Investing Strategy

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dchmelir
Posts: 3
Joined: Mon May 15, 2017 10:58 am

Investing Strategy

Postby dchmelir » Fri May 19, 2017 3:52 pm

Hello All,

Here is my portfolio for investment strategy help.

Looking to consolidate funds into some fidelity index funds instead of using the managed account.

Emergency funds: Have this
Debt: Mortgage $669,000 4.25% interest fixed for 30 years (27years to go)
Tax Filing Status: Married no children (but planning to)
Tax Rate: 28% Federal (effective), 10% State
State of Residence: CA
Age: 33
Desired Asset allocation: 95% stocks / 5% bonds
Desired International allocation: 25% of stocks

Overall Portfolio size, assets not counting equity in home or mortgage debt = low 7 figures

Current retirement assets:

Taxable
1.77% cash
14.01% stock (AAPL - current long term cap gains)
25.64% stock (AAPL - current short term cap gains)
(in a current managed acct with expense of 1.1% per year - there are hundreds of funds owned in this acct.)
12.44% Domestic Stock
5.11% Foreign Stock
3.55% Bonds
0.67% Short Term
0.44% Other

401k His 6% Company Match
17.07% LifePath Index 2050 Account A

401k Hers 6% Company Match
2.05% LifePath Index 2050 Account A
2.63% Eaton Vance Trust Co CIT High Yield Cl V
1.63% Vanguard Institutional 500 Index Trust
2.16% Fidelity Contrafund Commingled Pool
0.40% Vanguard Extended Market Index Trust
0.66% Nuveen NWQ Small-Cap Value I
2.17% Dodge & Cox International Stock
1.93% BNY Mellon EB Global Real Estate Sec II

Available 401k Funds listed here with Expense Ratios for people
LifePath Index 2020 Account A 0.05%
LifePath Index 2025 Account A 0.05%
LifePath Index 2030 Account A 0.05%
LifePath Index 2035 Account A 0.05%
LifePath Index 2040 Account A 0.05%
LifePath Index 2045 Account A 0.05%
LifePath Index 2050 Account A 0.05%
LifePath Index 2055 Account A 0.06%
LifePath Index 2060 Account A 0.06%
LifePath Index Retirement Account A 0.05%
Wells Fargo Stable Return Fund E 0.47%
Vanguard Total Bond Market Index Trust 0.03%
Eaton Vance Trust Co CIT High Yield Cl V 0.45%
Loomis Sayles Core Plus Bond Y 0.48%
Vanguard Windsor II Fund - Admiral 0.25%
Vanguard Institutional 500 Index Trust 0.01%
Fidelity Contrafund Commingled Pool 0.43%
William Blair SmallMid Cap Growth CIT II 0.75%
Vanguard Extended Market Index Trust 0.05%
Nuveen NWQ Small-Cap Value I 1.03%
Vanguard Total Intl Stock Idx InstlPls 0.07%
Dodge & Cox International Stock 0.64%
BNY Mellon EB Global Real Estate Sec II

His Roth IRA at Fidelity
1.30% FBGRX
1.27% FCNTX
1.29% FOCPX

Her Roth IRA at Fidelity
0.44% FBGRX
0.47% FCNTX
0.46% FOCPX
0.47% AMZN

Contributions

New annual Contributions (per year)
$18,000 his 401k (+ $10,200 employer match)
$18,000 her 401k (+ $8700 employer match)
$5500 his IRA then convert to Roth
$5500 her IRA then convert to Roth

retiredjg
Posts: 28847
Joined: Thu Jan 10, 2008 12:56 pm

Re: Investing Strategy

Postby retiredjg » Fri May 19, 2017 4:41 pm

This is going to be a long and serious commitment to clean up. Are you on board for that?

Here are the problems I see on quick look.

1) You have way too much APPL. It needs to be trimmed down to 5% or less of your portfolio. Considering how much you have, this may take awhile. But realize that having that much money in one individual stock is extremely risky and reducing this number probably is more important than cleaning up the mess in the rest of your taxable account because the "hundreds" of funds probably includes at least some diversification.

In the meantime, stop reinvesting dividends from the APPLE stock. Send that money to either money market (which you will use once or twice a year to buy something you do want) or to something basic like a Total Stock Market Index.

2) Her 401k has too many funds. That can be immediately fixed by putting the entire account (and the future contributions) into a LifePath Fund.

3) I don't know what is in the Roth IRAs, but holding those tiny slices in a small account does not help anything and just causes unnecessary complexity. I'd put each Roth IRA into a Fidelity Freedom INDEX fund. Do not accidentally get the higher cost regular Fidelity Freedom funds.

4) For the taxable account, you are going to have to look at each of the "hundreds" of holdings individually in order to get rid of them in an intelligent manner. You would sell anything with a loss (short or long term) immediately and sell a corresponding amount of APPL to start trimming down that issue as quickly as possible. It would be most efficient if you sold equal amounts of short term losses to offset short term gains, but that is a lesser issue.

Do you already understand how short term and long term losses and gains are taxed?

5) You need to get away from whoever is managing your taxable account. It would be helpful if you wish to tell us who is doing the managing. Can you give us some idea what types of funds are held there? That will help determine whether you can transfer in kind or if you need to liquidate everything and just move it. Yes, there is likely to be a significant tax cost if you have to do that.

Is this taxable account a recent inheritance? That may change things.

mhalley
Posts: 4295
Joined: Tue Nov 20, 2007 6:02 am

Re: Investing Strategy

Postby mhalley » Fri May 19, 2017 9:34 pm

Hundreds of FUNDS? Talk about egregious, are these loaded per chance? Run away from this charlaton asap.

dchmelir
Posts: 3
Joined: Mon May 15, 2017 10:58 am

Re: Investing Strategy

Postby dchmelir » Tue May 23, 2017 3:20 am

Thanks retiredjg. Here are some answers to your questions:

1a. Too much AAPL
My wife and I both work at Apple and they give significant portion of our overall compensation in AAPL stock. Yes I know I need to diversify even more. Earlier this year we sold AAPL and put the money in the managed account to start the diversification process, but I know we need to do more.

1b. Too many funds in the taxable managed acct. I have put all funds and percentage within that account I own at the bottom.
I really am looking for a few good simple index funds to consolidate these into.

1c. Stop reinvesting dividends AAPL. I'd be fine just converting those dividends to the index funds twice a year when our big RSU grants vest so I can take care of reconsolidating into the right index funds all at once.

2. Too many funds in wife's 401k. Does make sense to put her into one Life Path Fund to make things easy.

3. Put Roth IRA money into Freedom Index fund. Do you have a recommend fund I can take a look at?

4. We haven't made that much in the managed account so far, and selling all outright would put all sales in short term cap gains territory. It's not the end of the world, but in general, simplification is the key I'm trying to go after.

4b. Short/long term losses and gains. I know the differences between short/long term gains, but I'm unclear how losses are counted differently.

5. Managed account. It's a Fidelity Managed Account. 40 funds... looks like hundreds when you glance at it. All info is listed below:
It is not an inheritance.

Managed Acct Assets (22% of total assets)
FDRXX** FIDELITY GOVERNMENT CASH RESERVES 0.62%
CEMVX CAUSEWAY EMERGING MRKTS FD INV CL 2.57%
COFRX COLUMBIA CONTRARIAN CORE FUND CL R5 2.02%
CWB SPDR SERIES TRUST BLMBRG BRC CNVRT 2.05%
EFA ISHARES MSCI EAFE ETF 3.87%
FCTFX FIDELITY CALIFORNIA MUNICIPAL INCOME 2.67%
FDGRX FIDELITY GROWTH COMPANY 4.16%
FIIIX FIDELITY ADVISOR INTL GROWTH CLASS I 2.67%
FKSCX FRANKLIN INTERNATL SM CAP GRWTH ADVISOR 0.36%
FLCSX FIDELITY LARGE CAP STOCK 4.90%
FMNDX FIDELITY CONSERVATIV INCOME MUNI BD CL I 0.49%
FTABX FIDELITY TAX-FREE BOND 0.66%
FUQIX FIDELITY SAI U.S. QUALITY INDEX FUND 0.93%
FVDFX FIDELITY VALUE DISCOVERY 4.53%
GNR SPDR INDEX SHS FDS S&P GLOBAL NAT RES ETF 1.61%
IEMG ISHARES INC CORE MSCI EMERGING MKTS ETF 1.61%
IJS ISHARES S&P SMALLCAP 600 VALUE ETF 1.18%
IJT ISHARES S&P SMALLCAP GROWTH ETF 1.16%
IWB ISHARES RUSSELL 1000 ETF 3.64%
IWF ISHARES RUSSELL 1000 GROWTH ETF 6.93%
JAENX JANUS ENTERPRISE FUND CLASS T SHARES 3.72%
LSGRX LOOMIS SAYLES GROWTH CL Y 2.15%
LVAEX LSV VALUE EQUITY FUND INVESTOR 3.68%
MFMIX MSIF FRONTIER MARKETS PORT CL I 0.18%
MIQBX MORGAN STA INST INC. INTERNATL EQUITY A 1.82%
MTBAX MAINSTAY TAX FREE BOND CLASS A 2.17%
OAKIX OAKMARK INTL INVESTOR CL 3.05%
OAKMX OAKMARK FUND INVESTOR CLASS 6.95%
PATFX T ROWE PRICE TAX FREE HIGH YIELD ADV 2.18%
PRIUX T ROWE PRICE INTERNATIONAL STK I 2.73%
PRZIX T ROWE PRICE EMERG MARKETS STOCK FUND I 2.31%
SDCSX DEUTSCHE CALIFORNIA TAX FREE INC FD S 5.16%
SHMMX WESTERN ASSET MANAGED MUNI CL A 1.60%
TIDDX T ROWE PRICE INTNATL DISCOVERY FUND I CL 0.41%
TPINX TEMPLETON GLOBAL BOND CLASS A 2.17%
TROIX T ROWE PRICE OVERSEAS STOCK I CL 2.45%
TSWIX TRANSAMERICA INTL EQUITY CL I 0.89%
WAFMX WASATCH FRONTIER EMERGING SMALL COS 0.37%
WFMDX WELLS FARGO SPECIAL MID CAP ADM 3.66%
WUSMX WELLS FARGO ULTRA SHT MUNI INC ADM 3.71%

mortfree
Posts: 336
Joined: Mon Sep 12, 2016 7:06 pm

Re: Investing Strategy

Postby mortfree » Tue May 23, 2017 4:16 am

It's tough to manage the apple portion because all the stock does is go up (and down on occasion-recent run was $135 to $90 to $153) and pays very nice dividends. And when you work for them and receive stock compensation they are just making it even harder.

There could be worse stocks to hold or be rewarded but not apple.

You have other stuff to clean up first so focus on that and enjoy your apple investment a little longer.

Also wanted to say Thanks to you and your wife for your daily efforts working there, whether or not you have direct influence on the stock.

rkhusky
Posts: 3800
Joined: Thu Aug 18, 2011 8:09 pm

Re: Investing Strategy

Postby rkhusky » Tue May 23, 2017 7:37 am

I suggest putting your tax-advantaged accounts in Lifepath 2050 or Fidelity Freedom Index 2050 (or 2040 or 2045 if you keep holding significant Apple stock). As retiredjg said, sell all funds in the managed account with a loss. I would then buy Total Stock Market, Total International and/or Intermediate Tax Exempt.

retiredjg
Posts: 28847
Joined: Thu Jan 10, 2008 12:56 pm

Re: Investing Strategy

Postby retiredjg » Tue May 23, 2017 7:49 am

Just a quick reply right now. More later.


My wife and I both work at Apple and they give significant portion of our overall compensation in AAPL stock. Yes I know I need to diversify even more. Earlier this year we sold AAPL and put the money in the managed account to start the diversification process, but I know we need to do more.

The fact that you have two salaries dependent on the same company that your portfolio rests on is very concerning and very risky.

Of course, none of us believe that Apple will fail, but it has happened before and it will happen again to "can't fail" companies. During a downturn, you could both lose your jobs and lose a big chunk of your savings at the same time. That would be financially devastating and recovery could take quite a long time.

This is a completely unnecessary risk because you have control over it. Sell the APPLE stock and build up an emergency fund that will handle two job losses, not just one.


5. Managed account. It's a Fidelity Managed Account. 40 funds... looks like hundreds when you glance at it. All info is listed below:
It is not an inheritance.

Managed Acct Assets (22% of total assets)
FDRXX** FIDELITY GOVERNMENT CASH RESERVES 0.62%
CEMVX CAUSEWAY EMERGING MRKTS FD INV CL 2.57%
COFRX COLUMBIA CONTRARIAN CORE FUND CL R5 2.02%
CWB SPDR SERIES TRUST BLMBRG BRC CNVRT 2.05%
EFA ISHARES MSCI EAFE ETF 3.87%
FCTFX FIDELITY CALIFORNIA MUNICIPAL INCOME 2.67%
FDGRX FIDELITY GROWTH COMPANY 4.16%
FIIIX FIDELITY ADVISOR INTL GROWTH CLASS I 2.67%
FKSCX FRANKLIN INTERNATL SM CAP GRWTH ADVISOR 0.36%
FLCSX FIDELITY LARGE CAP STOCK 4.90%
FMNDX FIDELITY CONSERVATIV INCOME MUNI BD CL I 0.49%
FTABX FIDELITY TAX-FREE BOND 0.66%
FUQIX FIDELITY SAI U.S. QUALITY INDEX FUND 0.93%
FVDFX FIDELITY VALUE DISCOVERY 4.53%
GNR SPDR INDEX SHS FDS S&P GLOBAL NAT RES ETF 1.61%
IEMG ISHARES INC CORE MSCI EMERGING MKTS ETF 1.61%
IJS ISHARES S&P SMALLCAP 600 VALUE ETF 1.18%
IJT ISHARES S&P SMALLCAP GROWTH ETF 1.16%
IWB ISHARES RUSSELL 1000 ETF 3.64%
IWF ISHARES RUSSELL 1000 GROWTH ETF 6.93%
JAENX JANUS ENTERPRISE FUND CLASS T SHARES 3.72%
LSGRX LOOMIS SAYLES GROWTH CL Y 2.15%
LVAEX LSV VALUE EQUITY FUND INVESTOR 3.68%
MFMIX MSIF FRONTIER MARKETS PORT CL I 0.18%
MIQBX MORGAN STA INST INC. INTERNATL EQUITY A 1.82%
MTBAX MAINSTAY TAX FREE BOND CLASS A 2.17%
OAKIX OAKMARK INTL INVESTOR CL 3.05%
OAKMX OAKMARK FUND INVESTOR CLASS 6.95%
PATFX T ROWE PRICE TAX FREE HIGH YIELD ADV 2.18%
PRIUX T ROWE PRICE INTERNATIONAL STK I 2.73%
PRZIX T ROWE PRICE EMERG MARKETS STOCK FUND I 2.31%
SDCSX DEUTSCHE CALIFORNIA TAX FREE INC FD S 5.16%
SHMMX WESTERN ASSET MANAGED MUNI CL A 1.60%
TIDDX T ROWE PRICE INTNATL DISCOVERY FUND I CL 0.41%
TPINX TEMPLETON GLOBAL BOND CLASS A 2.17%
TROIX T ROWE PRICE OVERSEAS STOCK I CL 2.45%
TSWIX TRANSAMERICA INTL EQUITY CL I 0.89%
WAFMX WASATCH FRONTIER EMERGING SMALL COS 0.37%
WFMDX WELLS FARGO SPECIAL MID CAP ADM 3.66%
WUSMX WELLS FARGO ULTRA SHT MUNI INC ADM 3.71%

Congratulations. This is one of the ugliest taxable accounts I've ever seen posted. Your advisor has done you the worst kind of disservice. You are quite wise to realize so soon that this is just a mess. Getting out immediately would be the smartest thing to do, taxes or not taxes. There might be a few that are worth keeping, but I'll have to look at this list again later.

Where and how did you find this "advisor"? S/He should be ashamed.

goingup
Posts: 2344
Joined: Tue Jan 26, 2010 1:02 pm

Re: Investing Strategy

Postby goingup » Tue May 23, 2017 8:13 am

OP-
You've gotten great suggestions from retiredjg. You will have some work to do simplify, but it's worth it.

Now you may understand why this forum has such contempt for most advisors. They produce ridiculous portfolios at considerable cost with disappointing results. Clients get ensnared, especially with large taxable accounts, and feel like it's just easier to stay put.

User avatar
BL
Posts: 6789
Joined: Sun Mar 01, 2009 2:28 pm

Re: Investing Strategy

Postby BL » Tue May 23, 2017 8:47 am

goingup wrote:OP-
You've gotten great suggestions from retiredjg. You will have some work to do simplify, but it's worth it.

Now you may understand why this forum has such contempt for most advisors. They produce ridiculous portfolios at considerable cost with disappointing results. Clients get ensnared, especially with large taxable accounts, and feel like it's just easier to stay put.

+1
It looks like a taxable account. Normally one would suggest checking out the ERs to see what it is costing, but there are SOOO many!

Perhaps you have the Capital Gains/Losses for each fund, or at least the total, so you don't need to calculate them. I like to know what the tax results will be before selling, but that is a lot to calculate. Do you know what the gains are?

I wonder how a Vanguard PAS management (0.3%/yr AUM) would handle this mess. I would consider giving them a call to find out what they might do. They would probably sell and put you into a handful or so of low-ER Vanguard index funds. Not sure how they consider taxes, as most advisors stay away from that subject. You could drop them in a year or so if you wished and not be left with such a mess. Fidelity is fine if you know what you want, but I see the risk if you are not certain.

Owning so much stock in a company you work for is indeed a risk. I guess earning so much on them so far makes it a great problem to have.

dchmelir
Posts: 3
Joined: Mon May 15, 2017 10:58 am

Re: Investing Strategy

Postby dchmelir » Wed May 24, 2017 3:13 am

Man, you guys are awesome!!

I'm really not too concerned with just selling all the stuff in the managed account now, it's made only about $8000 in the last few months, so I'll just imagine I got a nice $8000 bonus from work, and I'll pay the taxes to get out of the mess.

I am definitely planning to sell the long term gain apple stock soon, I figured I would reach out here first before selling and putting it all in the managed account and adding to that rat's nest.

I'll take care of my wife's 401k consolidating all of it into the LifePath2050.

In general, is the strategy to hold the same funds in RothIRA that I hold in taxable accounts to keep things simple? Or is there a reason not to do that?

Can you give me some recommended funds that I can start to look at that? I figure you guys recommend having a few (not 40..haha) index funds that together address the 95/5 (stocks/bonds) and 70/30 (domestic/international) splits. Or are there goods funds that have it all diversified inside itself?

One note: In the investing help tutorial, it said to not include cash 'emergency' funds in the percentages I sent out initially. But I did want to let you know we have 5% of our overall assets in that cash account to guard against job loss, etc.

Thanks again for the all the help.

rkhusky
Posts: 3800
Joined: Thu Aug 18, 2011 8:09 pm

Re: Investing Strategy

Postby rkhusky » Wed May 24, 2017 2:42 pm

dchmelir wrote:In general, is the strategy to hold the same funds in RothIRA that I hold in taxable accounts to keep things simple? Or is there a reason not to do that?


That would be ideal in terms of simplicity. However, having taxable bonds in your taxable account would cause additional drag in your tax bracket. It's a question of whether you value simplicity versus tax efficiency.

The simplest would be to put a target year fund in taxable, which wouldn't be too bad initially, because target years 2040-2050 don't have much in the way of bonds anyway.

You could also go with a 3-fund approach, with Total Stock Martk (TSM), Total International Stock Market, Intermediate Tax Exempt in taxable, trying to emulate your target year fund's asset allocation.

You could go with just TSM and TISM in taxable, since the target year funds in your IRA/401K probably have more than 5% bonds, but this strategy may not work as well in the future, if you start to increase the amount of bonds in your portfolio.

You could forgo the target year funds and find a mix of TSM, TISM, Total Bond Market, and Intermediate Tax Exempt in your accounts that provides your desired allocation and allows simple allocation rebalancing. This is probably the most cost effective and tax efficient approach, but probably the most work.

inbox788
Posts: 3678
Joined: Thu Mar 15, 2012 5:24 pm

Re: Investing Strategy

Postby inbox788 » Wed May 24, 2017 8:39 pm

dchmelir wrote:I'm really not too concerned with just selling all the stuff in the managed account now, it's made only about $8000 in the last few months, so I'll just imagine I got a nice $8000 bonus from work, and I'll pay the taxes to get out of the mess.

Yes, what a mess with the managed account! You could just liquidate the account and pull off the bandaid (take the full tax hit) right now. Or if you want to take a little risk, consider keeping the biggest 2-4 dollar gains. When did you establish the account? How many dollars is IWF up? (over 12% YTD)
IWF ISHARES RUSSELL 1000 GROWTH ETF 6.93%

OAKMX has high fees, but tracks SP500. It might be one of the higher gains.
OAKMX OAKMARK FUND INVESTOR CLASS 6.95%

Find the highest dollar gain funds and if 2-4 of them come close to $8000 and you only need to hold them 6 months, consider taking the risk and waiting till next year to pay long term capital gains instead.

EFA and FDGRX are up nearly 15% YTD.
EFA ISHARES MSCI EAFE ETF 3.87%
FDGRX FIDELITY GROWTH COMPANY 4.16%

I'm having trouble just looking at the names figuring out where the losses or minor gains are, and if it takes too many funds to come up with a significant tax deferment, then it might not be worth the hassle.


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