Portfolio Review: Need your input and opinion

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pulibidda007
Posts: 4
Joined: Mon Jun 05, 2017 1:08 pm

Portfolio Review: Need your input and opinion

Post by pulibidda007 » Wed Jul 12, 2017 1:43 pm

Started investing last year after I bought my house with a 20% downpayment and filling up my emergency fund to cover my 1 yr expenses including mortgage PITI.

Here's the breakdown:

Emergency Stash (Incl. Mortgage PITI): $60,000
Yearly expenses : ~$30,000 (Not including Mortgage PITI)
Gross income: Salary $180,000 + 20% Bonus paid twice yearly (Wife is a SAHM). 1 toddler.
Tax filing status: MFJ

Tax advantaged:
401k (Past employer): Empower retirement invested 100% in Vanguard Target Retire Trust Plus 2050: $163,015.12
401K (Present employer): Fidelity VINIX(70%), VIMAX(20%), VSMAX(10%): Total $36,804.40
My Roth IRA: $5,634 (VTSMX)
Wife's Roth IRA: $5,634 (VTSMX) [No IRA as we don't qualify due to high income. I just backdoor into roth. 2016 was my 1st year]

Taxable accounts:
Vanguard: VFIAX ($26,287.37), VTSAX($15,370). Invested in VFIAX but found VTSAX has a slight advantage. So left VFIAX as is and started investing in VTSAX.

Wealthfront: Invested $10,000 in 2015. Now it is $12,378.55. Risk Score: 7.0. Didn't want to liquidate due to taxes and have free credits via referrals.

No debts.

I want your opinion on my portfolio. Shall I continue with I am doing? Or do I adjust. If so, what should I do?
Where do I fit Bonds in this mix? How about international funds? Any advise?

Additional information:
Age: 34
Risk Tolerance: I am not bothered about the general market fluctuations and recessions. I have an emergency stash to take care of all my expenses for a full year. So I am not going to take my money away from investing just because of a downturn. But, as I get closer to retirement (I am hoping to retire early, probably in about 16 years) I want to be more conservative as I will be feeding off of my investments.

Desired asset allocation (current): I am 100% stocks currently with the exception of my target retirement fund from my previous employer. I'd like to keep it that way for the time being. Ideally, I would be comfortable with a 80/20 stock/bond split. I haven't thought about international stocks at all, to be honest.

Current employer accepts rollovers from my previous employer. Previous employer 401K has a fees of $110 per year paid quarterly on top of the expense ratio.

Current 401K options:
Name/Inception Date Gross Expense Ratio** Shareholder Fees
AF FUNDMNTL INV R6 (RFNGX)08/01/1978 0.31% No additional fees apply to everything below
ALZGI NFJ DIV VAL I (NFJEX)05/08/2000 0.73%
MAINSTAY LG CAP GR I (MLAIX)07/03/1995 0.75%
VANGUARD INST INDEX (VINIX)07/31/1990 0.04%
JPM MIDCAP VALUE L (FLMVX)11/13/1997 0.95%
NWD GNV MDCP GR IS (NWHYX)01/04/1999 0.93%
VANG MIDCAP IDX ADM (VIMAX)05/21/1998 0.06%
ABF/S SM CAP GRTH I (STSIX)12/01/2005 1.1%
ALZGI NFJ SMCPVL IS (PSVIX)10/01/1991 0.88%
VANG SM CAP IDX ADM (VSMAX)10/03/1960 0.06%
AF EUROPAC GROWTH R6 (RERGX)04/16/1984 0.5%
LZRD EMRG MKTS EQ IS (LZEMX)07/15/1994 1.09%
TMPL FRGN SM CO ADV (FTFAX)09/20/1991 1.62%
VANG TOT INTL STK AD (VTIAX)04/29/1996 0.11%
VOYA GLOBAL RE I (IGLIX)11/05/2001 1.01%
TRP RETIREMENT 2005 (TRRFX)02/27/2004 0.6%
TRP RETIREMENT 2010 (TRRAX)09/30/2002 0.59%
TRP RETIREMENT 2015 (TRRGX)02/27/2004 0.62%
TRP RETIREMENT 2020 (TRRBX)09/30/2002 0.66%
TRP RETIREMENT 2025 (TRRHX)02/27/2004 0.69%
TRP RETIREMENT 2030 (TRRCX)09/30/2002 0.72%
TRP RETIREMENT 2035 (TRRJX)02/27/2004 0.74%
TRP RETIREMENT 2040 (TRRDX)09/30/2002 0.76%
TRP RETIREMENT 2045 (TRRKX)05/31/2005 0.76%
TRP RETIREMENT 2050 (TRRMX)12/29/2006 0.76%
TRP RETIREMENT 2055 (TRRNX)12/29/2006 0.76%
STABLE VALUE FUND03/27/2008 0.3%
FIAM CORE PLUS CL E06/30/2004 0.33%
VANG TOT BD MKT INST (VBTIX)12/11/1986 0.04%
VANG INFL PROT ADM (VAIPX)06/29/2000 0.1%

Fund available at previous 401K:
Putnam Stable Value Fund 0.32%
SSgA Russel Small Cap Index fund Class S 0.05%
SSgA Global Equity ex US Index NL Ser C 0.17%
SSgA S&P Mid Cap Indx NL Cl C 0.05%
Vanguard Target Retire Trust Plus Income 0.06%
Vanguard Target Retire trust Plus 2010-2060 (11 different funds) 0.06%
SSgA S&P 500 Idx NL Ser N 0.03%
SSgA U.S. Bond Index Fund Class C 0.06%


Thanks.
Last edited by pulibidda007 on Wed Jul 12, 2017 4:48 pm, edited 1 time in total.

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ruralavalon
Posts: 11087
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Portfolio Review: Need your input and opinion

Post by ruralavalon » Wed Jul 12, 2017 2:50 pm

Welcome to the forum :) .

Congratulations on your new home.
pulibidda007 wrote:Started investing last year after I bought my house with a 20% downpayment and filling up my emergency fund to cover my 1 yr expenses including mortgage PITI.

Here's the breakdown:

Emergency Stash (Incl. Mortgage PITI): $60,000
Yearly expenses : ~$30,000 (Not including Mortgage PITI)
Gross income: Salary $180,000 + 20% Bonus paid twice yearly (Wife is a SAHM). 1 toddler.
Tax filing status: MFJ

Tax advantaged:
401k (Past employer): Empower retirement invested 100% in Vanguard Target Retire Trust Plus 2050: $163,015.12
401K (Present employer): Fidelity VINIX(70%), VIMAX(20%), VSMAX(10%): Total $36,804.40
My Roth IRA: $5,634 (VTSMX)
Wife's Roth IRA: $5,634 (VTSMX) [No IRA as we don't qualify due to high income. I just backdoor into roth. 2016 was my 1st year]

Taxable accounts:
Vanguard: VFIAX ($26,287.37), VTSAX($15,370). Invested in VFIAX but found VTSAX has a slight advantage. So left VFIAX as is and started investing in VTSAX.

Wealthfront: Invested $10,000 in 2015. Now it is $12,378.55. Risk Score: 7.0. Didn't want to liquidate due to taxes and have free credits via referrals.

No debts.

I want your opinion on my portfolio. Shall I continue with I am doing? Or do I adjust. If so, what should I do?
Where do I fit Bonds in this mix? How about international funds? Any advise?

Thanks.
I suggest adding an intermediate-term bond fund, and an international stock fund. The first place to consider is your current 401k, if good well diversified, low expense ratio funds are offered there.

Some additional information is needed.

What is your age? What is your own assessment of your tolerance for risk?

What is your desired asset allocation (stock/bond mix, and domestic/international mix)?

Will your current 401k accept a rollover from your old 401k?

What funds are offered in your current 401k? Please give fund names, tickers and expense ratios.

What funds are offered in your old 401k? Please give fund names, tickers and expense ratios. Is there an account maintenance fee charged to keep the account there? If so how much?

You can simply add this to your original post using the edit button, it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

pulibidda007
Posts: 4
Joined: Mon Jun 05, 2017 1:08 pm

Re: Portfolio Review: Need your input and opinion

Post by pulibidda007 » Wed Jul 12, 2017 4:48 pm

Thank you. I updated the post with your suggestions. Sorry for the formatting mess.

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ruralavalon
Posts: 11087
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Portfolio Review: Need your input and opinion

Post by ruralavalon » Wed Jul 12, 2017 6:40 pm

Asset allocation.
pulibidda007 wrote:Age: 34
Risk Tolerance: I am not bothered about the general market fluctuations and recessions. I have an emergency stash to take care of all my expenses for a full year. So I am not going to take my money away from investing just because of a downturn. But, as I get closer to retirement (I am hoping to retire early, probably in about 16 years) I want to be more conservative as I will be feeding off of my investments.

Desired asset allocation (current): I am 100% stocks currently with the exception of my target retirement fund from my previous employer. I'd like to keep it that way for the time being. Ideally, I would be comfortable with a 80/20 stock/bond split. I haven't thought about international stocks at all, to be honest
In my opinion a 20% bond allocation is reasonable at age 34. This is expected to substantially reduce volatility (risk), with only a relatively slight decrease in return. Graph, "An Efficient Frontier: the power of diversification". Please see the wiki articles Bogleheads® investment philosophy, "Never bear too much or too little risk", and "Asset allocation".

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "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, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). You can find lots of debate here on international allocation, opinions running from 00% to 50% of stocks in international stocks.

That works out to about 20% bonds, 20% international stocks, and 60% domestic stocks. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.


Accounts.
pulibidda007 wrote:I want your opinion on my portfolio. Shall I continue with I am doing? Or do I adjust. If so, what should I do?
Where do I fit Bonds in this mix? How about international funds? Any advise?
As stated before I suggest adding a bond allocation and an international stock allocation. The real questions are what account to use, and what to do with the old 401k.

Both the old and current 401ks offer excellent fund choices, almost equal in diversification and expense ratios. the most striking difference is in the target retirement funds. The old 401k has "Vanguard Target Retire trust Plus 2010-2060 (11 different funds) 0.06%", but the current 401k offers "TRP RETIREMENT 2050 (TRRMX)12/29/2006 0.76%". The expense ratio difference of 0.70% is very significant, so if you really wish to stay with a target retirement investment ("I'd like to keep it that way for the time being.") then leave the old 401k as is.

However, my suggestion is to roll the old 401k over into the current 401k. This gives you one less account to keep track of and manage, and gives you slightly lower expense ratios than if you used the index funds in the old 401k. Also portfolio management will be easier. In general its better not to mix target retirement funds with regular index funds. That just makes it harder to keep track of your asset allocation. The main advantage of a target retirement fund is that it is an all-in-one fund, that you can just set and forget. You lose that advantage if you combine it with regular index funds.

In the combined 401k I suggest using these funds:
Vanguard Institutional Index Fund (a S&P 500 index fund) (VINIX) ER 0.04%
Vanguard Total International Sock Index Fund Admiral Shares (VTIAX) ER 0.11%
Vanguard Total Bond Market Index Fund Institutional (VBTIX) ER 0.04%


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".

It is often best to look at all accounts together as a single unified whole, rather than consider each account separately. Start fund selection by choosing only the one or two best funds (diversified + low ER) in the work-based accounts, where the choices offered are limited. Then complete the rest of the asset allocation using the nearly unlimited choices available in the IRAs.

For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (such as Vanguard Institutional Index Fund in the current 401k) is good enough for domestic stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations". An S&P 500 index fund covers 81% of the U.S. stock market, and in the 25 years since the creation of the first total stock market fund the performance of the two types of funds has been almost identical. Morningstar “growth of $10k” graph, VFINX vs VTSMX. See also Allan Roth, CBS Moneywatch, "John C. Bogle on the S&P 500 vs. the Total Stock Market". So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically added little in performance.

If you want to add the Vanguard Small-Cap Index Fund in the 401k, then an 82/18 mix of S&P 500 and small-cap will approximate the content of a total stock market index fund. Wiki article, "Approximating total stock market".

To make portfolio management easy it's important to have all three fund types inside one of the accounts, preferably a large account that will receive large contributions in the future. In your case that would be the current 401k.

In the taxable account I suggest using Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% and Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%. Both are very tax-efficient. Wiki article "Tax-efficient fund placement". Those funds are also well suited to any type of account. Both are very diversified with very low expense ratios.


Example portfolio.
Here is an example portfolio that you could consider. This is a three-fund type portfolio, modified as necessary to accommodate the fund offerings in your 401k. Current portfolio size = $262.7k. New annual contributions = ?????. The asset allocation is: 20% bonds; 20% international stocks; and 60% domestic stocks. The percentages given are percentages of the total portfolio, not of a given account. The suggestion is to switch both the existing balances and the new contributions to the funds indicated. All percentages and dollar amounts are rounded off, so may not add up exactly.

Taxable account @ Vanguard (16% of current portfolio; $41.7k)
06%, $15.4k, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%
10%, $26.3k, Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%

Current 401k, includes rollover of old 401k (76% of current portfolio; $199.8k)
36%, $94.6k, Vanguard Institutional Index Fund (a S&P 500 index fund) (VINIX) ER 0.04%
20%, $52.5k. Vanguard Total International Sock Index Fund Admiral Shares (VTIAX) ER 0.11%
20%, $52.5k, Vanguard Total Bond Market Index Fund Institutional (VBTIX) ER 0.04%

His Roth IRA, via backdoor (02% of current portfolio; $5.6k)
02%, $5.6k, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%

Her Roth IRA, via backdoor (02% of current portfolio; $5.6k)
02%, $5.6k, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%

Wealthfront account (04% of current portfolio; $10k)
04%, $10k, ????


Rebalancing.
Because the funds will grow at different and unpredictable rates, it may be necessary every year or two to rebalance in order to maintain the desired asset allocation. Wiki article, "Rebalancing". You can easily adjust the asset allocation by exchanging between funds inside the current 401k.

Avoid exchanging between funds in the taxable account, which can create income tax liability.

. . . . .

I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews".

If you have any questions just ask.

I hope that this helps.
Last edited by ruralavalon on Wed Jul 12, 2017 7:16 pm, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Duckie
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Re: Portfolio Review: Need your input and opinion

Post by Duckie » Wed Jul 12, 2017 7:13 pm

pulibidda007 wrote:Wealthfront: Invested $10,000 in 2015. Now it is $12,378.55. Risk Score: 7.0. Didn't want to liquidate due to taxes and have free credits via referrals.
Is this your play account or is it part of your retirement portfolio? What is it invested in?
I want your opinion on my portfolio. Shall I continue with I am doing? Or do I adjust. If so, what should I do?
Where do I fit Bonds in this mix? How about international funds? Any advise?
At age 34 I recommend at least 20% bonds and maybe 25%. I also recommend 30% of stocks in international.
Current employer accepts rollovers from my previous employer. Previous employer 401K has a fees of $110 per year paid quarterly on top of the expense ratio.
Roll the old 401k assets into the current 401k.
Current 401K options:
The best options are:
  • VANGUARD INST INDEX (VINIX) 0.04% -- Large caps, 80% of US stocks
  • VANG MIDCAP INDEX (VIMAX) 0.06% -- Mid caps, 6% of US stocks
  • VANG SM CAP INDEX (VSMAX) 0.06% -- Small caps, 14% of US stocks
  • VANG TOT INTL STK (VTIAX) 0.11% -- Complete international stocks
  • VANG TOT BD MKT INST (VBTIX) 0.04% -- US bonds
Funds available at previous 401K:
All decent funds. Moving would be for simplicity, not for cost. (Although moving would save you the $110 fee.)

The following example has an AA of 80% stocks, 20% bonds, with 30% of stocks in international. That breaks down to 56% US stocks, 24% international stocks, and 20% bonds. Your retirement portfolio could look something like:

Taxable at Vanguard -- $42K -- 17%
10% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
7% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

401k -- $200K -- 79% <-- Includes rollover from previous 401k.
25% (VINIX) Vanguard Institutional Index Fund Institutional Shares (0.04%)
10% (VSMAX) Vanguard Small-Cap Index Fund Admiral Shares (0.06%)
24% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
20% (VBTIX) Vanguard Total Bond Market Index Fund Institutional Shares (0.04%)

His Roth IRA at Vanguard -- $5.6K -- 2%
2% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15%)

Her Roth IRA at Vanguard -- $5.6K -- 2%
2% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15%)

My comments:
  • This ignores the Wealthfront account because I don't know its purpose.
  • This doesn't bother with the separate mid-caps.
  • Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot". See the Vanguard paper link and the discussion. I usually split the difference and recommend 30% of stocks.
Something to think about.
Last edited by Duckie on Thu Jul 13, 2017 2:16 pm, edited 1 time in total.

mega317
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Re: Portfolio Review: Need your input and opinion

Post by mega317 » Thu Jul 13, 2017 12:17 am

pulibidda007 wrote: Risk Tolerance: I am not bothered about the general market fluctuations and recessions. I have an emergency stash to take care of all my expenses for a full year. So I am not going to take my money away from investing just because of a downturn.
I just want to add my opinion that a sizable emergency fund doesn't necessarily relate to your risk tolerance in your retirement accounts. It's not about needing the money immediately. A big emergency fund isn't necessarily going to prevent the feeling, in a market crash, that you made a mistake in your retirement portfolio and you should sell. So I'd encourage you to think more deeply in deciding your asset allocation.

pulibidda007
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Re: Portfolio Review: Need your input and opinion

Post by pulibidda007 » Thu Jul 13, 2017 11:53 am

Thank so much for the incredible amount of information. I will read through these and respond. It looks like there is a lot of homework to do.

Kennyt7
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Joined: Mon Jan 19, 2015 7:28 pm

Re: Portfolio Review: Need your input and opinion

Post by Kennyt7 » Thu Jul 13, 2017 2:46 pm

make sure you include small cap, intl stock and bond, em, reits and vanguard total stock

pulibidda007
Posts: 4
Joined: Mon Jun 05, 2017 1:08 pm

Re: Portfolio Review: Need your input and opinion

Post by pulibidda007 » Thu Jul 13, 2017 4:51 pm

Duckie wrote: Is this your play account or is it part of your retirement portfolio? What is it invested in?
Hi Duckie, thanks for a detailed analysis/explanation. TBH, I invested in wealthfront 2 years ago just to figure out what it was and how it performs. This was even before I got serious about investing. Now that, it is doing well, I did not want to disturb and incur tax liability. So to answer your question, it is not a play account.

Thanks.

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BeBH65
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Re: Portfolio Review: Need your input and opinion

Post by BeBH65 » Fri Jul 14, 2017 5:05 pm

Kennyt7 wrote:make sure you include small cap, intl stock and bond, em, reits and vanguard total stock
Hello Kenny,
Not sure i fully understand your statement.
- total stock includes small cap and reit
- total international includes emerging market
And with bonds as a third fund you have a fully diversified portfolio.
Regards,
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

Kennyt7
Posts: 32
Joined: Mon Jan 19, 2015 7:28 pm

Re: Portfolio Review: Need your input and opinion

Post by Kennyt7 » Sun Jul 16, 2017 2:02 pm

small caps have done better than total stock mkt or sp500 long term

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