One single investment in a taxable account

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cegibbs
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One single investment in a taxable account

Post by cegibbs » Wed Mar 25, 2015 5:43 am

I'm looking to invest in a taxable account after maxing all of my retirement accounts. Which one single investment would you choose and be comfortable holding for a lifetime? When I retire in the next 4 years or so, I would like to use the dividends as income. Would prefer not to sell shares, but rather use the dividends or any capital gains that it distributes.

Thanks for taking the time to read my post. I really appreciate any thoughts that you have regarding my question.

BogleMe
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Re: One single investment in a taxable account

Post by BogleMe » Wed Mar 25, 2015 6:19 am

Cegibbs,

This question cannot be answered in a helpful manner without more information. There are some wonderfully diversified balanced funds out there, but they may not make sense for your situation for a host of reasons. Why not provide your marginal tax rate and your desired stock/bond domestic/international mix?

cegibbs
Posts: 39
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Re: One single investment in a taxable account

Post by cegibbs » Wed Mar 25, 2015 7:19 am

My tax rate is 25 percent. I have approximately $1.6 million saved, of which all but $100K is in tax-deferred accounts. I would like to maintain an approximate 60/40 allocation through my lifetime. Maybe as much as 65 percent equities. Currently, 55 percent in VWENX, 40 percent in PRWCX, and 5 percent in FPURX. I like minimizing my holdings.

Does this information help in responding?

Grt2bOutdoors
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Re: One single investment in a taxable account

Post by Grt2bOutdoors » Wed Mar 25, 2015 7:26 am

cegibbs wrote:My tax rate is 25 percent. I have approximately $1.6 million saved, of which all but $100K is in tax-deferred accounts. I would like to maintain an approximate 60/40 allocation through my lifetime. Maybe as much as 65 percent equities. Currently, 55 percent in VWENX, 40 percent in PRWCX, and 5 percent in FPURX. I like minimizing my holdings.

Does this information help in responding?
Typing out the names of your holdings would help tremendously, we don't have a lot of time to convert the symbols, nor do we know all of the Vanguard fund names by symbol using rote memory. :wink:
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

trasmuss
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Re: One single investment in a taxable account

Post by trasmuss » Wed Mar 25, 2015 7:41 am

I am retired and have both the Index 500 and Total Stock fund in my taxable account. I am receiving dividends from both and am happy with both. I am in the 15% tax bracket so the dividends are currently tax free. Your current tax bracket may or may not be relevant once you retire depending upon your individual circumstances. Either fund has the lowest expense ratio available from Vanguard.

Lafder
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Re: One single investment in a taxable account

Post by Lafder » Wed Mar 25, 2015 7:49 am

This is what you say you have now:

55% VWENX Vanguard Wellington (ER 0.18) 67% stock/33% bond http://quotes.morningstar.com/fund/VWENX/f?t=VWENX

40% PRWCX T Rowe Price Capital Appreciation Fund (ER 0.70) 64% stock/24% bond/ 10% cash/4% other I rounded up so not 100%) http://quotes.morningstar.com/fund/PRWCX/f?t=PRWCX

5% FPURX Fidelity Puritan (ER 0.56) 66% stock/31% bonds/3$ cash/other https://fundresearch.fidelity.com/mutua ... /316345107

You are picking relatively simple all in one funds, each does have International stocks.

You have brought up an issue that is discussed here, wanting to have holdings that pay dividends rather than having to sell any shares to take money out. One of the arguments against this is that you have to pay the tax on the dividends whether you needed the distribution at that time or not.

Do you have an emergency fund already set aside besides this 100k taxable money?

My taxable account is mostly Vanguard Total Stock Market, but that may not be right for you. Note the ER of 0.05% https://personal.vanguard.com/us/funds/ ... IntExt=INT

Maybe this will help: https://investor.vanguard.com/mutual-fu ... -one-funds

lafder

dbr
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Re: One single investment in a taxable account

Post by dbr » Wed Mar 25, 2015 7:55 am

Lafder wrote:
You have brought up an issue that is discussed here, wanting to have holdings that pay dividends rather than having to sell any shares to take money out. One of the arguments against this is that you have to pay the tax on the dividends whether you needed the distribution at that time or not.
It's much worse than that. Trying to select investments that pay dividends to meet a withdrawal plan means you have to engineer a Rube-Goldberg array of investment selections that may otherwise make little sense. And then, when dividend payouts drift away from what you need, you have to do it over again. And, for all of that, the exercise is completely unnecessary.

PS For those who are happy with their dividend payouts, this comment was not for you. If you are stymied by how to do this, then this comment should be something to think about.

JW-Retired
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Re: One single investment in a taxable account

Post by JW-Retired » Wed Mar 25, 2015 8:37 am

Vanguard LifeStrategy Moderate Growth (VSMGX). 60/40 AA like you want and 30% of stocks are international.
JW
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CABob
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Re: One single investment in a taxable account

Post by CABob » Wed Mar 25, 2015 11:50 am

You shouldn't look at this taxable account in isolation from the rest of your invested assets. Instead you should look at all accounts as a group. This might mean that you put all of you tax inefficient investments in your tax deferred accounts leaving your taxable account for the tax efficient investments. This might mean that your single holding in the taxable account would be a total stock market fund.
Bob

cegibbs
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Re: One single investment in a taxable account

Post by cegibbs » Wed Mar 25, 2015 12:53 pm

For whatever reason, I have for the most part been uncomfortable holding equity funds. That's why I have gone to balanced funds. It has allowed me to stay in the market during its many ups and steep downs.

DSInvestor
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Re: One single investment in a taxable account

Post by DSInvestor » Wed Mar 25, 2015 1:43 pm

cegibbs wrote:For whatever reason, I have for the most part been uncomfortable holding equity funds. That's why I have gone to balanced funds. It has allowed me to stay in the market during its many ups and steep downs.
Most folks would suggest Total Stock Market for your relatively small taxable account as it is very tax efficient. This would be a good approach if you're willing to look at all your accounts as one big portfolio. The balanced funds like the ones you own are not tax efficient and may not be appropriate for high tax bracket investors to hold in taxable accounts. Are you concerned about tax efficiency?

If you're concerned about tax efficiency and want to use a balanced fund, consider Vanguard Tax Managed Balanced Admiral VTMFX er=0.12% which holds 48/52 stock/bond AA. I believe it has to hold at least 50% muni bonds in order to qualify for tax exempt status on the muni bond income.

If you're not concerned about tax efficiency, Vanguard has a great selection of balanced funds for you to choose from. You're already familiar with Wellington 60/40.
Wellesley Income 40/60 is run by the same folks that run Wellington.
Vanguard Balanced Index Admiral 60/40 VBIAX has er=0.09%.
LifeStrategy Moderate Growth is 60/40.
LifeStrategy Conservative Growth is 40/60.

The higher the bond allocation, the higher the income generated. Note that these balanced funds are not tax efficient and the bond income is non-Qualified Dividend Income and will be taxable as ordinary income for fed and state tax.
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