Switching Global Wellington w/ Lifestrategy fund ..!?

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mespap
Posts: 14
Joined: Sun Nov 16, 2014 6:44 pm

Switching Global Wellington w/ Lifestrategy fund ..!?

Post by mespap » Sun Jun 17, 2018 10:07 pm

Emergency funds: 9 months
Debt: Leasing a car, term ends Nov. 2019
No CC debt, pay everything in full each month.

Tax Filing Status: Single
Tax Rate: 15% Federal, 2% State
State of Residence: CA
Age: 33
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 20-30% of stocks

Income: ~$36,000 (gross)

Current retirement assets

Pension
[$2300]
5.85% Cash
(100% vested, 2018 annual interest credit rate is 4.50%)

Taxable
[$6200]
15.78% Vanguard Total Stock (VTSMX) (0.14%)

His 401k
[$11800]
30.03% Blackrock S&P500 (Couldn’t find it ticker name) (0.02%)

Company match? 100% of up to 5%
ROTH 401k option is offered.

His Roth IRA at Vanguard
[$19000]
48.35% Vanguard Global Wellington (VGWLX) (0.45%)

Total of All Accounts Together (not each account individually) should equal 100%.

Contributions

New annual Contributions
$1800 his 401k (5% annually=$1800, plus $700+ annual special award)
$5500 his ROTH IRA
$1200 taxable (for retirement, not short term goals)
$1080 his Pension (3%, company puts it, not out of paycheck)

Available funds

Funds available in his 401(k)
Did not mention the rest of funds because do not plan on switching 401k fund.

Questions:

I understand that asset allocation is a personal decision, but I want to hear your thoughts on switching my ROTH IRA fund from Global Wellington to Lifestrategy Growth (VASGX).
Or should I just get Lifestrategy Moderate Growth?


Some Points

* I will be getting married next year, possibly mid-year.
* I used Vanguard tool and 80/20 portfolio was suggested.
* I want only one fund and don’t like Target funds.
* I understand that these two funds are not apple to apple. I am not looking to compare these.
* Once my wife starts working along me, I will be able to max out 401k.

I wanted to do this back in February, but I wrote all this and sat on it. I go in knowing additional risks and am happy with it. I am not increasing my allocation because of the high valuation of stocks right now. To be frank, I know we will have another deep correction (recession) in future. I believe I now have the temperament and patience to stay the course. The correction in February wasn’t huge but I didn’t check my portfolio or get anxious. I felt indifferent.

Here are some of my reasons for wanting to switch:

Reason #1: Manager risk. Foremost, no matter how talented the manger(s) might be, it has been bothering me that someone is making a decision about which stocks to pick. Honestly, I will be happier knowing my ROTH is all index funds.

Reason #2: Fees. 0.45% of Global Wellington vs ~0.14% of Lifestrategy Growth. I know, I know! I am getting an actively managed fund and I now have an international allocation. Plus, 0.45% is not extremely high in the investing world. Still, no matter how small, I will save some money in the fees. This is not the biggest reason.

Reason #3: I am sure the manager has picked stocks that cover different sectors, industries, etc. but second thing that has been really bothering me is that I am not as diversified as a Lifestrategy fund. Kind of going back to Reason #1, we don't know if these stocks will continue to do well.

Reason #4: I don’t know what future holds and 80/20 portfolio may or may not give the past performance. I am afraid of not having enough money in my retirement, although 65/35 is not too conservative for my age, I guess.


I appreciate in advance for taking the time to read this and give me your feedback. :wink:
Last edited by mespap on Mon Jun 18, 2018 1:53 pm, edited 1 time in total.

123
Posts: 3833
Joined: Fri Oct 12, 2012 3:55 pm

Re: Switching Global Wellington w/ Lifestrategy fund ..!?

Post by 123 » Sun Jun 17, 2018 10:24 pm

Vanguard LifeStrategy funds are funds-of-funds with the funds used being four Vanguard index funds. If you switch you will eliminate specific fund manager risk since there is none. Note that the LifeStrategy funds do have what I consider a high percentage of international stocks and bonds, I am bowing to the expertise and wisom of Vanguard in that regard.

I switched our retirement accounts from a basic 3 or 4 fund model which I periodically rebalanced to a LifeStrategy fund because it reduced complexity for my spouse when I am no longer in the picture. The ER of the LifeStrategy fund was somewhat higher than if I did the rebalancing but it was not a show-stopper for me. Sometimes we have to satisfy ourselves with a "good" solution instead of waiting for a "perfect" solution.

Try a LifeStrategy fund and see how it works for you. You can always switch to a different one, or go back to Global Wellington if you miss it.
The closest helping hand is at the end of your own arm.

mespap
Posts: 14
Joined: Sun Nov 16, 2014 6:44 pm

Re: Switching Global Wellington w/ Lifestrategy fund ..!?

Post by mespap » Sun Jun 17, 2018 10:39 pm

123 wrote:
Sun Jun 17, 2018 10:24 pm
Vanguard LifeStrategy funds are funds-of-funds with the funds used being four Vanguard index funds. If you switch you will eliminate specific fund manager risk since there is none. Note that the LifeStrategy funds do have what I consider a high percentage of international stocks and bonds, I am bowing to the expertise and wisom of Vanguard in that regard.

I switched our retirement accounts from a basic 3 or 4 fund model which I periodically rebalanced to a LifeStrategy fund because it reduced complexity for my spouse when I am no longer in the picture. The ER of the LifeStrategy fund was somewhat higher than if I did the rebalancing but it was not a show-stopper for me. Sometimes we have to satisfy ourselves with a "good" solution instead of waiting for a "perfect" solution.

Try a LifeStrategy fund and see how it works for you. You can always switch to a different one, or go back to Global Wellington if you miss it.
Thank you!

MJW
Posts: 597
Joined: Sun Jul 03, 2016 7:40 pm
Location: Pacific Northwest

Re: Switching Global Wellington w/ Lifestrategy fund ..!?

Post by MJW » Mon Jun 18, 2018 1:42 pm

Make the decision about your stock/bond allocation first.

The rationale you provided for switching to LS funds is solid enough to make the switch if you feel strongly enough about it.

Of course if Global Wellington is blowing the LS fund out of the water over the next several years you can't allow yourself to feel too badly about it. :)

mespap
Posts: 14
Joined: Sun Nov 16, 2014 6:44 pm

Re: Switching Global Wellington w/ Lifestrategy fund ..!?

Post by mespap » Mon Jun 18, 2018 1:51 pm

MJW wrote:
Mon Jun 18, 2018 1:42 pm
Make the decision about your stock/bond allocation first.

The rationale you provided for switching to LS funds is solid enough to make the switch if you feel strongly enough about it.

Of course if Global Wellington is blowing the LS fund out of the water over the next several years you can't allow yourself to feel too badly about it. :)
:thumbsup :)

Jordan4FI
Posts: 111
Joined: Mon May 28, 2018 11:00 am
Location: Honduras

Re: Switching Global Wellington w/ Lifestrategy fund ..!?

Post by Jordan4FI » Mon Jun 18, 2018 1:59 pm

.45% is getting sort of high, but if you get good returns that makes up for it... You could just let that fund ride a while, and start a new fund within your IRA.. Over time you can see how they are working out and you can move here or there at that time with better vision.

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