Would like to streamline my portfolio

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nwffdiver
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Would like to streamline my portfolio

Post by nwffdiver » Wed Nov 14, 2012 11:00 pm

I want to thank everyone for the first round of help streamlining my portfolio. I have instituted all the lowest cost index funds available in my different accounts.
Wondering how it looks ?


**Update**

Emergency Fund: 5-6 months
Debt: Mortgage: 148K @ 3% (15 yr)
Tax Filing Status: Married filing Jointly
Tax Rate: 28% Federal, 8% State
State of Residence: OR
His Age: 43
Her Age: 46
Desired Allocation: 60% Stocks/ 40% Bonds
Desired International Allocation 30%

Would Like to include about 5% REITS
I will also receive a PERS pension at age 55.



Current Retirement Assets: Around 250K


Taxable:

4% I bonds
8%. CD’s


His 457 from ING


12% ING Index Plus LgCap (IPLIX) .44
7% ING Index Plus Sm Cap (IPSIX) .50
10% ING International Index (IIIIX) .57
11% ING Intermediate Bond Portfolio - Class I .50


His 401(a):
Employers 4% match goes here

9% Nationwide Bond Index A (GBIAX) .68

His PEHP at Nationwide

2% Nationwide S & P 500 Index (GRISX) .50
2% PIMCO Total Return Fund (PTTAX) .83

Her 401(k):

4% Seix Intermediate Bond Fund (SAMIX) .15
17% Northern Trust S&P 500 Index Fund (NOSIX) .02
0.5% ADP Stock Fund N/A

Her company gives her the ADP stock in addition to her match.

His Roth IRA at Vanguard

3% VG REIT Index (VGSIX) .24
4% VG TBM (VBMFX) .22
2% VG TISM (VGTSX) .18


Her Roth IRA at Vanguard

5% VG TISM (VGTSX) .18


Current Contributions:

His 457 $12.500
Her 401 k $10000

His & Her Roth IRA $5500 each

Additional $ to sons 529 Plan (He has 3 yrs til college)
I bonds


I think that puts me at around-

US Stocks 41% (of total portfolio)
International Stocks 17%
Bond Funds 29%
Cash/Fixed Income 13%

Or about 58/42 so close on my 60/40

Stocks break down as:

52% S&P 500
11% Small Cap
29% International
5% REIT
3% ADP

Im wondering if I need more Small/Mid as I am currently:

I was thinking of adding VG Extended Markets Index (VEXMX) in my Roth, any ideas?
Last edited by nwffdiver on Sun Feb 24, 2013 5:50 pm, edited 3 times in total.

Grt2bOutdoors
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Re: Would like to streamline my portfolio

Post by Grt2bOutdoors » Thu Nov 15, 2012 8:54 am

You could do this one of two ways - each deferred account mimics your exact allocation 60/40 with 30% intl allocation or you could choose to have one account hold the equities and one account hold the fixed income/intl. If you select the latter, you should view the combined portfolio as one, however one or more of the accounts may have big swings in it due to volatility like these last two weeks market action. I don't have the time right now to give a suggestion, but I'm sure someone else will chime in soon.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

pingo
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Re: Would like to streamline my portfolio

Post by pingo » Thu Nov 15, 2012 9:51 am

EDIT: Actually, I think you need to redo the numbers. First, because your taxable account is stated as dollars and not percents, and second because you have things like 33k for Her 401k, but the percents add up to 20%. 20% of 223k is $44.6k. :confused

Let me get you started thinking about some things:

1. SHE has the best employer plan. You may want to adjust contributions to ensure full employer matching for you in 401 (only up to employer match) and then all other employer based savings go to HER 401k to the $17,500 maximum allowed. Put what's left into into His 457.

2. Why not increase contributions to max out His 457 also while using the $8.5k taxable savings to make up for loss of net income? This way you essentially "transfer" your taxable cash into your tax-advantaged space while lowering your current taxes and increasing tax efficiency of your investments. Perhaps by the time the $8.5k is drained, you could then access the CDs to do the same? Shoot. That way might be able to max contributions to Her 401k AND His 457 for 2013.

3. BTW why are taxable amounts not expressed as percents of retirement portfolio like everything else?

4. Her 401k is roughly 30% 14-20% of the portfolio (depending on whether you go by the percents posted or the cash amount indicated). Either way, put it all in SAMIX (ER 0.15%).
Last edited by pingo on Thu Nov 15, 2012 11:54 am, edited 1 time in total.

nwffdiver
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Re: Would like to streamline my portfolio

Post by nwffdiver » Thu Nov 15, 2012 11:33 am

Pingo, I just forgot to add the taxable percentages. I realize my wife's plan has much better cost than mine. She doesn't make near the money I do so she feels like if she contributes more, we won't have enough cash for day to day.

I do consider those as part of my FI.

How can I divide up the other accounts so I don't have multiple accounts doing the same. I too thought of using her bond fund for all. But how do I divide up the others to minimize the number of funds? Have tried to work it out on my own, but to no avail.

I plan to up the tax advantaged over the taxable, but have the cash put away until I decide where I want it.

Thanks for the help so far. Anybody else have other ideas?

nwffdiver
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Re: Would like to streamline my portfolio

Post by nwffdiver » Thu Nov 15, 2012 11:36 am

223k includes the 58k in the IAP, it's actually only 165k I have control over the accounts. The IAP is run by the PERS investment council. It grows by 6% of my salary annually.

So I added it into the total, sorry I should have been clearer on that.

pingo
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Re: Would like to streamline my portfolio

Post by pingo » Thu Nov 15, 2012 12:06 pm

I'll try to come back and see what I can answer if I get a chance (lately I never know when that'll be). With some luck, these posts will at least bump up your thread so someone else can respond before me.

The following is something I already was trying to post before realizing you posted again. For what it's worth...

I realized I had a minute to add something:

5. As to holding REITs and/or SV, you only have the Roth IRAs to hold them, but it may be more important to focus on holding more of your international stocks there (via VG Total Int'l) or using them to complete your employer plan international holdings, since those international funds are okay to use, but they do not include emerging markets. You may have to settle for overweighting/tilting small and/or mid cap in the employer accounts, which in turn also hold a higher percent of REIT, even if it's not the same.

I pulled the following up from another post of mine some time ago because I don't have much time right now. They are charts merely to get a very general idea of the past types of behavior/volatility/risk/returns of EAFE Int'l investing vs. Emerging Markets and REITs in hopes that you might see that it may not make a difference, so choose what you think is more important (probably emerging markets; sorry, I don't have time to add SV). When I did it it seemed that the effect of REIT or Emerging (in a portfolio including EAFE) would have been very similar, regardless. This is what I saw:

Vanguard Emerging Markets Stock Index Fund Investor Shares (VEIEX) ER 0.33
Vanguard REIT Index Fund Investor Shares (VGSIX) ER 0.24
Fidelity Spartan International Index Fund (FSIIX) ER 0.20 (ER taken from this thread.)

5 year chart - REIT outperforms Emerging by 20-ish %
Image

10 year chart - Emerging outperforms REIT by 36-ish %
Image

15 year chart - REIT outperforms Emerging by 19-ish %
Image

Both appear effective for adding risk and return diversification to a portfolio above and beyond what the EAFE would provide. I think adding Emerging Markets may be more important for completing the portfolio, but that's me and I'm no expert. REITs might be less correlated with Developed International than Emerging Markets, but as it looks from the above I'm not sure that it matters. We don't know which will come out on top or have lower correlation going forward (results can be period dependent).

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Peter Foley
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Re: Would like to streamline my portfolio

Post by Peter Foley » Thu Nov 15, 2012 12:24 pm

One approach to simplification would be to start with the smaller accounts and her 401k. Put the bonds in her 401k and then choose a single vehicle for each of the Roths.

You now have 3 accounts, each with one fund. Adjust the others accordingly to get to your AA. Your taxable is relatively small so the only change i would make there is to put the savings account money into the VTGSX. When the CDs mature, that money should go into equities as well so as to improve your tax efficiency.

pingo
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Re: Would like to streamline my portfolio

Post by pingo » Thu Nov 15, 2012 1:16 pm

nwffdiver wrote:223k includes the 58k in the IAP, it's actually only 165k I have control over the accounts. The IAP is run by the PERS investment council. It grows by 6% of my salary annually.

So I added it into the total, sorry I should have been clearer on that.


It's still not too clear to me, then. The IAP is included in the total AND the the listed account/fund percents keep that in mind, but it is not listed with those percents? You speak of the IAP at the beginning, but it isn't listed in the investment portfolio below. The IAP sounds like it may be the equivalent of in 26% bonds? (I don't know what an IAP is, so you may have to explain).

pingo
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Re: Would like to streamline my portfolio

Post by pingo » Thu Nov 15, 2012 1:19 pm

Peter Foley wrote:Your taxable is relatively small so the only change i would make there is to put the savings account money into the VTGSX. When the CDs mature, that money should go into equities as well so as to improve your tax efficiency.


Peter's idea is better and simpler. Forget about all that "spend down your taxable cash to increase tax-advantaged" talk. With Peter's suggestion you markedly improve and simplify your international equity situation.

nwffdiver
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Re: Would like to streamline my portfolio

Post by nwffdiver » Thu Nov 15, 2012 2:16 pm

The IAP is a secondary account (part of my pension plan) I added it in the total as it is amount added for consideration. However I have no control over how the money is invested. I probably should have left it out of the conversation .

So for discussion my total is about 165k.

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ruralavalon
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Re: Would like to streamline my portfolio

Post by ruralavalon » Thu Nov 15, 2012 2:35 pm

His Age: 43
Her Age: 46
Desired Allocation: 60% Stocks/ 40% Bonds
Desired International Allocation 30%
In my opinion your desired aasset allocation is within the range of what is reasonable.

Given your overall tax rate of 36% (28% Federal, plus 8% State) I would suggest that the investment priority be maxing out the 401k (which has some nice investment choices), and then using the 457 more fully, before any additional Roth investing. The 36% tax deduction is extremely valuable, and should not be passed up in my opinion, since you will almost certainly be in a lower tax bracket during retirement. Please see -- http://thefinancebuff.com/case-against-roth-401k.html .


Here is one possible portfolio idea for you to look at, using your desired asset allocation, a total of $176k for the portfolio, and planning $33.5k annual contributions (all %s and $s are rounded off, so may not add up exactly):

Taxable: (22%, $36K)
4%, $7.5k I bonds
8%, 15k CD’s (18 mon/1 yr), <= as CDs mature consider switching to VTIAX
8%, 13.5k Vanguard Total International Stock Index Fund Admiral Shares (VTIAX), er = 0.18%
5.1% 8.5K Online Savings Account

His 457 from ING (39%; $65K; add $16k/yr)
21% ING Index Plus LgCap (IPLIX) .44
5.9% ING Index Plus Mid Cap (IPMIX) .49
5.9% ING Index Plus Sm Cap (IPSIX) .50
5.9% ING International Index (IIIIX) .57
18% PIMCO Ttl Return Bond (IPCSX) . 83

His 401(a): (10%; $16K; Employers 4% match goes here)
4.8% Dreyfus S & P 500 index (PEOPX) .51
10% Nationwide Bond Index A (GBIAX) .68, <= will need to increase if maturing CDs in taxable are switched to VTIAX
1.4% Nationwide International Index A (GIIAX) . 73
1.9% Nationwide Small Cap Index A (GMRAX) .67


Her 401(k): (20%; $33K; add $17.5k/yr)
5% Seix Intermediate Bond Fund (SAMIX) .15
08% BlackRock Rusell 2000 Growth Index Fund (PSGIX) .04, <= to mimic total market, keep in 1:4 ratio to large caps funds
12% Northern Trust S&P 500 Index Fund (NOSIX) .02
1% ADP Stock Fund N/A

His Roth IRA at Vanguard (06%; $10K)
06% VG REIT Index (VGSIX) .24
2.4% VG TBM (VBMFX) .22
1.8% VG TSM (VTSMX) .18

Her Roth IRA at Vanguard (03%; $5K)
03%, Vanguard Total International Stock Index Fund inv Shares (VGTSX), ER = 0.22%, <= as CDs in taxable switch to VTIAX, you could add small value or more REIT here
1.2% VG TR 2015(VTXVX) .17


I hope that this helps.
Last edited by ruralavalon on Thu Nov 15, 2012 2:44 pm, edited 1 time in total.
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YDNAL
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Re: Would like to streamline my portfolio

Post by YDNAL » Thu Nov 15, 2012 2:41 pm

nwffdiver wrote:Would like to streamline my portfolio

I don't blame you! :)

nwffdiver wrote:Current Retirement Assets: $223K
nwffdiver wrote:223k includes the 58k in the IAP, it's actually only 165k I have control over the accounts.

The IAP is a secondary account (part of my pension plan) I added it in the total as it is amount added for consideration. However I have no control over how the money is invested. I probably should have left it out of the conversation .

Taxable: $36K (4 holdings)
His 457 from ING $65K (5 holdings)
His 401(a): $ 16K (4 holdings)
Her 401(k): $33K (4 holdings)
His Roth IRA at Vanguard $10K (3 holdings)
Her Roth IRA at Vanguard $5K (2 holdings)

Current Contributions:

His 457 $12.500
Her 401 k $10000
His & Her Roth IRA $5500 each
Additional $ to sons 529 Plan (He has 3 yrs til college)

Here is how I would "streamline:"

Taxable
22% Vanguard Total International (VTIAX)

His/Her Roth IRA
9% Vanguard IT Bond Index (VBIIX 0.22%, VBILX 0.11% over $10,000)
New money: 33% ($11K)

His 401a
10% Nationwide Bond Index A (GBIAX) .68

His 457
20% PIMCO Ttl Return Bond (IPCSX) . 83
9% ING International Index (IIIIX) .57 (developed only)
10% ING Index Plus Sm Cap (IPSIX) .50
New money: 37% ($12.5K), IPCSX ($2.5k), IIIIX ($5k), IPSIX ($5k)

Her 401K
20% Northern Trust S&P 500 Index Fund (NOSIX) .02
New money: 30% ($10K)
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

nwffdiver
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Re: Would like to streamline my portfolio

Post by nwffdiver » Thu Nov 15, 2012 5:09 pm

Thanks for all the replies, obviously I have some work to do. One question I thought I might use the SEIX bond in her 401 as the expense was lower than the PIMCO, yet everyone seems to have avoided it. Is there a reason, or was it just how everything lined up?

I was definitely planning on moving the CDs, however I thought I would use the first $11k to fill next years Roths. And the leftover to taxable.

I will definitely use more of our 457/ 401k space to lower the taxes a bit.

YDNAL
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Re: Would like to streamline my portfolio

Post by YDNAL » Thu Nov 15, 2012 6:22 pm

nwffdiver wrote:Thanks for all the replies, obviously I have some work to do. One question I thought I might use the SEIX bond in her 401 as the expense was lower than the PIMCO, yet everyone seems to have avoided it. Is there a reason, or was it just how everything lined up?

I feel that new contributions present the right opportunity to (1) avoid meddling with a plan/allocation and (2) rebalance the portfolio on an ongoing basis. That said, Her 401K has an S&P500 Fund at 0.02% which is unheard of, even in plans like TSP. Also, since most Bond options in work Plans are so-so (or worse), and 33% of new contributions go outside work Plans to Roth IRAs, I placed the Bond allocation in Roth IRAs. With regards to SEIX Intermediate (SAMIX), it is a viable choice at reasonable 0.15% cost.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

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ruralavalon
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Re: Would like to streamline my portfolio

Post by ruralavalon » Thu Nov 15, 2012 6:50 pm

nwffdiver wrote:Thanks for all the replies, obviously I have some work to do. One question I thought I might use the SEIX bond in her 401 as the expense was lower than the PIMCO, yet everyone seems to have avoided it. Is there a reason, or was it just how everything lined up?
. . . . .
I will definitely use more of our 457/ 401k space to lower the taxes a bit.

My thought was that -- (1) all choices in the 457 were sort of mediocre, but you really have to use something there, and the PIMCO fund is a good fund although its expense ratio has been inflated well above normal retail; and (2) in the 401k although the Seix bond fund has a nice expense ratio, the Northern Trust fund at 0.02% and Blackrock fund at 0.04% are even better.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

nwffdiver
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Re: Would like to streamline my portfolio

Post by nwffdiver » Thu Nov 15, 2012 9:27 pm

YDNAL and ruralavalon, thanks for the explanations.

YDNAL
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Re: Would like to streamline my portfolio

Post by YDNAL » Fri Nov 16, 2012 6:31 am

ruralavalon wrote:... and (2) in the 401k although the Seix bond fund has a nice expense ratio, the Northern Trust fund at 0.02% and Blackrock fund at 0.04% are even better.

nwffdiver,

In many cases, cost is the best predictor of future returns. However, I would be careful to NOT let the cost tail wag the portfolio dog. In the case of Blackrock PSGIX 0.04% in Her 401K, this is a Small GROWTH Fund with 64% invested in Small/Mid Growth according to Morningstar and I would personally stay away from that.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

nwffdiver
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Re: Would like to streamline my portfolio

Post by nwffdiver » Sat Nov 17, 2012 11:19 am

YDNAL,

His/Her Roth IRA
9% Vanguard IT Bond Index (VBIIX 0.22%, VBILX 0.11% over $10,000)
[color=#0000FF]

Is there a reason you prefer the Intermediate term bond to VG TBM?

nwffdiver
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Re: Would like to streamline my portfolio

Post by nwffdiver » Sat Nov 17, 2012 11:31 am

So. I guess I may need to rethink my need for REITs as well. I get the impression they add more volatility, and MAYBE some non correlated diversification. Possibly more complication than I need.

I appreciate everyone who has given me ideas here. I have learned more on this board, and reading the BGH books than I learned in 15 years meeting with my financial. "Planner" annually. She had me in 12 funds, all of which were 4-5 stars at MS, but I always thought it could be simplified. :happy

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ruralavalon
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Re: Would like to streamline my portfolio

Post by ruralavalon » Sat Nov 17, 2012 12:48 pm

nwffdiver wrote:So. I guess I may need to rethink my need for REITs as well. I get the impression they add more volatility, and MAYBE some non correlated diversification. Possibly more complication than I need.


Vanguard R-squared Correlation Results

Total Stock Market Index and REIT Index have a correlation of:

85
http://adviseronline.investorplace.com/ ... REIT+Index .

Correlations do change over time.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

YDNAL
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Re: Would like to streamline my portfolio

Post by YDNAL » Sat Nov 17, 2012 4:50 pm

nwffdiver wrote:
YDNAL wrote:His/Her Roth IRA
9% Vanguard IT Bond Index (VBIIX 0.22%, VBILX 0.11% over $10,000)

Is there a reason you prefer the Intermediate term bond to VG TBM?

Yes, I prefer a near 50/50 Treasury/Corporate Bond split. This intentionally excludes mortgage-backed securities (MBS).
https://personal.vanguard.com/us/funds/ ... =INT#tab=2

So. I guess I may need to rethink my need for REITs as well. I get the impression they add more volatility, and MAYBE some non correlated diversification. Possibly more complication than I need.

I find it difficult to think in terms of "need" of an industry bet.
  • REITs are stocks of companies that own, manage and finance real estate and they are included in Mid/Small Cap Indices, Total Mkt Indices, etc.
  • Question: do you think that you "need" a Fund/ETF in the financial sector? Look at all the "REITs" and real estate companies included in this Index.
    https://personal.vanguard.com/us/funds/ ... =INT#tab=2
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

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