need help with portfolio and asset location

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bogleboyz
Posts: 58
Joined: Sat May 21, 2016 2:30 am

need help with portfolio and asset location

Postby bogleboyz » Sun Jun 18, 2017 7:57 pm

Hi all

I am trying to get my financial house in order and would love to get your feedback on my portfolio and the location of the assets

so far i have been using the fidelity freedom funds 2045 fund (FFKGX) (ER 0.64) in my 401k and 457 at fidelity.
I also have roth IRA account for myself and my wife, plus a taxable account at Vanguard.

I want to take the money out of the Fidelity freedom funds and use the low cost Vanguard funds in the 401k and 457

Emergency funds: 6 months
Debt: $0
Tax Filing Status: married filing jointly
Tax Rate: 39% Federal, 0% State
Age: 40
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 33% of total stocks

I would like the following allocation

REIT Vanguard REIT index fund 7.5% (ER 0.12) (as total stock market has 3% REIT, this will get me around 10% REIT overall)

Remaining 72.5% of stocks are divided as follows

US stocks 48.5% of total portfolio
38.5% Vanguard total stock market index fund (0.04) or Fidelity Total Stock market index FSTVX (ER 0.045)
10% ISHARES S&P SMALL CAP 600 VALUE (ER 0.25) (equivalent of Vanguard small value index fund)


24% international stocks will be invested in Vanguard Total international stock market index fund (0.11)


For 20% Bonds I will use Vanguard total Bond market institutional index fund (available in 401k/457, ER 0.04)

Now regarding the location of the different funds in different accounts, here is what I am thinking

REIT index fund goes in the ROTH IRAs

Extra REIT amount which did not fit into ROTH IRA goes into 401K ( I can use fidelity brokerage link to access fidelity REIT index fund FSRVX ER 0.09)

457 will hold the Vanguard total Bond market index institutional

401 K will hold the following funds
- ISHARES S&P SMALL CAP 600 VALUE
- Vanguard total Bond market index fund institutional VBTIX (ER 0.04)
- Amount left will be invested in Fidelity Total Stock market index fund FSTVX (ER 0.045)

HSA (small balance) will be invested in Vanguard Small value index admiral VSIAX (ER 0.07 + 0.396 (extra fee charged by health equity) total ER 0.466)

Taxable Account
-Vanguard Total Stock Market index fund
-Vanguard Total International stock market index Fund


I would really appreciate any feedback . I am open to suggestions if you think there is a better way to locate these funds or if there any suggestions to improve the portfolio.

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Misenplace
Posts: 117
Joined: Mon Feb 01, 2016 9:46 pm

Re: need help with portfolio and asset location

Postby Misenplace » Sun Jun 18, 2017 9:09 pm

Hi bogleboyz,

You seem to have a great plan. I could not see any way to improve it. If I were starting with a clean slate and were your age, I think I would come up with something similar.

However, I wondered what your current portfolio looked like, and whether there were any issues moving to this proposed portfolio? Also, if you own real estate free and clear (you say you have no debts, so I assume no mortgage), I might not feel REIT's necessary. This is of course rather personal, and depending upon how much you already have tied up in real estate.

Best,
Misenplace

bogleboyz
Posts: 58
Joined: Sat May 21, 2016 2:30 am

Re: need help with portfolio and asset location

Postby bogleboyz » Wed Jun 21, 2017 12:28 am

Thanks for your reply

My current portfolio is a combination of the fidelity target date fund and vanguard total stock market, vanguard total international stock market.

I will only be making changes in the retirement accounts to there will be no capital gains.
I will change future contributions in the taxable account to achieve the desired allocation

However when going through the numbers i realized that my tax deferred space is limited and within the next year or i will not be able to keep the REIT, bonds and small value index fund in the retirement accounts.
At that point i will have either start holding the bonds or the small value index fund in the taxable account (which i understand is generally not advisable).

Therefore i was wondering if i should just forget about the small value index fund and use the total stock market for all of my US stocks?
It will probably make things simpler overall
I would appreciate any feedback
thanks

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Earl Lemongrab
Posts: 1986
Joined: Tue Jun 10, 2014 1:14 am

Re: need help with portfolio and asset location

Postby Earl Lemongrab » Wed Jun 21, 2017 12:47 pm

If I were going to skip one of those, it would be the REIT. That being said, I hold a good amount of small-value in taxable.
This week's fortune cookie: "You will enjoy doing something spontaneous this weekend." Apparently that meant working on a dead PC, but I didn't enjoy that much.

bogleboyz
Posts: 58
Joined: Sat May 21, 2016 2:30 am

Re: need help with portfolio and asset location

Postby bogleboyz » Thu Jun 22, 2017 12:18 am

what fund do you use for small value in taxable?
it was my understanding that small value should be held in retirement accounts as it may not be tax efficient.
whats the impact of holding small vale in taxable from taxes stand point? doesnt that affect your return?

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Earl Lemongrab
Posts: 1986
Joined: Tue Jun 10, 2014 1:14 am

Re: need help with portfolio and asset location

Postby Earl Lemongrab » Thu Jun 22, 2017 12:54 pm

bogleboyz wrote:what fund do you use for small value in taxable?

VBR and IJS. Generally IJS is more tax efficient, probably due to lower REIT percentage.
This week's fortune cookie: "You will enjoy doing something spontaneous this weekend." Apparently that meant working on a dead PC, but I didn't enjoy that much.


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