Diversification of retirement investments across multiple accounts

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manthus
Posts: 2
Joined: Fri Sep 22, 2017 12:24 am

Diversification of retirement investments across multiple accounts

Post by manthus » Fri Sep 22, 2017 1:09 am

I am managing 6 different retirement accounts and I am trying to diversify my investments across all my accounts. I am basically treating all the money in all the accounts as one lump sum and then trying to put 15% into a total stock market index fund, 15% into a small cap index fund, etc.

Two of the accounts are current 401k accounts and so my investment options are limited. In one of them, I have an option of a total stock market index fund with an expense ratio of 0.05% which is not bad however the other options in that account have expense ratios which are higher given that they are not index funds:

Small cap fund - 0.67%
Mid cap fund - 0.61%
Stable asset income - 0.24%
Active fixed income - 0.60%

I would be happy to put all of my money into total stock market index fund for this account however the issue is that this 401k account represents over 30% of my total retirements savings and is continuing to grow since it is the account I have with my current employer.

My question: Is it better to just put all of the money into the index fund for this account even though this would not work with my asset allocation strategy or would it be better to say put half in the index and half in the small cap fund?

rkhusky
Posts: 4289
Joined: Thu Aug 18, 2011 8:09 pm

Re: Diversification of retirement investments across multiple accounts

Post by rkhusky » Fri Sep 22, 2017 8:38 am

Note that the total stock market contains small cap stocks. Just want to be clear that you want a strong small cap tilt by making it equal to total stock market.

Without know the other elements of your desired asset allocation or your choices in the other accounts, specific advice is difficult to give.

A total stock market fund in your 401K with er of 0.05 is not only not bad, it's great!

I would start with the most constrained account and choose the best fund(s) from there, and then fill out the rest of the AA from other accounts going from most to least constrained.

If you can get to your AA without needing to use the 401K small cap fund, I wouldn't. You can always add it into the mix later. But you will need to decide whether the small cap fund will return 0.6% more than the total stock market fund every year on average.

goingup
Posts: 2701
Joined: Tue Jan 26, 2010 1:02 pm

Re: Diversification of retirement investments across multiple accounts

Post by goingup » Fri Sep 22, 2017 9:01 am

manthus wrote:
Fri Sep 22, 2017 1:09 am
I am managing 6 different retirement accounts and I am trying to diversify my investments across all my accounts.
Do you need 6? Consolidation and simplification is a worthy goal.

Choose the broadest low-cost funds available to you in each account. In one 401K it is a TSM ER.05. Is there another account that has low-cost International options? Another with a good bond fund?

You don't need to set up 6 accounts with matching AAs. Start with your largest account and use it as your core and build out from there. :)

Jack FFR1846
Posts: 5581
Joined: Tue Dec 31, 2013 7:05 am

Re: Diversification of retirement investments across multiple accounts

Post by Jack FFR1846 » Fri Sep 22, 2017 11:18 am

What else is in your 401k? I don't see bond funds in your list? Is there a low cost bond index fund?

Perhaps list out all of your accounts with all of your funds showing ER and $ in each along with other options available.

I have (I think...I'd have to count) 9 accounts and have no trouble not only balancing (in my IRA) but also using the absolute lowest ER funds available. My average ER is currently well under 0.04%.
Bogle: Smart Beta is stupid

manthus
Posts: 2
Joined: Fri Sep 22, 2017 12:24 am

Re: Diversification of retirement investments across multiple accounts

Post by manthus » Fri Sep 22, 2017 11:16 pm

Thanks for the advice so far. Here's some more info:

The reason for the 6 accounts is because my wife and I each have a roll over 401k, Roth IRA, and a 401k with our current employer. Our roll overs and Roths are with Vanguard so no issue with finding good fund options there. If there is a way to consolidate all that into one account, I'd really like to know how to do it.

Account balances:

Wife Rollover IRA (Vanguard) - $25K
Wife Roth IRA (Vanguard) - $5K
Wife Current 401K - $15K
My Rollover IRA (Vanguard) - $17K
My Roth IRA (Vanguard) - $6K
My Current 401K - $34K


My 401k options:

MFS Instl International Equity - 0.71%
T Rowe Price Institutional Small Cap - 0.67%
T. Rowe Price Instl Mid-Cap Equity Gr - 0.61%
JPMCB Equity Index Fund-CF - 0.05%
MainStay Large Cap Growth - 0.63%
JPMorgan US Active Fixed Income - 0.60%
JPMCB Stable Asset Income Inv - 0.24%


My wife's 401k options:

Stable Value Fund - 0.40%
US Bond Index Fund - 0.11%
Diversified Bond Fund - 0.44%
Inflation Protected Fund (VIPIX) - 0.14%
Core Equity Fund - 0.09%
Mid Cap Index Fund (VMCPX) - 0.12%
Global Equity Fund (RNPGX) - 0.52%
International Equity Index Fund International (VDIPX) - 0.13%
International Equity Fund - 0.56%
Small Cap Value Fund - 0.64%
Small Cap Index (VSCPX) - 0.12%
Small Cap Growth (VEXRX) - 0.40%


My target AA (if I was using all Vanguard funds) is the following:

Vanguard Total Stock Market Index (VTSMX) - 15.00%
Vanguard Small-Cap Index (NAESX) - 15.00%
Vanguard European Stock Index (VEURX) - 10.00%
Vanguard Pacific Stock Index (VPACX) - 10.00%
Vanguard Emerging Markets Index (VEIEX) - 10.00%
Vanguard Short-term Bond Index (VFSTX) - 10.00%
Vanguard High-Yield Corporates Fund (VWEHX) - 10.00%
Vanguard Inflation-Protected Securities Fund (VIPSX) - 10.00%
Vanguard REIT Index (VGSIX) - 5.00%
Vanguard Precious Metals Fund (VGPMX) - 5.00%

JBTX
Posts: 1165
Joined: Wed Jul 26, 2017 12:46 pm

Re: Diversification of retirement investments across multiple accounts

Post by JBTX » Fri Sep 22, 2017 11:48 pm

manthus wrote:
Fri Sep 22, 2017 11:16 pm
Thanks for the advice so far. Here's some more info:

The reason for the 6 accounts is because my wife and I each have a roll over 401k, Roth IRA, and a 401k with our current employer. Our roll overs and Roths are with Vanguard so no issue with finding good fund options there. If there is a way to consolidate all that into one account, I'd really like to know how to do it.

Account balances:

Wife Rollover IRA (Vanguard) - $25K
Wife Roth IRA (Vanguard) - $5K
Wife Current 401K - $15K
My Rollover IRA (Vanguard) - $17K
My Roth IRA (Vanguard) - $6K
My Current 401K - $34K


My 401k options:

MFS Instl International Equity - 0.71%
T Rowe Price Institutional Small Cap - 0.67%
T. Rowe Price Instl Mid-Cap Equity Gr - 0.61%
JPMCB Equity Index Fund-CF - 0.05%
MainStay Large Cap Growth - 0.63%
JPMorgan US Active Fixed Income - 0.60%
JPMCB Stable Asset Income Inv - 0.24%


My wife's 401k options:

Stable Value Fund - 0.40%
US Bond Index Fund - 0.11%
Diversified Bond Fund - 0.44%
Inflation Protected Fund (VIPIX) - 0.14%
Core Equity Fund - 0.09%
Mid Cap Index Fund (VMCPX) - 0.12%
Global Equity Fund (RNPGX) - 0.52%
International Equity Index Fund International (VDIPX) - 0.13%
International Equity Fund - 0.56%
Small Cap Value Fund - 0.64%
Small Cap Index (VSCPX) - 0.12%
Small Cap Growth (VEXRX) - 0.40%


My target AA (if I was using all Vanguard funds) is the following:

Vanguard Total Stock Market Index (VTSMX) - 15.00%
Vanguard Small-Cap Index (NAESX) - 15.00%
Vanguard European Stock Index (VEURX) - 10.00%
Vanguard Pacific Stock Index (VPACX) - 10.00%
Vanguard Emerging Markets Index (VEIEX) - 10.00%
Vanguard Short-term Bond Index (VFSTX) - 10.00%
Vanguard High-Yield Corporates Fund (VWEHX) - 10.00%
Vanguard Inflation-Protected Securities Fund (VIPSX) - 10.00%
Vanguard REIT Index (VGSIX) - 5.00%
Vanguard Precious Metals Fund (VGPMX) - 5.00%
What your thought process as to why you'd like all those different funds?

For instance you would like 3 different international funds but yet there may be some holes in areas not covered. Where is Canada in the portfolio? Why not just have a total market international fund. If you wanted and emerging market tilt you could add an additIonal small allocation to an EM fund.

If you are dead set on replicating that allocation then yes, you will have to put some money in an expensive fund in your 401k. I would submit that putting all of your 401k in total market index would give you a more reasonable allocation then you can use the other accounts to build the other pieces of your allocation.

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