Modify Taxable Funds? What to Add?

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Ardarsh
Posts: 9
Joined: Sat Mar 25, 2017 3:52 pm

Modify Taxable Funds? What to Add?

Post by Ardarsh » Sat Jan 20, 2018 3:13 pm

Hello,

Emergency funds: Yes
Debt: Education 40K at 2.5%
Tax Filing Status: Single
Tax Rate: Illinois 4.95%, Federal 33%
State of Residence: IL
Age: 35
Desired Asset allocation: 20-25 Bonds
Desired International allocation: Don't Care


Portfolio:
Cash $170K

Roth IRA
VFORX Vanguard Target 2040 -$75K

401K
SWPPX Schwab SP500 150K
SWSTX Schwab Total Market 150K

Taxable
VTSAX Vanguard Total Stock Adm 105K
VIMAX Mid Cap Adm 100K
VDIGX 25K (ER 0.3)

Questions:
1. Should I just leave VDIGX where it is at? Or exchange it outright? I don't plan on getting more.
2. Should I just stick with adding a target fund in the taxable account?
3. Where should I park my cash since buying a home fell through?

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in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: Modify Taxable Funds? What to Add?

Post by in_reality » Sat Jan 20, 2018 8:42 pm

Ardarsh wrote:
Sat Jan 20, 2018 3:13 pm
Questions:
1. Should I just leave VDIGX where it is at? Or exchange it outright? I don't plan on getting more.
2. Should I just stick with adding a target fund in the taxable account?
3. Where should I park my cash since buying a home fell through?
Well you are not me, and I don't claim to know the future. That said, I would:

1) Get rid of VDIGX in taxable. You don't need it's yearly capital gains. Since you have been paying capital gains taxes all along, and it's a dividend fund, you likely don't have that much in capital gains taxes if you sell. I'd look at it.

2) That's ok, but in taxable I'd prefer to have separate US and international funds in case there is a tax-loss harvesting chance for one but not the other.

3) I'd use short term (brokered) CD's or an online savings account.

Instant X-ray shows you at 92% US, 6% International and 2% bonds. And slightly underweight small cap stocks.

Personally, I would definitely switch VDIGX will an international index fund, preferably small cap such as VFSVX (0.27% ER) or VSS (same fund as VFSVX but 0.13% ER).

If you have access to Schwab's Target Index funds (not target date funds which are more expensive) such as SWYGX (2040 same as VFORX), I'd use that instead of SWPPX.

VDIGX --> VSS
and
SWPPX --> SWYGX

will give you:
15% International
5% bonds
+very close to market weight for small caps. More of that will be international but that's fine as it'll have a lower correlation to US large/mid.
+a little more in emerging markets since both VSS and SWYGX include that exposure (SWYGX will reduce it's exposure as you near retirement to lessen volatility)

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Tyler Aspect
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Location: California
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Re: Modify Taxable Funds? What to Add?

Post by Tyler Aspect » Sat Jan 20, 2018 10:48 pm

Need a full listing of your 401k fund names and expense ratios for detailed suggestions.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

Ardarsh
Posts: 9
Joined: Sat Mar 25, 2017 3:52 pm

Re: Modify Taxable Funds? What to Add?

Post by Ardarsh » Mon Jan 22, 2018 12:42 pm

Schwab S&P 500 Index
SWPPX
0.09%

Schwab Total Stock Market Index
SWTSX
0.09%


I will find out about the costs for dumping VDIGX.

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in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: Modify Taxable Funds? What to Add?

Post by in_reality » Tue Jan 23, 2018 8:36 am

Ardarsh wrote:
Mon Jan 22, 2018 12:42 pm
Schwab S&P 500 Index
SWPPX
0.09%

Schwab Total Stock Market Index
SWTSX
0.09%


I will find out about the costs for dumping VDIGX.
I think the question was what are the options in your 401k. Other than SWTSX and SWPPX, what choices do you have?

stan1
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Joined: Mon Oct 08, 2007 4:35 pm

Re: Modify Taxable Funds? What to Add?

Post by stan1 » Tue Jan 23, 2018 8:50 am

I'd be looking to sell VIMAX and VDIGX for a loss in taxable if there's a market decline. I don't view either as a desirable long term holding consistent with a total market strategy. My lesson learned is to never buy anything in taxable that you wouldn't want to keep forever. I would not add a Target Retirement fund with bonds into a taxable account.

Go back to the basics. Choose your asset allocation then choose the funds to meet the allocation.

You could do 75% equities (2/3 domestic, 1/3 international) & 25% fixed income

If you are planning to buy a house within 5 years I'd keep the down payment money in FDIC insured accounts (CDs, money market savings accounts). If you don't expect to have a use for it for at least 5 years I'd invest it in my taxable account per my asset allocation.

RRAAYY3
Posts: 926
Joined: Thu Jan 17, 2013 12:32 pm

Re: Modify Taxable Funds? What to Add?

Post by RRAAYY3 » Tue Jan 23, 2018 9:21 am

Taxable Accounts

Total US / Total Int’l

Done and done

Ardarsh
Posts: 9
Joined: Sat Mar 25, 2017 3:52 pm

Re: Modify Taxable Funds? What to Add?

Post by Ardarsh » Wed Jan 24, 2018 10:11 am

stan1 wrote:
Tue Jan 23, 2018 8:50 am
....

Go back to the basics. Choose your asset allocation then choose the funds to meet the allocation.

You could do 75% equities (2/3 domestic, 1/3 international) & 25% fixed income

.....
What do you suggest for the fixed income?
I will then just go with VTIAX for international exposure.

Ardarsh
Posts: 9
Joined: Sat Mar 25, 2017 3:52 pm

Re: Modify Taxable Funds? What to Add?

Post by Ardarsh » Wed Jan 24, 2018 10:16 am

in_reality wrote:
Tue Jan 23, 2018 8:36 am
I think the question was what are the options in your 401k. Other than SWTSX and SWPPX, what choices do you have?
The other choices have higher ER meaning near 1%. I can throw stuff in the Schwab healthcare which is near 0.4%. Otherwise there is a bond fund.

stan1
Posts: 6007
Joined: Mon Oct 08, 2007 4:35 pm

Re: Modify Taxable Funds? What to Add?

Post by stan1 » Wed Jan 24, 2018 9:18 pm

Ardarsh wrote:
Wed Jan 24, 2018 10:11 am
stan1 wrote:
Tue Jan 23, 2018 8:50 am
....

Go back to the basics. Choose your asset allocation then choose the funds to meet the allocation.

You could do 75% equities (2/3 domestic, 1/3 international) & 25% fixed income

.....
What do you suggest for the fixed income?
I will then just go with VTIAX for international exposure.
What I would do in your situation is invest the cash in tax exempt money market funds and FDIC insured accounts. I'd be looking for 12 month CDs above 2% and money market savings accounts 1.4% or higher. Sounds like you may decide to buy a house in the near future if you find one so I would not put my down payment money into equities. In my retirement accounts I would use Total Bond Index or maybe a money market fund if I wanted less sensitivity to interest rates. If I had a stable value fund in my 401K I might use that as well.

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