Can you take these Core funds and Create a Three Fund Portfolio?

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Voltron
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Can you take these Core funds and Create a Three Fund Portfolio?

Post by Voltron » Wed Apr 26, 2017 10:43 pm

My first post here. :beer
39 yo physician. 360K income. Married. No kids (trying for one this year)
360K left on mortgage (3.5% fixed)
Medical school loans paid off (222K)
No credit card debt (28K paid off)
No car debt

Schwab intelligent Portfolio Robovisor account has $103,000 (will no longer contribute)
76% stock, 12% fixed income, 5% commodities, 7% cash (I know drag :shock: )

Schwab intelligent portfolio backdoor Roth IRA has $5700 (will max 5500 annually after this year)
94% stock, 6% cash

Vanguard Taxable account has 150K in VTSAX, VTIAX (no bonds in this account) (will contribute 50K a year)

I max out my tax deferred accounts below.
401K worth 75K (three funds chosen by my father-in-law since clueless 4 yrs ago)
- contributing max 18K per year

Keogh worth 150K
- Vanguard Target Date 2040 (VFT40TP)(0.06)
- contributing max 36K per year

I see myself going 76% domestic and 24% international stock.

Anyways, read the boglehead book last month but prior to that was worried about choice of funds and signed up with Financial Engines for assets under management. They haven't made changes yet. However, ultimately I would like to construct what the Bogleheads think is the 3 fund portfolio from the core funds offered through my employment, since maybe I really don't need AUM. The core funds all confusing compared to how was so easy to construct in my Vanguard taxable account.

401K core funds offered:
Vanguard FTSE Social Index I (VFTNX)(0.12)
Vanguard Instl Ttl Stk Mkt Idx InstlPls (VITPX)(0.02)
Vanguard Morgan Growth Admiral (VMRAX)(0.28)
Vanguard PRIMECAP Adm (VPMAX)(0.33)
Vanguard Value Index I (VIVX)(0.07)
Hotchkis and Wiley Mid-Cap Value (HWMIX)(0.70)
Vanguard Small Cap Index InstlPlus (VSCPX)(0.05)
Vanguard International Growth Adm (VWILX)(0.33)
T. Rowe Price International Discovery (PRIDX)(1.20)
American Funds Capital World Gr&Inc R6 (RWIGX)(0.45)
Vanguard Wellington Admiral (VWENX)(0.16)
Vanguard Target Retire Trust Plus Income (VFTITP)(0.06)
Vanguard Target Retire Trust (enter date)(VFT40TP)(0.06)
Vanguard Total Bond Market Idx InstlPls (VBMPX)(0.04)
Stable Income Fund

Keogh core funds offered:
BTC US Equity Market Index Fund (USEQF)(0.01) <<--- is that expense ratio even possible?
Vanguard FTSE Social Index I (VFTNX)(0.12)
Janus Forty N (JFRNX)(0.71)
Vanguard Capital Opportunity Adm (VHCAX)(0.38)
DFA US Core Equity 2 I (DFQTX)(0.22)
Robeco Boston Partners Small Mid-Cap Value Fund (180J)(1.00)
Vanguard Small Cap Index InstlPlus (VSCPX)(0.5)
Cambiar Small Cap Value (CAMZX)(1.05)
Dodge & Cox International Stock (DODFX)(0.64)
Columbia Acorn International Y (CCYIX)(0.68)
American Funds Capital World Gr&Inc R6 (RWIGX)(0.45)
Vanguard Wellington Admiral (VWENX)(0.16)
Vanguard Target Retire Trust (enter date)(VFT40TP)(0.06)
Vanguard Target Retire Trust Plus Income (VFTITP)(0.06)
Standish Mellon Fixed Income Fund (180D)(0.25)
Interest Income Fund (180C)

Is the easiest way to just choose Vanguard Target dates for both tax deferred accounts?

Here is where my assets are allocated now and you can see what Financial Engines plans to do.

Image

Thoughts? What would you do as a Boglehead? :confused
Last edited by Voltron on Mon May 01, 2017 3:41 pm, edited 7 times in total.

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Voltron
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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by Voltron » Thu Apr 27, 2017 5:16 am

Thanks in advance. :happy

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by retiredjg » Thu Apr 27, 2017 6:32 am

Voltron wrote: 401K core funds offered:
Vanguard FTSE Social Index I
Vanguard Instl Ttl Stk Mkt Idx InstlPls <<<------
Vanguard Morgan Growth Admiral
Vanguard PRIMECAP Adm
Vanguard Value Index I
Hotchkis and Wiley Mid-Cap Value
Vanguard Small Cap Index InstlPlus
Vanguard International Growth Adm
T. Rowe Price International Discovery
American Funds Capital World Gr&Inc R6
Vanguard Wellington Admiral
Vanguard Target Retire Trust Plus Income
Vanguard Target Retire Trust (enter date)
Vanguard Total Bond Market Idx InstlPls <<<------
Stable Income Fund

Keogh core funds offered:
BTC US Equity Market Index Fund <<<------
Vanguard FTSE Social Index I
Janus Forty N
Vanguard Capital Opportunity Adm
DFA US Core Equity 2 I
Robeco Boston Partners Small Mid-Cap Value Fund
Vanguard Small Cap Index InstlPlus
Cambiar Small Cap Value
Dodge & Cox International Stock
Columbia Acorn International Y
American Funds Capital World Gr&Inc R6
Vanguard Wellington Admiral
Vanguard Target Retire Trust (enter date)
Vanguard Target Retire Trust Plus Income
Standish Mellon Fixed Income Fund
Interest Income Fund
When combined with the international index in your taxable account, these funds create the 3 fund portfolio.

A few questions though.

Are these the only accounts in your family?

What is in the US Market Index in the Keough? Sounds like it is a total market fund, but the description can tell us for sure.

Knowing how much money will go into each account in each year is important. We can set up a "3 fund" without that information, but you have to know how much money is flowing into each account to see if it works year after year.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by nisiprius » Thu Apr 27, 2017 6:57 am

The Vanguard Target Retirement funds--assuming that the "Retirement Trust" funds are the same as the mutual funds and have good expense ratios--are a perfectly reasonable choice.

Expense ratios matter, and you haven't mentioned them.

Notice that what matters is the overall composition of all of your portfolios combined; you don't need to have the same breakdown in each of the plans, and you can do things like having your U.S. stocks and bonds in one plan and your international stocks in the other.

We're looking for plain vanilla, low-cost (certainly under 0.50%, ideally much less) funds, and ideally index funds, but, if not, conservative, broad-based funds that represent a) the whole U.S. stock market, b) the whole world of stock markets outside the U.S. ("ex-U.S." or "international"), and c) the whole U.S. bond market.
Voltron wrote: Vanguard FTSE Social Index I
√ Vanguard Instl Ttl Stk Mkt Idx InstlPls
Vanguard Morgan Growth Admiral
Vanguard PRIMECAP Adm
Vanguard Value Index I
Hotchkis and Wiley Mid-Cap Value
Vanguard Small Cap Index InstlPlus

? Vanguard International Growth Adm
? T. Rowe Price International Discovery
? American Funds Capital World Gr&Inc R6
Vanguard Wellington Admiral
Vanguard Target Retire Trust Plus Income
Vanguard Target Retire Trust (enter date)

√ Vanguard Total Bond Market Idx InstlPls
Stable Income Fund

Keogh core funds offered:
BTC US Equity Market Index Fund
Vanguard FTSE Social Index I
Janus Forty N
Vanguard Capital Opportunity Adm
DFA US Core Equity 2 I
Robeco Boston Partners Small Mid-Cap Value Fund
Vanguard Small Cap Index InstlPlus
Cambiar Small Cap Value

? Dodge & Cox International Stock
? Columbia Acorn International Y
? American Funds Capital World Gr&Inc R6
Vanguard Wellington Admiral
Vanguard Target Retire Trust (enter date)
Vanguard Target Retire Trust Plus Income
Standish Mellon Fixed Income Fund
Interest Income Fund
So, no problem with U.S. stocks or U.S. bonds. The question is what to do with international, and whether we care much about the possible differences from a true index fund. I don't have a very good answer to that--except to say that in a similar situation once chose Fidelity Diversified International, an actively managed fund with a high-ish expense ratio, and it worked out find.

So, there are half a dozen international funds, and my knee-jerk reaction is Dodge and Cox just because I have a vague impression that they are a conservative, sensible firm that doesn't do speculative games, but let's look at growth charts, which I do a lot myself; see How to use Morningstar growth charts.

You can and should do this for yourself.

So here goes, and I'm going to make Vanguard Total International the fourth so it comes out in hard-to-see light yellow... and I will also allow myself to be influenced, not by Morningstar's star ratings which gauge past performance, but by their analyst ratings ("bronze," "silver," etc.) I'm looking to see if there are funds that do not show signs of being taking bigger risks in the form of bigger up-and-down excursions, have low expense ratios, and if possible are funds that Morningstar's analysts like.

¥our expense ratios in a plan are probably different from those seen by a retail investor, so find out what yours are. If you don't show the share class I can't tell the actual ticker symbol or expense ratio but I'll assume "institutional."

I wouldn't put any weight on whether Morningstar's analyst rating is "gold" versus "silver" or even "bronze," but I'd like to see that it has been rated, and I would not want to see a rating of "neutral" and certainly not "negative" ("neutral" and "negative" ratings are very rare).

Vanguard International Growth VWILX, 0.33% ER, "silver"
T. Rowe Price International Discovery, TIDDX, 1.08% ER (boo!), "silver"
American Funds Capital World Growth & Income, R6, RWIGX, 0.45%, "gold"
Dodge & Cox International Stock, DODFX, 0.64%, "gold"
Columbia Acorn International Y, CCYIX, 0.88%, "bronze"

Source
Image

I think I'm going to resist the temptation to state a personal choice. I'm inclined to say that any of the five is basically OK, and that personally I would disqualify the T. Rowe Price and Columbia funds as having just too darned high an expense ratio. I'm intrigued by the funds that dropped the least in 2008-2009 but I'd want to dig in and get some kind of answer as to "how they did it," and similarly almost everybody beat the index, especially during the early recovery from 2008-2009, and that bothers me just a little, I'd like to understand how they did that.
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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by ruralavalon » Thu Apr 27, 2017 4:06 pm

Welcome to the forum :) .

It's great to see that you are debt free.

Please amend your original post using the edit button, to add the expense ratios and ticker symbols for the funds offered. Sometimes the expense ratio offered in a 401k or KEOGH plan is different than the expense ratio offered to the general public.

Low expense ratios are critical to long-term portfolio performance. Vanguard blog post, "Stopping the silent killer of returns". Please see the table at the end of the post, "Cumulative impact of fees on ending wealth at various time horizons." Also, here is a calculator you could use to estimate the impact of investing expenses. Bankrate.com, "Mutual fund fees calculator".

Also, low expense ratios are the best predictor of future performance. Morningstar article. “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”

. . . . .

In the 401k you could consider these funds:
Vanguard Instl Ttl Stk Mkt Idx InstlPls
Vanguard International Growth Adm
Vanguard Total Bond Market Idx InstlPls

In the KEOGH plan you could consider these funds:
BTC US Equity Market Index Fund
Dodge & Cox International Stock

What does the fact sheet for the BTC fund say is the index tracked?

. . . . .
Voltron wrote:Vanguard Taxable account has 150K in VTSAX, VTIAX (no bonds in this account)

I max out my tax deferred accounts below.
401K worth 75K (three funds chosen by my father-in-law since clueless 4 yrs ago)

Keogh worth 150K
- Vanguard Target Date 2040

Anyways, read the boglehead book last month but prior to that was worried about choice of funds and signed up with Financial Engines for assets under management. They haven't made changes yet. However, ultimately I would like to construct what the Bogleheads think is the 3 fund portfolio from the core funds offered through my employment, since maybe I really don't need AUM. The core funds all confusing compared to how was so easy to construct in my Vanguard taxable account.
The taxable account may be the better place to buy your international stock fund. Wiki article "Tax-efficient fund placement".

About how much do you think you may be contributing to each account annually during the foreseeable future?

Do you have an asset allocation (stock/bond mix; domestic/international stock mix) that you think you want to aim for?

You can simply add this to your original post using the edit button, so that all of your information is in one place.
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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by pkcrafter » Thu Apr 27, 2017 5:46 pm

Voltron, just so you know.... Financial Engines is involved in multiple lawsuits for kickbacks.

I could post several links, but just the Google page will give you a good idea.

https://www.google.com/search?q=Fiancia ... 8&oe=utf-8


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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by Voltron » Thu Apr 27, 2017 8:12 pm

Retiredjg,

These are not the only accounts. I also have a taxable account with Schwab Intelligent Portfolio, and a Schwab backdoor Roth IRA. I've updated the original post.

BTC US Equity is similar to a total market fund.

54,000 goes to Keogh each year.
18,000 goes to 401K each year.

Nisprius, I've tried to add the stock ticket and expense ratios original post. I really appreciate the insight you were giving me!! The international core funds were confusing me!

Ruralavalon, I see myself going 76% domestic and 24% international stock.

Pkcrafter, true. They corner 40% of institutional advising. Hypothetically, let's say they were not guilty, they would be under a lot of scrutiny which is a good thing.

I spoke with them today. Of course he emphasized multiple times they were fiduciary. Now this year, to manage my 401K and Keogh it would cost about $831. The question...is it worth it?
Last edited by Voltron on Fri Apr 28, 2017 9:04 pm, edited 1 time in total.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by ANC » Fri Apr 28, 2017 2:35 am

On the international side, the Columbia and T Rowe Price funds are small-/mid-cap funds, which as I understand it are generally not the international component of a 3-fund portfolio.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by ruralavalon » Fri Apr 28, 2017 9:23 am

ANC wrote:On the international side, the Columbia and T Rowe Price funds are small-/mid-cap funds, which as I understand it are generally not the international component of a 3-fund portfolio.
That is correct.
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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by aristotelian » Fri Apr 28, 2017 9:41 am

In addition to above recommendations, note that you should not have bonds/fixed income in the taxable Intelligent Portfolio. More tax efficient to use Total Bond Market in your 401K, especially being in a high tax bracket. Is there a way that you can easily eliminate the fixed income portion of the Intelligent Portfolio?

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by Voltron » Fri Apr 28, 2017 11:45 am

aristotelian wrote:In addition to above recommendations, note that you should not have bonds/fixed income in the taxable Intelligent Portfolio. More tax efficient to use Total Bond Market in your 401K, especially being in a high tax bracket. Is there a way that you can easily eliminate the fixed income portion of the Intelligent Portfolio?
You are absolutely correct. This is one detractor to Schwab Intelligent Portfolio. I have to run the questionnaire and try to answer with all the highest risk tolerance to get in that asset allocation. I believe it has bonds in the Schwab intelligent Portfolio because I originally told them I wanted the money back in 6 years, however, the bonds are junk bonds which can be shaky.

Aristotelian, I will see if I can do that. I did that with my Schwab Intelligent Portfolio backdoor Roth and was able to get all stocks (aside from cash drag).

I am still undecided on Financial Engines but I am technically signed up, and they already made some adjustments. The customer service is great. I might try for 1 year, but my internal Boglehead voice is asking me if PRIMECAP funds, or (insert fund they are choosing) really better than a simple 3 fund portfolio? And I'll lose $831 at least a year for them to manage. At least they can see that I lack bonds in my taxable accounts that I linked up with them, and they are trying to compensate in my tax deferred 401K and Keogh.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by retiredjg » Fri Apr 28, 2017 3:49 pm

Do you mean you have junk bonds in the taxable account? That is about as tax-inefficient as you can get.

I was under the impression you could get tax-exempt bonds in the taxable account of the Intelligent Portfolio. In your tax bracket, that is what you should have. I'm thinking you just have the wrong kind of bonds there. Or I misunderstood.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by Voltron » Fri Apr 28, 2017 4:01 pm

Taxable Schwab Intelligent Portfolio:

Image

I thought US corporate high yield bonds were the same as junk bonds.

Yes, I was surprised intelligent portfolio didn't allocate tax friendlier bonds like Muni's. Hence, I am getting rid of the bonds in that portfolio. Yes, I asked them to order those tax friendly bonds in the questionnaire.
Last edited by Voltron on Fri Apr 28, 2017 4:44 pm, edited 1 time in total.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by retiredjg » Fri Apr 28, 2017 4:17 pm

I think you should look again. I feel confident, although I have no direct knowledge, that Schwab has a portfolio for taxable accounts for people in higher tax brackets. It would be incredibly stupid if they don't.

And the REITS definitely do not belong in taxable either.

They could hardly call this an "intelligent portfolio" for a person in your tax bracket. I have enough faith in Schwab to feel confident that there is something else available.
I thought US corporate high yield bonds were the same as junk bonds.
They usually are junk bonds. Junk bonds pay a lot because they are very risky. What they pay out is taxed at your ordinary rate which is likely to be at least 33%. Not a good choice for you. The problem is similar for the REITS.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by retiredjg » Sun Apr 30, 2017 2:05 pm

Since we now know the expense ratios, there are at least 2 really good options.

I'd put a target fund in the 401k and the Keogh because the cost is so close to the costs of using individual funds. You would pick the target fund by finding which is closest to whatever stock to bond ratio you desire. I don't see that listed above.

The "con" to the target funds is they probably have a little more international exposure than you said you wanted. The Vanguard funds tend to run about 40% of stocks and you seem to want about 25% of stocks. If this is a problem, you could make an easy 3 fund portfolio out of the 401k, Keogh, and taxable, holding your international in taxable and using the funds mentioned earlier.

Again, you need to look into the Intelligent Portfolio for your taxable account - the one you have is poorly designed for a taxable account and I feel sure Schwab has one that is better designed for a taxable account.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by Voltron » Sun Apr 30, 2017 6:39 pm

Do bogleheads care for managed Vanguard funds such as the Wellington or PRIMECAP funds? I am assuming I should dump them from my 401K and Keogh tax-deferred account in favor of Target date fund (or equivalent three fund portfolio scenario)?
Last edited by Voltron on Sun Apr 30, 2017 8:37 pm, edited 2 times in total.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by anil686 » Sun Apr 30, 2017 7:21 pm

The TR trust funds are really cheap - it would be an easy way to keep your taxable account in equities and change your bond allocation easily by switching the TR fund choices. Better yet, if you only want 25% international - only invest in TSM in the taxable account since 40% of the TR fund equities are international. JMO though...

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by Voltron » Sat May 06, 2017 1:18 pm

One of my options is BlackRock Equity Index Fund. It's goal is to track the US stock market, so an easy comparison would be to Vanguards ETF: VTI

The full name is "BlackRock Equity Index Collective Investment Trust; Class F Shares".

Since it is a Collective Investment Trust, it does not have a ticker. Does this make it an inferior investment option?

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by GMT-8 » Sat May 06, 2017 1:49 pm

I have been using Financial Engines allocation tool for more than 10 years to give me input on how to invest.
There's a link from my mainVanguard screen and it carries over the numbers from my accounts.
I don't pay anything for this -- perhaps it's part of being a Flagship level?

Having said this, I haven't actually traded using their advice; I just use it for a second opinion.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by ruralavalon » Sat May 06, 2017 2:04 pm

Voltron wrote:One of my options is BlackRock Equity Index Fund. It's goal is to track the US stock market, so an easy comparison would be to Vanguards ETF: VTI

The full name is "BlackRock Equity Index Collective Investment Trust; Class F Shares".

Since it is a Collective Investment Trust, it does not have a ticker. Does this make it an inferior investment option?
Being a Collective Investment Trust (CIT) does not make it an inferior investment option. It's run by BlackRock, they are a large experienced index fund manager. The drawback is you will have infrequent reporting, probably about quarterly.

What does the fact sheet for this CIT specify as the index being tracked?
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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by retiredjg » Sat May 06, 2017 2:38 pm

Voltron wrote: Does this make it an inferior investment option?
No.

Here's some information.

https://www.bogleheads.org/wiki/Collect ... ent_Trusts

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by Voltron » Mon May 22, 2017 2:14 pm

I am only 39 years old. Lets say for example my original Vanguard Target Date was 2040, but the allocation of the Vanguard Target Date for 2020 if placed in my tax deferred 401K and Keogh fit nicely to balance out having the amount of bonds with my overall portfolio in my taxable account.

Is it an odd decision to choose that Target Date 2020 fund for that purpose? I ask because the low expense ratio of 0.06% for all the Target Date Vanguard funds from my institution.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by retiredjg » Mon May 22, 2017 3:11 pm

It's not odd at all. It's smart.

Every few years, you'll need to see if the target fund is migrating too quickly or too slowly toward bonds. You might need to adjust part or all of your account to the next oldest or youngest fund periodically.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by livesoft » Mon May 22, 2017 3:16 pm

Voltron wrote:I am only 39 years old. Lets say for example my original Vanguard Target Date was 2040, but the allocation of the Vanguard Target Date for 2020 if placed in my tax deferred 401K and Keogh fit nicely to balance out having the amount of bonds with my overall portfolio in my taxable account.

Is it an odd decision to choose that Target Date 2020 fund for that purpose? I ask because the low expense ratio of 0.06% for all the Target Date Vanguard funds from my institution.
I would put my fixed income in my tax-deferred accounts if I could and NOT in my taxable account. My taxable account would be 10)% tax-efficient equity funds and not tax-exempt bond funds IF all my bond allocation could fit in tax-deferred accounts. A Roth IRA is not a tax-deferred account.

So ... I would not do what you propose.

But there is no problem using a Target Retirement fund that does not match your desired asset allocation if you can use other funds to get that desired asset allocation ... provided everything is tax efficient in the end and located in the best place for the asset classes.
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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by retiredjg » Mon May 22, 2017 3:25 pm

One of us has interpreted the plan backwards.

I took it to mean the poster wanted to increase bonds in the 401k and Keough to balance out the lack of bonds in taxable.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by Voltron » Mon May 22, 2017 3:38 pm

retiredjg wrote:One of us has interpreted the plan backwards.

I took it to mean the poster wanted to increase bonds in the 401k and Keough to balance out the lack of bonds in taxable.
Thank you. Yes, that is what I intended. It would greatly simply the above tax deferred accounts. I am going to fire Financial Engines. They are heavy on PRIMECAP and Wellington Vanguard managed funds in those tax deferred accounts which I don't know if that is a good choice.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by sometimesinvestor » Mon May 22, 2017 7:59 pm

Most experts including John Bogle do not consider bonds (including BND) a great investment at this time. THis does not mean it won't be a good investment in a year or two, As a bond substitute for your 3 fund portfolio I would check out the return on the stable income fund. If its more than 1.50% I would consider and if its paying 2.) % or more its clear cut. You can always reconsider in a year. Note this is a case when the guaranteed return not the expense ratio is the data you care about

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by Voltron » Mon May 22, 2017 11:03 pm

You are very observant. Yes, actually my plan was to split the 401K to have part Vanguard Total Bond Market and other part Stable Income Fund. I need to research more about stable income fund but so far it seemed to be better growth than total bond market.

The other fund I was trying to understand was Vanguard Target Retire Trust Plus Income.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by selters » Tue May 23, 2017 2:05 am

The international part can be covered by going 100% Target Retirement Fund, which has 40% international stocks. And if you think 40% international stocks is too much, the international allocation can be watered down by using a total US stock market fund and a total US bond fund.

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Re: Can you take these Core funds and Create a Three Fund Portfolio?

Post by ruralavalon » Tue May 23, 2017 10:08 am

Voltron wrote:You are very observant. Yes, actually my plan was to split the 401K to have part Vanguard Total Bond Market and other part Stable Income Fund. I need to research more about stable income fund but so far it seemed to be better growth than total bond market.

The other fund I was trying to understand was Vanguard Target Retire Trust Plus Income.
Both the Stable Value Fund and Vanguard Target Retirement Income Fund are worth a look.

But a the primary purpose of a bond allocation is to lend stability and safety to the overall portfolio. So don't use return as your main criteria in making the fund choice. You want some positive real return (return net of inflation), but primarily need lack of volatility in a market crisis. So in considering a bond fund or bond fund substitute look back to how it held up in 2008 and perhaps 2000 as well.

Vanguard Total Bond Market did hold up very well when stocks crashed.
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