Help with my investments. Too much cash

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whoever
Posts: 34
Joined: Thu Oct 17, 2013 7:17 pm

Help with my investments. Too much cash

Post by whoever » Sat Jan 20, 2018 9:36 pm

Emergency fund: Yes for 12 months (savings/checking)

Debt: 250k Mortgage at 3% (Recent appraisal at 450k)

Tax Filing Status: Married Filing Jointly with two kids age 17 and 14
Tax Rate: 24%(2018) , 28%(2017) Federal, 5.75% State
State of Residence: NC
Age: His 48, Her 45
Desired Asset allocation: 60% stocks / 40% bonds
Desired International allocation: 50% of stocks

Current Annual income 200k to 225k

Total portfolio: Low 7 digits (cash 40%, stocks/bonds 60%) - excluded 529 plan ~ 70k

Current retirement assets

Cash : 40%

Current asset allocation % excluding cash is 62% stocks, 38% bonds

Image

Image

Taxable:

12.9 % CDs and I bonds: ( 75% CD with 3% yield maturing Jan 2019, 25% is I bonds)
27.8% Vanguard TSM Admiral VTSAX (0.04)
8.7% Vanguard Intermediate-Term Tax-Exempt Bond Fund VWIUX (0.09)
1.1% SPDR Portfolio S&P World ex-U.S SPDW (0.04)
1% SPDR Portfolio emerging market SPEM (0.11)

His 401k:

34.2 % Vanguard Target 2030 Institutional (0.08)

His Roth

0.47% Vanguard Healthcare ETF VHT (0.11)
0.45% Vanguard Information technology ETF VGT (0.11)

His HSA

25k 70:30 stocks/bonds with Vanguard Admiral funds

Her Rollover IRA:

11.8% Vanguard Wellesley Admiral VWIAX (0.15)

Her 401k (need to rollover into IRA)

1.1% DFA Global equity DGEIX (0.3)
0.5% DFA Intermediate Govt Fixed income DFIGX (0.12)

Contributions:

18k + 6k(employer match) his 401k
$6.5k + 1.6k(employer) HSA
50k taxable

Available funds

Funds available in his 401k

Other fund options in 401k excluding target retirement and high expense fee ones
AF FUNDMNTL INV R6 (RFNGX) - 0.31
FID 500 INDEX INST (FXSIX) - 0.03
VANG WINDSOR II ADM (VWNAX) - 0.25
VANG SELECTED VALUE (VASVX) - 0.35
VANGUARD INTL VALUE (VTRIX) - 0.45
TCW MetWest Total Return Bond Fund - Class C - 0.30
FIMM GOVT INST (FRGXX) - 0.18

Funds available in HSA

Vanguard Emerging Mkts Stock Idx I (VEMIX)
Vanguard Extended Market Idx Instlplus (VEMPX)
Vanguard Growth Index I (VIGIX)
Vanguard In ation-Protected Secs I (VIPIX)
Vanguard Institutional Index Instl Pl (VIIIX)
Vanguard Materials Index Adm (VMIAX)
Vanguard Reit Index I (VGSNX)
Vanguard Small Cap Index Adm (VSMAX)
Vanguard Total Bond Market Idx Instlpls (VBMPX)
Vanguard Total Intl Stock Idx Instlpls (VTPSX)
Vanguard Short-Term Bond Index Adm (VBIRX)
Vanguard Total Intl Bd Idx Admiral (VTABX)
Vanguard Value Index Adm (VVIAX)
Vanguard Midcap Value Index Adm (VMVAX)
Vanguard Small-Cap Value Index Adm (VSIAX)
Vanguard Shrt-Term In -Prot Sec Idx Adm (VTAPX)
Vanguard Wellesley Income Admiral (VWIAX)


Please help in fixing this.

1)I would like to tilt to value and small cap
2)I am getting nothing from my current bank Wellsfargo. How about moving to Bofa/Merrill Edge ?
3)Would like to move to ETFs from my taxable mutual funds.
4)Options to park emergency fund
5)Options to invest some cash for 5 years(for kids school) - not part retirement cash

Beehave
Posts: 137
Joined: Mon Jun 19, 2017 12:46 pm

Re: Help with my investments. Too much cash

Post by Beehave » Sat Jan 20, 2018 10:05 pm

I think you will both like and hate my reply.

I think your current proportions and investments look carefully thought out and in my opinion correct.

I think your cash (versus bond) position, especially FDIC insured is great. I see no advantage to Merrill-BoA vs Wells-F in terms of FDIC-insured instruments.

I see no advantage to moving from mutual funds to ETFs.

If you want to tilt to small value or anything else, take 5% of your portfolio as a playground and do whatever you want. To me the fact is that any tilt anyone wants to do can be simply and better or at-worst equivalently achieved by just increasing your indexed total stock percentage relative to bond/cash.

This is just my opinion, I'm sure others will have other, well-reasoned opinions and suggestions.

whoever
Posts: 34
Joined: Thu Oct 17, 2013 7:17 pm

Re: Help with my investments. Too much cash

Post by whoever » Sat Jan 20, 2018 10:11 pm

Beehave wrote:
Sat Jan 20, 2018 10:05 pm
I think you will both like and hate my reply.

I think your current proportions and investments look carefully thought out and in my opinion correct.

I think your cash (versus bond) position, especially FDIC insured is great. I see no advantage to Merrill-BoA vs Wells-F in terms of FDIC-insured instruments.

I see no advantage to moving from mutual funds to ETFs.

If you want to tilt to small value or anything else, take 5% of your portfolio as a playground and do whatever you want. To me the fact is that any tilt anyone wants to do can be simply and better or at-worst equivalently achieved by just increasing your indexed total stock percentage relative to bond/cash.

This is just my opinion, I'm sure others will have other, well-reasoned opinions and suggestions.
Thanks for your response. I am underweight International. My Portfolio is 2M. I didn't include cash in asset allocation image . ~40% of it sitting in cash. I have to reinvest some portion in CDs, stocks and bonds. Don't you think?

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Tyler Aspect
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Joined: Mon Mar 20, 2017 10:27 pm
Location: California
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Re: Help with my investments. Too much cash

Post by Tyler Aspect » Sat Jan 20, 2018 10:33 pm

Synchrony Bank offers high interest savings product. You can park emergency cash there.

The New York 529 plan is usually well regarded for educational savings.

If you would like to invest in ETF instead of mutual funds, then US stocks (VTI, or ITOT), and international stocks (VXUS, or IXUS) are the typical selections.

You already have enough bonds in the rest of the portfolio to reach 60% stock / 40% bond if you exchange cash into a mix of VTI and VXUS.

It seemed you have enough cash to pay off your mortgage. At least consider paying it off.
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.

Beehave
Posts: 137
Joined: Mon Jun 19, 2017 12:46 pm

Re: Help with my investments. Too much cash

Post by Beehave » Sat Jan 20, 2018 10:54 pm

Tyler Aspect wrote:
Sat Jan 20, 2018 10:33 pm
Synchrony Bank offers high interest savings product. You can park emergency cash there.

The New York 529 plan is usually well regarded for educational savings.

If you would like to invest in ETF instead of mutual funds, then US stocks (VTI, or ITOT), and international stocks (VXUS, or IXUS) are the typical selections.

You already have enough bonds in the rest of the portfolio to reach 60% stock / 40% bond if you exchange cash into a mix of VTI and VXUS.

It seemed you have enough cash to pay off your mortgage. At least consider paying it off.
+1

I agree with the Synchrony Bank (or similar) suggestion. Bank of America CDs are near zero interest and useless. You might want just to go with a high rate savings account instead of CDs for some of the cash at Synchrony so it is truly readily accessible for emergencies or to invest in the market if it takes a sudden sharp downturn.

Regarding international funds, if you want to increase your allocation, that is reasonable. I'd suggest dollar-cost averaging moves for reallocation at a moderate pace.

Best wishes.

whoever
Posts: 34
Joined: Thu Oct 17, 2013 7:17 pm

Re: Help with my investments. Too much cash

Post by whoever » Sat Jan 20, 2018 11:32 pm

Thank you. I will move some cash to High Yield savings and some to 1 year CDs.

Looking for some options for small cap value funds for domestic and international.

czr
Posts: 151
Joined: Wed Dec 17, 2014 8:40 pm

Re: Help with my investments. Too much cash

Post by czr » Sat Jan 20, 2018 11:44 pm

I noticed this but at your stated age, isn't Hsa contribution too much? I thought it was $6.9k total per family under 55 and you have unless that $1.5k is included in that $6.5k number:

$6.5k + 1.6k(employer) HSA

I made mistake in the past and had to take a withdrawal for excess and pay taxes.

JBTX
Posts: 2352
Joined: Wed Jul 26, 2017 12:46 pm

Re: Help with my investments. Too much cash

Post by JBTX » Sun Jan 21, 2018 12:23 am

whoever wrote:
Sat Jan 20, 2018 9:36 pm
Emergency fund: Yes for 12 months (savings/checking)

Debt: 250k Mortgage at 3% (Recent appraisal at 450k)

Tax Filing Status: Married Filing Jointly with two kids age 17 and 14
Tax Rate: 24%(2018) , 28%(2017) Federal, 5.75% State
State of Residence: NC
Age: His 48, Her 45
Desired Asset allocation: 60% stocks / 40% bonds
Desired International allocation: 50% of stocks

Current Annual income 200k to 225k

Total portfolio: Low 7 digits (cash 40%, stocks/bonds 60%) - excluded 529 plan ~ 70k

Current retirement assets

Cash : 40%

Current asset allocation % excluding cash is 62% stocks, 38% bonds

Image

Image

Taxable:

12.9 % CDs and I bonds: ( 75% CD with 3% yield maturing Jan 2019, 25% is I bonds)
27.8% Vanguard TSM Admiral VTSAX (0.04)
8.7% Vanguard Intermediate-Term Tax-Exempt Bond Fund VWIUX (0.09)
1.1% SPDR Portfolio S&P World ex-U.S SPDW (0.04)
1% SPDR Portfolio emerging market SPEM (0.11)

His 401k:

34.2 % Vanguard Target 2030 Institutional (0.08)

His Roth

0.47% Vanguard Healthcare ETF VHT (0.11)
0.45% Vanguard Information technology ETF VGT (0.11)

His HSA

25k 70:30 stocks/bonds with Vanguard Admiral funds

Her Rollover IRA:

11.8% Vanguard Wellesley Admiral VWIAX (0.15)

Her 401k (need to rollover into IRA)

1.1% DFA Global equity DGEIX (0.3)
0.5% DFA Intermediate Govt Fixed income DFIGX (0.12)

Contributions:

18k + 6k(employer match) his 401k
$6.5k + 1.6k(employer) HSA
50k taxable

Available funds

Funds available in his 401k

Other fund options in 401k excluding target retirement and high expense fee ones
AF FUNDMNTL INV R6 (RFNGX) - 0.31
FID 500 INDEX INST (FXSIX) - 0.03
VANG WINDSOR II ADM (VWNAX) - 0.25
VANG SELECTED VALUE (VASVX) - 0.35
VANGUARD INTL VALUE (VTRIX) - 0.45
TCW MetWest Total Return Bond Fund - Class C - 0.30
FIMM GOVT INST (FRGXX) - 0.18

Funds available in HSA

Vanguard Emerging Mkts Stock Idx I (VEMIX)
Vanguard Extended Market Idx Instlplus (VEMPX)
Vanguard Growth Index I (VIGIX)
Vanguard In ation-Protected Secs I (VIPIX)
Vanguard Institutional Index Instl Pl (VIIIX)
Vanguard Materials Index Adm (VMIAX)
Vanguard Reit Index I (VGSNX)
Vanguard Small Cap Index Adm (VSMAX)
Vanguard Total Bond Market Idx Instlpls (VBMPX)
Vanguard Total Intl Stock Idx Instlpls (VTPSX)
Vanguard Short-Term Bond Index Adm (VBIRX)
Vanguard Total Intl Bd Idx Admiral (VTABX)
Vanguard Value Index Adm (VVIAX)
Vanguard Midcap Value Index Adm (VMVAX)
Vanguard Small-Cap Value Index Adm (VSIAX)
Vanguard Shrt-Term In -Prot Sec Idx Adm (VTAPX)
Vanguard Wellesley Income Admiral (VWIAX)


Please help in fixing this.

1)I would like to tilt to value and small cap.
Then buy a small cap value index fund like vanguards. I would not go overboard doing this.


2)I am getting nothing from my current bank Wellsfargo. How about moving to Bofa/Merrill Edge ?

I’m not following. There was no mention of wells in your OP. What do you have in Wells? Perhaps consider an online savings account like Ally or discover.
3)Would like to move to ETFs from my taxable mutual funds.
Why? Seems like you have pretty low fee funds. So you would liquidate your funds and tax a capital gains hit just to get into ETFs? I don’t see the logic in that.
4)Options to park emergency fund
Online savings accounts. Ibonds. Maybe short term CDs. Maybe some very low risk short term bond funds.

5)Options to invest some cash for 5 years(for kids school) - not part retirement cash
For five years I’d probably do the same options as I listed above. Personally I wouldn’t be sinking much or any money in stocks for 5 years or less.

There might be a marginal benefit of doing a 529 for kids school especially if you get state tax deduction.

Seems like the bigger issue is your 40% or retirement in cash, which I’m not clear in your post where that resides. I’d probably put much of it in a conservative blend fund, like vanguard balanced, vanguard Wellesley income or maybe vanguard life strategy conservative growth. Or a low fee index target date fund Not sure what your investment options are.

Overall seems like you have good funds. Longer term you may want to consider simplifying your portfolio to just a few funds.

msk
Posts: 642
Joined: Mon Aug 15, 2016 10:40 am

Re: Help with my investments. Too much cash

Post by msk » Sun Jan 21, 2018 12:57 am

Age: His 48, Her 45

What I would do (and what I did at your age). At your ages I was 100% invested in RE and stocks. In your current position I would go simply for 100% stocks (and I still am at 100% stocks at age 73). Your portfolio is already in 7 figures and you ought to be saving and investing $60+k p.a. (30% of after tax income). At Interactive Brokers a margin loan costs 2.7% p.a. last time I looked. Why the need for 12 months emergency fund? A small amount in a savings account (one month's expenses?) ought to be sufficient. Major emergency roof repair, etc. can be funded by a margin loan... Kids' education fund. When mine were in grade school I put $200k in 100% stocks for 2 of them. Years later they are about to graduate this spring. Their education fund has mushroomed so much that it can pay each a stipend equal to Minimum Wage for life. They don't know that :twisted: It is still 100% stocks. Each year at college I gave them one annual lump sum that I instructed them to split into 3 CDs; Fall, Winter and Summer semesters. If they are not in school over the summer each may choose to blow it all on a backpacker vacation or on savings. One did vacation, other saved.

Make use of the great buffer that a 7-figure portfolio offers you at your young ages, rather than be so conservative that you crimp your choices in life for the far future. The extreme would be to put a 100% in TIPS. Currently you have a compromise, sober AA. But I would suggest that you can afford and ought to consider a much more aggressive stance. Of course, you'll probably end up leaving an 8 figure portfolio for your heirs...

whoever
Posts: 34
Joined: Thu Oct 17, 2013 7:17 pm

Re: Help with my investments. Too much cash

Post by whoever » Sun Jan 21, 2018 9:10 am

JBTX wrote:
Sun Jan 21, 2018 12:23 am
For five years I’d probably do the same options as I listed above. Personally I wouldn’t be sinking much or any money in stocks for 5 years or less.

There might be a marginal benefit of doing a 529 for kids school especially if you get state tax deduction.

Seems like the bigger issue is your 40% or retirement in cash, which I’m not clear in your post where that resides. I’d probably put much of it in a conservative blend fund, like vanguard balanced, vanguard Wellesley income or maybe vanguard life strategy conservative growth. Or a low fee index target date fund Not sure what your investment options are.

Overall seems like you have good funds. Longer term you may want to consider simplifying your portfolio to just a few funds.
40% cash is in Savings account paying nothing. I need to invest in international to meet my international allocation goal and some tilt to small cap value.
Synchrony has 1 year CD at 2%. Think of investing some cash there. How about vanguard Wellesley instead of putting all in CDs. . Better returns with little bit more risk.

If I consider CDs as bonds I should be investing a lot more in stocks with any remaining cash.

whoever
Posts: 34
Joined: Thu Oct 17, 2013 7:17 pm

Re: Help with my investments. Too much cash

Post by whoever » Sun Jan 21, 2018 9:14 am

msk wrote:
Sun Jan 21, 2018 12:57 am
Age: His 48, Her 45

What I would do (and what I did at your age). At your ages I was 100% invested in RE and stocks. In your current position I would go simply for 100% stocks (and I still am at 100% stocks at age 73). Your portfolio is already in 7 figures and you ought to be saving and investing $60+k p.a. (30% of after tax income). At Interactive Brokers a margin loan costs 2.7% p.a. last time I looked. Why the need for 12 months emergency fund? A small amount in a savings account (one month's expenses?) ought to be sufficient. Major emergency roof repair, etc. can be funded by a margin loan... Kids' education fund. When mine were in grade school I put $200k in 100% stocks for 2 of them. Years later they are about to graduate this spring. Their education fund has mushroomed so much that it can pay each a stipend equal to Minimum Wage for life. They don't know that :twisted: It is still 100% stocks. Each year at college I gave them one annual lump sum that I instructed them to split into 3 CDs; Fall, Winter and Summer semesters. If they are not in school over the summer each may choose to blow it all on a backpacker vacation or on savings. One did vacation, other saved.

Make use of the great buffer that a 7-figure portfolio offers you at your young ages, rather than be so conservative that you crimp your choices in life for the far future. The extreme would be to put a 100% in TIPS. Currently you have a compromise, sober AA. But I would suggest that you can afford and ought to consider a much more aggressive stance. Of course, you'll probably end up leaving an 8 figure portfolio for your heirs...
Thank you. I am not sure I can handle another 50% drop with 100% stock portfolio :( . I agree I done have to be super conservative.

JBTX
Posts: 2352
Joined: Wed Jul 26, 2017 12:46 pm

Re: Help with my investments. Too much cash

Post by JBTX » Sun Jan 21, 2018 11:55 am

whoever wrote:
Sun Jan 21, 2018 9:10 am
JBTX wrote:
Sun Jan 21, 2018 12:23 am
For five years I’d probably do the same options as I listed above. Personally I wouldn’t be sinking much or any money in stocks for 5 years or less.

There might be a marginal benefit of doing a 529 for kids school especially if you get state tax deduction.

Seems like the bigger issue is your 40% or retirement in cash, which I’m not clear in your post where that resides. I’d probably put much of it in a conservative blend fund, like vanguard balanced, vanguard Wellesley income or maybe vanguard life strategy conservative growth. Or a low fee index target date fund Not sure what your investment options are.

Overall seems like you have good funds. Longer term you may want to consider simplifying your portfolio to just a few funds.
40% cash is in Savings account paying nothing. I need to invest in international to meet my international allocation goal and some tilt to small cap value.
Synchrony has 1 year CD at 2%. Think of investing some cash there. How about vanguard Wellesley instead of putting all in CDs. . Better returns with little bit more risk.

If I consider CDs as bonds I should be investing a lot more in stocks with any remaining cash.
Why do you have 40% in cash? My concern based upon this and your prior post is you are very conservative. While 60/40 is a very reasonable AA, you are currently closer to 40/60 if you include your cash as bonds. Jumping up to a 60/40 may be a big leap for you,especially after a long and high valued bull market.

That’s why is said something like Wellesley income or a conservative life strategy fund. The result gets you to 50/50, which gets you close to the 100- age in stocks, which can be appropriate for very conservative / risk averse investors

whoever
Posts: 34
Joined: Thu Oct 17, 2013 7:17 pm

Re: Help with my investments. Too much cash

Post by whoever » Sun Jan 21, 2018 12:12 pm

@JBTX, For the past two and half years I have accumulated cash due to profit from selling Realestate , company ESPP and RSU stocks. I didn't reinvest which was a mistake. I already have Wellesly in my wife Rollover IRA. Do you think it makes sense to have Wellesley in Taxable account since it is not tax efficient. Ofcourse it is better than keeping in cash :)

Grt2bOutdoors
Posts: 17744
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Help with my investments. Too much cash

Post by Grt2bOutdoors » Sun Jan 21, 2018 12:17 pm

Do not hold Wellesley in a taxable account.
Instead create an asset allocation that you are satisfied with and use a 3 Fund Portfolio using index funds and Tax Exempt Intermediate with. The distributions on Wellesley are fully taxable.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

tibbitts
Posts: 7257
Joined: Tue Feb 27, 2007 6:50 pm

Re: Help with my investments. Too much cash

Post by tibbitts » Sun Jan 21, 2018 12:36 pm

whoever wrote:
Sun Jan 21, 2018 9:10 am
JBTX wrote:
Sun Jan 21, 2018 12:23 am
Synchrony has 1 year CD at 2%. Think of investing some cash there. How about vanguard Wellesley instead of putting all in CDs. . Better returns with little bit more risk.
Please don't believe there is a free lunch here... Wellesley has almost nothing in common with CDs. There are different risks to both but there is considerable risk to nominal principal with Wellesley, and no matter how much history the fund has, there is no reason you shouldn't expect it perform worse in the furture than it has in the past.

BlackcatCA
Posts: 17
Joined: Sat Jan 20, 2018 2:55 pm

Re: Help with my investments. Too much cash

Post by BlackcatCA » Sun Jan 21, 2018 2:38 pm

OP: thanks for posting as I am in a somewhat similar situation- 25% cash thinking about best way to use. I, too, worry about the market dropping as the risk has risen this year versus 2017 and 2016.

I notice that your CD rate is about the same as your mortgage rate. Why not pay off the mortgage, and then use new cash to invest in international etc, rather than putting $$ in another CD of 2%?

whoever
Posts: 34
Joined: Thu Oct 17, 2013 7:17 pm

Re: Help with my investments. Too much cash

Post by whoever » Sun Jan 21, 2018 2:49 pm

BlackcatCA wrote:
Sun Jan 21, 2018 2:38 pm
OP: thanks for posting as I am in a somewhat similar situation- 25% cash thinking about best way to use. I, too, worry about the market dropping as the risk has risen this year versus 2017 and 2016.

I notice that your CD rate is about the same as your mortgage rate. Why not pay off the mortgage, and then use new cash to invest in international etc, rather than putting $$ in another CD of 2%?
I am still left with cash after paying off mortgage :-) . Easy to invest in low risk assets. 2% CD is 1 year maturity. Regarding paying off my mortgage what if markets drops in next couple years I will have cash to jump in.

Paying off mortgage makes sense but

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