Asset allocation

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thegoprogrammer
Posts: 2
Joined: Mon Oct 30, 2017 4:18 pm

Asset allocation

Post by thegoprogrammer » Mon Oct 30, 2017 4:31 pm

I am a 30 year old married man (no kids). I don't have any debt. I have total savings in cash of $40K. I am intending to open a ROTH IRA.

Risk tolerance: I do not want to take high risk. Moderate risk is good for me.

Tax status: "married filing jointly" However, my wife does not earn any income as of now.

Tax rate: Federal :30%. I reside in California. Sorry, not aware of the State tax rate

I have a Employer sponsored 401K.

My estimated/desired asset allocation: 60% in stocks and 40% in bonds/assured return instruments.

Im planning to buy stocks as part of my ROTH IRA. Non retirement/brokerage account: I want to go in for Index funds. Considering Vanguard and Charles Schwabb.

My questions:

1. Kindly suggest a good asset mix for my age.

2. Is it advisable to invest in Growth Stocks or Value stocks?

3. Considering expense ratios and trading fees, which one is cheaper, Vanguard or Charles Schhwab?

4. Any fund asuggestions, if thats not asking for too much.. :D :D

Ron Scott
Posts: 389
Joined: Tue Apr 05, 2016 5:38 am

Re: Asset allocation

Post by Ron Scott » Mon Oct 30, 2017 6:31 pm

60-40 sounds excellent given your stated interests.

Rather than thinking "growth" vs. "value", think "index" like a total index fund or S&P500 fund.

Schwab and VG are comparable in price. Know them both, like them both. I'm in VG.

VTSAX for stocks and VBTLX for bonds, for starters. No ETFs and avoid trading.

youngpleb
Posts: 26
Joined: Mon Oct 16, 2017 7:06 pm

Re: Asset allocation

Post by youngpleb » Mon Oct 30, 2017 6:35 pm

Hi! Good job on going after that Roth IRA and being proactive! A 60/40 mix is definitely on the safe side for your average 30 year-old, but if that helps you sleep good at night then it is worth it. The basic Boglehead starting point is your age in bonds, which is pretty moderate risk. So I'd maybe think about that, since that 10% difference could affect the final amount pretty significantly in the long run! Regardless of 60/40 or 70/30, I'd do about 80% of stocks into VTSAX and the remaining 20% into a good international stock index, with all bonds going in Total Bond Market Index.

As for growth vs value, the war wages on. Growth does very well in bull markets (like the current one), and is evident in the recent returns for many growth-centric funds. It really just comes down to the individual investor, but having a good mix is always healthy. Personally I like to lean towards value just slightly in my balance.

Fallible
Posts: 6145
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Re: Asset allocation

Post by Fallible » Mon Oct 30, 2017 6:50 pm

Welcome to the forum.

Have you read the wiki on asset allocation?
https://www.bogleheads.org/wiki/Asset_allocation

Another good read is pro Boglehead Rick Ferri's book, All About Asset Allocation, 2nd ed.

I think 60/40 is the right allocation for you now considering your stated risk tolerance. The basic question to ask yourself (and your wife) when setting an allocation is how much money you can afford to lose in a market crash before you will need it. For more on that, see the wiki's risk tolerance page:
https://www.bogleheads.org/wiki/Risk_tolerance
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle


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Earl Lemongrab
Posts: 3131
Joined: Tue Jun 10, 2014 1:14 am

Re: Asset allocation

Post by Earl Lemongrab » Tue Oct 31, 2017 10:27 am

There is a lot of information missing or suspect. There is no 30% federal tax bracket. If that is your average or effective rate, then your taxable income and so MAGI is quite high. You likely wouldn't even be able to put money directly into a Roth IRA. We need actual numbers. However, if that's at all near where you are, especially in CA where your state tax rate is probably 9% or better, then you need to be maximizing deductible investing. Are you using the 401(K)?

Take a step back, go through this:

viewtopic.php?f=1&t=6212

Put that information together and it will help you and the people here make the best choices.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

thegoprogrammer
Posts: 2
Joined: Mon Oct 30, 2017 4:18 pm

Re: Asset allocation

Post by thegoprogrammer » Thu Dec 07, 2017 2:09 am

Thank you all for the suggestions. So, my annual gross income is 115K. I have decided to put $5500 in ROTH IRA in a target dated fund and $10000 in a 3 fund portfolio with Schwab. This would be the initial investment. As I go along, I plan to put more money (around $ 25000) in the same 3 fund portfolio. And of course, will keep on maxing out ROTH IRA as long as I am eligible. Is this a good plan?

Apart from the above funds, I have around $22000 which I will need after 3 months. I was thinking if I should put this money in the 3 fund portfolio with Schwab ( US Total stock market index fund (SWTSX), Schwab International index fund (SWISX) and US aggregate Bond index fund (SWAGX)) and then withdraw these funds after 3 months. Is this advisable? What will be the tax implications (short term gains)?

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Sandtrap
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Re: Asset allocation

Post by Sandtrap » Thu Dec 07, 2017 11:19 am

thegoprogrammer wrote:
Thu Dec 07, 2017 2:09 am
Thank you all for the suggestions. So, my annual gross income is 115K. I have decided to put $5500 in ROTH IRA in a target dated fund and $10000 in a 3 fund portfolio with Schwab. This would be the initial investment. As I go along, I plan to put more money (around $ 25000) in the same 3 fund portfolio. And of course, will keep on maxing out ROTH IRA as long as I am eligible. Is this a good plan? see below: investment order link

Apart from the above funds, I have around $22000 which I will need after 3 months. I was thinking if I should put this money in the 3 fund portfolio with Schwab ( US Total stock market index fund (SWTSX), Schwab International index fund (SWISX) and US aggregate Bond index fund (SWAGX)) and then withdraw these funds after 3 months. Is this advisable? What will be the tax implications (short term gains)?
High yield accounts, etc. Short term cd?
For protection of principal, nothing more for such a short term.
If the market drops, would you be prepared to lose 25% or more of that $22,000 ???

Investment Order:
https://www.bogleheads.org/wiki/Priorit ... nvestments

Some helpful links:
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212
Bogle Philosophy
https://www.bogleheads.org/wiki/Bogleh ... hilosophy
Here are links to the wiki's "Getting Started" and "Investing Startup Kit" pages:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Bogleh ... rt-up_kit
Define General Investment Goals and Objectives
https://www.bogleheads.org/wiki/Invest ... statement
Outline of Investing
https://www.bogleheads.org/wiki/Outline_of_investing
Suggested Reading List
https://www.bogleheads.org/RecommendedReading.php
What the experts say about investing
https://www.bogleheads.org/wiki/What_ ... investing
Free Reading: "If You Can" by Bernstein
https://www.google.com/url?sa=t&rct=j& ... -SB3S580I5

j :D

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