Help with AA across multiple accounts [Asset Allocation]

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Emroo
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Joined: Thu Jun 07, 2018 12:39 pm

Help with AA across multiple accounts [Asset Allocation]

Post by Emroo » Mon Jun 11, 2018 7:02 pm

Hi everyone. First Bogleheads post. Writing to ask for some advice about implementing our AA across 4 retirement funds. Essentially wondering if we should do mirrored AA in each account or try to simply.

More details: My husband and I recently finished medical training, moved in together and merged finances (long distance previously). We’ve spent a lot of time this year educating ourselves financially (thanks to the White Coat Investor) and have come up with our IPS and desired asset allocation. Our current investment accounts are Roth IRA, 403b, non-governmental 457b each and a joint taxable account. We work for the same employer so have the exact same 403b and 457b. While we spent the time determining our AA we have been maxing out these accounts putting the money into the available Vanguard Index funds – Institutional Index (VINIX), Midcap index (VIMAX), small cap index (VSMAX), total international (VTIAX), and total bond (VBTLX).

Our desired AA is:
80% stock
35% US total stock market
15% US Small value
20% Total international
10% Emerging markets international
10% REIT
10% bond - total US bond

Since our retirement accounts do not have reasonable options for small value, emerging markets and REIT those will all be in Roths/taxable. They also do not have a total stock market index fund so I read the Bogleheads article on approximating a TSMI fund and have decided to go with 82% VINIX and 18% VSMAX for this portion of our AA. (Are we losing out by ditching VIMAX?)

At first it seemed to me that a mirrored asset allocation in each account would be the easiest and safest, but then I read the Bogleheads article on Asset allocation in multiple accounts which recommends against this. It would certainly be possible to put all the bonds in one account and all the small cap in another with the VINIX and VTIAX divided between two other accounts or so. My concern is that the 457b is a “riskier” account in the sense that the money is not legally ours until we withdraw it. We work for a very stable institution with an excellent credit rating so we are not overly concerned about this, but we will draw from these accounts first in retirement (30+ years, we both really enjoy our jobs and aren’t planning for early retirement any time soon). Secondly, it just seems like a good idea to me that my husband and I have relatively equivalent levels of risk in the funds under our name. We have a great marriage but worst case scenario it would be unfortunate for us to end up with lopsided accounts in the event of a divorce.

My current thinking is to put the bond portion in both of our 457bs, the small cap in the 403bs and institutional index and total international in both. Alternately we could do bonds and institutional index only in the 457b but I thought this might make rebalancing a little trickier? I have never done this before. Our contributions to each fund are equal but our employer contributions (roughly $25,000 yearly each) go to 403b only so this account will get much larger quite quickly. We plan to rebalance yearly or less.

Thanks so much for any thoughts,
Emily

Jablean
Posts: 250
Joined: Sat Jun 02, 2018 2:38 pm

Re: Help with AA across multiple accounts [Asset Allocation]

Post by Jablean » Mon Jun 11, 2018 8:00 pm

One fund for one account is just for simplicity and often because there's not a lot in an account so why not use it on just one thing.

However if you are using no-load funds and can meet the minimums (even Fidelity has different classes where the expense ratio shrinks just a bit for higher $ per fund) then it really doesn't matter whether you lump account funds or mirror. There's a bit more work on your part for re-balancing but that's about it.

I'd wind up playing with it and putting a similar but slightly different fund in each for some of the small amounts. I've probably done the mostly mirror accounts for similar reasons, keeping each person's personal accounts somewhat the same. So far you sound very disciplined, not surprising with doctors, so doing something for a year and reassessing should come naturally.

ExitStageLeft
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Joined: Sat Jan 20, 2018 4:02 pm

Re: Help with AA across multiple accounts [Asset Allocation]

Post by ExitStageLeft » Mon Jun 11, 2018 8:06 pm

Welcome to the forum! I advocate viewing all your assets as one big portfolio and allocating across them based on tax efficiency. Mirroring the allocation in every account is an unnecessary complication that can only lead to stress. Simplify is the right word here. Don't create more work for yourself now on the off chance that your union is ephemeral. Simplify expecting eternal bliss and know that in a worst case you can rebalance a retirement account with a few clicks of a mouse.

REITs are volatile and are lumped with equities when it comes to asset allocation. That leaves your proposed portfolio with a 90/10 AA. Make sure that's consistent with where your IPS suggests you should be at your current career stage. Many folks would suggest an 80/20 allocation.

if you look at Portfolio Visualizer, you'll find that over the last ten years your proposed asset allocation had a CAGR of 6.33%. By comparison, a four-fund portfolio of 50% total US stocks, 30% total international stocks, 10% REIT and 10% total US bonds had a CAGR of 6.16%. See a comparison here. The four-fund portfolio would be much easier to figure out across all your accounts and offers almost the same return with much broader diversification.

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Ozonewanderer
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Location: Central NY, South FL

Re: Help with AA across multiple accounts [Asset Allocation]

Post by Ozonewanderer » Mon Jun 11, 2018 9:09 pm

ExitStageLeft wrote:
Mon Jun 11, 2018 8:06 pm
Welcome to the forum! I advocate viewing all your assets as one big portfolio and allocating across them based on tax efficiency. Mirroring the allocation in every account is an unnecessary complication that can only lead to stress. Simplify is the right word here. Don't create more work for yourself now on the off chance that your union is ephemeral. Simplify expecting eternal bliss and know that in a worst case you can rebalance a retirement account with a few clicks of a mouse.
I agree with this. I have tried various other paradigms for constructing multiple individual portfolios but as I reflect back, it always really boiled down to being one big pot anyway. I also had more than ten accounts for many ears so this approach saved my sanity.

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Tyler Aspect
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Re: Help with AA across multiple accounts [Asset Allocation]

Post by Tyler Aspect » Mon Jun 11, 2018 10:42 pm

Normally asset allocation figures are required to add up to 100%.

Sample asset allocation for young people:
60% total US stock market index
20% total international stock market index
20% total US bond market index
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.

ExitStageLeft
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Joined: Sat Jan 20, 2018 4:02 pm

Re: Help with AA across multiple accounts [Asset Allocation]

Post by ExitStageLeft » Tue Jun 12, 2018 1:16 pm

Tyler Aspect wrote:
Mon Jun 11, 2018 10:42 pm
Normally asset allocation figures are required to add up to 100%.

Sample asset allocation for young people:
60% total US stock market index
20% total international stock market index
20% total US bond market index
There is beauty in simplicity. And some pretty decent returns too. I would opt for that simplicity, as it has the broadest diversification, a nice 20% bond allocation for stability, and had returns over the last 10 years indistinguishable from either of the more complicated portfolios. What's not to like?

Jack FFR1846
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Re: Help with AA across multiple accounts [Asset Allocation]

Post by Jack FFR1846 » Tue Jun 12, 2018 2:08 pm

Emroo wrote:
Mon Jun 11, 2018 7:02 pm
Our desired AA is:
80% stock
35% US total stock market
15% US Small value
20% Total international
10% Emerging markets international
10% REIT
10% bond - total US bond
My wife and I have 10 investment accounts across 4 providers with over $2MM invested. I have to say that it's a piece of cake to manage because it's all 3-fund. The above makes my head spin enough to make me dizzy.

Ours...3 fund in my IRA (half of our money). Exactly 1 fund or ETF in each of the other 9 accounts. Rebalancing takes no more than 15 minutes a year.
Bogle: Smart Beta is stupid

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