Investment Advice new member 30 years old

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swolesavage
Posts: 8
Joined: Mon Apr 03, 2017 9:07 pm

Investment Advice new member 30 years old

Post by swolesavage » Mon Apr 17, 2017 7:38 pm

Investing - Help with Personal Investments for 30 year old

Emergency funds: Six months saved in money market account
Debt: 1 car loan 0% and will be making last payment next month $410.
Tax Filing Status: Married Filing Jointly with 1 dependent.
Tax Rate: xx% 25,no state
State of Residence: Florida
Age: 30
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 20% of stocks
I would like to be 80-90% stocks

mid five-figures invested

Providing the split of your assets and contributions between taxable and tax-advantaged accounts is also helpful. Please include all investment and retirement accounts (yourself and spouse or civil partner, if applicable) as it's important to look at the portfolio as a unified whole rather than look at accounts in isolation. Also include the available funds in your employer provided retirement plans. For example:

Current retirement assets

Taxable
No taxable brokerage account. Just cash savings in money market.


His 401k
Changed jobs and rolled over to IRA

His Roth IRA at Schwab
74% American Funds American Balanced Fund® Class A ABALX (0.59) (This fund broker bought. Thinking of selling for index fund.. advice?)
17% Schwab® S&P 500 Index Fund SWPPX (0.03)
8% Schwab Small-Cap Index Fund® SWSSX (0.05)

His Rollover IRA at Schwab
(made by broker when rolled over from 403b)
3.1% Global X MLP & Energy Infrastructure ETF MLPX 0.45%
9.26% iShares Core MSCI EAFE ETF IEFA 0.08%
11.79%iShares Core MSCI Emerging Markets ETF IEMG 0.15%
14.42%iShares Core S&P Mid-Cap ETF IJH 0.07%
16.08%iShares Core S&P U.S. Growth ETF IUSG 0.05%
12.79%iShares Core S&P U.S. Value ETF IUSV 0.05%
4.74%iShares Russell 2000 ETF IWM 0.20%
24.76%Vanguard Total Stock Market Index Fund ETF Shares VTI 0.05%
3.05%Cash. going to put in TIPS bond fund


Her rollover IRA at Schwab
100% Schwab Total Stock Market Index Fund® SWTSX 0.03%

Her Roth IRA at Schwab
100% Schwab Total Stock Market Index Fund® SWTSX 0.03%


Contributions

New annual Contributions

$5500 his Roth IRA
$2500 her Roth IRA

Monthly contributions
$458 his
$210 hers


Available funds

brokerage is currently Schwab. I would also consider Vanguard. I just recently took my accounts over from a broker who was charging too much 1.5%
I am looking to mostly do index funds with Schwab, however I don't believe they have as many as Vanguard. I would switch to Vanguard, but I just recently rolled over my accounts to schwab as their total stock market was a bit cheaper as I don't have enough money for admiral shares in Roth accounts. Most of the money is in my rollover IRA and I will only be contributing to roth from now on.

Questions:
1. I was thinking of consolidating my accounts into 3-4 index funds. Total or S&P500 fund 60%, small cap 20%, international 10%, bonds 10%. Would this be a good portfolio?

2. Should i sell all the ETF's in my rollover IRA except VTI?

3. Should I be 90/10; 80/10;70/10% stock/bond at my age of 30? Also what bond portfolio is good? Seems like bonds aren't very good right now.

4. Should i sell American Funds American Balanced Fund® Class A ABALX (0.59)?

5. Any suggestions for asset allocation

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Duckie
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Re: Investment Advice new member 30 years old

Post by Duckie » Tue Apr 18, 2017 7:04 pm

swolesavage, welcome to the forum.
swolesavage wrote:I was thinking of consolidating my accounts into 3-4 index funds. Total or S&P500 fund 60%, small cap 20%, international 10%, bonds 10%. Would this be a good portfolio?
Schwab has limited index funds/ETFs. If you stay at Schwab, for US stocks go with SWTSX or SCHB. For US bonds go with SWAGX or SCHZ. The problem is international. Schwab doesn't have a total international index fund. They have developed markets SWISX or SCHF, emerging markets SCHE, and mid/small cap international SCHC. Developed markets is probably enough for now.
Should i sell all the ETF's in my rollover IRA except VTI?
Yes. Then you need to put the international stocks and US bonds somewhere. Bonds should go in a pre-tax account like the rollover IRAs.
Should I be 90/10; 80/10;70/10% stock/bond at my age of 30?
At age 30 I think you should have 20% bonds.
Also what bond portfolio is good? Seems like bonds aren't very good right now.
They're for stability, not growth. Buy a total US bond fund like SWAGX or SCHZ.
Should i sell American Funds American Balanced Fund® Class A ABALX (0.59)?
Yes. It's a good fund but 0.59% is too high.
Any suggestions for asset allocation
I recommend 80% stocks, 20% bonds, with 30% of stocks in international. That breaks down to 56% US stocks, 24% international stocks, and 20% bonds.

You have 100% in each of the four accounts. It should be 100% total, not each. What are your percentages?

aristotelian
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Re: Investment Advice new member 30 years old

Post by aristotelian » Tue Apr 18, 2017 7:50 pm

Congratulations on taking control and getting out of the advisor.
Yes, sell the American Funds Balanced. That is the best improvement you can make.
Rollover IRA is complicated but not bad. Simplifying is a good idea but that is more personal preference.
90/10 is justifiable at your age but 80/20 is probably a more standard recommendation. I am 75/25 at age 42 but I was 90/10 until very recently.
Schwab is good and absolutely sufficient for your needs. You can do a 3 or 4 fund portfolio with their big ETFs. You can always supplement with iShares or Vanguard ETFs if you want any tilts.
For what it's worth, I have SCHR (Intermediate Treasury ETF) as the main bond holding in my Roth.

Will he or she have 401K's in the near future? Will the monthly contributions be going up when the car is paid off? If no 401K, you might start thinking about opening a taxable brokerage account.

swolesavage
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Joined: Mon Apr 03, 2017 9:07 pm

Re: Investment Advice new member 30 years old

Post by swolesavage » Thu Apr 20, 2017 7:36 pm

Thank you for the response Duckie,
Duckie wrote:Schwab has limited index funds/ETFs. If you stay at Schwab, for US stocks go with SWTSX or SCHB. For US bonds go with SWAGX or SCHZ. The problem is international. Schwab doesn't have a total international index fund. They have developed markets SWISX or SCHF, emerging markets SCHE, and mid/small cap international SCHC. Developed markets is probably enough for now.
I plan to go with SWTSX for US stocks as my primary growth and SWAGX for bonds. What do you think about Schwab® Treasury Inflation Protected Securities Index Fund SWRSX? Schwab does have Schwab International Index Fund® SWISX for international. However I'm not completely convinced its a better route than US stocks. Seems like Bogle believes in Americas growth over adding an international fund. However I do see the case for more exposure and limiting risks by doing this.
Should i sell all the ETF's in my rollover IRA except VTI?
Duckie wrote:Yes. Then you need to put the international stocks and US bonds somewhere. Bonds should go in a pre-tax account like the rollover IRAs.
Should I keep bonds out of my Roth IRA and only put into my Rollover IRA or try to keep the same balance in all accounts?
Should i sell American Funds American Balanced Fund® Class A ABALX (0.59)?
Duckie wrote:Yes. It's a good fund but 0.59% is too high.
Done
Any suggestions for asset allocation
Duckie wrote:I recommend 80% stocks, 20% bonds, with 30% of stocks in international. That breaks down to 56% US stocks, 24% international stocks, and 20% bonds.
You have 100% in each of the four accounts. It should be 100% total, not each. What are your percentages?
Thank you for the suggestion. Needed to hear that. :beer And oops on the allocations. What do you think about other indexes for US stocks? Like Schwab Small-Cap Index Fund® SWSSX? Would it be good to have small and mid caps elsewhere?

swolesavage
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Joined: Mon Apr 03, 2017 9:07 pm

Re: Investment Advice new member 30 years old

Post by swolesavage » Thu Apr 20, 2017 7:49 pm

Aristotelian I sold the American Funds Balanced. Thank you. I think I will start 90/10 and adjust later.
aristotelian wrote:For what it's worth, I have SCHR (Intermediate Treasury ETF) as the main bond holding in my Roth.
What is the advantage of SCHR? I don't have a good understanding of the bond market.
aristotelian wrote:Will he or she have 401K's in the near future? Will the monthly contributions be going up when the car is paid off? If no 401K, you might start thinking about opening a taxable brokerage account.
I will be eligible for a 401k this October but there is no match. I would like to contribute 15% of our income in the future, maybe when the car is paid off yes. My wife recently quite her job to say home with our baby so no 401k their. She made enough early this year to contribute to her Roth IRA maxed out.

aristotelian
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Re: Investment Advice new member 30 years old

Post by aristotelian » Thu Apr 20, 2017 11:01 pm

swolesavage wrote:Aristotelian I sold the American Funds Balanced. Thank you. I think I will start 90/10 and adjust later.
aristotelian wrote:For what it's worth, I have SCHR (Intermediate Treasury ETF) as the main bond holding in my Roth.
What is the advantage of SCHR? I don't have a good understanding of the bond market.
aristotelian wrote:Will he or she have 401K's in the near future? Will the monthly contributions be going up when the car is paid off? If no 401K, you might start thinking about opening a taxable brokerage account.
I will be eligible for a 401k this October but there is no match. I would like to contribute 15% of our income in the future, maybe when the car is paid off yes. My wife recently quite her job to say home with our baby so no 401k their. She made enough early this year to contribute to her Roth IRA maxed out.
SCHZ and SCHR are very similar. Both are intermediate duration bond funds. As an aggregate bond fund, SCHZ is also going to include slightly risker classes such as corporate bonds and mortgage-backed securities. SCHR is only Treasuries. Lower return but lower risk. Some folks do not like SCHZ because it has had issues underperforming its benchmark when it is supposed to be an index fund. For only 10% of you allocation it doesn't really matter, but you could always go with Vanguard BND ETF as well.

swolesavage
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Re: Investment Advice new member 30 years old

Post by swolesavage » Fri Apr 21, 2017 11:54 am

Thanks for explaining that.
When selling my other ETF's is it better for me to just sell at market price to get rid of it or should I try to use limit orders to get a better price?

Not sure if I want to sell all the ETF's at least the ones with low expense ratios to see how they perform. Or would it just be best for me to sell them all and go for the total stock market index?

Yeti
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Re: Investment Advice new member 30 years old

Post by Yeti » Fri Apr 21, 2017 1:29 pm

swolesavage wrote:I will be eligible for a 401k this October but there is no match. I would like to contribute 15% of our income in the future, maybe when the car is paid off yes. My wife recently quite her job to say home with our baby so no 401k their. She made enough early this year to contribute to her Roth IRA maxed out.
Duckie has given you some good advice. I just wanted to point out that your wife doesn't need earned income to contribute to a Roth IRA (see spousal IRA contribution).

Good luck!
Yeti

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Duckie
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Re: Investment Advice new member 30 years old

Post by Duckie » Fri Apr 21, 2017 6:39 pm

swolesavage wrote:However I'm not completely convinced its a better route than US stocks. Seems like Bogle believes in Americas growth over adding an international fund. However I do see the case for more exposure and limiting risks by doing this.
Having an international allocation is a personal preference. Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot" when providing diversification. See the Vanguard paper link and the discussion.
Should I keep bonds out of my Roth IRA and only put into my Rollover IRA or try to keep the same balance in all accounts?
You should try to keep bonds in pre-tax accounts. That's not always possible, but try.
You have 100% in each of the four accounts. It should be 100% total, not each. What are your percentages?
Thank you for the suggestion. Needed to hear that. :beer And oops on the allocations.
What are the account percentages? You have:
  • His Rollover IRA at Schwab -- ??%
    Her Rollover IRA at Schwab -- ??%
    His Roth IRA at Schwab -- ??%
    Her Roth IRA at Schwab -- ??%
The percentages for all four accounts should add up to 100%. What are your numbers?
What do you think about other indexes for US stocks? Like Schwab Small-Cap Index Fund® SWSSX? Would it be good to have small and mid caps elsewhere?
SWTSX already holds US mid/small cap stocks at their market weights. If you buy a separate small cap fund you will be overweighting small caps.

swolesavage
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Joined: Mon Apr 03, 2017 9:07 pm

Re: Investment Advice new member 30 years old

Post by swolesavage » Fri Apr 21, 2017 11:17 pm

Her rollover IRA at Schwab:
SWTSX 1%
Her Roth IRA:
SWTSX 1%
His rollover IRA:
IEFA 8%
IEMG 10%
IJH 13%
UESG 14%
IUSV 11%
IWM 4%
VTI 21%
SWRSX 3%
SWAGX 3%
His Roth IRA:
SWPPX 2%
SWSSX 1%
SWTSX 8%

=100% Had to figure that out. I know I still need to sell the ETF's. Any other suggestions other than the great advice you have given?

swolesavage
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Joined: Mon Apr 03, 2017 9:07 pm

Re: Investment Advice new member 30 years old

Post by swolesavage » Sat Apr 22, 2017 8:07 am

Duckie wrote: Having an international allocation is a personal preference. Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot" when providing diversification. See the Vanguard paper link and the discussion
Thanks for the links. I see it would be a good diversification for my portfolio. 20-30% I would feel comfortable with. Historically it seems that US stocks have out performed non-US, but then I am speculating that for the future. Maybe a stocks 80/20 US/international and 20% bonds would be a good 3 fund portfolio for my needs and risks. How would that look then?

swolesavage
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Joined: Mon Apr 03, 2017 9:07 pm

Re: Investment Advice new member 30 years old

Post by swolesavage » Mon Apr 24, 2017 9:09 pm

I actually currently hold international ETF's in the iShares Core MSCI EAFE ETF IEFA Foreign large blend 8% and iShares Core MSCI Emerging Markets ETF IEMG 10% of my holding currently. They seem to be doing well and are diversified. That would make me 18% international. Or should I put all that money into something like the Schwab International Index Fund SWISX foreign large blend?
Most of the ETF's in my portfolio seem to be doing pretty well and low expense ratio. I just don't want to be overly complicating things or having money in the same stocks in different funds. I sold MLPX and IWM for bonds and am now closer to 10% bonds.

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