Looking for advice on portfolio restructuring

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matteddie
Posts: 1
Joined: Sat Sep 02, 2017 10:10 am

Looking for advice on portfolio restructuring

Post by matteddie »

I am 47 years old working as a software programmer. Married single earner with 2 kids (one is a junior and another in 6th grade), make about 160K/year.
Expected contribution to kid's education 400K, current 529 savings 140K.
With all the changes in programming jobs not sure how long I will be able earn at the same current income level(may be another 3 to 5 years tops)
Expected retirement 62 years (another 15 years)

I can see my investments are spread out into too many funds/stocks, I know I are keeping too much cash and feel my investments are not generating regular income. But I am worried that my exposure to market is too high and if enter now and market crashes I will loose good chunk of money (had been in this mind set for last 5 years hence accumulated cash).

My risk tolerance is 20% max on overall portfolio, but I do buy on dips.

I am seeking advice and thoughts on,

1, portfolio consolidation. I am open for suggestion on any kinds asset allocation. I prefer ETFs over Index funds with a thought that I can write covered calls to generate 1 to 2% additional return
2, am I keeping to much cash? what will be a better way to generate 4 to 5% return with minimal risk
3, investments generating monthly income vs invest for growth when you don't need cash for monthly expenses.

Thanks in advance for your advice and time.

Here are my details:

Age 47 & 46
Tax rate 30% Federal and 5% state
Tax filing Status Married Filing Jointly
State of Residence Colorado
Emergency Funds (already have) 50k
Debt Mortgage on Primary residence 2750/per month, 375K Balance
Annual 401K contribution including employer's match: 22K, IRA contribution to spouse's IRA account: 5K. 529 contributions: 6K


His 401K (about 390K)
Vanguard Total International Stock Index Fund Investor Shares VGTSX 95k 0.09%
Vanguard Extended Market Index Fund Investor Shares VEXMX 91k 0.21%
Vanguard Institutional Index Fund Insitutional Shared VINIX 87k 0.04%
T. Rowe Price Blue Chip Growth TRBCX 59k 0.72%
Vanguard Target Retirement 2040 Fund VFORX 31k 0.16%
Vanguard Total Bond Market Index Fund Investor Shares VBMFX 14k 0.15%

His Rollover IRA (228K and 21k cash)
SPDR® S&P 500 ETF SPY 49k 0.09%
T. Rowe Price International Discovery PRIDX 34k 1.20%
T. Rowe Price Balanced RPBAX 31k 0.60%
T. Rowe Price Small-Cap Value PRSVX 30k 0.80%
T. Rowe Price Equity Index 500 PREIX 18k 0.26%
Oakmark International Fund OAKIX 17k 1.00%
T. Rowe Price Blue Chip Growth TRBCX 11k 0.72%
Royal Dutch-Shell RDS-A 13k
PIMCO Income Instl  PIMIX 10k 0.45%
Exxon Mobil XOM 7.6k
Banco Santander SAN 3.5k
PIMCO Corporate and Income Opportunity Fund PTY 3.4K 1.19%
Chimera Investment Corporation CIM 1.1K
Arrow Electronics ARW 4.5k
Cash 21K

His Roth:
T. Rowe Price Equity Index 500 PREIX 16.5 0.26%


Her IRA (93k plus 20k cash):
T. Rowe Price Retirement 2040 TRRDX 33k 0.76%
SPDR® S&P 500 ETF SPY 25k 0.09%
ProShares Ultra S&P500 SSO 10k 0.90 %
T. Rowe Price High Yield PRHYX 7.5k 0.74%
T. Rowe Price Equity Index 500 PREIX 6k 0.26%
Southern Company SO 5k
Oakmark International Fund OAKIX 4k 1.00%
Dodge & Cox International Stock  DODFX 3.5k 0.64%
Cash 20k

Her Roth
T. Rowe Price Equity Index 500 PREIX 5,116.91 0.26%


Taxable Investments (70k):
Apple AAPL 16.5K
ProShares Ultra S&P500 SSO 9.3K
Pfizer PFE 6.7K
Altria Group MO 6.3K
Express Scripts Holding Company ESRX 6.2K
Qualcomm QCOM 5.2K
UnitedHealth Group Incorporated UNH 5K
General Electric Company GE 5.5k
AT&T T 4K
Microsoft MSFT 2K
Financial Select Sector SPDR XLF 2K 0.14%
Chimera Investment Corporation CIM 1.1K
Centurylink CTL .6k


Cash exculding emergency funds 400K
Health Savings Account Cash 27K
totality
Posts: 165
Joined: Mon Aug 21, 2017 1:06 pm

Re: Looking for advice on portfolio restructuring

Post by totality »

As you say, there is a lot of room to simplify here, but I think before moving any (significant sums!) of money around, you need to get a firm grasp on what your desired asset allocation is.

In its most basic form, this basically means answer these two questions:

1. What percentage of my portfolio should be in bonds?
2. Of my stocks, what percentage should be in the US and what percentage should be international? (Assuming that you live in the US)

These are the hardest, and also most important, questions for individual investors to answer.

Regarding question #1, you said:
matteddie wrote: Sat Sep 02, 2017 10:24 pm My risk tolerance is 20% max on overall portfolio, but I do buy on dips.
I'm not quite sure what you mean. You're saying that the biggest drop you would ever accept in a portfolio is 20%? That's quite conservative. If we assume that a bear market will look like 2008, where the market dropped in half, that would be a 60% bond allocation. If we assume that a bear market will look like the Great Depression, where the market dropped by 90%, that would be an almost 80% bond allocation. (Also, bonds are not a sure thing either, so if things really hit the fan, who knows what could happen.) Sadly, there's no way to know what future bear markets might look like.

60% bonds for someone your age would be considered quite conservative. But it sounds like, the way you have been letting cash build up, that you are quite conservative financially. Nevertheless, there is a point where being conservative becomes risky, as you exchange the risk of loss for the certainty of a poor return, which may not be enough for a comfortable retirement.

As a baseline, most target date funds would place someone 15 years from retirement at about 30% bonds, with a 30-40% allocation of stocks to international. There are rules of thumb that have been suggested, such as "age in bonds" (ie, you're 47, so you would hold 47% of your portfolio in bonds), but there's no one right answer.

For someone your age, 25% - 50% in bonds is probably reasonable, and given your conservative nature you should probably be on the higher end of that range. Regarding international allocation, advice varies from roughly 20% to 50% of stocks, but this is a much less crucial question than your bond allocation. If you don't have strong feelings on the matter, a 30% international allocation is just fine.

To sum it up, my advice is, go read about asset allocation and figure out your % in bonds (MOST IMPORTANT) and your % of equity held internationally. (much less important)

Once you know what your target is, you'll have a much easier time figuring out the nuts and bolts of how to get there.
JBTX
Posts: 11227
Joined: Wed Jul 26, 2017 12:46 pm

Re: Looking for advice on portfolio restructuring

Post by JBTX »

Yeah that portfolio is pretty hard to evaluate. I too would be concerned with max loss willingness of 20%. Vanguard balanced is 60/40 and went down 30% from top to bottom. To get to 20% you would have to go less than 50% stocks which is very conservative for your age. If the stock market dropped 50%, then you could only have roughly 40% in stock to max at a 20% loss (ignoring the impacts of the bond part of portfolio )

http://quotes.morningstar.com/chart/fun ... ture=en_US

But as long as you don't liquidate your entire portfolio at market bottom and you keep buying after then I wouldn't be too terribly concerned with one time dips.
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badbreath
Posts: 987
Joined: Mon Jul 18, 2016 7:50 pm

Re: Looking for advice on portfolio restructuring

Post by badbreath »

I agree with the questions above but I will attempt to simplify your holdings. Note I said holdings since I do not know what else is available to you. This is what I would do if I had what you have invested in but you can do whatever you like (and it looks like you have).
His 401K (about 390K)
Vanguard Total International Stock Index Fund Investor Shares VGTSX 95k 0.09%
Vanguard Extended Market Index Fund Investor Shares VEXMX 91k 0.21%
Vanguard Institutional Index Fund Insitutional Shared VINIX 87k 0.04%
T. Rowe Price Blue Chip Growth TRBCX 59k 0.72% Move this to total bond
Vanguard Target Retirement 2040 Fund VFORX 31k 0.16%Move this to total bond
Vanguard Total Bond Market Index Fund Investor Shares VBMFX 14k 0.15%

His Rollover IRA (228K and 21k cash)
SPDR® S&P 500 ETF SPY 49k 0.09%
T. Rowe Price International Discovery PRIDX 34k 1.20% Move to SPDR S&P 500
T. Rowe Price Balanced RPBAX 31k 0.60% Move to SPDR S&P 500
T. Rowe Price Small-Cap Value PRSVX 30k 0.80% Move to SPDR S&P 500
T. Rowe Price Equity Index 500 PREIX 18k 0.26% Move to SPDR S&P 500
Oakmark International Fund OAKIX 17k 1.00% Move to SPDR S&P 500
T. Rowe Price Blue Chip Growth TRBCX 11k 0.72% Move to SPDR S&P 500
Royal Dutch-Shell RDS-A 13k Move to SPDR S&P 500
PIMCO Income Instl PIMIX 10k 0.45% Move to SPDR S&P 500
Exxon Mobil XOM 7.6k Move to SPDR S&P 500
Banco Santander SAN 3.5k Move to SPDR S&P 500
PIMCO Corporate and Income Opportunity Fund PTY 3.4K 1.19% Move to SPDR S&P 500
Chimera Investment Corporation CIM 1.1K Move to SPDR S&P 500
Arrow Electronics ARW 4.5k Move to SPDR S&P 500
Cash 21K Move to SPDR S&P 500

His Roth:
T. Rowe Price Equity Index 500 PREIX 16.5 0.26% Why do you have it in TRP when Vanguard or Fidelity offer this at .04 ER


Her IRA (93k plus 20k cash):
T. Rowe Price Retirement 2040 TRRDX 33k 0.76% Move to SPDR S&P 500
SPDR® S&P 500 ETF SPY 25k 0.09%
ProShares Ultra S&P500 SSO 10k 0.90 % Move to Dodge & Cox International
T. Rowe Price High Yield PRHYX 7.5k 0.74% Move to Dodge & Cox International
T. Rowe Price Equity Index 500 PREIX 6k 0.26% Move to Dodge & Cox International
Southern Company SO 5k Move to Dodge & Cox International
Oakmark International Fund OAKIX 4k 1.00% Move to Dodge & Cox International
Dodge & Cox International Stock DODFX 3.5k 0.64%
Cash 20k Move to Dodge & Cox International

Her Roth
T. Rowe Price Equity Index 500 PREIX 5,116.91 0.26% Why do you have it in TRP when Vanguard or Fidelity offer this at .04 ER



Taxable Investments (70k): I will let you to decide what to do with this I see you are trying to go after divides
Apple AAPL 16.5K
ProShares Ultra S&P500 SSO 9.3K
Pfizer PFE 6.7K
Altria Group MO 6.3K
Express Scripts Holding Company ESRX 6.2K
Qualcomm QCOM 5.2K
UnitedHealth Group Incorporated UNH 5K
General Electric Company GE 5.5k
AT&T T 4K
Microsoft MSFT 2K
Financial Select Sector SPDR XLF 2K 0.14%
Chimera Investment Corporation CIM 1.1K
Centurylink CTL .6k


Cash exculding emergency funds 400K This is a lot of cash I would be investing tax efficient. www.bogleheads.org/wiki/Tax-efficient_fund_placement
Health Savings Account Cash 27K Why is this not invested in something
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx
Fallible
Posts: 8798
Joined: Fri Nov 27, 2009 3:44 pm

Re: Looking for advice on portfolio restructuring

Post by Fallible »

matteddie wrote: Sat Sep 02, 2017 10:24 pm ...
I can see my investments are spread out into too many funds/stocks, I know I are keeping too much cash and feel my investments are not generating regular income. But I am worried that my exposure to market is too high and if enter now and market crashes I will loose good chunk of money (had been in this mind set for last 5 years hence accumulated cash).

My risk tolerance is 20% max on overall portfolio, but I do buy on dips.
In addition to reading the wiki's "Asset Allocation" page, also link from there to the "Risk Tolerance" page. Generally, an allocation is based on your ability, need, and willingness to take risk:

https://www.cbsnews.com/news/asset-allo ... -you-take/
https://www.cbsnews.com/news/asset-allo ... -you-need/
https://www.cbsnews.com/news/asset-allo ... tolerance/
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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