New to investing - Help with portfolio & basics

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anon54010
Posts: 2
Joined: Sat Dec 02, 2017 5:01 am

New to investing - Help with portfolio & basics

Post by anon54010 » Sun Dec 03, 2017 5:13 am

Hello all,

I'm new to investing and I'm new to bogleheads. I just graduated from residency and am starting a new (relatively?) high paying job as an attending. I've been reading for a few months now, and wanted to take control of my investments, and wanted to get some feedback.

Emergency funds: Yes
Debt: None
Tax Filing Status: Single
Tax Rate: 33% federal, 6% state, 1% city
State of Residence: MO
Age: 30
Desired Asset allocation: 100% stock
Desired International allocation: 30%?

Current retirement assets (all holdings in Vanguard except for 403b, in TIAA) ~ 100k

Taxable
30% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11)
11% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)

Roth IRA
24.5% Vanguard Small Cap Value Index Fund Admiral Shares (VSIAX) (0.07)

401k (previous company)
9% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) (0.15)

403b (current company; in TIAA)
25.5% Vanguard Total Stock Market Index Fund Institutional (VITSX) (0.04)

I would be maxing contributions annually to my 403b and IRA. I would estimate about 100k/year contributions towards taxable.


Questions:
1) Is this reasonable? I'm trying to do a 70/30 domestic/international, and within domestic 65/35 total market to small value.

2) Should I roll over my previous company's 401k to current company's 403b? Are there any other suggestions? I'm paying a higher ER because I don't have enough money in that account to buy the admiral shares.

3) Should I contribute to a traditional IRA? Or should I try to convert that to a Roth IRA (i.e. backdoor roth as I'm over the income limit)

4) Should I hold 5% cash in a money market in taxable for "buying in" when the market drops?

3funder
Posts: 96
Joined: Sun Oct 15, 2017 9:35 pm

Re: New to investing - Help with portfolio & basics

Post by 3funder » Sun Dec 03, 2017 9:07 am

1) If you're truly comfortable with 100% equities, that's fine (I'm 33 and am 80% equities). However, your small cap value tilt is pretty aggressive. The point of the total stock market index fund is that it is efficient and can serve as a one stop shop for U.S. equity exposure. As a doctor, you probably won't NEED the POTENTIALLY higher long-term returns from such a noticable small cap value tilt. A 70/30 domestic/international split is reasonable.

2) if your new plan has cheaper administrative fees and offers access to the investment options you desire, then yes, roll it over. I wouldn't worry about admiral shares right now. When you have enough money, you'll get them, and that will be that.

3) You could do either. I'd probably consider it too much of a pain to do the Roth conversions, but others on this forum are well-versed in this area. Perhaps they can shed more light on this.

4) If you're referring to taxable investments, I prefer to transfer the money from my checking account to Vanguard when a buying opportunity presents itself. Note: MEANINGFUL buying opportunities do not come along very often. When they do, dive in. Over time, the most tax-efficient way to invest is to buy at the beginning of each year; however, this effect is less pronounced in passively managed than actively managed funds.

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FiveK
Posts: 3282
Joined: Sun Mar 16, 2014 2:43 pm

Re: New to investing - Help with portfolio & basics

Post by FiveK » Mon Dec 04, 2017 3:34 am

anon54010 wrote:
Sun Dec 03, 2017 5:13 am
1) Is this reasonable? I'm trying to do a 70/30 domestic/international, and within domestic 65/35 total market to small value.

2) Should I roll over my previous company's 401k to current company's 403b? Are there any other suggestions? I'm paying a higher ER because I don't have enough money in that account to buy the admiral shares.

3) Should I contribute to a traditional IRA? Or should I try to convert that to a Roth IRA (i.e. backdoor roth as I'm over the income limit)

4) Should I hold 5% cash in a money market in taxable for "buying in" when the market drops?
1) Yes, it's reasonable. No idea if it will be "best" or even "good" - but yes it's reasonable.
2) 3funder's advice looks good. If it is a relatively small amount, rolling it into your current 403b might be worthwhile just for simplicity.
3) Given no pre-tax money currently in traditional IRAs, a Backdoor Roth IRA is a good idea.
4) Maybe, but probably not. What exact criteria would you use to make the buy-in decision?

retiredjg
Posts: 30803
Joined: Thu Jan 10, 2008 12:56 pm

Re: New to investing - Help with portfolio & basics

Post by retiredjg » Mon Dec 04, 2017 8:23 am

anon54010 wrote:
Sun Dec 03, 2017 5:13 am
1) Is this reasonable? I'm trying to do a 70/30 domestic/international, and within domestic 65/35 total market to small value.
Lots of folks are doing this. Most have no idea what a market crash is like. Many will lose their money by selling at the worst time. Others will be miserable for the several years the market is down. What's the point?

In my opinion, having some bonds would be more reasonable. I'd suggest a minimum of 20%. You may have the desire to take a lot of risk, but there is no need to do it. At the rate you are saving, you could probably invest at 40% stock and 60% bonds and still have plenty for retirement.

2) Should I roll over my previous company's 401k to current company's 403b? Are there any other suggestions? I'm paying a higher ER because I don't have enough money in that account to buy the admiral shares.
You probably can't buy admiral shares in the plan anyway, but....I don't see any reason not to roll the old plan into the new plan.

3) Should I contribute to a traditional IRA? Or should I try to convert that to a Roth IRA (i.e. backdoor roth as I'm over the income limit)
There is no point in contributing to tIRA unless you do convert it to Roth. If you can figure out the back door paperwork ahead of time, I think it is a good idea. If you cannot pencil through the paperwork and get it to come out right, don't do it.

4) Should I hold 5% cash in a money market in taxable for "buying in" when the market drops?
No. Why let money sit on the side doing nothing? This is one of the functions of having bonds in your portfolio. When stocks crash, you sell some bonds to buy stocks.

iasw
Posts: 81
Joined: Mon Dec 05, 2016 2:02 pm

Re: New to investing - Help with portfolio & basics

Post by iasw » Mon Dec 04, 2017 9:50 am

retiredjg wrote:
Mon Dec 04, 2017 8:23 am
anon54010 wrote:
Sun Dec 03, 2017 5:13 am
1) Is this reasonable? I'm trying to do a 70/30 domestic/international, and within domestic 65/35 total market to small value.
Lots of folks are doing this. Most have no idea what a market crash is like. Many will lose their money by selling at the worst time. Others will be miserable for the several years the market is down. What's the point?

In my opinion, having some bonds would be more reasonable. I'd suggest a minimum of 20%. You may have the desire to take a lot of risk, but there is no need to do it. At the rate you are saving, you could probably invest at 40% stock and 60% bonds and still have plenty for retirement.

2) Should I roll over my previous company's 401k to current company's 403b? Are there any other suggestions? I'm paying a higher ER because I don't have enough money in that account to buy the admiral shares.
You probably can't buy admiral shares in the plan anyway, but....I don't see any reason not to roll the old plan into the new plan.

3) Should I contribute to a traditional IRA? Or should I try to convert that to a Roth IRA (i.e. backdoor roth as I'm over the income limit)
There is no point in contributing to tIRA unless you do convert it to Roth. If you can figure out the back door paperwork ahead of time, I think it is a good idea. If you cannot pencil through the paperwork and get it to come out right, don't do it.

4) Should I hold 5% cash in a money market in taxable for "buying in" when the market drops?
No. Why let money sit on the side doing nothing? This is one of the functions of having bonds in your portfolio. When stocks crash, you sell some bonds to buy stocks.
Can you clarify the bolded? If someone cannot do a backdoor Roth, isn't it still worth maxing out the tIRA before moving on to taxable investments?

retiredjg
Posts: 30803
Joined: Thu Jan 10, 2008 12:56 pm

Re: New to investing - Help with portfolio & basics

Post by retiredjg » Mon Dec 04, 2017 10:42 am

iasw wrote:
Mon Dec 04, 2017 9:50 am
retiredjg wrote:
Mon Dec 04, 2017 8:23 am
There is no point in contributing to tIRA unless you do convert it to Roth. If you can figure out the back door paperwork ahead of time, I think it is a good idea. If you cannot pencil through the paperwork and get it to come out right, don't do it.
Can you clarify the bolded? If someone cannot do a backdoor Roth, isn't it still worth maxing out the tIRA before moving on to taxable investments?
In some cases it might be. In general, I think not.

Here's the reason why not. If you put non-deductible contributions into IRA year after year, and if the money is invested in stock or stock funds, when it comes time to sell, the earnings may be large and are taxed as ordinary income. If that same money had been in a taxable account, the earnings would be taxed at the much lower capital gains rate. Better if the money had been in taxable.

Here are the exceptions I can think of.
  • -If you need more space for bonds and put your non-deductible contributions into IRA year after year and invest in bond funds, the earnings will not be as large and the earnings will be taxed as ordinary income - same as if the money had been in a taxable account. People will say "but I could have used a tax-exempt bond fund in taxable", and that is true. But over the long run, tax-exempt bonds tend to pay less than taxable bonds - so I prefer to put bonds into tax-deferred accounts.

    -The other exception is a person who is going to retire fairly soon. Putting non-deductible contributions into IRA for a few years seems pretty harmless no matter what you invest in. I think it could be a good idea for people without other IRAs (that are not Roth) and probably an OK idea for people with other IRAs (that are not (Roth).
This particular poster is just starting out. Non-deductible IRA contributions for the next 30 years is not a good choice in my opinion. Better to hold that money in taxable.

SimplicityNow
Posts: 280
Joined: Fri Aug 05, 2016 10:31 am

Re: New to investing - Help with portfolio & basics

Post by SimplicityNow » Mon Dec 04, 2017 11:17 am

I agree with retiredjg. 100% equities is more risk then some here would find in the realm of what's reasonable. Add the large small value tilt and it is an extremely aggressive portfolio. To what purpose?

Have you experienced a bad market downturn with large sums of money invested? And if so, were you able to maintain a 100% equity position and not sell during a downturn. I would think from you age probably not.

100% equity is a great thing when the market is up 20%/yr. Not so much when it drops 45%.

80% equities capture most of the gain with less volatility.

iasw
Posts: 81
Joined: Mon Dec 05, 2016 2:02 pm

Re: New to investing - Help with portfolio & basics

Post by iasw » Mon Dec 04, 2017 2:01 pm

retiredjg wrote:
Mon Dec 04, 2017 10:42 am
iasw wrote:
Mon Dec 04, 2017 9:50 am
retiredjg wrote:
Mon Dec 04, 2017 8:23 am
There is no point in contributing to tIRA unless you do convert it to Roth. If you can figure out the back door paperwork ahead of time, I think it is a good idea. If you cannot pencil through the paperwork and get it to come out right, don't do it.
Can you clarify the bolded? If someone cannot do a backdoor Roth, isn't it still worth maxing out the tIRA before moving on to taxable investments?
In some cases it might be. In general, I think not.

Here's the reason why not. If you put non-deductible contributions into IRA year after year, and if the money is invested in stock or stock funds, when it comes time to sell, the earnings may be large and are taxed as ordinary income. If that same money had been in a taxable account, the earnings would be taxed at the much lower capital gains rate. Better if the money had been in taxable.

Here are the exceptions I can think of.
  • -If you need more space for bonds and put your non-deductible contributions into IRA year after year and invest in bond funds, the earnings will not be as large and the earnings will be taxed as ordinary income - same as if the money had been in a taxable account. People will say "but I could have used a tax-exempt bond fund in taxable", and that is true. But over the long run, tax-exempt bonds tend to pay less than taxable bonds - so I prefer to put bonds into tax-deferred accounts.

    -The other exception is a person who is going to retire fairly soon. Putting non-deductible contributions into IRA for a few years seems pretty harmless no matter what you invest in. I think it could be a good idea for people without other IRAs (that are not Roth) and probably an OK idea for people with other IRAs (that are not (Roth).
This particular poster is just starting out. Non-deductible IRA contributions for the next 30 years is not a good choice in my opinion. Better to hold that money in taxable.
Thank you, that makes a lot of sense.

anon54010
Posts: 2
Joined: Sat Dec 02, 2017 5:01 am

Re: New to investing - Help with portfolio & basics

Post by anon54010 » Wed Dec 06, 2017 9:02 pm

Thanks for all of your responses.

I am considering investing in some bonds (perhaps up to 20% as suggested by several posters). I have a few follow up questions.

1) How should I decide between a bond fund (e.g. I am considering Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX)) versus TIPS? Does the former have a higher predicted return?

2) Since I still have a lot of room in my tax-advanaged accounts, then I should not be considering munis, is that correct?

retiredjg
Posts: 30803
Joined: Thu Jan 10, 2008 12:56 pm

Re: New to investing - Help with portfolio & basics

Post by retiredjg » Thu Dec 07, 2017 6:25 am

anon54010 wrote:
Wed Dec 06, 2017 9:02 pm
1) How should I decide between a bond fund (e.g. I am considering Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX)) versus TIPS? Does the former have a higher predicted return?
I'd use the Intermediate Term Index.
2) Since I still have a lot of room in my tax-advanaged accounts, then I should not be considering munis, is that correct?
In my opinion, yes.

raamakoti
Posts: 87
Joined: Mon Jul 31, 2017 10:20 am

Re: New to investing - Help with portfolio & basics

Post by raamakoti » Thu Dec 07, 2017 11:33 am

Read Peter lynch books
Read Berkshire Hathaway letters to shareholders
Letters by Howard marks
Watch Value investing videos on YouTube

gadoc
Posts: 27
Joined: Thu Aug 06, 2015 3:45 pm

Re: New to investing - Help with portfolio & basics

Post by gadoc » Thu Dec 07, 2017 2:24 pm

anon54010 wrote:
Wed Dec 06, 2017 9:02 pm
Thanks for all of your responses.

I am considering investing in some bonds (perhaps up to 20% as suggested by several posters). I have a few follow up questions.

1) How should I decide between a bond fund (e.g. I am considering Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX)) versus TIPS? Does the former have a higher predicted return?

2) Since I still have a lot of room in my tax-advanaged accounts, then I should not be considering munis, is that correct?
I have a different take on holding a bond fund in a taxable account. I am currently 100% equity and am not to far out from residency as well. We max 403b and 457. I have about 7 K given to me from employer. So per year i'm putting 44k into a tax deferred account. I also recently opened up a vanguard taxable account and have been putting money into the total stock market index fund and total international fund.

My plan would be to stay 100% equity in my tax deferred account but make my taxable account a little more conservative. Something like 70/30. We will be contributing close to 60-100k per year into the taxable account a year and anticipate me needing this money before I tap into my retirement accounts. We will start investing more heavily for the first time in this account starting in a few months. This just helps me sleep well at night knowing that my liquid investments that I can touch without penalty is in a somewhat more conservative asset allocation.

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