Help with allocating

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Julyguy754
Posts: 40
Joined: Wed Mar 11, 2015 8:17 pm

Help with allocating

Post by Julyguy754 » Tue Jan 23, 2018 2:55 pm

I am retired, age 63, and receive a pension each month. I have some Vanguard Funds(Wellington, Total Stock Index, and a beneficiary fund that is also in Wellington. I also have a Dodge & Cox Stock fund that I want to move into Vanguard, but not sure where the most ideal fund to move it into. Even though D&C is a solid fund it is listed as riskier by Morningstar. I need to shift more to bonds I know , but need to keep some stock for future earnings and growth.I want to ideally stick with index funds but am open to others, i.e., Vanguard Wellsley.
The following are my current mutual fund allocations:
VWELX:42%
VTSMX: 30%
DODGX: 17%
VWELX(Benef.):

I have a few ideas and hope I can gain some feedback. I was thinking of moving DODGX into either: Vanguard Total Bond Index Fund or into Wellsley. Or another thought was to switch my Wellington into Wellsley and then divide the D&C putting half in VTSMX and the other half into VWINX and/or VBTLX
. Or just put all of D&C into VBTLX, or into VWINX if I went this route. I would be more bond than in stocks. Does this make any sense or is it doable? I know it isn't probably the best way to go about it, but just wanting to get DODGX into Vanguard and allocate more to bonds. Thanks!

Mors
Posts: 192
Joined: Wed Aug 16, 2017 10:06 am

Re: Help with allocating

Post by Mors » Tue Jan 23, 2018 6:52 pm

I would put it to VBTLX. You need a higher bond allocation since you are retired.

I would also look to increase the international stocks exposure. I would consider replacing 22% of VWELX with VTIAX for 65/35 us/int allocation.

TwstdSista
Posts: 917
Joined: Thu Nov 16, 2017 4:03 am

Re: Help with allocating

Post by TwstdSista » Tue Jan 23, 2018 7:05 pm

^ Agreed.

Also, VTSMX is the Investor share of Vanguard's Total Stock Market Fund, get that bumped up to VTSAX for a better expense ratio (if this is a taxable account, Vanguard can do this at $10,000 and without it being a taxable event -- just call them).

Julyguy754
Posts: 40
Joined: Wed Mar 11, 2015 8:17 pm

Re: Help with allocating

Post by Julyguy754 » Tue Jan 23, 2018 8:26 pm

Thank you for your ideas; they will be a big help. I do have VTSAX, just a typo sorry. Also, my beneficiary IRA is11%, noticed I did not include the percentage. Just an added thought, what is your opinion of the Life Strategy/Target Retirement funds? I've read about them but they seem to have some drawbacks. Thanks again.

delamer
Posts: 5478
Joined: Tue Feb 08, 2011 6:13 pm

Re: Help with allocating

Post by delamer » Tue Jan 23, 2018 9:28 pm

Julyguy754 wrote:
Tue Jan 23, 2018 8:26 pm
Thank you for your ideas; they will be a big help. I do have VTSAX, just a typo sorry. Also, my beneficiary IRA is11%, noticed I did not include the percentage. Just an added thought, what is your opinion of the Life Strategy/Target Retirement funds? I've read about them but they seem to have some drawbacks. Thanks again.

The problem with any all-in-one fund (including Wellington) when you are drawing down your portfolio:

“You may benefit from a more tax-efficient withdrawal strategy. Sell high, not low, right? It can pay to be strategic about which assets you sell to meet your cash needs. But that’s not an option if you have all of your retirement money in a target-date fund, where withdrawals are made proportionately, according to the portfolio’s prescribed allocation, across all of the fund’s assets. “Even though I love target-date funds for accumulators,” says Christine Benz, director of personal finance at Morningstar, “most all-in-one funds are suboptimal when it comes to retirement withdrawals because the investor doesn’t have discretion over where those withdrawals come from.”


https://www.kiplinger.com/article/inves ... ement.html

This may be less of a problem for you since you have other funds, but why not just use separate (and cheaper) index funds for stocks and bonds?

Mors
Posts: 192
Joined: Wed Aug 16, 2017 10:06 am

Re: Help with allocating

Post by Mors » Tue Jan 23, 2018 9:57 pm

Julyguy754 wrote:
Tue Jan 23, 2018 8:26 pm
Thank you for your ideas; they will be a big help. I do have VTSAX, just a typo sorry. Also, my beneficiary IRA is11%, noticed I did not include the percentage. Just an added thought, what is your opinion of the Life Strategy/Target Retirement funds? I've read about them but they seem to have some drawbacks. Thanks again.
You are welcome.

They are excellent products. I can think just of a couple of drawback. The first one is the most obvious, the lack of flexibility compared to picking your funds separate. The second one is that you cannot lower the fees by going with admiral shares. The difference is very small, but it can make a noticeable difference in 6 digit numbers invested. In this case, you can replicate them with the relevant underling index funds.

The point made above from the Kimnplinger article seems to me a bit stretched; with the automatic rebalance the fund does, it already sells high and buys low for you; you do not lose any more flexibility compared to the accumulation phase.

Julyguy754
Posts: 40
Joined: Wed Mar 11, 2015 8:17 pm

Re: Help with allocating

Post by Julyguy754 » Wed Jan 24, 2018 10:21 am

The article from Kiplinger was very helpful, didn't even think about the withdraw strategies needed. With the information you have provided, my thoughts are now evolving to the fact that maybe I need to redo my whole portfolio. Meaning possibly getting out of Wellington and going to the 3 fund approach- Vanguard Total stock, bond, and international stock index funds and be done with it. I am moving the Dodge & Cox into VBTLX then all my assets with be in Vanguard. Then I can look to see about tweaking things, i.e., maybe dissolving Wellington into the 3 funds. Hope this makes sense.
Thanks for all your help- appreciate it!

delamer
Posts: 5478
Joined: Tue Feb 08, 2011 6:13 pm

Re: Help with allocating

Post by delamer » Wed Jan 24, 2018 1:37 pm

Mors wrote:
Tue Jan 23, 2018 9:57 pm
Julyguy754 wrote:
Tue Jan 23, 2018 8:26 pm
Thank you for your ideas; they will be a big help. I do have VTSAX, just a typo sorry. Also, my beneficiary IRA is11%, noticed I did not include the percentage. Just an added thought, what is your opinion of the Life Strategy/Target Retirement funds? I've read about them but they seem to have some drawbacks. Thanks again.
You are welcome.

They are excellent products. I can think just of a couple of drawback. The first one is the most obvious, the lack of flexibility compared to picking your funds separate. The second one is that you cannot lower the fees by going with admiral shares. The difference is very small, but it can make a noticeable difference in 6 digit numbers invested. In this case, you can replicate them with the relevant underling index funds.

The point made above from the Kimnplinger article seems to me a bit stretched; with the automatic rebalance the fund does, it already sells high and buys low for you; you do not lose any more flexibility compared to the accumulation phase.
The fund internally rebalances, but when you sell your fund shares, by definition, you sell positions in stocks and bonds proportionally to how the fund holds them. If you need $1,000 after a big stock run-up, for example, you can’t just sell $1,000 of stocks in your portfolio. You are selling bonds too, in the all-in-one fund. (Assuming that your entire portfolio is in the fund.)

Mors
Posts: 192
Joined: Wed Aug 16, 2017 10:06 am

Re: Help with allocating

Post by Mors » Wed Jan 24, 2018 7:02 pm

delamer wrote:
Wed Jan 24, 2018 1:37 pm
Mors wrote:
Tue Jan 23, 2018 9:57 pm
Julyguy754 wrote:
Tue Jan 23, 2018 8:26 pm
Thank you for your ideas; they will be a big help. I do have VTSAX, just a typo sorry. Also, my beneficiary IRA is11%, noticed I did not include the percentage. Just an added thought, what is your opinion of the Life Strategy/Target Retirement funds? I've read about them but they seem to have some drawbacks. Thanks again.
You are welcome.

They are excellent products. I can think just of a couple of drawback. The first one is the most obvious, the lack of flexibility compared to picking your funds separate. The second one is that you cannot lower the fees by going with admiral shares. The difference is very small, but it can make a noticeable difference in 6 digit numbers invested. In this case, you can replicate them with the relevant underling index funds.

The point made above from the Kimnplinger article seems to me a bit stretched; with the automatic rebalance the fund does, it already sells high and buys low for you; you do not lose any more flexibility compared to the accumulation phase.
The fund internally rebalances, but when you sell your fund shares, by definition, you sell positions in stocks and bonds proportionally to how the fund holds them. If you need $1,000 after a big stock run-up, for example, you can’t just sell $1,000 of stocks in your portfolio. You are selling bonds too, in the all-in-one fund. (Assuming that your entire portfolio is in the fund.)
I see what you mean, but this is awfully close to market timing (if not market timing outright). I mean, if the stock run-up was significant, the fund will have already rebalance by selling some winners. If it was not significant enough to rebalance itself, then how can you judge that now it is an ideal time to change my asset allocation (that is what you do when you decide to sell more stocks than you have to in order to conserve the existing stocks/bonds allocation).

This is what does not strike me well and in the end fail to see the "drawback".

Julyguy754
Posts: 40
Joined: Wed Mar 11, 2015 8:17 pm

Re: Help with allocating

Post by Julyguy754 » Fri Jan 26, 2018 11:56 am

Do you think that substituting some of my bond holds with Vanguard Inflation-Protected Securities Fund would make sense? Or would that just unnecessarily complicate things beyond the 3 fund portfolio of Total Stock, Total int. Stock, and Total Bond index funds? Just and idea from Mike Piper's book, Investing Made Simple. Thanks!

Mors
Posts: 192
Joined: Wed Aug 16, 2017 10:06 am

Re: Help with allocating

Post by Mors » Sat Jan 27, 2018 6:45 pm

Julyguy754 wrote:
Fri Jan 26, 2018 11:56 am
Do you think that substituting some of my bond holds with Vanguard Inflation-Protected Securities Fund would make sense? Or would that just unnecessarily complicate things beyond the 3 fund portfolio of Total Stock, Total int. Stock, and Total Bond index funds? Just and idea from Mike Piper's book, Investing Made Simple. Thanks!
There is no right or wrong answer. Check the Vanguard glide path for their TDFs for guidance. They start with no allocation, and 5 years before retirement they increase it gradually until it becomes about 18% of the portfolio (in an 30/70 stocks/bonds portfolio).

I would argue that until bonds make for a larger part of your portfolio, then you do not need to complicate the matter with TIPS. By definition, a stock heavy fund does not need inflation protection anyway. When your bond holdings become larger than the stock ones, consider adding a TIPS allocation.

Julyguy754
Posts: 40
Joined: Wed Mar 11, 2015 8:17 pm

Re: Help with allocating

Post by Julyguy754 » Sun Jan 28, 2018 12:42 pm

Ok, that makes sense and as you can tell I am a novice at this point. Will research into it further. I am more of a risk-taker by nature, so I definitely don't want to down-size my exposure to stocks too much. But of course, don't want to loose my shirt or anything else if/when the market takes a lengthy down turn. Thanks!

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