Another Portfolio Review

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eastlansingspartans
Posts: 19
Joined: Tue Jul 18, 2017 7:57 pm

Another Portfolio Review

Post by eastlansingspartans » Tue Aug 22, 2017 9:19 pm

Hi Friends. Hoping to get some opinions on my portfolio. Thanks!

Emergency funds: Six months of expenses.
Debt: Federal Student Loans $32k @4% (down from $43k)
Tax Filing Status: Single
Tax Rate: 25% Federal, 4.25% State
State of Residence: MI
Age: 24
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 25% of stocks

Current retirement assets:

Taxable at Vanguard
4% Total Stock Market VTI (0.05%)

401k
32% Vanguard Institutional 500 Index Trust (0.0115%)
16% Vanguard Institutional Total International Stock Market Index Trust (0.07%)
13% Vanguard Institutional Extended Market Index Trust (0.031%)
6% Vanguard Institutional Total Bond Market Index Trust (0.03%)
Company match: 150% of 6%.

Roth IRA at Vanguard
29% Target Retirement 2060 VTTSX (0.16%)

Total Portfolio: $16k

New annual Contributions:
$15,000 401k ($8,500 employee/$6,500 employer)
$5,500 Roth IRA
$120 taxable (for retirement)

Comments:
No longer being super aggressive with the student loans. Paying slightly higher than the minimum payment but not much. Focusing on investing given the low 4% interest rate + tax deduction on the interest.

Questions:
1. I am aware I'm breaking the 3 fund rule, but I am under the impression there is value in the Extended Market Index, as I am young and there is long term possibilities there. Correct me if I am wrong.

2. Also aware I have heavy on international equities. Same as above, I think my age allows for such aggression.

Please feel free to share you thoughts!

MPAndy222
Posts: 42
Joined: Thu Mar 31, 2016 6:26 pm

Re: Another Portfolio Review

Post by MPAndy222 » Tue Aug 22, 2017 10:01 pm

Any reason why you have a taxable account? I would recommend maxing out your 401k before starting a taxable account - especially since it looks like you have a lot of good options in your 401k

venkman
Posts: 718
Joined: Tue Mar 14, 2017 10:33 pm

Re: Another Portfolio Review

Post by venkman » Wed Aug 23, 2017 12:02 am

eastlansingspartans wrote:
Tue Aug 22, 2017 9:19 pm
Questions:
1. I am aware I'm breaking the 3 fund rule, but I am under the impression there is value in the Extended Market Index, as I am young and there is long term possibilities there. Correct me if I am wrong.

2. Also aware I have heavy on international equities. Same as above, I think my age allows for such aggression.

Please feel free to share you thoughts!

You're mostly following the 3-fund portfolio, which uses Total US Stock Market as one component. By combining the S&P 500 and Extended Market Index in your 401k, you're approximating the TSM. You are tilting a bit toward mid- and small-cap (To approximate TSM is a ratio of about 80% S&P to 20% Extended Market), but there's nothing wrong with that.

And, while plenty of people here will say you don't need any international stocks, many others will say you should hold them according to global market weight (about 45%). I think your overall international allocation works out to 28-ish% of equities. That's in no way too heavy, especially with your time horizon.

Was the $120 a year contribution in taxable a typo? It just seems a bit low to bother with. Regardless, VTI is a fine place for it.

To sum up, you absolutely appear to be on the right track. Good job. :happy

eastlansingspartans
Posts: 19
Joined: Tue Jul 18, 2017 7:57 pm

Re: Another Portfolio Review

Post by eastlansingspartans » Wed Aug 23, 2017 7:59 am

venkman wrote:
Wed Aug 23, 2017 12:02 am
Was the $120 a year contribution in taxable a typo? It just seems a bit low to bother with. Regardless, VTI is a fine place for it.
The taxable account was created as a mistake actually. I misunderstood the Roth IRA withdrawal rules, so I created the taxable account for more security. I keep $10 a month going because it's insignificant and I just feel like it's a good habit, to be honest.

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