider a very simple 3-fund portfolio, such as 50% Total US Stock / 20% Total International / 30% Total Bond which will arguably out perform the most complex of portfolios. For what it's worth I use VTSAX (Total US Stock), VTIAX (Total International) and a mix of VFICX and VBMFX (Intermediate grade and Total Bond).

- Consider whether your current investment company offers low cost index funds as seen in the step above or whether you have access to purchase outside index funds without any fees (I use Vanguard). Perhaps a transfer to a low cost brokerage firm might be required?

- Sell your current holdings (but perhaps not your taxable holdings if they will trigger undesirable capital gains) and immediately purchase low cost index funds (if you can do this in the same day that would be ideal since your money would not be leaving the market). If not you can utilize your cash. For example, in your SEP IRA you could sell your 6 US based stocks, your global equity fund, and your international growth fund and at the same time use the equivalent amount of cash to purchase your settled upon index funds (if you decide to go that route). Once your mutual funds have cleared you would have about the same amount of cash again.

- I would do this until I have ridded myself of any high cost actively managed mutual funds.

1. As for your cash that is a rather personal decision. You could just lump sum it back into your funds or dollar cost average it into the market. There are many debates on that issue here. I believe you just received that cash from selling prior positions last month. If you were just to put it back in the market now you would basically be just as invested as you were last month.

2. I don't keep cash, I keep everything invested all the time. I bet some/many keep cash though.

3. I don't create the same allocation in each of my own accounts. For example, one account has only a single bond fund. Another account only has two different funds. My third account has a few different funds. However it is when all three accounts are considered together that my asset allocation is achieved.

For example:
-in Her IRA you could put your entire 30% bond holdings ($360,000 worth) which would mean none of your other accounts would have any bond holdings.
-you could put your entire 20% (if you like that percentage, which would come to $240,000) international holdings into the His IRA account
-the rest of your accounts could be filled with a Total US Stock fund.

4. See above. I'd personally just try to do everything as quick as possible and limit the amount of time that money is out of the market (and in cash) but that is me. In fact I did this a few years ago (went from active funds to index funds). It was easy for me.

lkp007 wrote:
:shock: My head is spinning! My questions are the following:
1. How to re-invest the $600K cash in all these different accounts? Do we invest the whole lump sum or dollar cost averaging?
2. Should I hold onto some cash and take advantage of correction to invest the appropriate index fund?
3. Since cash is in several accounts what is the best way to go about the asset allocation? Should I allocate on the account basis or putting different asset category in certain accounts as long as they add up the target asset allocation.
4. What else to do with the rest of the portfolio beside cash? Should I sell these first and then tackle the whole portfolio?

I read about the bucket approach. Seem simple but I couldn't figure out how to get started with questions above playing in my head constantly. Any help (with some clear steps) will be much appreciated.
Topic Author
lkp007
Posts: 12
Joined: Tue Sep 16, 2014 6:36 pm

Re: How to go about our messy portfolio?

Post by lkp007 »

Thank you, red5. I really appreciate you took the time to provide some clear steps.
User avatar
Duckie
Posts: 9777
Joined: Thu Mar 08, 2007 1:55 pm

Re: How to go about our messy portfolio?

Post by Duckie »

lpk007, I have some questions/comments:
  1. Is His SEP IRA from a current or former job?
    .
  2. Is Her SEP IRA from a current or former job?
    .
  3. Are you anywhere near the income limits for direct contributions to Roth IRAs?
    .
  4. Will his current 401k (I believe it's current) allow incoming rollovers from IRAs?
    .
  5. Although I am a big fan of Vanguard their solo-401k rules are limiting; they don't allow incoming rollovers from IRAs and don't allow Admiral shares. She may be better off opening up the solo-401k at Fidelity.
Topic Author
lkp007
Posts: 12
Joined: Tue Sep 16, 2014 6:36 pm

Re: How to go about our messy portfolio?

Post by lkp007 »

Duckie,

1. His SEP IRA was from a former job when he was on a 1099.
2. Her SEP IRA is from her current job on a 1099.
3. We are not eligible to contribute to Roth IRA however he currently contributes to his employer 401K IRA.
4. Good question. We will have to find out if his current 401K allow rollover from IRAs. What can we achieve by rolling over the IRA to 401K instead of keeping in a discount brokerage?
5. Good to know. I was about to open a Vanguard solo 401K so I should look into the Fidelity option since I am thinking about investing in the Admiral shares. Does Fidelity has the option to purchase the Vanguard Admiral shares?
Duckie wrote:lpk007, I have some questions/comments:
  1. Is His SEP IRA from a current or former job?
    .
  2. Is Her SEP IRA from a current or former job?
    .
  3. Are you anywhere near the income limits for direct contributions to Roth IRAs?
    .
  4. Will his current 401k (I believe it's current) allow incoming rollovers from IRAs?
    .
  5. Although I am a big fan of Vanguard their solo-401k rules are limiting; they don't allow incoming rollovers from IRAs and don't allow Admiral shares. She may be better off opening up the solo-401k at Fidelity.
User avatar
celia
Posts: 16774
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: How to go about our messy portfolio?

Post by celia »

Wow, my head is spinning too.

The good news is you have lots in assets and anything sold in the tax-deferred accounts does not have tax consequences (until pulled out of tax deferred accounts). The bad news is that you are in for a very big surprise when you turn age 70 and have to take Required Minimum Distributions. I suggest you not do anything until you have a final plan in mind, even if you will be implementing it in phases.

There may be several topics here that various people in this forum can help you with depending on further information:

6. Are either of you starting retirement within the next year or two (you mentioned the bucket theory which involves a way to hold your assets while spending some of them down in retirement)?

7. Will either of you have a pension? If so, at your expected retirement ages, what percent of your expenses do you think the pension(s) will cover?

8. Are either of you eligible for Social Security? If so, have you decided at what age you each will start collecting and what percent of your expenses do you think it will cover?

9. Do you have plans to stay in California in retirement or would you be moving to another state with lower/no state income taxes?

These questions are meant to figure out if you need to use your tax-deferred assets in retirement for living expenses or not. Many people here consider a pension and Social Security like an annuity or bond that pays out for the rest of your life. If you have known income, with cost-of-living increases built in, you won't need to pull as much out of your accounts. We will also try to determine if it makes sense for you to convert some of your IRAs to Roths.

Obviously, you have put a lot of effort into collating your data so far. I admire the effort it took to do it. But if you have not yet calculated the following, you should estimate:
A. your living expenses in retirement (don't use a rule-of-thumb, such as 80% of previous wages, as some people increase their expenses when retired (travel, new hobbies, health care) while others decrease their expenses (time with family, volunteer work, no commuting expenses or work clothing needed). Calculate it in today's dollars. To make it easier, we can assume the expenses, pensions, and social security will all be inflated together, with investments probably going up more.
B. pension amounts (does it keep up with inflation?)
C. Social Security benefits (we will tell you the benefits of waiting till age 70 if you expect a long life)

If you have been collecting most of the info by yourself so far, why not have your spouse help by collecting some of the data. You really can't plan well for a retirement if you both aren't on the same page (eg, one expects to spend more in retirement and one expects to spend less).
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Duckie
Posts: 9777
Joined: Thu Mar 08, 2007 1:55 pm

Re: How to go about our messy portfolio?

Post by Duckie »

lkp007 wrote:1. His SEP IRA was from a former job when he was on a 1099.
That means he can combine it with His TIRA for one less account or possibly roll both to His current 401k.
2. Her SEP IRA is from her current job on a 1099.
So she is self-employed, using the SEP IRA and will stop contributing to the SEP and start the solo 401k.
3. We are not eligible to contribute to Roth IRA however he currently contributes to his employer 401K IRA.
You are allowed to contribute via the 
Backdoor Roth IRA
 method. However, because of the pro-rata rule your non-Roth IRAs get in the way.
4. Good question. We will have to find out if his current 401K allow rollover from IRAs. What can we achieve by rolling over the IRA to 401K instead of keeping in a discount brokerage?
If he rolls His TIRA and His old SEP IRA into His current 401k he will be able to contribute to a Roth IRA using the above mentioned backdoor method. This depends not only on whether the current 401k will allow incoming rollovers but what the options and expense ratios are in the plan. If she rolls Her TIRA and Her SEP IRA into Her new solo 401k she also will be able to add to her Roth IRA.
5. Good to know. I was about to open a Vanguard solo 401K so I should look into the Fidelity option since I am thinking about investing in the Admiral shares. Does Fidelity has the option to purchase the Vanguard Admiral shares?
I'm not sure if she can buy the Admiral shares of the fund and if she can she'll be paying a transaction fee, but she could buy the ETF version for less. However, Fidelity has excellent, low cost Spartan funds with no transactions fees. She could buy the following funds which are equivalent to VTSAX, VTIAX, and VBTLX:
  • (FSTVX) Spartan Total Market Index Fund Advantage Class (0.05%)
    (FSGDX) Spartan Global ex U.S. Index Fund Advantage Class (0.18%)
    (FSITX) Spartan U.S. Bond Index Fund Advantage Class (0.10%)
Please list all the options in His current 401k (names, ticker symbols, expense ratios) so we can figure out if rolling his IRAs to the 401k makes sense.
Topic Author
lkp007
Posts: 12
Joined: Tue Sep 16, 2014 6:36 pm

Re: How to go about our messy portfolio?

Post by lkp007 »

Duckie,

Thanks very much for your response and below are my comments in RED.
Duckie wrote:
lkp007 wrote:1. His SEP IRA was from a former job when he was on a 1099.
That means he can combine it with His TIRA for one less account or possibly roll both to His current 401k.
Do you know if there is any tax implication for merging the SEP and TIRA? His SEP IRA was actually from his consulting days with an S or C corp. What happen if he goes back to consulting in the future? Can he open another SEP IRA account?
2. Her SEP IRA is from her current job on a 1099.
So she is self-employed, using the SEP IRA and will stop contributing to the SEP and start the solo 401k.
Correct and also with the Roth 401K
3. We are not eligible to contribute to Roth IRA however he currently contributes to his employer 401K IRA.
You are allowed to contribute via the 
Backdoor Roth IRA
 method. However, because of the pro-rata rule your non-Roth IRAs get in the way.
This is way over our heads right now so I think we will stick with his employer's Roth 401K and her solo Roth 401K
4. Good question. We will have to find out if his current 401K allow rollover from IRAs. What can we achieve by rolling over the IRA to 401K instead of keeping in a discount brokerage?
If he rolls His TIRA and His old SEP IRA into His current 401k he will be able to contribute to a Roth IRA using the above mentioned backdoor method. This depends not only on whether the current 401k will allow incoming rollovers but what the options and expense ratios are in the plan. If she rolls Her TIRA and Her SEP IRA into Her new solo 401k she also will be able to add to her Roth IRA.
I read about about the backdoor method however I think we will stick with his employer Roth 401K and her solo Roth 401K
5. Good to know. I was about to open a Vanguard solo 401K so I should look into the Fidelity option since I am thinking about investing in the Admiral shares. Does Fidelity has the option to purchase the Vanguard Admiral shares?
I'm not sure if she can buy the Admiral shares of the fund and if she can she'll be paying a transaction fee, but she could buy the ETF version for less. However, Fidelity has excellent, low cost Spartan funds with no transactions fees. She could buy the following funds which are equivalent to VTSAX, VTIAX, and VBTLX:
  • (FSTVX) Spartan Total Market Index Fund Advantage Class (0.05%)
    (FSGDX) Spartan Global ex U.S. Index Fund Advantage Class (0.18%)
    (FSITX) Spartan U.S. Bond Index Fund Advantage Class (0.10%)
Please list all the options in His current 401k (names, ticker symbols, expense ratios) so we can figure out if rolling his IRAs to the 401k makes sense.
Once we figure out if rolling over his IRA into his 401K is an option then we will look into the investment options otherwise there is no point.
yukon50
Posts: 334
Joined: Thu Jan 13, 2011 7:23 pm

Re: How to go about our messy portfolio?

Post by yukon50 »

how long have you had the cash sitting in cash?
Topic Author
lkp007
Posts: 12
Joined: Tue Sep 16, 2014 6:36 pm

Re: How to go about our messy portfolio?

Post by lkp007 »

Yukon50, Cash sitting around since late August 2014. The intention is to cash out of individual stocks to buy Vanguard Funds and got a little overwhelm as to how to proceed. Since reading red5 reply I am able to take some concrete steps to start the process of investing the cash back into the market. Obviously the market has perform slightly better since late August but I determine to simplify our portfolio and reduce risk in the case of a correction. I just need some simple steps to get back into the market and continue consolidating the portfolio.
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Duckie
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Re: How to go about our messy portfolio?

Post by Duckie »

lkp007 wrote:Do you know if there is any tax implication for merging the SEP and TIRA? His SEP IRA was actually from his consulting days with an S or C corp. What happen if he goes back to consulting in the future? Can he open another SEP IRA account?
There are no tax implications. If he goes back to consulting he can open another SEP IRA or a solo 401k.
This is way over our heads right now so I think we will stick with his employer's Roth 401K and her solo Roth 401K
Just be aware that Vanguard does have Roth solo 401k plans but does not allow incoming rollovers from IRAs and Fidelity does not have Roth solo 401k plans but does allow incoming rollovers from IRAs. I'm mentioning this because you may want to use the backdoor Roth IRA method in the future and having a solo 401k at Vanguard will be an impediment.
Lafder
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Location: East of the Rio Grande

Re: How to go about our messy portfolio?

Post by Lafder »

Welcome!

I agree your accounts/funds are WAY too complicated. I have enough trouble calculating and rebalancing the about 6 funds we have in our 6 accounts: Ours/His Rollover IRA/His SEP/His 401k/Her Rollover IRA/Her SEP.

What is your end goal? DO you want to try to have 1 fund portfolios such as a lifestrategy fund, or target date retirement fund? Or would you enjoy 3-6 (or more) index funds that you would have to be a bit more involved in managing and rebalancing every year or so?

Which of these accounts have access to ANY Vanguard fund? Which of these accounts has limited choices and what are the choices?

Have you seen this as a description of simple portfolios that do not take much attention? http://www.bogleheads.org/wiki/Lazy_portfolios

You say you want 70/30, that is aggressive for your ages. DO you have guaranteed income or other sources of $ so you can handle a big drop in your portfolio value? There is a general rec of age in bonds. (I think that is too conservative and am at 70/30 myself, we are 46 and 50 and have steady good income). Remember a 50% drop in account value requires a 100% gain to catch up. Be sure you are aware of the possible drop in account value with so much in stock.

Unless you have a sentimental reason to hold your individual stock holdings, I would sell them all! I would rather have a diverse index fund than an individual stock. Especially since they are in retirement accounts and there will not be capital gains tax due! ((The only reason we have not sold our 2 remaining individual stocks is they are in a nontaxable account and I don't want to pay the capital gains tax that will be due if we move them))

The asset allocation should be across all accounts. So it is possible to have one account be all bonds , another be US stocks/bonds, another be international and US stocks. You do not need to repeat your funds in each account. The simpler (less funds) the better and easier to rebalance.

It may be easier to rollover any accounts you can to simplify, but be sure you understand tax implications as others have mentioned.

As far as what to do with 600k, I would look at ALL of your accounts and find a way to simplify. People here can make more suggestions if you let us know the options in each account.

Once you decide your overall asset allocation, I would get all of the accounts there. And I would either put all of the 600k in too or plan how to do it over the next 6 months. No reason to wait though, it was in the market til less than a month ago!

If the market drops before you put the cash back in, you will feel brilliant and have a buying opportunity! However since you can not know when that will happen, find an asset allocation and account simplification you can sleep well at night with, and go ahead and fix everything at once. (Or make a plan of how much to invest monthly and set it to automatic).

It will be a huge relief to get it all simplified!
Lafder
Topic Author
lkp007
Posts: 12
Joined: Tue Sep 16, 2014 6:36 pm

Re: How to go about our messy portfolio?

Post by lkp007 »

Duckie wrote:
lkp007 wrote:Do you know if there is any tax implication for merging the SEP and TIRA? His SEP IRA was actually from his consulting days with an S or C corp. What happen if he goes back to consulting in the future? Can he open another SEP IRA account?
There are no tax implications. If he goes back to consulting he can open another SEP IRA or a solo 401k.
This will definitely help with the consolidation
This is way over our heads right now so I think we will stick with his employer's Roth 401K and her solo Roth 401K
Just be aware that Vanguard does have Roth solo 401k plans but does not allow incoming rollovers from IRAs and Fidelity does not have Roth solo 401k plans but does allow incoming rollovers from IRAs. I'm mentioning this because you may want to use the backdoor Roth IRA method in the future and having a solo 401k at Vanguard will be an impediment.
Is there any advantage using backdoor Roth IRA when Roth 401K is available for both of us?
Topic Author
lkp007
Posts: 12
Joined: Tue Sep 16, 2014 6:36 pm

Re: How to go about our messy portfolio?

Post by lkp007 »

Lafder wrote:Welcome!
Than you, Lafder.

I agree your accounts/funds are WAY too complicated. I have enough trouble calculating and rebalancing the about 6 funds we have in our 6 accounts: Ours/His Rollover IRA/His SEP/His 401k/Her Rollover IRA/Her SEP.


What is your end goal? DO you want to try to have 1 fund portfolios such as a lifestrategy fund, or target date retirement fund? Or would you enjoy 3-6 (or more) index funds that you would have to be a bit more involved in managing and rebalancing every year or so?
The goal is to have 3-6 funds and I think I will enjoy managing them.

Which of these accounts have access to ANY Vanguard fund? Which of these accounts has limited choices and what are the choices?

His SEP IRA
His IRA
Her SEP IRA
Her IRA
Our Brokerage
About 80% of our portfolio is in Scottrade and 15% with Wells Fargo where we have a PMA account & get 100 free trades every year. Both have access to Vanguard funds


Have you seen this as a description of simple portfolios that do not take much attention? http://www.bogleheads.org/wiki/Lazy_portfolios
Yes

You say you want 70/30, that is aggressive for your ages. DO you have guaranteed income or other sources of $ so you can handle a big drop in your portfolio value? There is a general rec of age in bonds. (I think that is too conservative and am at 70/30 myself, we are 46 and 50 and have steady good income). Remember a 50% drop in account value requires a 100% gain to catch up. Be sure you are aware of the possible drop in account value with so much in stock.
We believe we can handle the drop and have no intention to retire in the next 10-15 years.

Unless you have a sentimental reason to hold your individual stock holdings, I would sell them all! I would rather have a diverse index fund than an individual stock. Especially since they are in retirement accounts and there will not be capital gains tax due! ((The only reason we have not sold our 2 remaining individual stocks is they are in a nontaxable account and I don't want to pay the capital gains tax that will be due if we move them))

The asset allocation should be across all accounts. So it is possible to have one account be all bonds , another be US stocks/bonds, another be international and US stocks. You do not need to repeat your funds in each account. The simpler (less funds) the better and easier to rebalance.
I agree and have started planning to do just this.

It may be easier to rollover any accounts you can to simplify, but be sure you understand tax implications as others have mentioned.

As far as what to do with 600k, I would look at ALL of your accounts and find a way to simplify. People here can make more suggestions if you let us know the options in each account.

Once you decide your overall asset allocation, I would get all of the accounts there. And I would either put all of the 600k in too or plan how to do it over the next 6 months. No reason to wait though, it was in the market til less than a month ago!
I think we have decided on 70/30 and just deciding investing back all at once or phase it.

If the market drops before you put the cash back in, you will feel brilliant and have a buying opportunity! However since you can not know when that will happen, find an asset allocation and account simplification you can sleep well at night with, and go ahead and fix everything at once. (Or make a plan of how much to invest monthly and set it to automatic).

It will be a huge relief to get it all simplified!
Lafder
Lafder
Posts: 4127
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: How to go about our messy portfolio?

Post by Lafder »

For what it is worth, these are the funds we have, spread between Ours, His, Hers. All bonds are in retirement accounts: I have worked towards simplifying what we used to have over the past 6 years.

These 4 Vanguard funds are the bulk (75%) of our savings: (Just the top 3 could be sufficient for all of your portfolio!!!!!) We can use any available Vanguard funds.
VTSAX Vanguard Total Stock Market Index Fund Admiral Shares
VBTLX Vanguard Total Bond Market Index Fund Admiral Shares
VTIAX Vanguard Total International Stock Index Fund Admiral Shares
VSMAX Vanguard Small-Cap Index Fund Admiral Shares

In His Fidelity account, about 25% of our holdings, we have (limited to employer's offerings):
Fidelity® U.S. Equity Index Commingled Pool Class 2 (US stocks)
SSGA U.S. Bond Index Securities Lending Series Fund Class XII (US bonds)
BTC ACWI XUS Index Fund (All country world index stock fund)

For full disclosure,the following are a small percent of total, less than 10% of our total, and we can move it anywhere.
On a whim I added 20k to this to have international bonds, not sure I am glad I did: VTABX Vanguard Total International Bond Index Fund Admiral Shares
We also have a small account set aside for a short term goal I have in VSMGX Vanguard LifeStrategy Moderate Growth Fund
We still have shares in 2 individual stocks I have resisted selling due to low cost basis.

If you could pick the 3-6 funds you want to end up with, others can help suggest how to get there with what you have. It should not be too hard. I think the hardest part is choosing what you want to end up with. You pick and give percents and greater minds than mine can help you sort out what needs to be done to make it happen.

Also, if you still want 70/30 which sounds fine to me, what % stocks do you want international?

You are getting closer!
lafder
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Duckie
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Re: How to go about our messy portfolio?

Post by Duckie »

lkp007 wrote:Is there any advantage using backdoor Roth IRA when Roth 401K is available for both of us?
Contributing to a Roth IRA via the backdoor allows you to shelter more income. If you can afford the extra contributions, then doing so is a good idea. Whether you choose to backdoor or not at least move your IRAs to a better custodian. Your listed funds are expensive. You could do a lot better.
Topic Author
lkp007
Posts: 12
Joined: Tue Sep 16, 2014 6:36 pm

Re: How to go about our messy portfolio?

Post by lkp007 »

Lafder wrote:For what it is worth, these are the funds we have, spread between Ours, His, Hers. All bonds are in retirement accounts: I have worked towards simplifying what we used to have over the past 6 years.

These 4 Vanguard funds are the bulk (75%) of our savings: (Just the top 3 could be sufficient for all of your portfolio!!!!!) We can use any available Vanguard funds.
VTSAX Vanguard Total Stock Market Index Fund Admiral Shares
VBTLX Vanguard Total Bond Market Index Fund Admiral Shares
VTIAX Vanguard Total International Stock Index Fund Admiral Shares
VSMAX Vanguard Small-Cap Index Fund Admiral Shares
Yes, I took a small step last Thu and took a small position in VTSAX and will be continue to do so with the rest of the funds above in the coming weeks.

In His Fidelity account, about 25% of our holdings, we have (limited to employer's offerings):
Fidelity® U.S. Equity Index Commingled Pool Class 2 (US stocks)
SSGA U.S. Bond Index Securities Lending Series Fund Class XII (US bonds)
BTC ACWI XUS Index Fund (All country world index stock fund)

For full disclosure,the following are a small percent of total, less than 10% of our total, and we can move it anywhere.
On a whim I added 20k to this to have international bonds, not sure I am glad I did: VTABX Vanguard Total International Bond Index Fund Admiral Shares
We also have a small account set aside for a short term goal I have in VSMGX Vanguard LifeStrategy Moderate Growth Fund
We still have shares in 2 individual stocks I have resisted selling due to low cost basis.

If you could pick the 3-6 funds you want to end up with, others can help suggest how to get there with what you have. It should not be too hard. I think the hardest part is choosing what you want to end up with. You pick and give percents and greater minds than mine can help you sort out what needs to be done to make it happen.

Also, if you still want 70/30 which sounds fine to me, what % stocks do you want international?
We decided on 20% on international so it will be 50%/20% US/International.

You are getting closer!
This forum has helped me by giving some clarity on the next steps so now I don't feel so overwhelm with the tasks on hand.
Thank you, all.

lafder
Lafder
Posts: 4127
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: How to go about our messy portfolio?

Post by Lafder »

Once headed in the right direction it gets easier!!

It gets confusing when people talk about % international, it is usually, from what I have figured out, described as % of stocks or equity. Not percent of total.

So your 20% international of 70% stocks = 28.57% which is spot on between Vanguard's rec of 20-40% of stock portfolio being held in international!

I just wanted to be clear since I have gotten caught in this a few times and see people posting international both % total portfolio and % stock.

It is easiest for me to think of it as you have: 50 % us stock/ 20% international stock/ 30% bond.

But it is often reported as 70/30 with 29% international stocks.

Hopefully this will help as you see discrepancies in how people describe % international,
lafder
Topic Author
lkp007
Posts: 12
Joined: Tue Sep 16, 2014 6:36 pm

Re: How to go about our messy portfolio?

Post by lkp007 »

After much thoughts here is the direction that I thought might work in simplifying our portfolio. Your comments are appreciated.

I should have limited to Fidelity and Wells Fargo however I already started the process with rolling over to Vanguard. The reason for Fidelity is because I have a Roth IRA with them and it allows rollover of my SEP IRA into my yet to be established solo 401K.

Summary of allocation of portfolio as follow when all is said and done:
Total portfolio: $1.23M
49% US Stock (consists of 1 Vanguard & 1 Fidelity mututal funds, 9 US individual stocks (down from 20 US Stocks and 6 loaded mutual funds)
20% International (1 Vanguard mutual fund)
23% Bond (2 Vanguard bond funds)
8% Bond & Dividend (1 Vanguard mutual fund)

VANGUARD:
1. His SEP IRA & IRA in Scottrade rollover to Vanguard IRA $530K allocated as follows:
a. Vanguard Total International (VTIAX) $240K = 20% of total portfolio
b. Vanguard Intermediate Bond (VFICX) $140K = 11% of total portfolio
c. Vanguard Total Bond (VBMFX) $150K= 12% of total portfolio
2. Her IRA $360K already rollover to Vanguard, all allocated to Vanguard Total Stock (VTSAX) = 30% of total portfolio.

FIDELITY: This will continue to be mainly for Total Stock mutual fund in the future.
3. Her SEP IRA $30K rollover to a yet to be established solo 401K in Fidelity Total Stock = 2%.
4. Her Roth IRA $10K in Fidelity in Fidelity Total Stock = 1%


WELLS FARGO Primary bank account and has PMA privileges
5. Her IRA $165K
a. Keep her BRKB $68K = 5.5% (count towards Stock portfolio)
b. Vanguard Bond & Dividend (VWINX) $97K = 8%
6. Taxable Trust Brokerage $70K in US Stock = 5.5% (Will liquidate when it makes sense because of capital gains, for now count towards Stock portfolio)

ETRADE
7. HIS ESPP & RSU Employer's Stock $65K = 5%

------------------------------------------
8. HIS 401K ($15K) allocated between 60% US Stocks, 20% International Stocks, 20% Bond. This will be rebalanced based on 80/20 independently of the rest of the portfolio (which will rebalance based on 70/30). Since this is independent and therefore not added to the total portfolio for allocation purposes.
n00b_to_investing
Posts: 67
Joined: Mon Feb 11, 2013 12:37 pm

Re: How to go about our messy portfolio?

Post by n00b_to_investing »

apologies if its a dumb question but wonder what role does "b. Vanguard Bond & Dividend (VWINX) $97K = 8%" play ? would you move the money eventually back to your index funds
Topic Author
lkp007
Posts: 12
Joined: Tue Sep 16, 2014 6:36 pm

Re: How to go about our messy portfolio?

Post by lkp007 »

n00b_to_investing wrote:apologies if its a dumb question but wonder what role does "b. Vanguard Bond & Dividend (VWINX) $97K = 8%" play ? would you move the money eventually back to your index funds
Good question, n00b_to_investing. Until a month ago I had a portfolio with 90% US stocks. Instead of going straight 70/30 stock/bond I have a stake of something in between. Not sure this is a good idea either. Should I just allocate this to bonds?
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