Best Portfolio to hold in a taxable account

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Best Portfolio to hold in a taxable account

Postby coldman » Sat Mar 26, 2011 3:22 pm

I have maxed out my 401K and Roth IRA. Now here is my problem. I want to start putting around $3000 a month into some kind of a taxable account and let it grow. My thought is I want to keep it simple for reporting taxes and yet I want it to grow as much as possible. What tax efficient Vanguard mutual funds would be the best as a I try to have the most efficient portfolio? Please suggest your idea of the best funds to do this. I already have about $40,000 to start this off with as my goal is to continue to add to this monthly.[/b]
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Postby hsv_climber » Sat Mar 26, 2011 3:30 pm

Start with Vanguard Total Stock Market Index Fund (or VTI) and then slowly add VEA (or VXUS) into the mix.

But don't forget to adjust your overall AA to maintain your desired stocks / bonds ratio.
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Re: Best Portfolio to hold in a taxable account

Postby Taylor Larimore » Sat Mar 26, 2011 3:53 pm

coldman wrote:I have maxed out my 401K and Roth IRA. - What tax efficient Vanguard mutual funds would be the best as a I try to have the most efficient portfolio? Please suggest your idea of the best funds to do this.


Hi coldman:

Total Stock Market Index Fund and Total International Index Fund are two funds that should always be considered for taxable accounts. Here's why:

* Very diversified (lower risk)
* Converts tax-inefficient funds into tax-Efficient funds.
* Low turnover
* No style drift
* No front running
* Earlier qualification for Admiral status
* Consolidates to fewer funds
* Less rebalancing
* Simple to understand and maintain.
* Low cost
* Contributions and withdrawals do not unbalance the portfolio.
* On the "Efficient Frontier"
* No worry about under-performing the market.
"Simplicity is the master key to financial success." -- Jack Bogle
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Postby Darkwaters » Sat Mar 26, 2011 9:56 pm

Taylor,

What would you recommend for the bond allocation in the taxable account? Muni's?
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Re: Best Portfolio to hold in a taxable account

Postby Lumpr » Sat Mar 26, 2011 10:41 pm

Taylor Larimore wrote:. . . Total Stock Market Index Fund and Total International Index Fund are two funds that should always be considered for taxable accounts. Here's why:

. . .

* On the "Efficient Frontier"

. . .


Is this accurate?
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Postby grabiner » Sat Mar 26, 2011 10:53 pm

Darkwaters wrote:What would you recommend for the bond allocation in the taxable account? Muni's?


View all your accounts as one portfolio. If you want 40% of your portfolio to be bonds, there is no need for 40% of your taxable account to be bonds; you could put all your bonds in an IRA and hold a taxable account containing only stock index funds.

If you do need to hold bonds in a taxable account, then municipal bonds are usually best.
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Re: Best Portfolio to hold in a taxable account

Postby Taylor Larimore » Sat Mar 26, 2011 11:00 pm

Lumpr wrote:
Taylor Larimore wrote:. . . Total Stock Market Index Fund and Total International Index Fund are two funds that should always be considered for taxable accounts. Here's why:

. . .

* On the "Efficient Frontier"

. . .


Is this accurate?


Hi Lumpr:

Many academics agree that Total Stock Market Index Funds are on the "Efficient Frontier." This is one study:

Three Proofs that TSM is Efficient
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Best Portfolio to hold in a taxable account

Postby dailybagel » Sat Mar 26, 2011 11:07 pm

Taylor Larimore wrote:Many academics agree that Total Stock Market Index Funds are on the "Efficient Frontier." This is one study:

Three Proofs that TSM is Efficient


I wouldn't really call this a study... more like a way to organize our thinking about whether TSM is on the efficient frontier.
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A good answer

Postby Taylor Larimore » Sun Mar 27, 2011 8:44 am

Darkwaters wrote:Taylor,

What would you recommend for the bond allocation in the taxable account? Muni's?


Hi Darkwaters:

Grabiner gave a good answer to your question.

Thank you, Grabiner.
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Postby Bob's not my name » Sun Mar 27, 2011 9:00 am

A year ago, Submariner1980 wrote:Check out the "Asking Portfolio Questions" sticky and re-ask your question in that format. You'll almost certainly get the answers you need.

I made my first post in the suggested format and the answers I got changed my investments dramatically for the better.
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