Seeking Advice For Portfolio Construction

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JFDAKAN
Posts: 4
Joined: Sat May 12, 2018 11:03 pm

Seeking Advice For Portfolio Construction

Post by JFDAKAN » Wed Jun 20, 2018 10:01 am

Hello To All,

I am a new investor who is 70 years old and will turn 71 in two weeks. I have no previous investing experience. After my father's passing in 2010, I was involved in a two year legal battle with my older brother and after settlement of the estate I wound up with a nice piece of property and a nice nest egg. This inherited money has been sitting on the sidelines in a savings account in my local bank earning next to nothing in interest. I have spent the last four to five years trying to educate myself about investing. I have read the books by Jack Bogle, The Little book Of Common Sense Investing, First Edition and also the 10TH Anniversary Edition of the same book. I made the decision to go with Vanguard this past spring because of the excellent reputation of Jack Bogle and also because of Vanguard's low fees. I opened an account with Vanguard at the beginning of March and now have $400K plus sitting in Vanguard Prime Money Market Fund. I am seeking advice from the Bogleheads Community about how to invest this money which would be in a taxable account. My personal financial situation is as follows:

Age: 70 - Will turn 71 in two weeks
Tax Filing Status: Single - No dependents
Tax Rate: 28% Federal
Emergency Funds: Yes
Current Investment Assets: None - I own my own home plus 25 acres
Annual Income: $30,000 - $50,000 per year including Social Security
Debt: I have zero debt
State Of Residence: West Virginia
Desired Asset Allocation: 60% Stocks/40% bonds
Goal: I want to grow my nest egg for awhile and then begin taking income in retirement

I am thinking about going with The Three Fund Portfolio of Total Stock Market Index, Total International Stock Index, Total Bond Market Index,
plus Vanguard Prime Money Market Fund. My first question for the Bogleheads Community is what would be the recommended portfolio of index funds for someone in my situation and what would be the recommended percentage of each fund in the portfolio.

My second question is, would it be necessary to rebalance the above mentioned portfolio and how often should I rebalance. I want to be a long term investor, stay the course and set it and forget it, if I can.

My third question is, should I keep the Vanguard Prime Money Market fund open, and if so, what percentage of my assets should I keep in the money market fund.

My fourth and last question is, can anyone give me the name of a good, longtime, experienced adviser/broker whom I could contact in the Vanguard organization to help me set up this new portfolio. I am currently In Vanguard Voyager Services, but I hope to eventually be in Vanguard Flagship Services, in which case I would have my own personal adviser.

Thanks for all your help in advance.

Best Regards,
New Investor John
Last edited by JFDAKAN on Fri Aug 10, 2018 1:09 pm, edited 1 time in total.

bloom2708
Posts: 5021
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Seeking Advice For Portfolio Construction

Post by bloom2708 » Wed Jun 20, 2018 1:50 pm

Welcome.

The 3 fund portfolio is an excellent option. There are always some "buts". The Total US Bond portion interest is ordinary income, taxed at your highest marginal rate. There is no 28% bracket in 2018. So likely 12% or 22% based on what you listed as income. We would have to know your AGI estimate to see if Tax-Exempt Bonds might make more sense with taxable dollars. Factoring in your SS income.

I think you could use the 3 fund or an easier version to manage would be to use a LifeStrategy fund that matches your desire/need to take risk. There is a 20/80, 40/60 and 60/40 version (stocks/bonds). I don't think the 80/20 is in scope at 71.

The LifeStrategy funds have the 4 horsemen inside (Total US, Total International, Total US Bond, Total International Bond). They re-balance for you.

My parents use Vanguard Tax-Managed Balanced Fund in taxable. It is ~47/53 stocks/bonds. This may be a good option. A one fund solution requires no rebalancing.

I don't think you need to pay the Personal Advisory Service (PAS) fee of .3% unless you are wanting to go with something more complex. You can do it yourself with 3 or even 1 fund.

You could leave 1-2 years of expenses in the Prime Money Market. That is paying a good rate now. ~1.9% the last time I checked. Have dividend/interest from the fund/funds sent to the Settlement fund. That is simply an option on the account. To re-invest or not re-invest dividends.

I think you are on the right track. Decide on how much risk you want to take (30/70 to 50/50 would probably be where I settle).

Hopefully others can help pinpoint what you want to do with bonds. I am assuming these dollars are outside of an IRA and in a post-tax/taxable account.

Welcome again!
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

delamer
Posts: 6460
Joined: Tue Feb 08, 2011 6:13 pm

Re: Seeking Advice For Portfolio Construction

Post by delamer » Wed Jun 20, 2018 3:48 pm

Where does your current income come from? Is it work and/or Social Security? Are there any other sources?

How much income do you hope to get from your $400,000?

Your best portfolio in part rests on how much money you need. And also whether you want to leave a legacy to heirs or a charity.

ExitStageLeft
Posts: 1006
Joined: Sat Jan 20, 2018 4:02 pm

Re: Seeking Advice For Portfolio Construction

Post by ExitStageLeft » Thu Jun 21, 2018 2:20 pm

If you are earning income, you can (and probably should) put up to $6500 per year in an Individual Retirement Account (IRA). You can open up an IRA with Vanguard in about 2 minutes and transfer your Money Market funds into the IRA. If you are only getting SS and passive income, and IRA is not available to you.

JFDAKAN
Posts: 4
Joined: Sat May 12, 2018 11:03 pm

Re: Seeking Advice For Portfolio Construction

Post by JFDAKAN » Fri Jun 22, 2018 1:22 am

Hello To All Again,

My current income comes from a combination of Social Security and doing international foundry consulting work. I am a Metallurgical Engineer or foundry metallurgist who travels abroad and teaches people how to make good glass container mould castings which are machined into finished mould equipment and sent to glass plants to make glass bottles. Since my father's passing, I have been to China three times and the Philippines five times doing this type of work. I am semi-retired and don't currently need income from the $400K nest egg. My current goal is to grow my nest egg and start taking income somewhere in the future. Under these circumstances, my question is, what would be the ideal and recommended portfolio. Thanks to all for taking the time to respond to my post. Thank you all so much for your time and advice.

Best Regards,
New Investor John

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