Do I need Value funds after Blend?

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Stovila
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Do I need Value funds after Blend?

Post by Stovila » Fri Jul 01, 2016 6:26 am

Greetings,
I have a question that I hope can find the answer or get some insight.

The only funds available that is worth taking in my 401k match is Vanguard 500 admiral (vfiax large blend), vanguard total international stock and Vanguard small cap admiral (vsmax small blend).

I have roth ira account (for mid cap and an USAA nasdaq index fund USNQX), do I necessary need to add Value funds on my portfolio or not? (Considering blend covers both growth and value?)

Thank you

mhalley
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Re: Do I need Value funds after Blend?

Post by mhalley » Fri Jul 01, 2016 10:23 am

The decision to tilt is up to you. There are multiple portfolios that are perfectly reasonable, ranging from the 3 fund portfolio to tilting to value, small cap, adding reits etc.
http://whitecoatinvestor.com/150-portfo ... han-yours/
The most important thing to do is pick your portfolio and stay the course. I would look into deciding on your portfolio, then creating an ips and follow it.
https://www.bogleheads.org/wiki/Investm ... _statement

Stovila
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Re: Do I need Value funds after Blend?

Post by Stovila » Fri Jul 01, 2016 10:55 am

Thank you for the reply and link of references. I have check both links and do you guys only recommend exclusively on Vanguard? Do you consider other funds?

Also the IPS seems like a solid idea, I should write that down. Meanwhile may I post my IpS and my current holdings and kindly give some recommendation?

I find it rather difficult to adjust my current funds toward the links you gave me without major change as I own almost none of those...

BigJohn
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Re: Do I need Value funds after Blend?

Post by BigJohn » Fri Jul 01, 2016 3:44 pm

Here is a wiki page that includes how to implement a simple 3 fund portfolio at companies other than VG https://www.bogleheads.org/wiki/Three-fund_portfolio#Choosing_three_funds

If you want to add a tilt to small value or REITS all of those companies will likely have funds that allow you to do that just e sure to check the ER.

Stovila
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Re: Do I need Value funds after Blend?

Post by Stovila » Fri Jul 01, 2016 7:12 pm

Is there a particular reason why tilting toward REIT is popular instead of other sector?

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grabiner
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Re: Do I need Value funds after Blend?

Post by grabiner » Fri Jul 01, 2016 9:16 pm

Stovila wrote:Is there a particular reason why tilting toward REIT is popular instead of other sector?


Much of the real estate market is not publicly traded. Thus, if you buy more real estate stocks than the stock market holds, you may be holding a portfolio which better represents the US economy, even though it does not represent the part of the economy which is traded on the stock market.
David Grabiner

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Taylor Larimore
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Target funds

Post by Taylor Larimore » Fri Jul 01, 2016 9:28 pm

Stovila wrote:Greetings,
I have a question that I hope can find the answer or get some insight.

The only funds available that is worth taking in my 401k match is Vanguard 500 admiral (vfiax large blend), vanguard total international stock and Vanguard small cap admiral (vsmax small blend).

I have roth ira account (for mid cap and an USAA nasdaq index fund USNQX), do I necessary need to add Value funds on my portfolio or not? (Considering blend covers both growth and value?)

Thank you

Stovila:

Welcome to the Bogleheads Forum!

If all your funds are in your 401k and IRA, and if you have Target Funds in your 401k, consider one (expert-designed) Target Fund in each account.

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

Lafder
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Re: Do I need Value funds after Blend?

Post by Lafder » Fri Jul 01, 2016 9:46 pm

Stovila,
The less categories you have, the easier it is to calculate your AA and rebalance.

I say no to a Value fund. That is a person trying to pick stocks they think are a good value. I believe in the power of Index funds over time versus an active manager making picks.

I try to follow the 3 fund portfolio

Total stock market
Total International stock market
Total bond market

The only reason to have more than those 3 is if you want to tilt to any sector, or add International bonds, or your employer offerings force you to use several funds to equal total stock market.

I agree REIT may be the most common "extra" holding people have. I do not have any though.

Total stock market is over 80% large cap = SP 500 companies, the rest is small cap and mid cap. If your employer only offers large cap and small cap, you can keep it simple and have just large cap which is already close to total stock market. Or you can use 82% of stocks large cap and 18% of stocks small cap. Note there are also "extended market funds" that are usually small and mid cap stocks and can be used with large cap to equal total stock market.

See this https://www.bogleheads.org/wiki/Approxi ... ock_market

lafder

looking
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Re: Do I need Value funds after Blend?

Post by looking » Sat Jul 02, 2016 12:21 am

3 funds is much better

Stovila
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Re: Do I need Value funds after Blend?

Post by Stovila » Sat Jul 02, 2016 12:54 am

Thank you for the suggestion, so here's what I am going to propose for my portfolios. Please kindly give some feedback and suggestion.
@Taylor: As much as it is simpler and easier to go with target fund, I feel not comfortable to give 100% control to them, although they're expert. Beside I want to learn understanding this stuff too (fairly new to me).

Emergency funds: 6 months
Debt: mortgage only, 68k @ 2.6%
Tax Filing Status: Married Jointly
Tax Rate: 15% federal
State of Residence: NH
Age: 33
Desired Asset allocation: 90 stock / 10 bond
Desired International allocation: 10%

-------------

401k (that worth looking)
VFIAX / Vanguard 500 Index Admiral / Large Blend / 0.05%
VSMAX / Vanguard Small Cap Index Fund Admiral / Small Blend / 0.08%
VTIAX / Vanguard Total International Stock Index Admiral / Foreign Large Blend / 0.12%
VBTLX / Vanguard Total Bond Index Admiral / Intermediate- Term Bond / 0.06%

I have 22,000 in my 401k.
Will contribute approx $5000 / year.

ROTH IRA (My wife and I) - we have $7500 total, and will contribute $7500 / year.
We have account at Vanguard & Scwhab.

-------------
Personal Thought:
My whole asset allocation target is: US Stock, 80%, International 10%, Bond 10%.

US Stock
Since there's no Global Stock on my 401k, I have to take Large Blend and Small Blend, and I try to balance the rest on my Roth IRA.
The default allocation for US STOCK normally is 80/5/15 (large / medium / small) based on: https://www.bogleheads.org/wiki/Approxi ... ock_market - But I would like to tilt to 50 / 15 / 35 , do you think that's reasonable?

I am not taking the VTIAX since its poor performance for the past few years, beside since it hold small percentage on my whole portfolio (10%), I want to focus more on the Foreign Small Blend since it perform better.

This is what I project my portfolio at the end of 2016:

Large Cap 42%
VFIAX (500 index) 10,700 -- + 1500 / yr
VHDYX (Vanguard High Yield Dividend) 6000 -- tilt + 3000 / yr


Mid Cap 13%
VIMSX (Vanguard Mid-Cap Index) 4000 -- + 800 / yr
JAENX (Janus Enterprise Fund / 0.91%) 1000 - tilt -- + 1200 / yr

Small Cap 25%
VSMAX (Vanguard Small-Cap Index) 10,000 -- + 2500 / yr


International 10%
FMIJX (FMI Int. / Large Blend / 0.98%) 1800 - tilt -- + 1200 / yr
SFILX (Schwab Int. Small Index / 0.49%) 2000 -- + 1200 / yr

Bond 10%
VBTLX (Vanguard Total Bond Index) 4000 -- + 1000 / yr

Desired allocation: 40/15/25 - 10/10
Any insight on how to tilt better, replace funds, or allocating the $ amount?
Thank you.

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ruralavalon
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Re: Do I need Value funds after Blend?

Post by ruralavalon » Sat Jul 02, 2016 12:48 pm

Asset allocation.
Stovila wrote:Age: 33
Desired Asset allocation: 90 stock / 10 bond
Desired International allocation: 10%

In my opinion an asset allocation of 80/20 stocks/bonds would be more reasonable at age 33. Please see the wiki articles "Risk tolerance", "Asset allocation", and Bogleheads® investment philosophy, "Never bear too much or too little risk".

I suggest at least 20% of stocks in international stocks. Vanguard paper, "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit (p. 6).

That would work out to about: 20% bonds; 15% international stocks; and 65% domestic stocks.


Accounts.
Can you please list all the accounts separately and state -- who owns each account, where each account is located, how much money is in each account, how much money will be contributed to each account annually, and what funds you are considering using in each account?


Fund selection.
In selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".

I suggest using these funds from your 401k:
VFIAX / Vanguard 500 Index Admiral / Large Blend / 0.05%
VTIAX / Vanguard Total International Stock Index Admiral / Foreign Large Blend / 0.12%
VBTLX / Vanguard Total Bond Index Admiral / Intermediate- Term Bond / 0.06%

In my opinion JAENX (Janus Enterprise Fund / 0.91%) , FMIJX (FMI Int. / Large Blend / 0.98%) and SFILX (Schwab Int. Small Index / 0.49%) have expense ratios that are too high. Its extremely important to keep expenses low. Over 30 years an added 0.50% in expense ratio costs you 14% in the end value of your investment, and an added 1.00% in expense ratio costs you 26% in the end value of your investment. Vanguard blog post, "Stopping the silent killer of returns"

If you really want international small-cap use some Vanguard FTSE All-World ex-US Small-Cap Index Fund Investor Shares (VFSVX) ER 0.31%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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