New Investor - Introduction

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Joined: Thu Oct 12, 2017 11:16 am

New Investor - Introduction

Post by BlueDreamer » Thu Oct 12, 2017 1:41 pm

Hello All,

I recently decided to take a good hard look at my investments and how I can maximize my financial opportunities. I currently only have a 401k and a checking account. I would like to open a Roth IRA and a brokerage account through Schwab in the next couple weeks and put my money to work instead of stacking it in my checking account. The below details are my proposed allocations, nothing is set in stone other than my 401k.

Emergency funds: $35k in a rewards checking account earning 2.27% APY (only up to $35k). Just opened this account to replace my regular checking account, seems like a no-brainer. This is about 18-24mo of living expenses. I plan on keeping this account at the $35k mark and putting everything I have left into the brokerage account monthly.
Debt: Used car loan with $8,300 remaining. 2.24% APR. Will be paid off 12/19.
Tax Filing Status: Single
Tax Rate: 25% Federal, 6.27% State
State of Residence: WI
Age: 26
Desired Asset allocation: 94% stocks / 6% bonds in 401k and Roth IRA, 60/40 in taxable to save for a house in 5-10 years.
Desired International allocation: 33% of stocks

Total portfolio by end of 2017:
Cash: $35k
401k: $80k
Roth IRA: $5.5k
Brokerage: $5-10k

New annual Contributions
$36k 401k (including match)
$5.5k Roth IRA
$10-12k taxable (for house down payment)


401k, 100% match
63% Schwab S%P 500 Index (SWPPX) (.03)
31% Vanguard Total Intl Stock Index Admiral (VTIAX) (.11)
6% Vanguard Total Bond Market Index Adm (VBTLX) (.05)

Roth IRA

63% Schwab Total Stock Market Index (SWTSX) (.03)
31% Schwab International Index (SWISX) (.06)
6% Schwab US Aggregate Bond Index (SWAGX) (.04)

40% Schwab Total Stock Market Index (SWTSX) (.03)
20% Schwab International Index (SWISX) (.06)
40% Schwab US Aggregate Bond Index (SWAGX) (.04)

Mainly I'd like to make sure my strategy with the taxable account isn't too far out of line. I can put that money in a MMA and earn 1.5% interest but I am ok with taking on some extra risk due to my emergency fund/checking account being well funded. Is this a bad idea? Should I be more conservative based on the 5-10yr horizon?

I think my 401k/Roth AA and fund choices are pretty standard around here, but if anyone has thoughts on those please feel free to share.

Thanks for any advice!

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Joined: Sat Feb 28, 2015 4:35 pm

Re: New Investor - Introduction

Post by EHEngineer » Thu Oct 12, 2017 5:26 pm

Hi BlueDreamer,
Welcome to Bogleheads.

You have a good grasp on your finances and a good plan. I have only a couple minor comments.
You have two different goals with two different allocations and it's a little confusing to put them both in one post.
1) Retirement funds, and
2) Home downpayment funds

You have clearly done your homework and found the "how to ask portfolio questions" thread. Good work there. But you made one small error, normally when we specify asset percentages, we specify by percent of portfolio, not percent of account. Relatedly, "portfolio" means only those funds directed toward a goal. So in your case you have a Retriement portfolio, and a home downpayment portfolio. This is basically irrelevant for you as you are allocating each account exactly at your overall desired allocation. And that's a good thing because it effectively achieves a tax-adjusted allocation. But for clarity of thought I would update your post.

Probably the biggest concern I have is a 60/40 allocation for your home downpayment fund. That's a bit risky for my taste. If 5 years is a real possibility I would have no more than 20% stock, and the rest in CDs. IF the market keeps going up you will hate me for that advice, but I prefer that to, "whoops, I lost 30% of my home downpayment fund in 5 years". YMMV.

Nice work overall.
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius

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Re: New Investor - Introduction

Post by patrick013 » Thu Oct 12, 2017 5:37 pm

Tax-efficient Fund Placement

I would use the above wiki info for fund placement.
age in bonds, buy-and-hold, 10 year business cycle

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Re: New Investor - Introduction

Post by ruralavalon » Fri Oct 13, 2017 10:07 am

Welcome to the forum :) .

In my opinion a 60/40 asset allocation for your house down payment money, 5-10 years away, is reasonable.

I suggest that you consider having your Roth IRA and taxable account at Vanguard, so you can use the more diversified Vanguard Total International Stock Index Fund. Schwab International Index Fund covers only larger companies, only in developed markets excluding Canada. The Schwab fund omits emerging markets, Canada, and small company stocks. Vanguard Total International Stock Index Fund covers both larger and smaller companies, in both emerging and developed markets, including Canada.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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