Intro & advice requested on rebalancing

[olliema]

Hi - I have followed the forum over the past few months. I am 45 and working to build financial independence so I can retire in about 15 years.

I am seeking advice on a portfolio re-balance, which I have not done in about a decade (I am very hands-off, a little too hands off perhaps)

My goal is to get a fairly consistent 6% return on my 953K portfolio (all in non-Roth 401Ks except for $33K in Roth IRA and $31K in Trad. IRA) for the next 15 years, which my calculations get me to roughly $3MM which could fund a 2.5% inflation adjusted $100K/yr retirement for 35 years.

Until Friday, I was 77% Vanguard Mid-Cap VMCPX, 9% Fidelity SP500 Index, 8% Vanguard Target Retirement 2040, 3% T. Rowe Growth Fund, and 3% T.Rowe Cash. I feel like this has worked well for me return-wise given my age, but the exposure feels large to mid-cap, too many random funds, and the T. Rowe ones have high expense ratios. I also forgot I had 30K sitting around as cash for the past 7 years.

On Friday I took my portfolio out of the market, so that I could re-balance. It is spread across 2 old 401Ks, an active 401K, and the IRA accounts. I put it into (cash, short term bonds, and the like). I'm not a market timer, but will say the extra boost on Friday made me say OK today is the day to make a switch.

I intend to get back into the market as quickly as possible, but do not want to make hasty decisions. From my research, here is where I am headed:

45% Vanguard Institutional Index Fund (VIIIX)
40% Vanguard Mid-Cap Index Fund Institutional Plus Shares (VMCPX)
15% Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX)

Let me know if you have any suggestions, or what further questions I could answer to help you offer guidance. Thanks in advance.

[wanderer]

Welcome to the forum! Congratulations on your staying the course for so many years and accumulating healthy savings.

I'm not one of the experts, but I'll give your post a bump and my $0.02.

The three funds you list are all low cost. - All good.

They are all institutional shares, so presume these are all choices within your corporate 401(k) plan. What is your plan/options for the other tIRA and Roth IRA funds? while the 401(k) is the big dog, it's best to look at the investments as a total plan.

With the three funds listed your asset allocation plan appears to be 85% stock/15% bond. Is that your target?
With the three funds listed you would still be heavily tilted towards mid-cap size companies as compared to the total stock market. Is that your target?
With the three funds listed you would not have any international stock or bond investments. Again, is that your target?

If yes to all three questions, then Yes, you are good to go. If your answer(s) are no, or "I'm not sure", then suggest taking a look at the Wiki pages....

Midcaps:
Stock market capitalization: https://www.bogleheads.org/wiki/Approxi ... ock_market

Getting started:
"Start-up": https://www.bogleheads.org/wiki/Boglehe ... art-up_kit
Investment policy statement: https://www.bogleheads.org/wiki/Investm ... _statement

Also, so as to not steer you wrong, the experts here generally like to have a more comprehensive view of your situation...
Asking portfolio questions: viewtopic.php?f=1&t=6212

Again, congrats on your progress!

[delamer]

What do you mean by “a fairly consistent 6% return”?

It is possible to get an average 6% return when investing in stocks, although only in hindsight. But if you want to get a consistent return year-to-year, then you are limited to a lower return by investing in cash and bonds.

This might be of interest: https://personal.vanguard.com/us/insigh ... llocations

The allocation that you are considering is aggressive and likely pretty volatile.

[krow36]

I intend to get back into the market as quickly as possible, but do not want to make hasty decisions. From my research, here is where I am headed:

45% Vanguard Institutional Index Fund (VIIIX)
40% Vanguard Mid-Cap Index Fund Institutional Plus Shares (VMCPX)
15% Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX)

Let me know if you have any suggestions, or what further questions I could answer to help you offer guidance. Thanks in advance.

If you are interested in maximum diversification, I think you would be better off using Vanguard's Small Cap fund. the Institutional Index fund includes a number of mid-cap stocks. Perhaps you are in the John Bogle way of thinking that international stock funds are not necessary? If you are interested in maximum diversification, you should consider putting at least 20% of equities in international stock funds. Just a thought.