What is the best way to change current investments to tilt to SCV

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KATNYC
Posts: 433
Joined: Fri Apr 07, 2017 4:34 pm

What is the best way to change current investments to tilt to SCV

Post by KATNYC » Sun Jan 21, 2018 2:03 pm

We have access to one 401K, family HSA & have two Vanguard ROTHs. We want to tilt SCV.
After adding our portfolio to the M* Xray tool, it is clear that our 401K small cap CIT isn't small cap at all.
401K has no funds, only CITs so we used placeholders that were recommended by bogleheads with far more expertise than us.

Large Cap Equity Index Fund -Large Blend - NT Collective S&P 500 Index Fund Non-Lending .04 ER - used VFIAX
Small & Mid Cap Equity Index - Northern Trust Extended Equity Market Index Fund Non Lending .06 ER - used VEXAX
International Equity Index Fund - NT Collective All Country World ex-US Investable Market Index Fund Non-Lending .12 ER - VTIAX
10% company stock (Large Cap)
We moved out of bonds this week.

401K only other options are:
Capital Preservation Fund, tracks ICE BofAML 3 Months T Bills TR ER .38
Income Fund, tracks Bloomberg Barclays U.S. Universal TR ER .39
Inflation Strategy Fund, tracks Bloomberg Barclays U.S. TIPS TR ER .24
Growth Fund tracks MSCI World NR USD ER .48
Bond Index Fund, tracks Bloomberg Barclays U.S. Aggregate Bond TR ER .06

About us:
Ages: 33, 29
Tax Filing Status: Married Filing Jointly
No kids
Tax Rate: 25% Federal 2017
9% NYC rate 2017
Salaries: 2017: $135K (includes bonus, no bonus guaranteed for 2018)/$44K (new job so earnings prorated in 2017)
State of Residence: NY (NYC)
Desired Asset allocation: 100% stocks
Specifically: 75% US / 25% International

Assets:
$59,320 cash - emergency fund (30,000 in 3% accounts, balance in 1% accounts)
NYC apartment $700,000 appraisal
2007 SUV $4,4000
Hers: $299,410 in 401K with 6% company match (401k loans available up to 50% of balance; no mega ROTH options)
Hers: $6,380 Vanguard ROTH VFSVX - all world small cap
His: $6,710 Vanguard ROTH -VISVX - domestic small cap value
HSA: $6,854.18 - DGS international emerging small cap

Debt:
Hers: $45,540 in student loan debt 3.71% fixed
$177,940 10/1 ARM mortgage 3.375%

It seems easiest to buy only SCV with 2017 ROTH contributions & 2018 ROTH contributions & 2018 HSA contributions. However, given the $5,500 & $6,900 limitations, those contributions won't make much of a difference to tilt SCV. The 401K has no SCV option.
We have no taxable account.

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Last edited by KATNYC on Sun Jan 21, 2018 3:26 pm, edited 1 time in total.

livesoft
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Re: What is the best way to change current investments to tilt to SCV

Post by livesoft » Sun Jan 21, 2018 2:59 pm

You could buy IJS in your taxable account, say with the $59,320 you mentioned, but maybe paying off debt is a better idea for the $59,320.
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KATNYC
Posts: 433
Joined: Fri Apr 07, 2017 4:34 pm

Re: What is the best way to change current investments to tilt to SCV

Post by KATNYC » Sun Jan 21, 2018 3:33 pm

livesoft wrote:
Sun Jan 21, 2018 2:59 pm
You could buy IJS in your taxable account, say with the $59,320 you mentioned, but maybe paying off debt is a better idea for the $59,320.
The cash is our emergency fund (could comfortably lower it to $51,600). Updated the original post.
We set up an M1 Finance portfolio a few days ago (have not funded it) to buy VIOV but are funneling extra cash to pay down debt for now. We likely won't open a taxable account until cashflow increases.

KATNYC
Posts: 433
Joined: Fri Apr 07, 2017 4:34 pm

Re: What is the best way to change current investments to tilt to SCV

Post by KATNYC » Mon Jan 22, 2018 8:08 am

It appears we are sort of stuck until we can build up a taxable account or stash away enough in HSA & ROTHs to make a difference in our SCV allocation.

deltaneutral83
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Re: What is the best way to change current investments to tilt to SCV

Post by deltaneutral83 » Mon Jan 22, 2018 9:03 am

livesoft wrote:
Sun Jan 21, 2018 2:59 pm
You could buy IJS in your taxable account, say with the $59,320 you mentioned, but maybe paying off debt is a better idea for the $59,320.
Is VIOV not more tax efficient tracking the same thing?
Last edited by deltaneutral83 on Mon Jan 22, 2018 9:32 am, edited 1 time in total.

livesoft
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Re: What is the best way to change current investments to tilt to SCV

Post by livesoft » Mon Jan 22, 2018 9:09 am

^Maybe. I don't know.
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stan1
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Re: What is the best way to change current investments to tilt to SCV

Post by stan1 » Mon Jan 22, 2018 9:12 am

deltaneutral83 wrote:
Mon Jan 22, 2018 9:03 am
livesoft wrote:
Sun Jan 21, 2018 2:59 pm
You could buy IJS in your taxable account, say with the $59,320 you mentioned, but maybe paying off debt is a better idea for the $59,320.
Is VIOW not more tax efficient tracking the same thing?
Today I'd prefer VIOV over IJS because Vanguard has a solid history of lowering expense ratios that Blackrock has not always done with iShares products. Instead of lowering the expense ratio on their existing Emerging Markets ETF (EEM) they created a new ETF with a lower expense ratio. People who bought EEM in a taxable account are stuck paying a disproportionate portion of Blackrock's expenses until the position is sold.

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grabiner
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Re: What is the best way to change current investments to tilt to SCV

Post by grabiner » Mon Jan 22, 2018 1:54 pm

deltaneutral83 wrote:
Mon Jan 22, 2018 9:03 am
livesoft wrote:
Sun Jan 21, 2018 2:59 pm
You could buy IJS in your taxable account, say with the $59,320 you mentioned, but maybe paying off debt is a better idea for the $59,320.
Is VIOV not more tax efficient tracking the same thing?
VIOV and IJS should be equally tax-efficient; neither Vanguard nor iShares stock index ETFs are likely to distribute capital gains. VIOV is a bit less expensive.
Wiki David Grabiner

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