Rebalancing my Portfolio

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Topic Author
NotJen
Posts: 16
Joined: Thu Feb 09, 2012 2:07 pm

Rebalancing my Portfolio

Post by NotJen »

I'm finally getting it together to rebalance my retirement accounts to the allocations I want! I have an old SEP IRA and Roth IRA at Edward Jones. I am not contributing to either anymore (since my company switched to a 401k), and I plan to leave them as is – I hate that I paid high fees to invest, so might as well leave them there. I’m planning to sell my current Roth funds (at Vanguard) to buy completely new ones, since I don’t know what I had in mind when I picked those two (well, I chose STAR because it had a small initial investment, I believe). I have enough invested there to get Admiral Shares for 2 funds.


Emergency Funds: Plenty

Debt: Mortgage $110k, 4.0%, 15 yrs

Tax Filing Status: Single

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

Age: 32

Desired Asset Allocation: 90 Stocks/10 Bonds

Intl Allocation: 30% of Stocks


Current Portfolio (100k range)

Taxable: None

Roth at Vanguard
13.0% Vanguard Growth Index Fund (VIGRX, 0.26)
9.0% Vanguard STAR Fund (VGSTX, 0.34)

401k
9.7% Vanguard Developed Markets Index (VDMIX, 0.22)
8.0% Vanguard Index 500 (VFINX, 0.17)
8.2% Vanguard Mid Cap Index (VIMSX, 0.26)
1.7% Vanguard REIT Index (VGSIX, 0.26)
3.3% Vanguard Small Cap Index (NAESX, 0.31)

Roth and SEP IRA at Edward Jones
41.3% Domestic
3.0% International
2.8% Bonds

Total of All Accounts Together: 100%


New Annual Contributions
$13,800 401k (estimate, depends on company contribution)
$ 5,000 Roth at Vanguard

Funds Available in Roth at Vanguard
All Vanguard funds

Funds Available in 401k *Recently Updated*
Vanguard Prime Money Market
MetLife SV 25053 CL III 0
Rydex Inverse S&P 500 Strategy Inv (1.44)
Vanguard Emerging Mkts Stock Idx Sg (0.22)
American Century Balanced Inv (0.91)
Fidelity Select Gold (0.9)
Vanguard Developed Mkts Index (0.22)
Fidelity Select Health Care (0.82)
Vanguard High-Yield Corporate (0.25)
Vanguard Index 500 (0.17)
Vanguard PRIMECAP (0.45)
Vanguard Morgan Growth (0.44)
Vanguard Windsor II (0.35)
Vanguard Long-Term Bond Index (0.22)
Vanguard Mid Cap Index (0.26)
Fidelity Select Energy (0.85)
Vanguard REIT Index (0.26)
Vanguard Short-Term Inv-Grade (0.22)
DFA Inflation-Protected Securities I, DIPSX (0.13)
Vanguard Small Cap Index (0.31)
Fidelity Select Technology (0.85)
American Funds Cap Inc Builder R4 (0.67)


Questions:

1. My plan is to put Bonds and International in my Roth at Vanguard. I was going to buy the Total Bond Market Index (VBTLX, 0.11%) for a total of 8.5% of my portfolio. Is the total bond index the way to go? For international, either the FTSE All World Index (VFWAX, 0.18%) or Total International Stock Index (VTIAX, 0.20%) for a total of 13.5% of my portfolio. Do you guys have a preference? They seem much the same, and would probably just default to the (slightly lower) FTSE index.

2. For future allocations, I plan to add, the following:
Roth - 10% Bonds, 17% International
401k - 10% International, 63% Domestic
For Domestic, I will probably increase my allocations to REIT and Small Cap, because I am heavy in Large Cap. For the International portion of the 401k, should I continue adding to just Developed Markets, or buy Emerging Markets as well? I will have some emerging market exposure in the Roth.
Last edited by NotJen on Thu Feb 23, 2012 8:18 am, edited 2 times in total.
User avatar
tyrion
Posts: 1423
Joined: Fri Feb 08, 2008 2:33 pm

Re: Rebalancing my Portfolio

Post by tyrion »

Good thing your name's not Jen. For her, I would suggest 100% of the 401k in this fund: Rydex Inverse S&P 500 Strategy Inv (1.44) Since you're not Jen, let's try something else.
I have an old SEP IRA and Roth IRA at Edward Jones. I am not contributing to either anymore (since my company switched to a 401k), and I plan to leave them as is – I hate that I paid high fees to invest, so might as well leave them there.
Front loads paid are sunken costs. You should compare the expense ratios of the existing funds vs the Vanguard counterparts. Also I assume they're not index funds? It sucks that you got taken, but leaving the money there doesn't make a whole lot of sense. I'm guessing you will continue to pay more at Edward Jones on a yearly basis than you would at VG. Move on, pay the $100 fee or whatever to roll it over. Then you will have better options, easier to control, easier to rebalance, etc.
1. My plan is to put Bonds and International in my Roth at Vanguard. I was going to buy the Total Bond Market Index (VBTLX, 0.11%) for a total of 8.5% of my portfolio. Is the total bond index the way to go? For international, either the FTSE All World Index (VFWAX, 0.18%) or Total International Stock Index (VTIAX, 0.20%) for a total of 13.5% of my portfolio. Do you guys have a preference? They seem much the same, and would probably just default to the (slightly lower) FTSE index.

2. For future allocations, I plan to add, the following:
Roth - 10% Bonds, 17% International
401k - 10% International, 63% Domestic
For Domestic, I will probably increase my allocations to REIT and Small Cap, because I am heavy in Large Cap. For the International portion of the 401k, should I continue adding to just Developed Markets, or buy Emerging Markets as well? I will have some emerging market exposure in the Roth.
Otherwise your plan looks fine. I would probably use the ST Investment Grade (.22 ER) fund in the 401k for bonds. Domestic in the 401k (combination of 500 index, midcap index, small cap index - the wiki has articles about how to replicate total stock market with those indexes), international in the Roth IRA. But really those are small details and your way of doing it is totally okay.

If you can increase your 401k contribution a little bit you can add some international to the 401k, which will allow you to rebalance using just that account.
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: Rebalancing my Portfolio

Post by YDNAL »

NotJen wrote:I'm finally getting it together to rebalance my retirement accounts to the allocations I want! I have an old SEP IRA and Roth IRA at Edward Jones. I am not contributing to either anymore (since my company switched to a 401k), and I plan to leave them as is – I hate that I paid high fees to invest, so might as well leave them there.
Welcome, NotJen!

What you paid in loads to EJ is gone and you are not going to recover it!

To pay high expense ratios for lousy options with EJ going forward, year-after-year, is absurd.
Age: 32

Desired Asset Allocation: 90 Stocks/10 Bonds

Intl Allocation: 30% of Stocks

Current Portfolio (100k range)

New Annual Contributions
$13,800 401k (estimate, depends on company contribution)
$ 5,000 Roth at Vanguard
You have good options in the 401K to build a portfolio — together with Roth IRA — that accepts new money in a way to keep the desired allocation mostly in balance.

Roth at Vanguard
12% Vanguard Total Bond VTBLX
10% Vanguard Extended VEXAX (to complete VFINX in 401K)
New money: $5K (26%) split evenly

401k
11% Vanguard Index 500 (VFINX, 0.17)
10% Vanguard Developed Mkts Index (0.22)
10% Vanguard Emerging Mkts Stock Idx Sg (0.22)
New money: $13.8K (74%) split evenly

Roth and SEP IRA at Vanguard
35% Vanguard Total Stock Market VTSAX
12% Vanguard Total International VTIAX
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
Topic Author
NotJen
Posts: 16
Joined: Thu Feb 09, 2012 2:07 pm

Re: Rebalancing my Portfolio

Post by NotJen »

Okay, I will re-examine the EdJ account and consider moving the Roth and rolling over the SEP. The 401k also has fees that I need to understand first.
It sucks that you got taken
I didn't get taken. I knew what I was getting into, and that I would do better in the future.
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: Rebalancing my Portfolio

Post by YDNAL »

NotJen wrote:Okay, I will re-examine the EdJ account and consider moving the Roth and rolling over the SEP. The 401k also has fees that I need to understand first.
tyrion wrote:It sucks that you got taken
I didn't get taken. I knew what I was getting into, and that I would do better in the future.
NotJen, there should be little to "consider" about what EJ has to offer (not).

With regards the other quote, we all make mistakes and the best way to handle it is to learn and move on. That said, your last post is counterintuitive — focusing only on negatives and completely ignoring positive feedback without a single comment. :(
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
Topic Author
NotJen
Posts: 16
Joined: Thu Feb 09, 2012 2:07 pm

Re: Rebalancing my Portfolio

Post by NotJen »

My 401k fees were $265 last year. I pay $40 to EdJ.

I have been convinced to move my EdJ Roth to Vanguard. I was assuming I could only move my SEP to my 401k, but if I can move it to Vanguard, that might be the best plan...

YDNAL,
I still need to take the time to consider the positive recommendations! I really needed a kick in the pants to get rid of my old account, very grateful.
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: Rebalancing my Portfolio

Post by YDNAL »

NotJen wrote:YDNAL,
I still need to take the time to consider the positive recommendations! I really needed a kick in the pants to get rid of my old account, very grateful.
Time is on your side!
NotJen wrote:Age: 32

Desired Asset Allocation: 90 Stocks/10 Bonds

Intl Allocation: 30% of Stocks
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
Topic Author
NotJen
Posts: 16
Joined: Thu Feb 09, 2012 2:07 pm

Re: Rebalancing my Portfolio

Post by NotJen »

YDNAL,
By time, I mean a few days to research everything. I like your proposed split, just need to look up the funds that are new to me.

tyruon,
Did you suggest bonds in the 401k because my Roth % is equal to my desired International %? Good idea. The fund in the 401k is good enough for all my bond index needs?
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: Rebalancing my Portfolio

Post by YDNAL »

NotJen wrote:YDNAL,
By time, I mean a few days to research everything. I like your proposed split, just need to look up the funds that are new to me.
By "time is on your side" I mean that you have absolutely no need to rush into anything. Investing is a looooong term proposition.
NotJen wrote:tyruon,
Did you suggest bonds in the 401k because my Roth % is equal to my desired International %? Good idea. The fund in the 401k is good enough for all my bond index needs.
One should have little to do with the other.

You contribute 74% to 401K and 26% to Roth. One driver in designing a portfolio is to select the best available funds — especially in work plans like a 401K. Another driver is to make sure that new money can maintain the portfolio mostly balanced as per your desired AA.
NotJen wrote:New Annual Contributions
$13,800 401k (estimate, depends on company contribution)
$ 5,000 Roth at Vanguard
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
Topic Author
NotJen
Posts: 16
Joined: Thu Feb 09, 2012 2:07 pm

Re: Rebalancing my Portfolio

Post by NotJen »

One driver in designing a portfolio is to select the best available funds — especially in work plans like a 401K.
That was basically my question. Is Vangurad Short Term Investment Grade better/worse/equal to VTBLX?

Once my transfers are complete, my portfolio will be split:
29% Roth at Vanguard
31% 401k
40% SEP at Vanguard

Does that change your recommended fund split? New money stays the same.
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: Rebalancing my Portfolio

Post by YDNAL »

NotJen wrote:
YDNAL wrote:One driver in designing a portfolio is to select the best available funds — especially in work plans like a 401K.
That was basically my question. Is Vangurad Short Term Investment Grade better/worse/equal to VTBLX?
Apples and Oranges.
1. Total Bond Market* (VBTLX) vs. Investment Grade Market (VFSTX).
2. Intermediate Term (VBTLX) vs. Short Term (VFSTX).

* treasuries, investment grade (corporates), mortgage-backed.
NotJen wrote:Once my transfers are complete, my portfolio (100k range) will be split:
29% Roth at Vanguard
31% 401k
40% SEP at Vanguard

Does that change your recommended fund split? New money stays the same.
No.

Have you seen the reading list?
http://www.bogleheads.org/readbooks.htm
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
Topic Author
NotJen
Posts: 16
Joined: Thu Feb 09, 2012 2:07 pm

Re: Rebalancing my Portfolio

Post by NotJen »

I think this is as simple as I can go to meet my AA.

Vanguard Roth
10% VTBLX
10% VEXAX
9% VTSAX
(New money 40% VTBLX / 60% VEXAX) <-- or maybe more to bonds.

401k
9% VDMIX
8% VERSX
14% VFINX
(New money 18% VDMIX / 18% VERSX / 64% VFINX)

Vanguard SEP IRA
10% VTIAX
30% VTSAX

I'll definitely check out the reading list while I'm waiting for my EdJ transfers to occur.
Topic Author
NotJen
Posts: 16
Joined: Thu Feb 09, 2012 2:07 pm

Re: Rebalancing my Portfolio

Post by NotJen »

Any thoughts on my last re-balance plan? I'm starting to like it.
Topic Author
NotJen
Posts: 16
Joined: Thu Feb 09, 2012 2:07 pm

Re: Rebalancing my Portfolio

Post by NotJen »

My 401k is adding an inflation-protected bond fund - DFA Inflation-Protected Securities I, DIPSX (0.13). Just wondering if this is something I should mix with the total bond index? I've read a lot about TIPS here (I realize this fund is not the same), but I'm still not sure if there is a general guideline for mixing an inflation-protected bond with a total index.

I'm fine with keeping it simple and just using VTBLX for my bond allocation, but would like any opinions on this new fund available in my 401k.
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