Need Your Feedback on 100% VTSAX

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lake100
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Need Your Feedback on 100% VTSAX

Post by lake100 » Mon Jul 02, 2018 10:30 am

Hello,

Thank you for all your answer to my questions during July 2017. After some research (bogleheads and JLCollins) and additional savings, I have decided to invest $55K in VTSAX (Admiral) over the course of the next three months. After that, I will be adding $1700 of monthly salary towards this fund. I realize the strategy is risky as I am 100% in US stocks with no international stock or bond funds for protection. I am willing to take some hits to the investment and hold it for as long as I can and add bonds as I get closer to retirement. I am 42, have been working as a public school teacher for the last 15 years. I intend to work until 65. I have a teacher pension. I am single with no children. I have emergency fund for 12 months and do not foresee any short/medium term expenditures (3-5 years).

1) Your comments about the plan?
2) How does re balancing work in my case?
3) Is this tax efficient?

Thank you

SimplicityNow
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Re: Need Your Feedback on 100% VTSAX

Post by SimplicityNow » Mon Jul 02, 2018 10:39 am

I think it is overly aggressive at your age. If you have been in the market when there was a prior bear market and stayed the course through a large 30-50% down turn that would be one thing. If not you don’t know if you will panic and sell.

If you are 100% stock there is nothing to rebalance. You can either have the dividend s automatically reinvested or do it yourself.

VTSAX is very tax efficient in a taxable account. In a retirement account it doesn’t matter.

ny_rn
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Re: Need Your Feedback on 100% VTSAX

Post by ny_rn » Mon Jul 02, 2018 10:40 am

I (33-year-old single male) have this same plan spread across my 403(b), Roth IRA and taxable account. I'll add bonds when I can no longer sleep at night. All extra money is contributed to taxable account.

Tax-efficient fund placement: https://www.bogleheads.org/wiki/Tax-eff ... _placement

reformed.trader
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Re: Need Your Feedback on 100% VTSAX

Post by reformed.trader » Mon Jul 02, 2018 10:40 am

With US markets at near all time highs valuation wise, I do not think this is wise. According to most models I have seen expected real returns for US stock market is between 0-2% per annum whereas EM returns are expected to be in the 5-6% range. Why not equal weight across US, International Developed and EM or ditch US altogether for now?

There is no rebalancing with one fund. Can you elaborate?

Is this in a tax deferred account? If not, buy the ETF(not a vanguard guy, but I am guessing it would be VTI), not the mutual fund. ETFs are far more tax efficient.

lake100
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Re: Need Your Feedback on 100% VTSAX

Post by lake100 » Mon Jul 02, 2018 10:51 am

Hello,

Thanks for all your quick and helpful replies. The fund would be in a taxable account. My school does not have good funds in 403 b).

SimplicityNow:
I hear you. I have never been in the market before and if the market drops 50% or more, it would be quite a hit and there is no way I can panic and sell. I suppose there is no way to prepare for that except to stay the course. Easier said, I understand.

Ny_RN: That is more or less my thought. Thanks for the link.

Reformed Trader:
The US companies in VTSAX tend to be international and more stable. The international markets seem more volatile. Your thoughts?
Last edited by lake100 on Mon Jul 02, 2018 11:07 am, edited 2 times in total.

WhiteMaxima
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Re: Need Your Feedback on 100% VTSAX

Post by WhiteMaxima » Mon Jul 02, 2018 10:57 am

If you would like 100% in equity. Why not add some % int'l? I would do 70/30 or 80/20/. Also you need to know VTSAX is heavy in large cap. I like small and mid cap. So I would tile to ward to small/mid by adding Vanguard extended marlet fund.

lake100
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Re: Need Your Feedback on 100% VTSAX

Post by lake100 » Mon Jul 02, 2018 11:03 am

Hello,

WhiteMaxima:
That makes sense. I will look into adding some international (as suggested by Reformed Trader earlier) and also the small/midcap fund.

Thank you

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eye.surgeon
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Re: Need Your Feedback on 100% VTSAX

Post by eye.surgeon » Mon Jul 02, 2018 11:08 am

A reasonable asset allocation at your age and planned retirement age would be from 90/10 to 50/50, (stock/bond) depending on your risk tolerance. You certainly wouldn't be alone here at 100% stocks in your 40s but it would be considered very aggressive, however the amount of money is not large so the risk is relatively less. If it was a million dollars I'd think harder.

I would be careful in dismissing your work's sponsored 403 account... the choices would have to be terrible to not invest at least up to your match. Ideally you should fully fund it. consider posting your choices here for input.
Last edited by eye.surgeon on Mon Jul 02, 2018 11:15 am, edited 1 time in total.
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MotoTrojan
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Re: Need Your Feedback on 100% VTSAX

Post by MotoTrojan » Mon Jul 02, 2018 11:10 am

I wouldn’t over complicate with small-caps, more likely to change your plan when you shouldn’t and longterm the differences aren’t drastic. Total Market (US) and then 20-30% of Total International would be my call.

While usually ETFs are more tax-efficient, at Vanguard the mutual funds are a different class of the same shares so no differences. MF will allow you to buy fractional shares and also automatically invest on a recurring basis.

Once you are comfortable start looking into tax-loss harvesting. With 100% stock id wager contributions alone will maintain balance (buying the under performing asset). Also research tax-advantaged accounts. At a minimum you should be eligible for a Roth but I’d assume there’s a 4XX plan through work too. Invest there before taxable.

dbr
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Re: Need Your Feedback on 100% VTSAX

Post by dbr » Mon Jul 02, 2018 11:20 am

lake100 wrote:
Mon Jul 02, 2018 10:30 am
Hello,

Thank you for all your answer to my questions during July 2017. After some research (bogleheads and JLCollins) and additional savings, I have decided to invest $55K in VTSAX (Admiral) over the course of the next three months. After that, I will be adding $1700 of monthly salary towards this fund. I realize the strategy is risky as I am 100% in US stocks with no international stock or bond funds for protection. I am willing to take some hits to the investment and hold it for as long as I can and add bonds as I get closer to retirement. I am 42, have been working as a public school teacher for the last 15 years. I intend to work until 65. I have a teacher pension. I am single with no children. I have emergency fund for 12 months and do not foresee any short/medium term expenditures (3-5 years).

1) Your comments about the plan?
2) How does re balancing work in my case?
3) Is this tax efficient?

Thank you
If I understand correctly this is all the investment money you have, no 401k/403b/IRA, right? There is also money in an emergency fund. This money is somewhere else right now but the plan is to put it all in VTSAX and then continue to contribute as time goes on eventually reallocating to include bonds.

I don't see any real problem with this. VTSAX is as tax efficient as anything. In the case of Vanguard the fund and the ETF are equally tax efficient.

From the point of view of actual asset allocation I think the emergency fund should be counted as an asset. If there is an emergency and it is used up then you readjust. You don't say how much money that is. Anyway, to start with, you are not dealing with a huge investment here, and when it has grown, you plan to adjust.

When you are invested 100% in stocks there is no rebalancing. The purpose of rebalancing is to control risk. You have decided to take the risk of 100% stocks in your actual invested assets, so there is nothing to control.

The ultimate answer to how much risk to take is to look at your need, ability, and willingness to take risk. At your age it might start to be useful to look at a planning tool like www.firecalc.com and consider your anticipated need for income, your pension, and what you will have saved depending on contributions and asset allocation, all of which is information you can enter into the model. There are other models as well.

reformed.trader
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Re: Need Your Feedback on 100% VTSAX

Post by reformed.trader » Mon Jul 02, 2018 11:25 am

lake100 wrote:
Mon Jul 02, 2018 10:51 am


Reformed Trader:
The US companies in VTSAX tend to be international and more stable. The international markets seem more volatile. Your thoughts?
Yes, it might be a bit more volatile, but who cares if you get less volatility if you get no real return. IMO the long term has been shown to be quite predictable. Because of this, I have very little US exposure. I don't understand why others would when there are other options with far higher projected returns. I guess you have to read the research and believe it. I do.

rgs92
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Re: Need Your Feedback on 100% VTSAX

Post by rgs92 » Mon Jul 02, 2018 11:29 am

I would say the key questions are:
1. How much is your pension at retirement (estimated)and is it inflation-adusted?
2. Will you get social security also? (This is always an issue for teachers and depends on what state you are in.)
3. How secure do you feel your job is?
4. Do you anticipate any unusually high expenses in retirement (beyond the usual ones for most people)?
5. How good are your retirement benefits? (Mainly health benefits.)

I would say if all of these questions have nicely positive answers, you are good to go.
Last edited by rgs92 on Mon Jul 02, 2018 11:30 am, edited 1 time in total.

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White Coat Investor
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Re: Need Your Feedback on 100% VTSAX

Post by White Coat Investor » Mon Jul 02, 2018 11:30 am

lake100 wrote:
Mon Jul 02, 2018 10:30 am
Hello,

Thank you for all your answer to my questions during July 2017. After some research (bogleheads and JLCollins) and additional savings, I have decided to invest $55K in VTSAX (Admiral) over the course of the next three months. After that, I will be adding $1700 of monthly salary towards this fund. I realize the strategy is risky as I am 100% in US stocks with no international stock or bond funds for protection. I am willing to take some hits to the investment and hold it for as long as I can and add bonds as I get closer to retirement. I am 42, have been working as a public school teacher for the last 15 years. I intend to work until 65. I have a teacher pension. I am single with no children. I have emergency fund for 12 months and do not foresee any short/medium term expenditures (3-5 years).

1) Your comments about the plan?
2) How does re balancing work in my case?
3) Is this tax efficient?

Thank you
1) Could be more diversified
2) The fund will do it automatically
3) Yes
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

Swansea
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Re: Need Your Feedback on 100% VTSAX

Post by Swansea » Mon Jul 02, 2018 11:35 am

At your age and also with a staple job and a future pension, I was 100% stock. When I hit 50, I started moving to a mix of stock and bond funds, ending up at 60 stock an 40 bond at age 60.
As to investing the 55K, my recommendation would be to do it over a year in equal amounts or 5K a month for 11 months.

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BL
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Re: Need Your Feedback on 100% VTSAX

Post by BL » Mon Jul 02, 2018 11:42 am

I suggest you put 5500/year into a Roth IRA (see Backdoor Roth if income is too high for direct contributions). Never be taxed on gains in retirement.

Also suggest you post what the ERs (expense ratios) of available 403b funds are, along with name and ticker. There may be at least one lower cost index fund under 1%? Then put the rest in your taxable account.

If you don't like bonds, then CDs, Vanguard Prime (or other) Money Market,
or I-bonds (10k/yr) from
https://treasurydirect.gov/
would be just fine.

2. No re-balancing possible or necessary, unless you consider changing your AA to hold some fixed income.

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nisiprius
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Re: Need Your Feedback on 100% VTSAX

Post by nisiprius » Mon Jul 02, 2018 11:48 am

First of all, based on past history, international stocks have sometimes given some incremental diversification, but I don't think you can point to any time when they have provided anything you could call "protection." In 2000-2002, US and international both fell about 43%. In 2008-2009, US fell about 53% and international fell about 60%. So I wouldn't worry about not having them in terms of investment... but if I were you, I would worry a bit about not having the past history of US and international stocks in your head. Ditto bonds.

Similarly, with regard to 100% stocks, the important thing is to make sure that you are making an intelligent and well-informed choice that is suitable to your own risk tolerance. And that means truly assessing your personal risk tolerance, just as best as you can. Not assuming that it must be high because people seem to expect it of younger investors. Remember, we are talking about a 50% decline, not just once, but twice within the last twenty years. When it happens, you don't think of it as a percentage, you think of how many years it took you, cutting back on "nice things" like cars and vacations, to save it up, and now half of it is gone, just shot to hell.

Right now, we know of course that the market recovered, fairly quickly in the case of 2008-2009. However, it did not seem that quick, nor that steady, while it was happening, and in the early years there was a lot of talk about "dead cat bounces" and "value traps" and "V-shaped recovery or L-shaped recovery?" During a bull market nobody believes they will panic-sell, and yet during a crash people do. For the record, I personally did not but my stock allocation was a lot less than 100%, it was a very near thing, and it was more like "deer caught in the headlights" than "steadfastly and confidently staying the course."

What I mean to say is, don't take the evaluation of your personal risk tolerance casually. Some people really are able to tolerate 100% stocks, but I don't think it is very many. And look at the data for yourself.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

lostdog
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Re: Need Your Feedback on 100% VTSAX

Post by lostdog » Mon Jul 02, 2018 12:52 pm

All U.S. Equity is a bad idea. Here is why:

https://www.youtube.com/watch?v=LwTHLtuToSY

lake100
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Re: Need Your Feedback on 100% VTSAX

Post by lake100 » Mon Jul 02, 2018 1:16 pm

Hello,

I cannot thank you all for your insightful answers - I am learning a lot!

Below I have provided additional information about my case and if you don't mind, I have some additional questions:

1) My emergency fund is $25,000 (same as my annual expenses). $15,000 is invested in Ally Bank Savings @1.75%. $10,000 is in my checking account earning no interest. Would you recommend I move this to a CD or a Money Market Account/I-Bonds?

2) My investment amount is $55,000. I have no other money. I realize I need to save a lot more.

3) I have two choices for 403 b) - Valic and Metlife - both of them are annuities. I am unable to get much information from Valic. For Metlife, the
only investment option is a variable annuity. The annuity can be funded by several mutual funds (they have T Rowe Price but no Vanguard). The ER for these funds range from 0.25 to 0.5 %. Since they offer a death benefit, they charge a 1.5% every year. So, the total annual cost is 1.5 - 2%. I will be getting list of all their funds today and will post it soon. I decided against it 2 years ago because of the high fees and the lack of a match from my employer. This remains true even today. Your comments?

4) If I am not doing a 403 b), as suggested in several replies, I should have a Roth IRA. If I want 100% Equities, should I just buy VTSAX for Roth?

5) If I would be going for some international stocks, is VTIAX the way to go?

6) My pension income at 65 would be around $3500. The income is inflation adjusted every year. I will also be getting social security. There is also a health insurance credit from the retirement system. My job is relatively secure barring deep education cuts from state government. As for major expenses in retirement other than the usual, I cannot think of any at this time.

7) The video about 100% US Equities being a bad idea is interesting. Does Vanguard offer a World Equity Index in one fund? Or is a combination of VTSAX and VITAX equivalent to a owing a world equity fund?

8) What are the key points about tax loss harvesting I need to know?

Thank you

reformed.trader
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Re: Need Your Feedback on 100% VTSAX

Post by reformed.trader » Mon Jul 02, 2018 1:56 pm

VT is vanguard's total world market ETF. I would highly recommend it over a mutual fund in a taxable account.

lake100
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Re: Need Your Feedback on 100% VTSAX

Post by lake100 » Mon Jul 02, 2018 2:00 pm

Thank you, I will look into that.

cjcerny
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Re: Need Your Feedback on 100% VTSAX

Post by cjcerny » Mon Jul 02, 2018 2:06 pm

Why do you think you "need to save a lot more money"? You've already told us that your current annual expenses are $25k and that your pension will be $42k a year at age 65. Do you mean you need a much higher savings rate than what you currently have? I doubt it. Sounds to me like your savings rate is just fine the way it is.

Should you definitely be maxing out a Roth IRA. Any savings beyond that can go into cash. I think your VTSAX plan is just fine. It will be volatile, however, but you can always smooth that out down the road with bonds and municipal bonds if you can't stomach the volatility--just don't panic and sell the VTSAX if the market nose dives.

MotoTrojan
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Re: Need Your Feedback on 100% VTSAX

Post by MotoTrojan » Mon Jul 02, 2018 2:21 pm

reformed.trader wrote:
Mon Jul 02, 2018 11:25 am
lake100 wrote:
Mon Jul 02, 2018 10:51 am


Reformed Trader:
The US companies in VTSAX tend to be international and more stable. The international markets seem more volatile. Your thoughts?
Yes, it might be a bit more volatile, but who cares if you get less volatility if you get no real return. IMO the long term has been shown to be quite predictable. Because of this, I have very little US exposure. I don't understand why others would when there are other options with far higher projected returns. I guess you have to read the research and believe it. I do.
Sorry, you’re arguing international returns have beat US? Where are you suggesting people look outside the US for best past returns?

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BL
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Re: Need Your Feedback on 100% VTSAX

Post by BL » Mon Jul 02, 2018 2:59 pm

I would get info on Valic. Also see if your state has a 457b you can invest in.

Total stock fund is efficient and is same as the ETF at Vanguard. Easier to set up auto investing with mutual funds.

total world fund or ETF is 56% North American.

1. Looks good as is.

4. If income is too high for direct Roth IRA, consider Backdoor Roth (search Wiki) if you have no IRAs.

reformed.trader
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Re: Need Your Feedback on 100% VTSAX

Post by reformed.trader » Mon Jul 02, 2018 3:36 pm

MotoTrojan wrote:
Mon Jul 02, 2018 2:21 pm
reformed.trader wrote:
Mon Jul 02, 2018 11:25 am
lake100 wrote:
Mon Jul 02, 2018 10:51 am


Reformed Trader:
The US companies in VTSAX tend to be international and more stable. The international markets seem more volatile. Your thoughts?
Yes, it might be a bit more volatile, but who cares if you get less volatility if you get no real return. IMO the long term has been shown to be quite predictable. Because of this, I have very little US exposure. I don't understand why others would when there are other options with far higher projected returns. I guess you have to read the research and believe it. I do.
Sorry, you’re arguing international returns have beat US? Where are you suggesting people look outside the US for best past returns?
I am suggesting that based on current valuations, international markets will provide you a better return over the next 5 or 10 years. CAPE, P/B, P/S etc all show US is heavily overvalued compared to itself historically, as well as other markets around the world presently.

I also said history has shown future returns can be predicted pretty well. If you believe we will get average historical returns here in the US over the next 10 years with a current CAPE of 33, then go for it. I will take the other side of that bet.

lake100
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Re: Need Your Feedback on 100% VTSAX

Post by lake100 » Mon Jul 02, 2018 4:48 pm

Hello,

cjcerny : Thanks for your reply. That was helpful.

BL : I will look at Valic and Total World Fund. My employer does not offer 457 b) although my state has a 457 b). Does that still make me eligible?
My income still faills within the annual Roth IRA limit, so I will go for that with VSTAX or VITAX.

MotoTrojan & reformed.trader:
Interesting debate between US Stocks Vs International. I guess I will have a mix of both.

I would be grateful for more answers to my questions.

Thank you

lostdog
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Re: Need Your Feedback on 100% VTSAX

Post by lostdog » Mon Jul 02, 2018 6:14 pm

Vanguard Total World fund. VT

Here is a good video on why you would want to make international part of your equity allocation.


https://m.youtube.com/watch?v=LwTHLtuToSY

lake100
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Re: Need Your Feedback on 100% VTSAX

Post by lake100 » Mon Jul 02, 2018 6:36 pm

Thank you, lostdog!

bluerafters
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Re: Need Your Feedback on 100% VTSAX

Post by bluerafters » Mon Jul 02, 2018 7:06 pm

Honest question why not something like VFORX?

dogagility
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Re: Need Your Feedback on 100% VTSAX

Post by dogagility » Mon Jul 02, 2018 7:30 pm

lake100 wrote:
Mon Jul 02, 2018 1:16 pm
I have some additional questions:

1) My emergency fund is $25,000 (same as my annual expenses). $15,000 is invested in Ally Bank Savings @1.75%. $10,000 is in my checking account earning no interest. Would you recommend I move this to a CD or a Money Market Account/I-Bonds?

2) My investment amount is $55,000. I have no other money. I realize I need to save a lot more.

3) I have two choices for 403 b) - Valic and Metlife - both of them are annuities. I am unable to get much information from Valic. For Metlife, the
only investment option is a variable annuity. The annuity can be funded by several mutual funds (they have T Rowe Price but no Vanguard). The ER for these funds range from 0.25 to 0.5 %. Since they offer a death benefit, they charge a 1.5% every year. So, the total annual cost is 1.5 - 2%. I will be getting list of all their funds today and will post it soon. I decided against it 2 years ago because of the high fees and the lack of a match from my employer. This remains true even today. Your comments?

4) If I am not doing a 403 b), as suggested in several replies, I should have a Roth IRA. If I want 100% Equities, should I just buy VTSAX for Roth?

5) If I would be going for some international stocks, is VTIAX the way to go?

6) My pension income at 65 would be around $3500. The income is inflation adjusted every year. I will also be getting social security. There is also a health insurance credit from the retirement system. My job is relatively secure barring deep education cuts from state government. As for major expenses in retirement other than the usual, I cannot think of any at this time.

7) The video about 100% US Equities being a bad idea is interesting. Does Vanguard offer a World Equity Index in one fund? Or is a combination of VTSAX and VITAX equivalent to a owing a world equity fund?

8) What are the key points about tax loss harvesting I need to know?
1. Yes, put the 10K in Ally savings, a no-penalty CD (see Ally), or some other safe, liquid vehicle with comparable interest rates. Treasuries?
2. I wouldn't suggest DCAing this money. When you are ready to invest, just put it all in and forget about it.
4. Yes, you should be investing in a Roth IRA up to your maximum allowed each year. You can invest in any index fund in a Roth IRA.
5. I suggest VTIAX if you're planning on diversifying into international. It's not really needed, but some people like the extra diversification.
6. Sweet!
7. Yes. VT. It's an ETF with a lower expense ratio than the comparable mutual fund (VTWSX).
8. I don't know.

Finally, if you are a person that can forget about this investment and truly be detached from it's valuation, you are all set to be 100% in equity. This was my attitude throughout my 20s, 30s and 40s because I realized the market would rebound before I needed the money. I was 100% equity for most of the last 25 years. Didn't have a problem with any of the downturns... just wished I had more money to sink in the market during the "troubles".
Taking "risk" since 1995.

lake100
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Re: Need Your Feedback on 100% VTSAX

Post by lake100 » Mon Jul 02, 2018 7:55 pm

Hello,

bluerafters: That is another good option!

dogagility: Should I even bother with treasuries if I am using Ally Savings Account/CD's? What are the advantages?
Thanks for telling me about your personal experience with 100% Equities! That was helpful.

Thank you

dbr
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Re: Need Your Feedback on 100% VTSAX

Post by dbr » Tue Jul 03, 2018 10:17 am

lake100 wrote:
Mon Jul 02, 2018 7:55 pm

dogagility: Should I even bother with treasuries if I am using Ally Savings Account/CD's? What are the advantages?
That sort of thing is another example of being complete. There are lots of options in fixed income with big little differences among them but only little big differences.

Are there advantages to Treasuries. Here are some differences that a person might explore:

1. Treasury interest is exempt from state income taxes.
2. There are inflation indexed Treasuries including TIPS, which are like nominal bonds available in maturities up to 30 years, and I bonds, which are savings bonds the gains on which, interest and inflation, are tax deferred for thirty years.
3. A person may or may not like holding the account at Treasury Direct rather than dealing with banks for CDs and savings. Bonds, (also notes, and bills?) are marketable and can be bought and sold by a brokerage, like brokered CDs also can. Treasury Direct does not hold IRAs but an IRA at a broker can trade in Treasury bonds but not in Treasury savings bonds.

What you "should" bother with is completely up to you.

lake100
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Re: Need Your Feedback on 100% VTSAX

Post by lake100 » Tue Jul 03, 2018 12:46 pm

Hello,

dbr: Thank you for such a detailed reply!!

guyesmith
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Re: Need Your Feedback on 100% VTSAX

Post by guyesmith » Tue Jul 03, 2018 2:20 pm

lostdog wrote:
Mon Jul 02, 2018 12:52 pm
All U.S. Equity is a bad idea. Here is why:

https://www.youtube.com/watch?v=LwTHLtuToSY
Good video

jeffh19
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Re: Need Your Feedback on 100% VTSAX

Post by jeffh19 » Tue Jul 03, 2018 5:25 pm

reformed.trader wrote:
Mon Jul 02, 2018 10:40 am
With US markets at near all time highs valuation wise, I do not think this is wise. According to most models I have seen expected real returns for US stock market is between 0-2% per annum whereas EM returns are expected to be in the 5-6% range. Why not equal weight across US, International Developed and EM or ditch US altogether for now?

There is no rebalancing with one fund. Can you elaborate?

Is this in a tax deferred account? If not, buy the ETF(not a vanguard guy, but I am guessing it would be VTI), not the mutual fund. ETFs are far more tax efficient.
I started with ETFs and went to MFs for the sole reason that I can invest entire dollar amounts and do auto investments. This really helps me invest more, so auto investments so I never see the money and just set it and forget it. With ETFs I was often trying to time the market during the day etc.

I’m curious the tax difference between VTI and VTSAX

Nthomas
Posts: 113
Joined: Fri Jul 15, 2016 8:46 am

Re: Need Your Feedback on 100% VTSAX

Post by Nthomas » Tue Jul 03, 2018 6:42 pm

jeffh19 wrote:
Tue Jul 03, 2018 5:25 pm
reformed.trader wrote:
Mon Jul 02, 2018 10:40 am
With US markets at near all time highs valuation wise, I do not think this is wise. According to most models I have seen expected real returns for US stock market is between 0-2% per annum whereas EM returns are expected to be in the 5-6% range. Why not equal weight across US, International Developed and EM or ditch US altogether for now?

There is no rebalancing with one fund. Can you elaborate?

Is this in a tax deferred account? If not, buy the ETF(not a vanguard guy, but I am guessing it would be VTI), not the mutual fund. ETFs are far more tax efficient.
I’m curious the tax difference between VTI and VTSAX
There is no tax difference. This is unique to Vanguard ETF's and MF's.

reformed.trader
Posts: 41
Joined: Sat Apr 15, 2017 11:14 pm

Re: Need Your Feedback on 100% VTSAX

Post by reformed.trader » Tue Jul 03, 2018 10:07 pm

jeffh19 wrote:
Tue Jul 03, 2018 5:25 pm
reformed.trader wrote:
Mon Jul 02, 2018 10:40 am
With US markets at near all time highs valuation wise, I do not think this is wise. According to most models I have seen expected real returns for US stock market is between 0-2% per annum whereas EM returns are expected to be in the 5-6% range. Why not equal weight across US, International Developed and EM or ditch US altogether for now?

There is no rebalancing with one fund. Can you elaborate?

Is this in a tax deferred account? If not, buy the ETF(not a vanguard guy, but I am guessing it would be VTI), not the mutual fund. ETFs are far more tax efficient.
I started with ETFs and went to MFs for the sole reason that I can invest entire dollar amounts and do auto investments. This really helps me invest more, so auto investments so I never see the money and just set it and forget it. With ETFs I was often trying to time the market during the day etc.

I’m curious the tax difference between VTI and VTSAX
You are losing a lot to taxes more than likely. Try M1 Finance for automatic ETF investing.

drk
Posts: 811
Joined: Mon Jul 24, 2017 10:33 pm
Location: Seattle

Re: Need Your Feedback on 100% VTSAX

Post by drk » Tue Jul 03, 2018 10:11 pm

reformed.trader wrote:
Tue Jul 03, 2018 10:07 pm
You are losing a lot to taxes more than likely. Try M1 Finance for automatic ETF investing.
This is incorrect. VTI and VTSAX are different share-classes of the same fund. You can read about Vanguard's unique fund structure in the wiki.

reformed.trader
Posts: 41
Joined: Sat Apr 15, 2017 11:14 pm

Re: Need Your Feedback on 100% VTSAX

Post by reformed.trader » Wed Jul 04, 2018 1:47 pm

drk wrote:
Tue Jul 03, 2018 10:11 pm
reformed.trader wrote:
Tue Jul 03, 2018 10:07 pm
You are losing a lot to taxes more than likely. Try M1 Finance for automatic ETF investing.
This is incorrect. VTI and VTSAX are different share-classes of the same fund. You can read about Vanguard's unique fund structure in the wiki.
Interesting, I did not know this.

Outside of this unique Vanguard structure, ETFs will almost always be better. Rule of thumb would be, at best MFs can only be as good as ETFs in terms of tax efficiency, even for Vanguard funds.

Finridge
Posts: 499
Joined: Mon May 16, 2011 7:27 pm

Re: Need Your Feedback on 100% VTSAX

Post by Finridge » Fri Jul 20, 2018 5:06 pm

lake100 wrote:
Mon Jul 02, 2018 10:30 am
Hello,

Thank you for all your answer to my questions during July 2017. After some research (bogleheads and JLCollins) and additional savings, I have decided to invest $55K in VTSAX (Admiral) over the course of the next three months. After that, I will be adding $1700 of monthly salary towards this fund. I realize the strategy is risky as I am 100% in US stocks with no international stock or bond funds for protection. I am willing to take some hits to the investment and hold it for as long as I can and add bonds as I get closer to retirement. I am 42, have been working as a public school teacher for the last 15 years. I intend to work until 65. I have a teacher pension. I am single with no children. I have emergency fund for 12 months and do not foresee any short/medium term expenditures (3-5 years).

1) Your comments about the plan?
2) How does re balancing work in my case?
3) Is this tax efficient?

Thank you
1. My comments on your plan:

Given your circumstances, and if you an sleep at night--even after a downturn--I think a 100% stock allocation may make sense for you. If you sell after downturn, then you almost certainly had a too-aggressive allocation.

I would suggest filling out this questionnaire and taking into consideration it's recommendations:
https://personal.vanguard.com/us/FundsInvQuestionnaire

This tool WILL recommend a 100% equity allocation for people whose responses indicate that they are aware of the risk and can bear the risk of such an allocation. This allocation is not appropriate for most people, and ultimately only you can determine if it is appropriate for you. Are you OK waking up one morning and seeing that your $500K account went down to $250K (or lower) overnight? If the thought of this makes your stomach churn now, count on it being much worse when it actually happens. An all-stock portfolio is volatile and you can expect that it will be a wild roller-coaster ride.

However, even if you go with all stocks, I would suggest that you allocate a portion of your portfolio to the Total International Stock Market Index Fund.

2. Rebalancing. If you go with just one fund, there is nothing to rebalance! If you have more than one fund, know your planned allocation and rebalance yearly.

3. Tax Efficiency. yes, the VTSAX fund is tax efficient in a non-tax advantaged account. However to the extent you can, you need to put as much of your portfolio as possible into tax-advantaged accounts. As a teacher you have options other people don't. Research what options you have with regard to 403b and 457 plans. And also IRA and Roth IRA accounts. Spend time researching this--it is worth it.

lake100
Posts: 16
Joined: Fri Jul 28, 2017 12:25 am

Re: Need Your Feedback on 100% VTSAX

Post by lake100 » Wed Aug 08, 2018 10:21 am

Finridge : Thanks a lot for your reply! Sorry, I did not check my replies earlier. I take your points about #1 and #2 as they have been echoed by several thoughtful replies earlier. For #3, my school has only a 403 b) with mostly annuities, which have high expenses. I have a Roth IRA with Vanguard which I will be funding to the max limit in the coming months.

I have a question for the forum:
In case of an extreme emergency, I might need money beyond my one year of emergency fund (Ally Bank + my checking account). If I were to withdraw money from the Brokerage account in Vanguard, what will be my capital gains tax? I spoke to a Vanguard rep a moment ago and was told Vanguard does not charge anything for selling but there might be a capital gains tax if VTSAX Admiral has gained in value. If VTSAX Admiral has lost value, I was told I could write off in my taxes. The rep said the tax will depend on my income. From what I know, isnt' the capital gains tax independent of income and is around 25%? Kindly let me know.

Thank you

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