Funds for my Roth?

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Topic Author
Marcyp
Posts: 13
Joined: Fri Sep 22, 2017 12:39 am

Funds for my Roth?

Post by Marcyp »

I just created a Vanguard account, opened a Roth IRA and am waiting for my bank account to be verified. I have also created a taxable account which I plan to fund with 55% Vanguard Total Stock Market Index Admiral Shares, 25% Vanguard Total International Stock Index Admiral shares and 20% Vanguard Total Bond Market Index Admiral Shares. How should I go about choosing index funds for my Roth? Would it be a wise idea to have the same type of funds in my Roth? And if so, which Index funds would you recommend to have a similar investing strategy? Would a Target fund be more appropriate in this case?


Current Income: $25,000
Monthly Expenses: $900
Current Assets: $200,000.00 inherited sum of cash, $34,000.00 inherited IRA (Amount of assets will increase as other material things within my inheritance are being sold. Estimate of money still to come is around $34,000.00)
Emergency funds: I have enough set aside to cover 1 year of expenses but I can increase the amount if necessary.
Debt: No debt of any kind with no foreseeable debt accumulation in the near future
Tax Filing Status: Single with no dependents
Tax: Federal-10% State-2%
State of Residence: Louisiana
Age:30
Desired Asset allocation: 80% Stocks 20% Bonds but am willing to alter this
Desired International allocation: 25%
Last edited by Marcyp on Thu Sep 28, 2017 9:03 am, edited 1 time in total.
Senti
Posts: 12
Joined: Wed Jul 05, 2017 5:05 pm

Re: Funds for my Roth? (edited)

Post by Senti »

Keep more of the total bond fund in the Roth and less in the taxable account.

See: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Topic Author
Marcyp
Posts: 13
Joined: Fri Sep 22, 2017 12:39 am

Re: Funds for my Roth? (edited)

Post by Marcyp »

Senti wrote: Wed Sep 27, 2017 8:10 pm Keep more of the total bond fund in the Roth and less in the taxable account.

See: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Should I be looking at total allocation as being spread across both my Roth and taxable account rather than each account individually being allocated to similar percentages? I've heard people say "look at it as a whole" is that what they're referring to? I do know that it makes more sense to keep bonds in tax efficient accounts. I do fall into a very low tax bracket which caused me to be less concerned with the allocation initially. I'm not sure if I'm looking at it all correctly though. Initially I was attempting to allocated both my Roth and taxable account in the same 80/20 with 25% international. My taxable account was easy to allocate seeing as how I have a much larger amount of money to work with. I hit a snag when it came to my Roth and using the same allocation because of the minimums allowed to purchase the funds.
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Taylor Larimore
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Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Funds for my Roth? (edited)

Post by Taylor Larimore »

Marcyp:

You are investing in The Three-Fund Portfolio.

If you use the link above, in the Opening Post you will read the following:
Fund Placement For Maximum Tax-Efficiency: Place Total Bond Market in tax-advantaged account(s). If full, use a tax-exempt bond fund in a taxable account. Place Total Stock Market and Total International Stock Market in either a tax-advantaged account (best) or a taxable account.
Yes, you "should be looking at total allocation as being spread across both my Roth and taxable account rather than each account individually being allocated to similar percentages?"

I am sorry about the death, but I am very pleased that you are investing your inheritance in a suitable and simple, low-cost, tax-efficient and diversified portfolio.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Topic Author
Marcyp
Posts: 13
Joined: Fri Sep 22, 2017 12:39 am

Re: Funds for my Roth? (edited)

Post by Marcyp »

Taylor Larimore wrote: Wed Sep 27, 2017 9:23 pm Marcyp:

You are investing in The Three-Fund Portfolio.

If you use the link above, in the Opening Post you will read the following:
Fund Placement For Maximum Tax-Efficiency: Place Total Bond Market in tax-advantaged account(s). If full, use a tax-exempt bond fund in a taxable account. Place Total Stock Market and Total International Stock Market in either a tax-advantaged account (best) or a taxable account.
Yes, you "should be looking at total allocation as being spread across both my Roth and taxable account rather than each account individually being allocated to similar percentages?"

I am sorry about the death, but I am very pleased that you are investing your inheritance in a suitable and simple, low-cost, tax-efficient and diversified portfolio.

Best wishes.
Taylor
Thank you for the information! It's greatly appreciated!
Topic Author
Marcyp
Posts: 13
Joined: Fri Sep 22, 2017 12:39 am

Re: Funds for my Roth?

Post by Marcyp »

I've been looking into Vanguards LifeStrategy Growth Fund (VASGX). It would give me the 80/20 split that I want and would also include the international aspect I'm looking for as well. It would also have my 20% bond in my tax deferred account. I also like the idea of it rebalancing itself since I am still very new to investing and still have much to learn. I've also looked into Target Retirement Funds. They seem pretty similar to me. Could anyone tell me which they think would be the better option? And should I consider dumping my entire taxable account into the Lifestrategy or Target Retirement fund? Would I be better off using the 3 fund method that I suggested in my original post and using a tax exempt bond fund instead? Or should I stick with the Total stock market index admiral and total International stock market index admiral and leave out the bond fund since I have the 20% allocation within my Roth? Sorry for all of the questions. Just trying to make sure I'm understanding everything correctly.
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ruralavalon
Posts: 19446
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Location: Illinois

Re: Funds for my Roth?

Post by ruralavalon »

Marcyp wrote: Wed Sep 27, 2017 7:13 pm I just created a Vanguard account, opened a Roth IRA and am waiting for my bank account to be verified. I have also created a taxable account which I plan to fund with 55% Vanguard Total Stock Market Index Admiral Shares, 25% Vanguard Total International Stock Index Admiral shares and 20% Vanguard Total Bond Market Index Admiral Shares. How should I go about choosing index funds for my Roth? Would it be a wise idea to have the same type of funds in my Roth? And if so, which Index funds would you recommend to have a similar investing strategy? Would a Target fund be more appropriate in this case?


Current Income: $25,000
Monthly Expenses: $900
Current Assets: $200,000.00 inherited sum of cash, $34,000.00 inherited IRA (Amount of assets will increase as other material things within my inheritance are being sold. Estimate of money still to come is around $34,000.00)
Emergency funds: I have enough set aside to cover 1 year of expenses but I can increase the amount if necessary.
Debt: No debt of any kind with no foreseeable debt accumulation in the near future
Tax Filing Status: Single with no dependents
Tax: Federal-10% State-2%
State of Residence: Louisiana
Age:30
Desired Asset allocation: 80% Stocks 20% Bonds but am willing to alter this
Desired International allocation: 25%
In my opinion at age 30 a bond allocation of 20% is within the range of what is reasonable.

In my opinion 25% of stocks in international stocks is also within the range of what is reasonable.

Using just a few broadly diversified index funds with low expense ratios is a very good idea.

It's often better to treat all accounts together as a single unified portfolio, rather than consider each account individually.

Do you have a work-based account, such as a 401k, 403b, 457 or TSP? If so what funds are offered in the work-based account? Please give fund names, tickers and expense ratios.

Do you have any other accounts? If so, what investment company is each account with, and what funds are held in each account?

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.

Since you are in the 10% tax bracket fund placement in your taxable account may make little or no difference in your case. Do you expect that your income will substantially increase in the future?

Marcyp wrote: Wed Sep 27, 2017 10:10 pm I've been looking into Vanguards LifeStrategy Growth Fund (VASGX). It would give me the 80/20 split that I want and would also include the international aspect I'm looking for as well. . . . . . .
In my opinion Vanguard LifeStrategy Growth Fund (VASGX) is a reasonable fund to consider. It does give a larger international stock allocation than you wished.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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