Please judge my Vanguard portfolio

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prince
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Please judge my Vanguard portfolio

Post by prince » Mon Oct 02, 2017 12:11 pm

Hi,

Trying this again with the official info:

Emergency funds: No, need to build this up.
Debt: Mortgage/3.875%
Tax Filing Status: Married Filing Jointly
Tax Rate: 28% Federal, 6% State
State of Residence: GA
Age: 36
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 20% of stocks

Roth IRA at Vanguard - 5 figure (expense ratio)
50% - VFIAX - 500 Index Fund Admiral Class (0.04%)
5% - VGHCX - Health Care (0.37%)
5% - VGSTX - Star (0.32%)
15% - VTSMX - Total Stock Market Index (0.15%)
15% - VWELX - Wellington (0.25%)

Roth 401k at Fidelity - 5 figure (expense ratio)
30% - FXSIX - 500 Index Fund (0.03%)
30% - MEIJX - MFS Value Fund R4 (0.61%)
30% - MSEQX - Morgan Stanley Institutional (0.63%)
5% - BCOIX - Baird Core Plus Bond (0.3%)
5% - FIAM Target Date 2045 (0.47%)

Annual Contributions
$5200 into Vanguard
4% into Fidelity (company match 4%)

Questions
1. Total newbie so looking for analysis, efficiency and optimization.

2. I know the Vanguard Admiral shares are supposed to be better in terms of efficiency and expense ratio stuff, I was thinking of maybe combining the remaining into another admiral share class while keeping the 500 admiral share?

Thank you again! :)
Last edited by prince on Tue Oct 03, 2017 12:25 pm, edited 7 times in total.

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ruralavalon
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Re: Please judge my Vanguard portfolio

Post by ruralavalon » Mon Oct 02, 2017 5:20 pm

Welcome to the forum :) .
prince wrote:
Mon Oct 02, 2017 12:11 pm
Hi,

New to investing, rolled over a 401k from previous employer into Vanguard:

50% - VFIAX - 500 Index Fund Admiral Class
5% - VGHCX - Health Care
5% - VGSTX - Star
15% - VTSMX - Total Stock Market Index
15% - VWELX - Wellington

That's what I have setup now, would love any helpful info/advice/criticism :)
Do you have any other accounts? Is there a work-based account offered at your current employer? Usually we treat all accounts together as a single unified portfolio.

If this is your only account, then it looks like you have only 2% in bonds. The STAR Fund is 40% bonds (40% x .05 = 2%). I usually suggest a minimum of about 20% of portfolio in bonds. You could consider Vanguard Total Bond Market Index Fund.

Also the S&P 500 and total stock market funds are almost duplicates, and both overlap with the Wellington Fund. You could more simply just use Vanguard Total Stock Market Index Fund (VTSMX) by itself for your domestic stocks.

You show investment of less than 1% in international stocks. The STAR Fund is 19% international stocks (19% x .05 = less than 1% in international stocks). I usually suggest around 20-30% of stocks in international stocks. I suggest using Vanguard Total International Stock Index Fund.
Last edited by ruralavalon on Mon Oct 02, 2017 5:32 pm, edited 2 times in total.
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bloom2708
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Re: Please judge my Vanguard portfolio

Post by bloom2708 » Mon Oct 02, 2017 5:26 pm

Welcome prince!

You have some good funds, but a bunch of overlap and not much international.

Total US Stock + Total International Stock + Total US Bond = 3 fund portfolio would (probably) be a better place to be. No overlap, better diversification and lower cost.

Total US Stock wholly contains 500 index and Healthcare and the stocks in Star and Wellington. Star and Wellington have bond portions. Star has some international.

How old are you and what is your desired mix of stocks and bonds? You are in THE right place to read and learn. Welcome again!
Last edited by bloom2708 on Mon Oct 02, 2017 5:43 pm, edited 1 time in total.
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Taylor Larimore
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Re: Please judge my Vanguard portfolio

Post by Taylor Larimore » Mon Oct 02, 2017 5:36 pm

prince wrote:
Mon Oct 02, 2017 12:11 pm
Hi,

New to investing, rolled over a 401k from previous employer into Vanguard:

50% - VFIAX - 500 Index Fund Admiral Class
5% - VGHCX - Health Care
5% - VGSTX - Star
15% - VTSMX - Total Stock Market Index
15% - VWELX - Wellington

That's what I have setup now, would love any helpful info/advice/criticism :)
Prince:

Welcome to the Bogleheads Forum!

You have rolled-over to an excellent company. You also have good funds. However, it is impossible to give you informed advice (especially asset-allocation, etc.) without more information. Please edit your post using the little crayon box at the top of your post and follow these guidelines:

ASKING PORTFOLIO QUESTIONS

Thank you and best wishes.
Taylor
Last edited by Taylor Larimore on Mon Oct 02, 2017 6:14 pm, edited 1 time in total.
"Simplicity is the master key to financial success." -- Jack Bogle

livesoft
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Re: Please judge my Vanguard portfolio

Post by livesoft » Mon Oct 02, 2017 5:56 pm

I'm not sure if this will be helpful, probably not, but here is my criticism:

This portfolio looks like the funds were selected in a bout of performance chasing and not for any other reason. The HealthCare and STAR funds at 5% each truly look like they were selected because they have great returns in 2017 and for no other reason.

The S&P500 fund is has slightly better performance than the Total Stock Market fund in 2017 simply because the latter has some small caps which did great last year, but not this year. But as already mentioned, the S&P500 fund is 100% contained in the TSM fund, so no reason to own it.

VWELX is another crowd favorite has its adherents, but it is actively-managed. Yes, it has some bonds in it.

The overall portfolio is way underweighted in international equities and way underweighted in bonds.

It is nice that only Vanguard funds are used, but it's not a particularly good mix of funds that work well together to reduce risk and increase return.
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delamer
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Re: Please judge my Vanguard portfolio

Post by delamer » Mon Oct 02, 2017 6:20 pm

Here is a short paper with excellent advice for those new to investing: http://www.etf.com/docs/IfYouCan.pdf

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Mon Oct 02, 2017 8:30 pm

ruralavalon wrote:
Mon Oct 02, 2017 5:20 pm
Welcome to the forum :) .

Do you have any other accounts? Is there a work-based account offered at your current employer? Usually we treat all accounts together as a single unified portfolio.

If this is your only account, then it looks like you have only 2% in bonds. The STAR Fund is 40% bonds (40% x .05 = 2%). I usually suggest a minimum of about 20% of portfolio in bonds. You could consider Vanguard Total Bond Market Index Fund.

Also the S&P 500 and total stock market funds are almost duplicates, and both overlap with the Wellington Fund. You could more simply just use Vanguard Total Stock Market Index Fund (VTSMX) by itself for your domestic stocks.

You show investment of less than 1% in international stocks. The STAR Fund is 19% international stocks (19% x .05 = less than 1% in international stocks). I usually suggest around 20-30% of stocks in international stocks. I suggest using Vanguard Total International Stock Index Fund.
Thank you! Yes, I just updated based on the official portfolio asking post.

So Vanguard Total Bond and Total International Stock...

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Mon Oct 02, 2017 8:32 pm

bloom2708 wrote:
Mon Oct 02, 2017 5:26 pm
Welcome prince!

You have some good funds, but a bunch of overlap and not much international.

Total US Stock + Total International Stock + Total US Bond = 3 fund portfolio would (probably) be a better place to be. No overlap, better diversification and lower cost.

Total US Stock wholly contains 500 index and Healthcare and the stocks in Star and Wellington. Star and Wellington have bond portions. Star has some international.

How old are you and what is your desired mix of stocks and bonds? You are in THE right place to read and learn. Welcome again!
Thank you so much! I am 36, I am not exactly sure what I need, totally clueless!

prince
Posts: 19
Joined: Mon Oct 02, 2017 12:04 pm

Re: Please judge my Vanguard portfolio

Post by prince » Mon Oct 02, 2017 8:33 pm

Taylor Larimore wrote:
Mon Oct 02, 2017 5:36 pm
Prince:

Welcome to the Bogleheads Forum!

You have rolled-over to an excellent company. You also have good funds. However, it is impossible to give you informed advice (especially asset-allocation, etc.) without more information. Please edit your post using the little crayon box at the top of your post and follow these guidelines:

ASKING PORTFOLIO QUESTIONS

Thank you and best wishes.
Taylor
Thank you Taylor, I did not see that post, thank you so much for directing me to it! I have updated the original per your instructions, hope it is a little better now :)

prince
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Joined: Mon Oct 02, 2017 12:04 pm

Re: Please judge my Vanguard portfolio

Post by prince » Mon Oct 02, 2017 8:35 pm

livesoft wrote:
Mon Oct 02, 2017 5:56 pm
I'm not sure if this will be helpful, probably not, but here is my criticism:

This portfolio looks like the funds were selected in a bout of performance chasing and not for any other reason. The HealthCare and STAR funds at 5% each truly look like they were selected because they have great returns in 2017 and for no other reason.

The S&P500 fund is has slightly better performance than the Total Stock Market fund in 2017 simply because the latter has some small caps which did great last year, but not this year. But as already mentioned, the S&P500 fund is 100% contained in the TSM fund, so no reason to own it.

VWELX is another crowd favorite has its adherents, but it is actively-managed. Yes, it has some bonds in it.

The overall portfolio is way underweighted in international equities and way underweighted in bonds.

It is nice that only Vanguard funds are used, but it's not a particularly good mix of funds that work well together to reduce risk and increase return.
Yes completely helpful!! You are absolutely correct, they were selected only because of the great returns and no other reason. As a total newbie I just picked whatever seemed to have great returns without realizing they were just duplicates, thank you for pointing that out! I am hoping now to combine all of them except the 500 into another admiral class.. but which one.....

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Mon Oct 02, 2017 8:38 pm

delamer wrote:
Mon Oct 02, 2017 6:20 pm
Here is a short paper with excellent advice for those new to investing: http://www.etf.com/docs/IfYouCan.pdf
Thank you so much! I will read this, just from a rough skim it looks like I will be getting a lot smarter, thank you for putting this together! I like your plan of putting 15% into stock, international stock and bond. Perhaps I can reconfigure what I am doing now into that same plan.

Perhaps keep the 500 admiral, convert the remaining Vanguard into either bond or international stock and concentrate the Fidelity into the other?

livesoft
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Re: Please judge my Vanguard portfolio

Post by livesoft » Mon Oct 02, 2017 8:56 pm

What is the expense ratio of FIAM and/or other target date funds available in your 401(k)?

Your best portfolio will probably be Target Date 2045 funds in your Roth and your 401(k).
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prince
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Re: Please judge my Vanguard portfolio

Post by prince » Mon Oct 02, 2017 9:02 pm

livesoft wrote:
Mon Oct 02, 2017 8:56 pm
What is the expense ratio of FIAM and/or other target date funds available in your 401(k)?

Your best portfolio will probably be Target Date 2045 funds in your Roth and your 401(k).
Just updated the original post with the expense ratio's, the FIAM is 0.47%.

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Taylor Larimore
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Your stock/bond allocation?

Post by Taylor Larimore » Mon Oct 02, 2017 9:24 pm

prince:

Your first and most important decision is your allocation between stocks and bonds. More than anything else it determines your expected return and expected risk. You indicated you are "unsure." Do the best you can.

Please use this Vanguard Asset Allocation Tool to help you make a decision only you and your wife can make:

Investor Questionnaire

You should expect your portfolio to fall 50% of its stock allocation in the next bad bear market. For example, a 60% stock/40% bond allocation might decline about 30% during the next bear market.

Come back with your stock/bond decision. We can then talk about your international percentage and the funds you want to select.

It will also be helpful if you put the exact percentage (or dollars) of each account (2) in your TOTAL portfolio.

Thank you and best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

jalbert
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Re: Please judge my Vanguard portfolio

Post by jalbert » Mon Oct 02, 2017 11:23 pm

I would second livesoft's view of just holding one properly selected Target Retirement fund in each account as being likely best.

I would ask why your 401K is exclusively Roth contributions? This may be optimal for you, but for most people it is not. You want to have enough traditional contributions to utilize the tax free and low tax brackets for withdrawals. If you switch to traditional contributions, you can increase your contribution to be higher than 4% and still have the same take home pay. Your situation may be different, but for most people this will increase the after-tax value of 401K withdrawals.
Risk is not a guarantor of return.

delamer
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Re: Please judge my Vanguard portfolio

Post by delamer » Tue Oct 03, 2017 9:59 am

prince wrote:
Mon Oct 02, 2017 8:38 pm
delamer wrote:
Mon Oct 02, 2017 6:20 pm
Here is a short paper with excellent advice for those new to investing: http://www.etf.com/docs/IfYouCan.pdf
Thank you so much! I will read this, just from a rough skim it looks like I will be getting a lot smarter, thank you for putting this together! I like your plan of putting 15% into stock, international stock and bond. Perhaps I can reconfigure what I am doing now into that same plan.

Perhaps keep the 500 admiral, convert the remaining Vanguard into either bond or international stock and concentrate the Fidelity into the other?

Just to be clear, the paper was written by Bill Bernstein who is highly regarded in Boglehead circles for his analysis and recommendations. He originally trained as a neurologist.

Here is a link to his own website: http://www.efficientfrontier.com

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ruralavalon
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Re: Please judge my Vanguard portfolio

Post by ruralavalon » Tue Oct 03, 2017 10:32 am

prince wrote:
Mon Oct 02, 2017 12:11 pm
Hi,

Trying this again with the official info:

Emergency funds: No, need to build this up.
Debt: Mortgage/3.875%
Tax Filing Status: Married Filing Jointly
Tax Rate: xx% Federal, xx% State <-- how do I find this?
Try www.bankrate.com , their "taxes" section explains the brackets and has calculators to use.

prince wrote:State of Residence: GA
Age: 36
Desired Asset allocation: xx% stocks / xx% bonds <-- not sure
Desired International allocation: xx% of stocks <-- not sure
At age 36 I suggest around 20-25% in bonds. This is expected to substantially decrease portfolio volatility (risk), with relatively small impact on portfolio performance. Please see the wiki article "asset allocation" and the wiki article Bogleheads Investment Philosophy part 3 "never bear too much or too little risk".

I suggest around 20-30% of stocks in international stocks. This historically has captured around 84-99% of the maximum historical diversification benefit. For a pdf of a Vanguard paper on this subject Google "Considerations for Investing in Non-U.S. Equities" (see pp. 5-6).

prince wrote:Roth IRA at Vanguard - 5 figure (expense ratio)
50% - VFIAX - 500 Index Fund Admiral Class (0.04%)
5% - VGHCX - Health Care (0.37%)
5% - VGSTX - Star (0.32%)
15% - VTSMX - Total Stock Market Index (0.15%)
15% - VWELX - Wellington (0.25%)

Roth 401k at Fidelity - 5 figure (expense ratio)
30% - FXSIX - 500 Index Fund (0.03%)
30% - MEIJX - MFS Value Fund R4 (0.61%)
30% - MSEQX - Morgan Stanley Institutional (0.63%)
5% - BCOIX - Baird Core Plus Bond (0.3%)
5% - FIAM Target Date 2045 (0.47%)
What other funds are offered in your 401k? Please give fund names, tickers and expense ratios.

The Fidelity 500 Index Fund (FXSIX) is a very good low ER fund to use for domestic stocks. But there may be better fund choices offered for bonds and international stock.

Please simply add this to your original post using the edit button.

Annual Contributions
$5200 into Vanguard
4% into Fidelity (company match 4%
How much is your 401k contribution and the employer match in dollars?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

prince
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Re: Your stock/bond allocation?

Post by prince » Tue Oct 03, 2017 12:26 pm

Taylor Larimore wrote:
Mon Oct 02, 2017 9:24 pm
prince:

Your first and most important decision is your allocation between stocks and bonds. More than anything else it determines your expected return and expected risk. You indicated you are "unsure." Do the best you can.

Please use this Vanguard Asset Allocation Tool to help you make a decision only you and your wife can make:

Investor Questionnaire

You should expect your portfolio to fall 50% of its stock allocation in the next bad bear market. For example, a 60% stock/40% bond allocation might decline about 30% during the next bear market.

Come back with your stock/bond decision. We can then talk about your international percentage and the funds you want to select.

It will also be helpful if you put the exact percentage (or dollars) of each account (2) in your TOTAL portfolio.

Thank you and best wishes
Taylor
Thank you Taylor! I used the quiz and it gave me 80% stock and 20% bonds. I just put 20% international but not sure, look forward to your feedback. I do like your example except 60% domestic stock, 20% bond and 20% international maybe.

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Tue Oct 03, 2017 12:27 pm

jalbert wrote:
Mon Oct 02, 2017 11:23 pm
I would second livesoft's view of just holding one properly selected Target Retirement fund in each account as being likely best.

I would ask why your 401K is exclusively Roth contributions? This may be optimal for you, but for most people it is not. You want to have enough traditional contributions to utilize the tax free and low tax brackets for withdrawals. If you switch to traditional contributions, you can increase your contribution to be higher than 4% and still have the same take home pay. Your situation may be different, but for most people this will increase the after-tax value of 401K withdrawals.
Thank you! And that is a good question, I originally rolled into a Roth IRA with the Vanguard and with the new company just went into Roth 401k. I am expecting to retire at a higher tax bracket. I would love your insight though if this does not make sense.

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Tue Oct 03, 2017 12:28 pm

delamer wrote:
Tue Oct 03, 2017 9:59 am

Just to be clear, the paper was written by Bill Bernstein who is highly regarded in Boglehead circles for his analysis and recommendations. He originally trained as a neurologist.

Here is a link to his own website: http://www.efficientfrontier.com
Ah did not know that, thank you for clearing it up. I like his methodology, will be browsing his site for sure. Thank you!

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Tue Oct 03, 2017 12:31 pm

ruralavalon wrote:
Tue Oct 03, 2017 10:32 am

I suggest around 20-30% of stocks in international stocks. This historically has captured around 84-99% of the maximum historical diversification benefit. For a pdf of a Vanguard paper on this subject Google "Considerations for Investing in Non-U.S. Equities" (see pp. 5-6).
So say 30% international, 20% bond and 50% domestic stock?

ruralavalon wrote:
The Fidelity 500 Index Fund (FXSIX) is a very good low ER fund to use for domestic stocks. But there may be better fund choices offered for bonds and international stock.

Please simply add this to your original post using the edit button.
Makes sense, I will do so later tonight.

ruralavalon wrote: How much is your 401k contribution and the employer match in dollars?
Will update after reviewing later tonight, thank you!

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Taylor Larimore
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The Target Funds Solution

Post by Taylor Larimore » Tue Oct 03, 2017 1:30 pm

prince wrote:
Tue Oct 03, 2017 12:26 pm
Taylor Larimore wrote:
Mon Oct 02, 2017 9:24 pm
prince:

Your first and most important decision is your allocation between stocks and bonds. More than anything else it determines your expected return and expected risk. You indicated you are "unsure." Do the best you can.

Please use this Vanguard Asset Allocation Tool to help you make a decision only you and your wife can make:

Investor Questionnaire

You should expect your portfolio to fall 50% of its stock allocation in the next bad bear market. For example, a 60% stock/40% bond allocation might decline about 30% during the next bear market.

Come back with your stock/bond decision. We can then talk about your international percentage and the funds you want to select.

It will also be helpful if you put the exact percentage (or dollars) of each account (2) in your TOTAL portfolio.

Thank you and best wishes
Taylor
Thank you Taylor! I used the quiz and it gave me 80% stock and 20% bonds. I just put 20% international but not sure, look forward to your feedback. I do like your example except 60% domestic stock, 20% bond and 20% international maybe.
prince:

Now we are getting somewhere. Assuming you have settled on an 80% stock and 20% bond portfolio, I agree with those who recommend expertly designed, simple, very diversified target funds in your tax-advantaged portfolio.

I tried to get more information about the FIAM (Fidelity Institutional Asset Management) target fund in your 401k plan but Fidelity information is hazy. In any event, it appears to be a very good low-cost target fund (they call it a "pool.") Pick a fund (pool) with about a 80% stocks. Don't fret about the exact international stock amount.

For your IRA consider Vanguard Target Retirement 2015 (VTTHX) with 80% stocks and 20% bonds which meets your desired asset-allocation.

With these two fund-of-funds you will own over 15,000 world-wide individual securities so there is no need to add more funds. In addition to the extreme diversification (lower risk), The funds automatically become more conservative with age. You will not have to worry about rebalancing or other maintenance chores. The funds do it for you. You can read about the Vanguard Target Funds here:

https://investor.vanguard.com/mutual-fu ... rview/0305

If you have more questions, ask them here.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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ruralavalon
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Re: Please judge my Vanguard portfolio

Post by ruralavalon » Tue Oct 03, 2017 2:09 pm

prince wrote:
Tue Oct 03, 2017 12:31 pm
ruralavalon wrote:
Tue Oct 03, 2017 10:32 am

I suggest around 20-30% of stocks in international stocks. This historically has captured around 84-99% of the maximum historical diversification benefit. For a pdf of a Vanguard paper on this subject Google "Considerations for Investing in Non-U.S. Equities" (see pp. 5-6).
So say 30% international, 20% bond and 50% domestic stock?
No. That's about 20% bonds, 20% international stocks, and 60% domestic stocks.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

prince
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Re: The Target Funds Solution

Post by prince » Tue Oct 03, 2017 10:44 pm

Taylor Larimore wrote:
Tue Oct 03, 2017 1:30 pm

With these two fund-of-funds you will own over 15,000 world-wide individual securities so there is no need to add more funds. In addition to the extreme diversification (lower risk), The funds automatically become more conservative with age. You will not have to worry about rebalancing or other maintenance chores. The funds do it for you. You can read about the Vanguard Target Funds here:
Thank you Taylor! There was mention in the earlier posts of a lot of overlap with the ones I currently have. No worries about overlap in the two target funds from Vanguard and Fidelity?

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Tue Oct 03, 2017 10:48 pm

ruralavalon wrote:
Tue Oct 03, 2017 2:09 pm

No. That's about 20% bonds, 20% international stocks, and 60% domestic stocks.
Would owning

60% - VFIAX - 500 Index Admiral
20% - VBTLX - Total Bond Market
20% - VTIAX - Total International

cover this just to keep things simple?

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ruralavalon
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Re: Please judge my Vanguard portfolio

Post by ruralavalon » Wed Oct 04, 2017 8:26 am

prince wrote:
Tue Oct 03, 2017 10:48 pm
ruralavalon wrote:
Tue Oct 03, 2017 2:09 pm

No. That's about 20% bonds, 20% international stocks, and 60% domestic stocks.
Would owning

60% - VFIAX - 500 Index Admiral
20% - VBTLX - Total Bond Market
20% - VTIAX - Total International

cover this just to keep things simple?
Yes.

But my suggestion for better diversification is Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% whenever it's available, instead of Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Wed Oct 04, 2017 9:34 am

ruralavalon wrote:
Wed Oct 04, 2017 8:26 am

But my suggestion for better diversification is Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% whenever it's available, instead of Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%
Thank you, in my initial research before discovering bogle I found more people recommending the 500. Is diversification your sole reason for picking total over the 500?

renue74
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Re: Please judge my Vanguard portfolio

Post by renue74 » Wed Oct 04, 2017 9:43 am

One thing I suggest is to run your portfolio through Morningstar X-Ray analysis and that will give you a good view of overlap, market segments, etc.

The best way...I use is to have a T. Rowe Price account. I don't think you need to have funds with TRP, but you can make an account...and they have M* baked into the asset allocation planning section once you log in.

Otherwise, you have to pay $ for it.

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ruralavalon
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Re: Please judge my Vanguard portfolio

Post by ruralavalon » Wed Oct 04, 2017 9:58 am

prince wrote:
Wed Oct 04, 2017 9:34 am
ruralavalon wrote:
Wed Oct 04, 2017 8:26 am

But my suggestion for better diversification is Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% whenever it's available, instead of Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%
Thank you, in my initial research before discovering bogle I found more people recommending the 500. Is diversification your sole reason for picking total over the 500?
Yes, the total stock market index fund includes stocks of smaller companies not included in the S&P 500 index.

The Vanguard 500 Index Fund is perfectly acceptable in a 401k that doesn't offer a total stock market index fund.
Last edited by ruralavalon on Wed Oct 04, 2017 10:00 am, edited 1 time in total.
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tigerdoc93
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Re: Please judge my Vanguard portfolio

Post by tigerdoc93 » Wed Oct 04, 2017 9:59 am

The Morningstar X-ray is free with IPad app.

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ruralavalon
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Re: Please judge my Vanguard portfolio

Post by ruralavalon » Wed Oct 04, 2017 10:01 am

tigerdoc93 wrote:
Wed Oct 04, 2017 9:59 am
The Morningstar X-ray is free with IPad app.
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jalbert
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Re: Please judge my Vanguard portfolio

Post by jalbert » Wed Oct 04, 2017 2:15 pm

Thank you! And that is a good question, I originally rolled into a Roth IRA with the Vanguard and with the new company just went into Roth 401k. I am expecting to retire at a higher tax bracket. I would love your insight though if this does not make sense.
The only retirement income that is taxed at your marginal tax bracket rate is the regular income that falls in your marginal bracket But Roth contributions are taxed at your marginal rate. Hypothetically, If all of your income is from a traditional IRA, some of that is realized in the zero bracket, which is income on which you were never taxed. If all of your retirement income comes from Roth sources, you miss out on this opportunity. My opinion is that Roth accounts were created to generate more net tax revenue for the government.

Because of RMDs and other sources of retirement income (SS, pensions, taxable account income), determining the optimal mix of traditional and Roth contributions is quite complex, and there is no 1-size-fits-all answer. In general, I think traditional contributions are the safer choice until one has maxed out 401K opportunities. If you are maxing out a 401K and can afford to have some or all be Roth contributions, that becomes equivalent to a trad contribution larger than the 401K limit which is more compelling.
Last edited by jalbert on Wed Oct 04, 2017 4:47 pm, edited 4 times in total.
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Taylor Larimore
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Answer to question

Post by Taylor Larimore » Wed Oct 04, 2017 3:20 pm

prince wrote:
Tue Oct 03, 2017 10:44 pm
Taylor Larimore wrote:
Tue Oct 03, 2017 1:30 pm

With these two fund-of-funds you will own over 15,000 world-wide individual securities so there is no need to add more funds. In addition to the extreme diversification (lower risk), The funds automatically become more conservative with age. You will not have to worry about rebalancing or other maintenance chores. The funds do it for you. You can read about the Vanguard Target Funds here:
Thank you Taylor! There was mention in the earlier posts of a lot of overlap with the ones I currently have. No worries about overlap in the two target funds from Vanguard and Fidelity?
prince:

You ask a difficult question about the nearly 100% overlap when using similar target funds in both your accounts. I'll try to explain:

Normally, when funds overlap, only a relatively small number of securities overlap. This overlap magnifies the concentration of the overlapping securities thereby reducing the diversification effect of the two funds. However, when two target funds containing similar securities are overlapped, there is no concentration of overlapping securities and maximum diversification is unchanged.

My suggestion of similar Target Funds in each portfolio results in only two funds for maximum simplicity. Please read my link below to understand the many advantages of a simple portfolio.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Wed Oct 04, 2017 10:46 pm

renue74 wrote:
Wed Oct 04, 2017 9:43 am
One thing I suggest is to run your portfolio through Morningstar X-Ray analysis and that will give you a good view of overlap, market segments, etc.

The best way...I use is to have a T. Rowe Price account. I don't think you need to have funds with TRP, but you can make an account...and they have M* baked into the asset allocation planning section once you log in.

Otherwise, you have to pay $ for it.
What an incredible tool! I like the free option on the site as ruralavalon mentions.

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Wed Oct 04, 2017 10:51 pm

jalbert wrote:
Wed Oct 04, 2017 2:15 pm
Hypothetically, If all of your income is from a traditional IRA, some of that is realized in the zero bracket, which is income on which you were never taxed. If all of your retirement income comes from Roth sources, you miss out on this opportunity.
I think this just flew over my head... how would income from a traditional IRA be realized in the zero bracket?
jalbert wrote:
Wed Oct 04, 2017 2:15 pm
My opinion is that Roth accounts were created to generate more net tax revenue for the government.
I think I may be in a higher tax bracket when I retire hence the Roth angle but I would love to know why you think this. Could it not be a win-win for both govt and myself?

prince
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Re: Answer to question

Post by prince » Wed Oct 04, 2017 11:04 pm

Taylor Larimore wrote:
Wed Oct 04, 2017 3:20 pm

My suggestion of similar Target Funds in each portfolio results in only two funds for maximum simplicity. Please read my link below to understand the many advantages of a simple portfolio.
Thank you for the explanation Taylor, I agree with you on simplicity. I like your approach but I also like the 3 fund approach explained in the "If you can" paper. Right now I am thinking of switching my Vanguard funds to a 3 fund approach (Total Stock Market, Total International, and Total Bond) and keep just the Target fund in Fidelity and at other times I want to go 3 fund in both or target in both :?

I am loving the dividends the 500 gives me along with the Health even though both are in the Total as explained by bloom earlier.

jalbert
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Re: Please judge my Vanguard portfolio

Post by jalbert » Wed Oct 04, 2017 11:13 pm

I think this just flew over my head... how would income from a traditional IRA be realized in the zero bracket?
Suppose, hypothetically for the sake of example, you retired 12/31/2017 and your sole source of income will be traditional IRA withdrawals. If you are single with 1 exemption and withdraw $24,000 next year, at today's tax rates, you would owe $1574 in federal income tax. That's an aggregate tax rate of 6.6%, despite the fact that you would be in the 15% marginal tax rate bracket.
Last edited by jalbert on Wed Oct 04, 2017 11:34 pm, edited 1 time in total.
Risk is not a guarantor of return.

jalbert
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Joined: Fri Apr 10, 2015 12:29 am

Re: Please judge my Vanguard portfolio

Post by jalbert » Wed Oct 04, 2017 11:33 pm

I am loving the dividends the 500 gives me
When a company distributes profit as a dividend, the value of the company drops by the amount distributed. This does not enhance your total return in any way, and should not influence your decision on whether to hold an SP500 or total US market index in a tax-qualified account for US stock exposure. The major benefit of a target retirement product is professional management, which will avoid mistakes due to a misunderstanding and avoid emotional decisions.

Splitting the portfolio holdings across different accounts can make sense if the good investment options in one account such as a 401K are too limited. But if you can set up the portfolio structure of hold a target retirement fund in each account, it will facilitate rebalancing. If you hold, say, US stocks in your 401K and non-US stocks and bonds in your IRA, how would you rebalance the US holdings in response to significant market movements?
Risk is not a guarantor of return.

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Thu Oct 05, 2017 4:16 pm

jalbert wrote:
Wed Oct 04, 2017 11:13 pm
Suppose, hypothetically for the sake of example, you retired 12/31/2017 and your sole source of income will be traditional IRA withdrawals. If you are single with 1 exemption and withdraw $24,000 next year, at today's tax rates, you would owe $1574 in federal income tax. That's an aggregate tax rate of 6.6%, despite the fact that you would be in the 15% marginal tax rate bracket.
I apologize for my newbie confusion trying to wrap my head around it, why would I be taxed 6.6% when I would be in the 15% bracket?

prince
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Re: Please judge my Vanguard portfolio

Post by prince » Thu Oct 05, 2017 4:19 pm

jalbert wrote:
Wed Oct 04, 2017 11:33 pm
Splitting the portfolio holdings across different accounts can make sense if the good investment options in one account such as a 401K are too limited. But if you can set up the portfolio structure of hold a target retirement fund in each account, it will facilitate rebalancing. If you hold, say, US stocks in your 401K and non-US stocks and bonds in your IRA, how would you rebalance the US holdings in response to significant market movements?
This makes sense, thank you for the explanation. I've been reading that nothing really beats the total stock market so the total fund I would think would be great to have in addition to a target?

delamer
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Re: Please judge my Vanguard portfolio

Post by delamer » Thu Oct 05, 2017 4:23 pm

prince wrote:
Thu Oct 05, 2017 4:16 pm
jalbert wrote:
Wed Oct 04, 2017 11:13 pm
Suppose, hypothetically for the sake of example, you retired 12/31/2017 and your sole source of income will be traditional IRA withdrawals. If you are single with 1 exemption and withdraw $24,000 next year, at today's tax rates, you would owe $1574 in federal income tax. That's an aggregate tax rate of 6.6%, despite the fact that you would be in the 15% marginal tax rate bracket.
I apologize for my newbie confusion trying to wrap my head around it, why would I be taxed 6.6% when I would be in the 15% bracket?
Each additional dollar of income would be taxed at 15%. The 6.6% is the total tax paid divided by income in the example. Every dollar of income is not taxed at your top rate of 15%.

jalbert
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Re: Please judge my Vanguard portfolio

Post by jalbert » Fri Oct 06, 2017 1:22 am

prince wrote:
Thu Oct 05, 2017 4:16 pm
jalbert wrote:
Wed Oct 04, 2017 11:13 pm
Suppose, hypothetically for the sake of example, you retired 12/31/2017 and your sole source of income will be traditional IRA withdrawals. If you are single with 1 exemption and withdraw $24,000 next year, at today's tax rates, you would owe $1574 in federal income tax. That's an aggregate tax rate of 6.6%, despite the fact that you would be in the 15% marginal tax rate bracket.
I apologize for my newbie confusion trying to wrap my head around it, why would I be taxed 6.6% when I would be in the 15% bracket?
Because of the standard deduction of $6350 for single filers, the first $6350 of income for a single person in 2017 is tax-free. That's true whether it comes from a Roth or traditional account. Then there's a chunk of income taxed in the 10% bracket, and only income past that is taxed at 15% if your marginal bracket is 15%.

I see that you are married. The tax thresholds for different brackets are higher for married persons who file jointly.

I think you may want to consider discussing your Roth vs traditional decision with a CPA. There is a very good chance that switching to traditional contributions and increasing your contribution amount to maintain the same take-home salary will be worth far more than the cost of a consultation with a tax professional.
Risk is not a guarantor of return.

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