Looking for you smart folks to critique my portfolio, if you would please. Observations, criticisms and recommendations are welcome and encouraged. What do you think? How am I doing? Where am I not optimizing? Am I taking unnecessary risk without concomitant potential for gain? Is there a way to allocate for better tax efficiency? Any other drag on this portfolio? What questions am I not asking myself about how to allocate assets? Where and how could I improve this portfolio?
Emergency fund and one year of living expenses are in place and separate from investable assets.
Live outside the USA.
Tax Filing Status: Head of Household in 2017 but could very well change to married filing separately in 2018 (foreign national spouse with no obligation yet to file US tax return). Would this make a difference in my case?
Income Tax Rates: 0% federal, 0% state on 1099 earned income – All earned income is excluded from taxation by the Foreign Earned Income Exclusion.
Self-employment tax for 2018: 15.3%
Age: Turn 51 in 2018. Two healthy children ages 3 and 2, so the road ahead stretches out beyond the horizon. I am thinking of returning to the USA within the next 2 years, maybe a little longer, and would prefer to not rejoin the rat race at full tilt. But I could surely earn some money so as to keep pressure off the investment accounts.
Desired Asset Allocation: For a long time I was around 90/10. I recently scaled to 85/15, which feels about right to me. But this is one of my questions: what asset allocation would you Bogleheads suggest? What are the main factors in setting that allocation for myself.
Desired International allocation: This is also where I am looking for input. Currently international stock funds are 8.9% of all holdings. Some have suggested a portfolio should contain 30-50% international, which strikes me as high, but I can’t articulate why that feels high to me so I am soliciting helpful opinions on that too. What about the idea that holding large US stock funds provides international exposure?
Assets currently invested total $1.073 million split about 54% taxable account and 46% traditional IRA.
Assets across all accounts are held as:
86.1% - Index Funds
10.65% - Actively Managed Funds
3.25% - Amazon Stock
Current asset allocation across all accounts is:
15% US taxable bond funds
56.2% large U.S. stock
19.2% mid/small US stock
8.9% international stock
100% of assets held across all accounts look like this:
- 49.37% Vanguard Total Stock Market Index Fund Admiral Shares
11.4% Vanguard 500 Index Fund Admiral Shares
3.25% AMAZON.COM INC
3.6% Vanguard Star Fund Investor Shares
4% Vanguard International Growth Fund Investor Shares
3.76% Vanguard Real Estate Index Fund Admiral Shares
2.23% Vanguard International Value Fund Investor Shares
1.9% Vanguard Long-Term Corporate Bond Index Fund Admiral Shares
.8% Vanguard Prime Money Market Fund
3.1% ISHARES CORE MSCI EAFE ETF
2.33% Vanguard High Dividend Yield Index Fund Investor Shares
2.23% Vanguard Short-Term Bond Index Fund Admiral Shares
.4% Vanguard Total Bond Market Index Fund Investor Shares
1.4% Vanguard Long-Term Bond Index Fund Investor Shares
.8% Vanguard High-Yield Corporate Fund Investor Shares
2.33% Vanguard Long-Term Treasury Index Fund Admiral Shares
1.3% Vanguard Short-Term Corporate Bond Index Fund Admiral Shares
.8% VANGUARD MORTGAGE BACKED SECURITIES ETF
2.5% VANGUARD INTERMEDIATE TERM CORP BOND ETF
2.5% Vanguard Large-Cap Index Fund Admiral Shares
It has been suggested my bond holdings may be moderately over-weighted toward long-term bonds.
Average amount available to invest is currently about $3,500 per month while living abroad. I don’t expect to be able to maintain that level if and when I return to the USA. So I am looking for suggestions on how I should invest those monthly amounts so as to put this total portfolio in shape for maximum efficiency and maximum benefit within the bounds of reasonable risk and adequate diversification.
Right now I can only contribute to the taxable account, so I am considering an individual Roth 401(k) for future monthly investments. Good idea? Also I wonder if I can fund an individual Roth 401(k) with existing assets (say, index funds from my taxable account), or if the individual 401(k) must be done only with “new” cash money.
If you've slogged through to this point you are a trooper and I thank you.