A reasonable 3-fund portfolio?

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pfb3326
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Joined: Wed Dec 26, 2007 8:19 pm

A reasonable 3-fund portfolio?

Post by pfb3326 » Tue Jul 02, 2013 10:03 am

Hi,

Would you consider the following to be a reasonable, simple 3-fund portfolio for a 56-year old single male with little investment experience? Total to be invested is about 2.5 million.

50% Total Stock Market Index Admiral
25% Total International Stock Index Admiral
25% Short-Term Tax Exempt Bonds Admiral (to be changed to Intermediate-Term at a future date when things settle down)

Everything is in taxable accounts. The bond income is expempted from Federal taxes but subject to prox 5% state tax.

Using a reasonable withdrawal rate, it seems to me this should provide a good lifetime income.

Thanks in advance for any suggestions.
Last edited by pfb3326 on Tue Jul 02, 2013 10:42 am, edited 2 times in total.

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bertilak
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Re: A reasonable 3-fund portfolio?

Post by bertilak » Tue Jul 02, 2013 10:07 am

How much is in tax advantaged accounts? Point being tax exempt bonds not needed there.
Otherwise seems OK.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

Call_Me_Op
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Re: A reasonable 3-fund portfolio?

Post by Call_Me_Op » Tue Jul 02, 2013 10:12 am

pfb3326 wrote: Using a reasonable withdrawal rate, it seems to me this should provide a good lifetime income.
I would replace "should" above with "is expected to (based upon past performance)." There are no guarantees with stocks, and you should be able to stomach a worst-case scenario (which I could not at 75% equities).
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Taylor Larimore
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Need more information

Post by Taylor Larimore » Tue Jul 02, 2013 10:21 am

pfb3326 wrote:Hi,

Would you consider the following to be a reasonable, simple 3-fund portfolio for a 56-year old single male with little investment experience? Total to be invested is about 2.5 million.

50% Total Stock Market Index Admiral
25% Total International Stock Index Admiral
25% Short-Term Tax Exempt Admiral (to be changed to Intermediate-Term at a future date when things settle down)

Using a reasonable withdrawal rate, it seems to me this should provide a good lifetime income.

Thanks in advance for any suggestions.
pfb:

Your proposed 3-fund portfolio might be improved but you could easily do a lot worse.

It is impossible to evaluate a portfolio without more information. I suggest you use Laura's format to get informed advice:

ASKING PORTFOLIO QUESTIONS

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

Calm Man
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Re: A reasonable 3-fund portfolio?

Post by Calm Man » Tue Jul 02, 2013 11:41 am

I like the proposal with 4 suggestions:
1. The 75/25 is too risky. I would go to 60/40. The 60% in stocks according to your 2/1 ratio would be 40% US.
2. I would not presume that you have the skills (nobody does) to know when to switch from short to intermediate bonds. I would just go with intermediate. Frankly, the yield or the long term tax exempt is quite a bit more than intermediate and the duration is only 1 year more. Larry Swedroe or Rick Ferri, I don't remember who, believe that a 0.2% increment in yield for a year is worth going long for. It is about 3/4% now.
3. I would consider a single state muni fund if Vanguard has the one you want. (I do this with New Jersey)
4. VERY IMPORTANT-- if you are mostly cash now, I worry that you might panic if you go all in now.I was in a similar situation a year and a half ago and elected a 4-5 year averaging in period. I am glad I did as I might have gotten nervous now.

So here goes:
Total stock index admiral: 40$
Total international stock index admiral: 20%
Intermediate term (or long term or state specific long term) muni fund: 40%

Divide it up into 16 pieces and do it quarterly over 4 years.
Or 12 pieces and quarterly over 3 years.

Last, prepare for a discussion on dollar cost averaging vs lump sum investing unless you tell others to avoid it !!!

Good luck.

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