Portfolio Review Request

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bogleboy
Posts: 95
Joined: Sat Apr 28, 2012 9:02 am

Portfolio Review Request

Post by bogleboy » Mon Dec 04, 2017 12:18 pm

I am a huge fan of this forum and the Wiki. Without it, I would not be where I am. Thank you.

I am preparing to rebalance the portfolio and would like some advice.

Portfolio Size: $850,000

His Salary: $165k
His Salary: $65k
Additional assets in small business that should net $800k-$1m when sold in 2-3 years paid out in about $200k per year over 4-5 years.
Note: We purchase health insurance on the exchange, i.e. it's a major expense.

Emergency funds: 1 YR
Debt: $300,000k mortgage in High Cost of Living Area
Tax Filing Status: Married Filing Jointly
Tax Rate: 28% Federal, 5% State
State of Residence: Massachusetts
Age: 40 yrs, wife 37 yrs
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 40% of stocks

Cash:
19% Savings to Invest (non-Emergency Fund)FDRXX Fidelity® Government Cash Reserves 0.08ER

Paper Savings Bonds:
5% Inherited Paper Savings Bonds Averaging ~6%

Taxable Fidelity Brokerage:
25% FSTVX Fidelity® Total Market Index Fund Premium Class 0.04ER
3% FDRXX Fidelity® Government Cash Reserves 0.37ER

His Roth:
1% FSGDX Fidelity® Global ex U.S. Index Fund Premium Class 0.10ER
3% FSITX Fidelity® U.S. Bond Index Fund Premium Class 0.05ER

His Traditional IRA:
.7% FBIDX Fidelity® U.S. Bond Index Fund Investor Class 0.14ER

His 401k:
23% FDRXX Fidelity® Government Cash Reserves 0.05ER
.37% FBIDX Fidelity® U.S. Bond Index Fund Investor Class 0.14ER
20% FSGDX Fidelity® Global ex U.S. Index Fund Premium Class 0.15ER

Available Funds
All accounts are at Fidelity.

Contributions:
His 401k/profit share: 15k per year + company contribution of 10% of salary regardless of contribution.
Her 401k/profit share: (Starting Jan 1) Deciding how much to self-contribute. Company will add 10% of salary regardless of contribution.
No recent Roth IRA or Traditional IRA contributions.

Additional Savings Rate: $40k per year in taxable

Questions:

1. I’m trying to bring my asset allocation to 70/30. I’ve read the Wiki on tax efficient placement. If in the future I need to purchase bonds in my taxable due to lack of space in tax-advantaged, should I continue to use FBIDX or is there another recommended fund?

2. I setup the portfolio seven to eight years ago based on the Wiki (I LOVE this forum!), which recommended FSGDX. I see that FTIPX is now recommended. Should I sell my FSGDX and replace with FTIPX? If not, should future purchases be FTIPX? But that will give me a four fund portfolio.

3. Is it possible to have too much in tax-advantaged accounts? We’re hoping to retire early and want to make sure we put funds in the appropriate accounts. Should we reduce the 401k contributions?

4. How should HE or SHE be handling IRA contributions? We don’t do anything now.

brad.clarkston
Posts: 588
Joined: Fri Jan 03, 2014 8:31 pm
Location: Kansas City, MO

Re: Portfolio Review Request

Post by brad.clarkston » Mon Dec 04, 2017 1:41 pm

bogleboy wrote:
Mon Dec 04, 2017 12:18 pm

Questions:

1. I’m trying to bring my asset allocation to 70/30. I’ve read the Wiki on tax efficient placement. If in the future I need to purchase bonds in my taxable due to lack of space in tax-advantaged, should I continue to use FBIDX or is there another recommended fund?

FBIDX is good enough unless you want to move to a more active managed fund. (no need to unless you want the risk)


2. I setup the portfolio seven to eight years ago based on the Wiki (I LOVE this forum!), which recommended FSGDX. I see that FTIPX is now recommended. Should I sell my FSGDX and replace with FTIPX? If not, should future purchases be FTIPX? But that will give me a four fund portfolio.

No need to switch. FTIPX has just a tiny bit of Medium & Small cap verses FSGDX's none but it's not really enough to make a difference.

3. Is it possible to have too much in tax-advantaged accounts? We’re hoping to retire early and want to make sure we put funds in the appropriate accounts. Should we reduce the 401k contributions?

I can't see a point of "to much".

4. How should HE or SHE be handling IRA contributions? We don’t do anything now.

However works, monthly or lump sum but you should be doing it if you can afford it.

KlangFool
Posts: 7174
Joined: Sat Oct 11, 2008 12:35 pm

Re: Portfolio Review Request

Post by KlangFool » Mon Dec 04, 2017 1:47 pm

bogleboy wrote:
Mon Dec 04, 2017 12:18 pm

3. Is it possible to have too much in tax-advantaged accounts? We’re hoping to retire early and want to make sure we put funds in the appropriate accounts. Should we reduce the 401k contributions?
bogleboy,

In general, when someone made this statement, it is because they do not know how to access money in those accounts early without paying penalty. The following URL/Article should get you up to speed.

https://www.madfientist.com/how-to-acce ... nds-early/

KlangFool

Olemiss540
Posts: 221
Joined: Fri Aug 18, 2017 8:46 pm

Re: Portfolio Review Request

Post by Olemiss540 » Mon Dec 04, 2017 1:52 pm

Personally, I think you need to be maxing ALL available 401k/Roth IRA/ HSA space prior to taxable investing. No sense in not taking full advantage of these programs.

livesoft
Posts: 57192
Joined: Thu Mar 01, 2007 8:00 pm

Re: Portfolio Review Request

Post by livesoft » Mon Dec 04, 2017 2:30 pm

Since you are using Fidelity, you should use the "Analysis" tab at Fidelity to explore what your Asset Allocation actually is and test changes to see what happens. See this post: viewtopic.php?p=2248876#p2248876

Presumably that 23% in his 401(k) in a money market fund is going to be put to good use this week, right?

As for IRA contributions, why not max out 2 Roth IRA contributions each year?
This signature message sponsored by sscritic: Learn to fish.

bogleboy
Posts: 95
Joined: Sat Apr 28, 2012 9:02 am

Re: Portfolio Review Request

Post by bogleboy » Tue Dec 05, 2017 9:50 pm

brad.clarkston wrote:
Mon Dec 04, 2017 1:41 pm
bogleboy wrote:
Mon Dec 04, 2017 12:18 pm

Questions:

1. I’m trying to bring my asset allocation to 70/30. I’ve read the Wiki on tax efficient placement. If in the future I need to purchase bonds in my taxable due to lack of space in tax-advantaged, should I continue to use FBIDX or is there another recommended fund?

FBIDX is good enough unless you want to move to a more active managed fund. (no need to unless you want the risk)


Brad, Thank you for commenting on this post. It's very helpful. I think I read somewhere that tax-exempt bonds are more suitable for taxable accounts -- did I misread/misunderstand?

2. I setup the portfolio seven to eight years ago based on the Wiki (I LOVE this forum!), which recommended FSGDX. I see that FTIPX is now recommended. Should I sell my FSGDX and replace with FTIPX? If not, should future purchases be FTIPX? But that will give me a four fund portfolio.

No need to switch. FTIPX has just a tiny bit of Medium & Small cap verses FSGDX's none but it's not really enough to make a difference.

Thank you for the confirmation. I'll stick with FSGDX to keep things simple. Maybe they'll merge it with FTIPX in the future.

3. Is it possible to have too much in tax-advantaged accounts? We’re hoping to retire early and want to make sure we put funds in the appropriate accounts. Should we reduce the 401k contributions?

I can't see a point of "to much".

I've studied quite a bit about this the last few days. It's now obvious my wife and I need to be stocking away the total $18500 each in tax-advantaged instead of taxable. I've learned early retirement should not be a factor. Appreciated your comment on this.


4. How should HE or SHE be handling IRA contributions? We don’t do anything now.

However works, monthly or lump sum but you should be doing it if you can afford it.

bogleboy
Posts: 95
Joined: Sat Apr 28, 2012 9:02 am

Re: Portfolio Review Request

Post by bogleboy » Tue Dec 05, 2017 9:54 pm

KlangFool and Olemiss, Appreciate your making me rethink/research this in terms of early retirement. We adjusted our investing strategy and will max out all retirement accounts.

bogleboy
Posts: 95
Joined: Sat Apr 28, 2012 9:02 am

Re: Portfolio Review Request

Post by bogleboy » Tue Dec 05, 2017 9:56 pm

livesoft wrote:
Mon Dec 04, 2017 2:30 pm
Since you are using Fidelity, you should use the "Analysis" tab at Fidelity to explore what your Asset Allocation actually is and test changes to see what happens. See this post: viewtopic.php?p=2248876#p2248876

Presumably that 23% in his 401(k) in a money market fund is going to be put to good use this week, right?

As for IRA contributions, why not max out 2 Roth IRA contributions each year?
Appreciate the link Livesoft.

I just invested the 401k cash tonight. Glad to get that in FBIDX now.

We'll max out both 401ks from next year, and do a regular Roth for my wife and a backdoor Roth for me this week.

iasw
Posts: 78
Joined: Mon Dec 05, 2016 2:02 pm

Re: Portfolio Review Request

Post by iasw » Wed Dec 06, 2017 12:07 am

bogleboy wrote:
Tue Dec 05, 2017 9:56 pm
livesoft wrote:
Mon Dec 04, 2017 2:30 pm
Since you are using Fidelity, you should use the "Analysis" tab at Fidelity to explore what your Asset Allocation actually is and test changes to see what happens. See this post: viewtopic.php?p=2248876#p2248876

Presumably that 23% in his 401(k) in a money market fund is going to be put to good use this week, right?

As for IRA contributions, why not max out 2 Roth IRA contributions each year?
Appreciate the link Livesoft.

I just invested the 401k cash tonight. Glad to get that in FBIDX now.

We'll max out both 401ks from next year, and do a regular Roth for my wife and a backdoor Roth for me this week.
If you are married filing jointly, is your wife indeed eligible to contribute to a Roth? Wouldn't she need to backdoor, too if your income exceeded the limit this year?

brad.clarkston
Posts: 588
Joined: Fri Jan 03, 2014 8:31 pm
Location: Kansas City, MO

Re: Portfolio Review Request

Post by brad.clarkston » Wed Dec 06, 2017 1:08 am

bogleboy wrote:
Tue Dec 05, 2017 9:56 pm
livesoft wrote:
Mon Dec 04, 2017 2:30 pm
Since you are using Fidelity, you should use the "Analysis" tab at Fidelity to explore what your Asset Allocation actually is and test changes to see what happens. See this post: viewtopic.php?p=2248876#p2248876

Presumably that 23% in his 401(k) in a money market fund is going to be put to good use this week, right?

As for IRA contributions, why not max out 2 Roth IRA contributions each year?
Appreciate the link Livesoft.

I just invested the 401k cash tonight. Glad to get that in FBIDX now.

We'll max out both 401ks from next year, and do a regular Roth for my wife and a backdoor Roth for me this week.
This is going to be funny coming from a Fidelity ra-ra guy like me but I can't stand Fidelity's "Analysis" tool it's the weakest part of the website IMHO. I like and use https://www.personalcapital.com/'s "Investing Checkup" tool instead it's just a better tool and it at least uses two-factor authentication to login.

Granted you have to signup (free) and link your accounts (Fidelity, VG, TD, bank, etc) but I think it's a better https://www.mint.com/ than mint is. It's got some slick banking tools and it's all free. Once you link more than $100k to the account you might get a rep call about letting them handle your money but once I said I'm a bogglehead he left me alone.

User avatar
ruralavalon
Posts: 11848
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Portfolio Review Request

Post by ruralavalon » Wed Dec 06, 2017 9:58 am

bogleboy wrote:
Mon Dec 04, 2017 12:18 pm
I am a huge fan of this forum and the Wiki. Without it, I would not be where I am. Thank you.

I am preparing to rebalance the portfolio and would like some advice.

Portfolio Size: $850,000

His Salary: $165k
His Salary: $65k
Additional assets in small business that should net $800k-$1m when sold in 2-3 years paid out in about $200k per year over 4-5 years.
Note: We purchase health insurance on the exchange, i.e. it's a major expense.

Emergency funds: 1 YR
Debt: $300,000k mortgage in High Cost of Living Area
Tax Filing Status: Married Filing Jointly
Tax Rate: 28% Federal, 5% State
State of Residence: Massachusetts
Age: 40 yrs, wife 37 yrs
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 40% of stocks

Cash:
19% Savings to Invest (non-Emergency Fund)FDRXX Fidelity® Government Cash Reserves 0.08ER

Paper Savings Bonds:
5% Inherited Paper Savings Bonds Averaging ~6%

Taxable Fidelity Brokerage:
25% FSTVX Fidelity® Total Market Index Fund Premium Class 0.04ER
3% FDRXX Fidelity® Government Cash Reserves 0.37ER

His Roth:
1% FSGDX Fidelity® Global ex U.S. Index Fund Premium Class 0.10ER
3% FSITX Fidelity® U.S. Bond Index Fund Premium Class 0.05ER

His Traditional IRA:
.7% FBIDX Fidelity® U.S. Bond Index Fund Investor Class 0.14ER

His 401k:
23% FDRXX Fidelity® Government Cash Reserves 0.05ER
.37% FBIDX Fidelity® U.S. Bond Index Fund Investor Class 0.14ER
20% FSGDX Fidelity® Global ex U.S. Index Fund Premium Class 0.15ER

Available Funds
All accounts are at Fidelity.

Contributions:
His 401k/profit share: 15k per year + company contribution of 10% of salary regardless of contribution.
Her 401k/profit share: (Starting Jan 1) Deciding how much to self-contribute. Company will add 10% of salary regardless of contribution.
No recent Roth IRA or Traditional IRA contributions.

Additional Savings Rate: $40k per year in taxable

Questions:

1. I’m trying to bring my asset allocation to 70/30. I’ve read the Wiki on tax efficient placement. If in the future I need to purchase bonds in my taxable due to lack of space in tax-advantaged, should I continue to use FBIDX or is there another recommended fund?
I see just 09% in bonds, and 45% in a money market fund, being Fidelity® Government Cash Reserves (FDRXX). Cash is almost certain to give you a negative real return net of inflation, I think its better to invest in something with the prospect of a positive real return.

I suggest in his 401k exchanging the 23% Fidelity® Government Cash Reserves (FDRXX) ER 0.05% to enough additional Fidelity® U.S. Bond Index Fund Investor Class (FBIDX) ER 0.14% (about 21%) to get to your 30% bond allocation, the rest (about 02%) to a Fidelity® stock index fund.

I suggest switching the 19% cash to invest and the 3% cash in the Fidelity taxable account to very tax-efficient stock index funds such as Fidelity® Total Market Index Fund Premium Class (FSTVX) ER 0.04%.

I don't see a reason to consider bonds in the taxable account.


bogleboy wrote:
Mon Dec 04, 2017 12:18 pm
2. I setup the portfolio seven to eight years ago based on the Wiki (I LOVE this forum!), which recommended FSGDX. I see that FTIPX is now recommended. Should I sell my FSGDX and replace with FTIPX? If not, should future purchases be FTIPX? But that will give me a four fund portfolio.
I would switch from Fidelity® Global ex US Index Premium (FSGDX) ER 0.10% to Fidelity® Total International Index Premium (FTIPX) ER 0.10%. You get more diversification with zero extra expense. This is a free lunch.

The Morningstar style box for Fidelity® Global ex US Index Premium (FSGDX) is:
33/32/27
03/03/03
00/00/00

The Morningstar style box for Fidelity® Total International Index Premium (FTIPX) is:
29/28/24
06/06/05
01/01/01

bogleboy wrote:
Mon Dec 04, 2017 12:18 pm
3. Is it possible to have too much in tax-advantaged accounts? We’re hoping to retire early and want to make sure we put funds in the appropriate accounts. Should we reduce the 401k contributions?
No. You should increase contributions to both 401ks, to the employee maximum of $18k this year and $18.5k/yr starting next year.

There is no penalty for a 401k withdrawal if the "distribution is made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy)" or if the "if you are age 55 or over when you separate from service with your employer." Wiki article, 401k, "Early withdrawals and loans"


bogleboy wrote:
Mon Dec 04, 2017 12:18 pm
4. How should HE or SHE be handling IRA contributions? We don’t do anything now.
If eligible both should contribute the maximum $5.5k annually to Roth IRAs. "Regular Contributions can be withdrawn at any time with no tax and no penalty."Wiki article, "Roth IRA".

If not eligible for direct contributions to Roth IRAs, then you could consider backdoor Roth IRAs. Wiki article, "Backdoor Roth IRA".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

betablocker
Posts: 305
Joined: Mon Jan 11, 2016 1:26 pm

Re: Portfolio Review Request

Post by betablocker » Wed Dec 06, 2017 10:21 am

I'd also consider your 70/30 split based on when you want to retire and other contributors (inheritance, social security, other income, etc.). If I were relying primarily on the Fidelity accounts going forward, I'd be thinking about lowering my equity exposure. What happens to your spending plan if we get a 50% drawdown and it takes 10 years to recover. If retirement is farther off, it's not as much of an issue.

User avatar
ruralavalon
Posts: 11848
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Portfolio Review Request

Post by ruralavalon » Wed Dec 06, 2017 10:53 am

You say "hoping to retire early". About what retirement age are you considering?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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