DIY: Three versus One! Are the Advantages Worth it?

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JustWantToGetItRight
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DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 5:04 pm

Hey all,

Love the DIY attitude and support for using the the three-fund philosophy over a one-fund philosophy

The benefits are:

1. Ability to place money in right location (in Roth, IRA, etc) for greatest tax efficiency
2. Control of the stock to bond ratio over time as you get closer to retirement.
3. Lower fees associated with admiral offerings

You don't get the above in a Target or Life Strategy fund. But are these difference worth the effort of DIY rather than just setting and forgetting?

PFInterest
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by PFInterest » Mon Sep 03, 2018 5:13 pm

this has been discussed mult times.
you pick what you can work with and what you can handle.

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nisiprius
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by nisiprius » Mon Sep 03, 2018 5:28 pm

I've brooded over this quite a bit.

At the moment, where I come down is that the composition of the LifeStrategy and Target Retirement funds is just too different from my personal preferences. The big problem for me personally is that I'm a great big fan of TIPS, having bought my first one in 1998. In the interest of simplification, I decided to exchange all my individual TIPS for a TIPS fund. However, about half of my marketable bonds are intermediate-term TIPS (and I often think it should be more). The LifeStrategy funds have no TIPS at all. The Target Retirement funds don't have enough--Target Retirement Income has only 1/4th of its bond allocation TIPS--and the shift from intermediate-term TIPS to short-term TIPS makes no sense at all to me. You don't need protection against short-term changes in inflation, the whole point of TIPS--to me--is that TIPS make it safer to hold longer-term bonds.

I also find the difference in international stock allocation between me and Vanguard to be more than I'm comfortable with.

I am not arguing that you should feel the same way, or use my stock allocation. I'm just explaining that for me, the difference, in the bond allocation, between 50% intermediate-term TIPS (me) versus 25% short-term TIPS is too wide a chasm to bridge... and the difference, in the stock allocation, between 20-25% international (me) versus 40% (Vanguard) is pretty wide too.

So it's not a question of convenience, it's that their cake mix really isn't to my taste. If it were closer, I'd shrug it off.
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.

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 5:31 pm

PFInterest wrote:
Mon Sep 03, 2018 5:13 pm
this has been discussed mult times.
you pick what you can work with and what you can handle.
Hi, yes, I have seen similar threads on this, but i didn't feel it was asked quite in this way. Usually people are confused about the benefits. Conversely, I am aware of the benefits, but I am unsure whether the benefits outweigh the extra time one must take.

So I ask you, does it take a lot of extra time to balance on your own once a year? Is it confusing to figure out where to put your money first (taxable, versus tax deferred versus tax free).

Everyone is so supportive on this thread I just thought that I would ask YOU and OTHERS.

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 5:42 pm

nisiprius wrote:
Mon Sep 03, 2018 5:28 pm
I've brooded over this quite a bit.

At the moment, where I come down is that the composition of the LifeStrategy and Target Retirement funds is just too different from my personal preferences. The big problem for me personally is that I'm a great big fan of TIPS, having bought my first one in 1998. In the interest of simplification, I decided to exchange all my individual TIPS for a TIPS fund. However, about half of my marketable bonds are intermediate-term TIPS (and I often think it should be more). The LifeStrategy funds have no TIPS at all. The Target Retirement funds don't have enough--Target Retirement Income has only 1/4th of its bond allocation TIPS--and the shift from intermediate-term TIPS to short-term TIPS makes no sense at all to me. You don't need protection against short-term changes in inflation, the whole point of TIPS--to me--is that TIPS make it safer to hold longer-term bonds.

I also find the difference in international stock allocation between me and Vanguard to be more than I'm comfortable with.

I am not arguing that you should feel the same way, or use my stock allocation. I'm just explaining that for me, the difference, in the bond allocation, between 50% intermediate-term TIPS (me) versus 25% short-term TIPS is too wide a chasm to bridge... and the difference, in the stock allocation, between 20-25% international (me) versus 40% (Vanguard) is pretty wide too.

So it's not a question of convenience, it's that their cake mix really isn't to my taste. If it were closer, I'd shrug it off.

Great answer. Thank you for taking the time. You sound a lot more experienced than myself. I am consider the Personal Advisory Service (PAS) at Vanguard to get the hang of all this stuff first---maybe a year--and then to go DIY.

I really like the funds that they picked for me: Total Stock Index (42%), Total Stock International (28%), Total Bond 28%), and Total Bond International (2%). They placed as much of the bonds as they could in the Roth (considering the limits and the amount that was already in the account after I transferred it from another broker) and the rest in the taxable accounts.

As I said, My thoughts are to dump the PAS program and save the fee in the near future when I feel more confident and I am out of GRAD school, but I just want to be sure that I will be able to handle the small amount of work that i will have to do.

Since you seem to be rebalancing, placing accordingly in the right tax and tax deferred or tax free accounts, stomaching the ups and downs, and staying the course, is it something that I WILL BE ABLE to do?

Thanks,

mpnret
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by mpnret » Mon Sep 03, 2018 5:49 pm

Instead of the life strategy fund I just purchased the funds it holds. I re-balance once a year and the lower expense ratio saves me a few thousand a year. Plus it allows me to fine tune the mix. Others may prefer the convenience of a life strategy and may not mind paying a little more for not having to re-balance.

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 6:31 pm

mpnret wrote:
Mon Sep 03, 2018 5:49 pm
Instead of the life strategy fund I just purchased the funds it holds. I re-balance once a year and the lower expense ratio saves me a few thousand a year. Plus it allows me to fine tune the mix. Others may prefer the convenience of a life strategy and may not mind paying a little more for not having to re-balance.
A few thousand a year. WOW! Then it is worth it. The Bogle philosophy of cutting costs whenever possible, right? Is rebalancing hard to do?

PFInterest
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by PFInterest » Mon Sep 03, 2018 6:36 pm

JustWantToGetItRight wrote:
Mon Sep 03, 2018 5:31 pm
Hi, yes, I have seen similar threads on this, but i didn't feel it was asked quite in this way. Usually people are confused about the benefits. Conversely, I am aware of the benefits, but I am unsure whether the benefits outweigh the extra time one must take.

So I ask you, does it take a lot of extra time to balance on your own once a year? Is it confusing to figure out where to put your money first (taxable, versus tax deferred versus tax free).

Everyone is so supportive on this thread I just thought that I would ask YOU and OTHERS.
still discussed:
viewtopic.php?t=173749

- it doesnt take a lot of time.
- its not confusing.

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 6:46 pm

PFInterest wrote:
Mon Sep 03, 2018 6:36 pm
JustWantToGetItRight wrote:
Mon Sep 03, 2018 5:31 pm
Hi, yes, I have seen similar threads on this, but i didn't feel it was asked quite in this way. Usually people are confused about the benefits. Conversely, I am aware of the benefits, but I am unsure whether the benefits outweigh the extra time one must take.

So I ask you, does it take a lot of extra time to balance on your own once a year? Is it confusing to figure out where to put your money first (taxable, versus tax deferred versus tax free).

Everyone is so supportive on this thread I just thought that I would ask YOU and OTHERS.
still discussed:
viewtopic.php?t=173749

- it doesnt take a lot of time.
- its not confusing.

Thank you so much for your help. I know that the difference in the expense ratio between an all in one fund (without admiral option) and individual (with ADMIRAL option) can save an investor quite a lot. I was worried about the time and effort, but you made me feel a little better. Thanks for the link as well, and sorry if you feel that I duplicated the topic.
Last edited by JustWantToGetItRight on Mon Sep 03, 2018 7:09 pm, edited 1 time in total.

PFInterest
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by PFInterest » Mon Sep 03, 2018 6:48 pm

JustWantToGetItRight wrote:
Mon Sep 03, 2018 6:46 pm

Thank you so much for your help. I know that the difference in the expense ratio between an all in one fund (with admiral option) and individual (with ADMIRAL option) can save an investor quite a lot. I was worried about the time and effort, but you made me feel a little better. Thanks for the link as well, and sorry if you feel that I duplicated the topic.
oh its totally fine. just wanted you to dig around.
realize, most TDF/all in one funds dont have admiral versions. the exceptions are the institutional versions offered in some workplace plans.

Jack FFR1846
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by Jack FFR1846 » Mon Sep 03, 2018 6:55 pm

I manage my own $2.3MM portfolio on my own. My total expenses for this is $504 per year. I rebalance on my birthday. For those 15 minutes, or less......I'm free.
Bogle: Smart Beta is stupid

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 7:11 pm

PFInterest wrote:
Mon Sep 03, 2018 6:48 pm
JustWantToGetItRight wrote:
Mon Sep 03, 2018 6:46 pm

Thank you so much for your help. I know that the difference in the expense ratio between an all in one fund (with admiral option) and individual (with ADMIRAL option) can save an investor quite a lot. I was worried about the time and effort, but you made me feel a little better. Thanks for the link as well, and sorry if you feel that I duplicated the topic.
oh its totally fine. just wanted you to dig around.
realize, most TDF/all in one funds dont have admiral versions. the exceptions are the institutional versions offered in some workplace plans.


correction, I meant: I know that the difference in the expense ratio between an all in one fund (without admiral option) and individual (with ADMIRAL option) can save an investor quite a lot---making the individual three fund option attractive to those brave enough to get out a calculator and rebalance on their own...LOL.....I am trying to psyche myself up to do it.

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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 7:13 pm

Jack FFR1846 wrote:
Mon Sep 03, 2018 6:55 pm
I manage my own $2.3MM portfolio on my own. My total expenses for this is $504 per year. I rebalance on my birthday. For those 15 minutes, or less......I'm free.
Wow. This is an inspiring story that makes me feel that I can do it (buy three or four individual funds) and save on the lower expense ratios.

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Sasquatch
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by Sasquatch » Mon Sep 03, 2018 7:16 pm

I run a 4 fund portfolio which is very similar to the 3 fund. I consider myself a novice investor. Despite investing for over 30 years this is a recent change for me. I havent been through a major correction with this portfolio so time will tell. I have a simple spreadsheet that tracks portfolio drift and I will rebalance annually. If I can do it by reading a bunch on here its likely you can as well.

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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by Cody » Mon Sep 03, 2018 7:32 pm

JustWantToGetItRight

Is 2% of International bonds even worth it? I thought the general rule was own at least 5%-!0% of anything to make it work?

Best,
Cody

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 7:45 pm

Cody wrote:
Mon Sep 03, 2018 7:32 pm
JustWantToGetItRight

Is 2% of International bonds even worth it? I thought the general rule was own at least 5%-!0% of anything to make it work?

Best,
Cody

Good question. I was surprised at the low allocation of bods in the international fund as well. I will ask the advisor at Vanguard this question in my next meeting. Thank you....

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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 7:47 pm

Sasquatch wrote:
Mon Sep 03, 2018 7:16 pm
I run a 4 fund portfolio which is very similar to the 3 fund. I consider myself a novice investor. Despite investing for over 30 years this is a recent change for me. I havent been through a major correction with this portfolio so time will tell. I have a simple spreadsheet that tracks portfolio drift and I will rebalance annually. If I can do it by reading a bunch on here its likely you can as well.
Thank you so much for the inspiration. And by doing it myself (rebalancing), I will save more money that earns over the years as well. I have made a spread sheet as well, but do not expect to do it until next year....I suppose it is bet not to do it too often as to NOT trigger short term gains.

PFInterest
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by PFInterest » Mon Sep 03, 2018 7:57 pm

JustWantToGetItRight wrote:
Mon Sep 03, 2018 7:47 pm
Thank you so much for the inspiration. And by doing it myself (rebalancing), I will save more money that earns over the years as well. I have made a spread sheet as well, but do not expect to do it until next year....I suppose it is bet not to do it too often as to NOT trigger short term gains.
You should not have to incur taxes to rebalance

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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by nps » Mon Sep 03, 2018 7:57 pm

JustWantToGetItRight wrote:
Mon Sep 03, 2018 6:31 pm
mpnret wrote:
Mon Sep 03, 2018 5:49 pm
Instead of the life strategy fund I just purchased the funds it holds. I re-balance once a year and the lower expense ratio saves me a few thousand a year. Plus it allows me to fine tune the mix. Others may prefer the convenience of a life strategy and may not mind paying a little more for not having to re-balance.
A few thousand a year. WOW! Then it is worth it. The Bogle philosophy of cutting costs whenever possible, right? Is rebalancing hard to do?
Just for some perspective. The expense ratio of the moderate growth life strategy fund is 0.13%, while the expense ratio of the underlying admiral funds is .07%.

Let's say a "few thousand" is at least $2,000. The portfolio would need to be over $3M to generate that much in savings.

Alternatively, it's about $60 per $100k invested.

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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by Sasquatch » Mon Sep 03, 2018 8:04 pm

JustWantToGetItRight wrote:
Mon Sep 03, 2018 7:47 pm
Sasquatch wrote:
Mon Sep 03, 2018 7:16 pm
I run a 4 fund portfolio which is very similar to the 3 fund. I consider myself a novice investor. Despite investing for over 30 years this is a recent change for me. I havent been through a major correction with this portfolio so time will tell. I have a simple spreadsheet that tracks portfolio drift and I will rebalance annually. If I can do it by reading a bunch on here its likely you can as well.
Thank you so much for the inspiration. And by doing it myself (rebalancing), I will save more money that earns over the years as well. I have made a spread sheet as well, but do not expect to do it until next year....I suppose it is bet not to do it too often as to NOT trigger short term gains.
My funds are in a 401k so there is no tax consequence when rebalancing.

Mike Scott
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by Mike Scott » Mon Sep 03, 2018 8:17 pm

The DIY fund approach is a bit cheaper but you can pick your own fund choices and decide what to keep in what account. It takes a little more knowldege but not a lot of time.

The single fund approach handles all of this for you once you pick the fund but it forces you into a cookie cutter plan and costs a bit more and will cost more in taxes if you also keep it in a taxable account.

The extra cost of the advisor is to take care of all of this for you but you have to trust them.

You know yourself and you have to choose your own approach.

There is enough information in this 16 page booklet to get you well started...
https://www.etf.com/docs/IfYouCan.pdf

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 8:18 pm

PFInterest wrote:
Mon Sep 03, 2018 7:57 pm
JustWantToGetItRight wrote:
Mon Sep 03, 2018 7:47 pm
Thank you so much for the inspiration. And by doing it myself (rebalancing), I will save more money that earns over the years as well. I have made a spread sheet as well, but do not expect to do it until next year....I suppose it is bet not to do it too often as to NOT trigger short term gains.
You should not have to incur taxes to rebalance

but what would happen if you had to rebalance in the taxable account (for instance sell some stock off and buy some bonds back)---especially if you don't have the room in the Roth for instance......My Roth (which only has bonds in it) only makes up 8% of the total 30% on my bond portfolio. I just started my Roth three years ago.

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Mon Sep 03, 2018 8:19 pm

Mike Scott wrote:
Mon Sep 03, 2018 8:17 pm
The DIY fund approach is a bit cheaper but you can pick your own fund choices and decide what to keep in what account. It takes a little more knowldege but not a lot of time.

The single fund approach handles all of this for you once you pick the fund but it forces you into a cookie cutter plan and costs a bit more and will cost more in taxes if you also keep it in a taxable account.

The extra cost of the advisor is to take care of all of this for you but you have to trust them.

You know yourself and you have to choose your own approach.

There is enough information in this 16 page booklet to get you well started...
https://www.etf.com/docs/IfYouCan.pdf
The advisor is Vanguard and their PAS service. I feel I can trust them. You?

nps
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by nps » Tue Sep 04, 2018 5:58 am

JustWantToGetItRight wrote:
Mon Sep 03, 2018 8:18 pm
PFInterest wrote:
Mon Sep 03, 2018 7:57 pm
JustWantToGetItRight wrote:
Mon Sep 03, 2018 7:47 pm
Thank you so much for the inspiration. And by doing it myself (rebalancing), I will save more money that earns over the years as well. I have made a spread sheet as well, but do not expect to do it until next year....I suppose it is bet not to do it too often as to NOT trigger short term gains.
You should not have to incur taxes to rebalance

but what would happen if you had to rebalance in the taxable account (for instance sell some stock off and buy some bonds back)---especially if you don't have the room in the Roth for instance......My Roth (which only has bonds in it) only makes up 8% of the total 30% on my bond portfolio. I just started my Roth three years ago.
It seems like you might be set up to incur capital gains taxes when rebalancing just so that you can keep bonds in tax-deferred.

If you have a relatively small tax-deferred balance relative to taxable you could be better off keeping a good mix in the tax-deferred so you have room to rebalance without incurring capital gains taxes.

PFInterest
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by PFInterest » Tue Sep 04, 2018 7:07 am

JustWantToGetItRight wrote:
Mon Sep 03, 2018 8:18 pm
but what would happen if you had to rebalance in the taxable account (for instance sell some stock off and buy some bonds back)---especially if you don't have the room in the Roth for instance......My Roth (which only has bonds in it) only makes up 8% of the total 30% on my bond portfolio. I just started my Roth three years ago.
first why do you have your Roth with only FI? do you have a 401k/etc where you can put that? you want the max out of the rIRA you can, so it should be volatile assets (stocks, REITs).

you rebalance first within retirement accounts. then you add new money to taxable. then you can sell in taxable for TLH purposes. but i wouldnt sell just to rebalance if it created gains in my tax bracket.

rixer
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by rixer » Tue Sep 04, 2018 7:34 am

We use Lifestrategy CG. The fee is .12% and seems reasonable enough to me. It's not that it's so time consuming to rebalance but in my case, I have let my emotions dictate what I do rather than stay with the plan. My allocation can become too conservative at times and it's cost me money. By using a balanced fund like LS, it always keeps me in balance. Also, the wife is more comfortable with LS if I pass first.
It's a very boring portfolio. I read the news and shrug because there really isn't anything to do with the info. I'm already where I likely need to be.

UpperNwGuy
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by UpperNwGuy » Tue Sep 04, 2018 8:37 am

JustWantToGetItRight wrote:
Mon Sep 03, 2018 7:11 pm
correction, I meant: I know that the difference in the expense ratio between an all in one fund (without admiral option) and individual (with ADMIRAL option) can save an investor quite a lot---making the individual three fund option attractive to those brave enough to get out a calculator and rebalance on their own...LOL.....I am trying to psyche myself up to do it.
It sounds like the most important issue to you is a fear of undertaking the actual rebalancing . If so, you should be asking folk how to rebalance. Have you ever exchanged one fund for another? I have a suspicion that the answer may be no. What are your fears?

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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JBTX » Tue Sep 04, 2018 8:56 am

nisiprius wrote:
Mon Sep 03, 2018 5:28 pm
I've brooded over this quite a bit.

At the moment, where I come down is that the composition of the LifeStrategy and Target Retirement funds is just too different from my personal preferences. The big problem for me personally is that I'm a great big fan of TIPS, having bought my first one in 1998. In the interest of simplification, I decided to exchange all my individual TIPS for a TIPS fund. However, about half of my marketable bonds are intermediate-term TIPS (and I often think it should be more). The LifeStrategy funds have no TIPS at all. The Target Retirement funds don't have enough--Target Retirement Income has only 1/4th of its bond allocation TIPS--and the shift from intermediate-term TIPS to short-term TIPS makes no sense at all to me. You don't need protection against short-term changes in inflation, the whole point of TIPS--to me--is that TIPS make it safer to hold longer-term bonds.

I also find the difference in international stock allocation between me and Vanguard to be more than I'm comfortable with.

I am not arguing that you should feel the same way, or use my stock allocation. I'm just explaining that for me, the difference, in the bond allocation, between 50% intermediate-term TIPS (me) versus 25% short-term TIPS is too wide a chasm to bridge... and the difference, in the stock allocation, between 20-25% international (me) versus 40% (Vanguard) is pretty wide too.

So it's not a question of convenience, it's that their cake mix really isn't to my taste. If it were closer, I'd shrug it off.
My take on this is in the long run I will have a base of target dates and/or life strategy, and will supplement with TIPS. I'm OK with the international allocation, but if not you could supplement with a us stock index fund or a balanced index fund. You can tweak allocations and glidepaths by using different years, or combining target date and life strategy.

While the above is definitely not one fund, your three fund becomes 4 fund with TIPS, and probably requires more rebalancing than what I am proposing above.

mpnret
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by mpnret » Tue Sep 04, 2018 9:10 am

nps wrote:
Mon Sep 03, 2018 7:57 pm
JustWantToGetItRight wrote:
Mon Sep 03, 2018 6:31 pm
mpnret wrote:
Mon Sep 03, 2018 5:49 pm
Instead of the life strategy fund I just purchased the funds it holds. I re-balance once a year and the lower expense ratio saves me a few thousand a year. Plus it allows me to fine tune the mix. Others may prefer the convenience of a life strategy and may not mind paying a little more for not having to re-balance.
A few thousand a year. WOW! Then it is worth it. The Bogle philosophy of cutting costs whenever possible, right? Is rebalancing hard to do?
Just for some perspective. The expense ratio of the moderate growth life strategy fund is 0.13%, while the expense ratio of the underlying admiral funds is .07%.

Let's say a "few thousand" is at least $2,000. The portfolio would need to be over $3M to generate that much in savings.

Alternatively, it's about $60 per $100k invested.
Exactly. That's why I buy the funds within LS and rebalance myself. It's no harder to rebalance a large portfolio than it is to rebalance a smaller one. It's hard for me to walk away from a few thousand per year but I suppose if I didn't have much to invest I might just throw it into LS.

dharrythomas
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by dharrythomas » Tue Sep 04, 2018 9:49 am

Moving to Vanguard and making the big expense cut is where you save money. If you have the discipline, rebalancing isn't that hard but the cost savings it's that much. Moving from say USAA Cornerstone Moderately Agressive to Vanguard LifeStrategy Moderate Growth reduces the expense ratio from 0.97 to 0.13. Over 7 times as much. The reduction from 0.13 to 0.07 is not worth nearly as much.

Many of the issues discussed here are like I've heard about achedemiachedemic politics, we fight so hard because the stakes art so small.

I've gone to fewer funds as I aged to make my portfolio simpler for whoever might have to manage it for me or after I'm gone. That and the more funds I have the more tempted I am to fine tune and meddle--and that has generally dampened my returns.

Do what you want to. Good Luck.

sco
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by sco » Tue Sep 04, 2018 10:46 pm

To me it is worth it.

The ultimate in simplicity would be one Vanguard account with one fund. However, I am still in the accumulation phase. So between work accounts, HSA accounts, etc I cannot simply consolidate like I would prefer. So until I can, I might as well use the best 1 fund in most accounts, and just rebalance in one of the larger accounts.

It isn't a lot of work, and I like doing it anyway.

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Tue Sep 04, 2018 11:48 pm

sco wrote:
Tue Sep 04, 2018 10:46 pm
To me it is worth it.

The ultimate in simplicity would be one Vanguard account with one fund. However, I am still in the accumulation phase. So between work accounts, HSA accounts, etc I cannot simply consolidate like I would prefer. So until I can, I might as well use the best 1 fund in most accounts, and just rebalance in one of the larger accounts.

It isn't a lot of work, and I like doing it anyway.


Hey there, one fund might work for you for sure, but doing tons of research, here is where I am....I have the....

1) Vanguard total stock index admiral shares
2) Vanguard total International stock index admiral shares
3. Vanguard total bond index admiral shares
4) Vanguard total international bond index admiral shares

These provide a low expense ratio, high diversification, more flexibility in the stock/bond ratio, and more flexibility with fund placement to maximize tax costs.

On my birthday, all I need to do is....

1) Add up the current total $ about of all accounts
2) Add up the current stock $ amount of all stock accounts
3) Multiply out the desired $ amount in stocks
4) Subtract the desired amount from the current amount and figure out what % that difference is to the total account (if the difference is more than 5% then you must rebalance (i.e., you must buy or sell that difference is stocks and do the opposite in the bonds funds.

As long as you know the ratio of the Total stock fund to the total international stock fund and the ratio of the total bond fund to the total international bond fund, this is really easy.....

With the helpful customer service reps at Vanguard, it is hard to mess this up.....

The key is to stay the course and hang in through the years............

Peace

sco
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by sco » Tue Sep 04, 2018 11:50 pm

If you notice by my reply, I use the 3 fund method because I have no choice.

I may never go for the simpler option, I don't know at this point..

KyleAAA
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by KyleAAA » Tue Sep 04, 2018 11:53 pm

The “effort” of a 3 fund portfolio amounts to approximately 2 additional minutes per year. I’m not exaggerating. You’ve already done the equivalent of 10 years of portfolio work participanting in this thread.

SoAnyway
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by SoAnyway » Wed Sep 05, 2018 12:10 am

How old are you, OP? (sorry if you said in a subsequent post - didn't have time to wade)

In my younger days (if TRD funds existed back then), I'd have wondered the same. Now that I'm older, I'm THRILLED they didn't exist back then. The flexibility would have been worthless to me back then, but it's priceless now. YMMV.
Look down the field.
Last edited by SoAnyway on Sat Dec 08, 2018 4:28 pm, edited 1 time in total.

TwstdSista
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by TwstdSista » Wed Sep 05, 2018 4:00 am

I have a spreadsheet that tracks our Total US/Total International/Total Bond. It automatically tells me which is off-kilter, what the percentage is, and what the corresponding dollar value is. Very simple to see what is high and move it to what is low -- maybe 10 minutes per month.

And why bonds in your Roth? They are usually preferred in traditional-type accounts....

ETA: I recreated BuckyBadger's spreadsheet from the last post on this page -- viewtopic.php?f=10&t=229857&start=100

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Wed Sep 05, 2018 10:34 am

TwstdSista wrote:
Wed Sep 05, 2018 4:00 am
I have a spreadsheet that tracks our Total US/Total International/Total Bond. It automatically tells me which is off-kilter, what the percentage is, and what the corresponding dollar value is. Very simple to see what is high and move it to what is low -- maybe 10 minutes per month.

And why bonds in your Roth? They are usually preferred in traditional-type accounts....

ETA: I recreated BuckyBadger's spreadsheet from the last post on this page -- viewtopic.php?f=10&t=229857&start=100

Hi, Why bonds in a Roth....That is what nearly everyone on this blog, Bogle, and all the books recommended here say to do.
Am I wrong?

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Wed Sep 05, 2018 10:39 am

JustWantToGetItRight wrote:
Wed Sep 05, 2018 10:34 am
TwstdSista wrote:
Wed Sep 05, 2018 4:00 am
I have a spreadsheet that tracks our Total US/Total International/Total Bond. It automatically tells me which is off-kilter, what the percentage is, and what the corresponding dollar value is. Very simple to see what is high and move it to what is low -- maybe 10 minutes per month.

And why bonds in your Roth? They are usually preferred in traditional-type accounts....

ETA: I recreated BuckyBadger's spreadsheet from the last post on this page -- viewtopic.php?f=10&t=229857&start=100

Hi, Why bonds in a Roth....That is what nearly everyone on this blog, Bogle, and all the books recommended here say to do.
Am I wrong? Put tax inefficient vehicles in tac efficient accounts.

Hi, I just went to the page you suggested for tracking. Trying to figure all of this stuff out and was a little confused. I don't think I care to hear daily stock prices......

All I care to know is whether the accounts are balanced so that I can rebalance and what the total balance looks like this year as compare to last year.

Would a very simple Excel spread sheet do?

sco
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by sco » Wed Sep 05, 2018 10:55 am

Ideally your Roth assets would be the higher growth stocks, Since you won’t have to pay taxes on these again.

This is due to the fact that you eventually will have to pay taxes on the tax deferred (401k etc) assets. So you put the slower growing stuff there when possible

There are of course exceptions if your tax deferred accounts are lacking a good bond option or something.

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Wed Sep 05, 2018 11:03 am

sco wrote:
Wed Sep 05, 2018 10:55 am
Ideally your Roth assets would be the higher growth stocks, Since you won’t have to pay taxes on these again.

This is due to the fact that you eventually will have to pay taxes on the tax deferred (401k etc) assets. So you put the slower growing stuff there when possible

There are of course exceptions if your tax deferred accounts are lacking a good bond option or something.

Yes, I get that highest earning stocks could go in the Roth (instead of the taxable), but I ALSO understood that bonds should go here as well.
Vanguard put all my Bonds in the Roth....my Roth is very small...just started it and made max contributions for for three years....maybe there is no room for other stuff in there? I'll ask them....but they are very aware of tax efficiency, so now I am a but confused.

here is a post from another Boglehead:

I have often said that if one has both substantial taxable and tax-deferred accounts, it would make sense to make the taxable accounts more stock heavy and the tax-deferred accounts more bond heavy. I also often say that if the bulk of your investments are in retirement accounts, invest retirement accounts for maximum return. Rick Ferri has posted that he allocates taxable accounts and tax-deferred accounts the same. So there is more than one school of thought on this.

Sometimes I think folks here would rather avoid paying tax than actually making money on their investments. Like the numerous posts on tax loss harvesting, by all means take advantage of it if available, but don't invest to lose in one place to offset a gain somewhere else. It seems that sometimes the tax tail wags the investment dog. Yes, take into mind the taxability of investments and maximizing tax efficiency. But I don't know, I invest to MAKE money, I guess I am naive about all of this. If you are paying taxes, that is a measure of success and not failure. That means you are making money and that is what we all want. What we want is both tax efficiency and portfolio efficiency.

If your retirement accounts are really, really bond heavy; one might ask if he or she is too conservatively invested. Retirement accounts are meant to allow tax deferred growth of retirement savings in hope that one can retire off those savings in the future. I see them both as an investment vehicle and a tax deferral vehicle. Lots of folks seemed too focused on just the tax deferral. We invest monies for a reason.

123
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by 123 » Wed Sep 05, 2018 11:20 am

I used to do a 4 fund portfolio for the most part. Early this year I converted to a LifeStrategy fund in most of our tax-deferred accounts. (Some tax deferred accounts are small enough that a single holding, like Vanguard Total Stock Market, works just fine.) I understand that LifeStrategy costs us more than if we used admiral versions of the component funds. I came to the conclusion that the extra cost of LifeStrategy, about $1,000 annually per million $ was worth the cost to simplify things for my spouse when I'm not arround. It provides protection against the need for financial advisors when I'm not around to fend them off. I think I've got a good plan. As TaylorLarimore has said it's often better to be content with a good plan instead of holding our for a perfect plan. A perfect plan would include having my spouse being as interested in finance and investment as I am and able to rebalance and integrate new investments, that ain't gonna happen.

So far we've been content with the LifeStrategy option.
The closest helping hand is at the end of your own arm.

TwstdSista
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by TwstdSista » Wed Sep 05, 2018 12:46 pm

JustWantToGetItRight wrote:
Wed Sep 05, 2018 10:34 am
Hi, Why bonds in a Roth....That is what nearly everyone on this blog, Bogle, and all the books recommended here say to do.
Am I wrong? Put tax inefficient vehicles in tac efficient accounts.
I'm not sure where you are reading this? Most posters on this forum, and the wiki article all suggest equities in Roth, bonds in tax deferred. Even the poster you later quoted says that.
JustWantToGetItRight wrote:
Wed Sep 05, 2018 10:39 am
Would a very simple Excel spread sheet do?
Yes! A very simple spreadsheet could do exactly what you want it to do. It's just a matter of creating it.

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Wed Sep 05, 2018 7:24 pm

TwstdSista wrote:
Wed Sep 05, 2018 12:46 pm
JustWantToGetItRight wrote:
Wed Sep 05, 2018 10:34 am
Hi, Why bonds in a Roth....That is what nearly everyone on this blog, Bogle, and all the books recommended here say to do.
Am I wrong? Put tax inefficient vehicles in tac efficient accounts.
I'm not sure where you are reading this? Most posters on this forum, and the wiki article all suggest equities in Roth, bonds in tax deferred. Even the poster you later quoted says that.
JustWantToGetItRight wrote:
Wed Sep 05, 2018 10:39 am
Would a very simple Excel spread sheet do?
Yes! A very simple spreadsheet could do exactly what you want it to do. It's just a matter of creating it.

Hi, i spoke with Vanguard after I read your post. And also viewed this video: https://www.youtube.com/watch?v=P1xyzjqrToc

The goal, is to try to get as much of your investments into a tax advantaged accounts as possible, BUT that is not always easy given each person's personal situation and the limitation on contributions.

I can only afford to budget/contribute 10% of my income into my "non matching" 401k which is an amount that doesn't even help me come close to maxing it out. Currently I have 60K. This represents only 15% of my total fund of 400K

As for my Roth, I got a lump sum of money and had to open up a taxable account (no choice)---I move the max $6,500 per year into the Roth—currently I only have 27k. This is just 6.75% of my total fund of my total fund of 400K.

My taxable broker account holds about $313,000.

So, as you can see, my tax benefit accounts (401K and Roth) only hold 21% of my total retirement fund, and while this will grow (I contribute to the 401K and I move 6,500 from the tax account to the Roth yearly), right now Vanguard put the bonds in the Roth because the bonds pay income that would otherwise be subject to immediate yearly taxes in the tax account. The stock investments will not be taxed until I sell the investments and have to withdraw money in retirement 15 years from now.

I have been hearing a lot about this topic and everyone seems to have a little bit of different view.

sco
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by sco » Wed Sep 05, 2018 9:33 pm

This makes sense, we all agree for the most part what Ideal is... But you have to do what works in your situation.

I would ask you one thing though, based on your post. Just something to think about.
Why aren't you maxing your 401k and just living off of some of the taxable account? Say you need another 10k to fill your 401k but don't have the budget to do this, simply increase your payroll contributions and sell 10k out of the taxable account every year. You can likely do this until the day you retire, or perhaps someday you get raises and the budget doesn't require this anymore?

This gets your tax deferred space up greatly over time.

Olemiss540
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by Olemiss540 » Wed Sep 05, 2018 10:07 pm

Target date fund for me atleast until/if I ever wratchet up the taxable investing.

I find the ability to just shovel money into a pool simple and automatic. It also keeps me from constant internal banter regarding allocations and prevents tinkering. To each the own but I enjoy my extra 15 min of sleep a year :P !
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

TwstdSista
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by TwstdSista » Thu Sep 06, 2018 2:45 am

Got it. While bonds are preferred in Roth accounts, they are acceptable given no other alternatives.

I would consider maxing your 401k contribution and living off your taxable account. The tax deduction will help to offset any gains.

JustWantToGetItRight
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by JustWantToGetItRight » Thu Sep 06, 2018 9:23 am

sco wrote:
Wed Sep 05, 2018 9:33 pm
This makes sense, we all agree for the most part what Ideal is... But you have to do what works in your situation.

I would ask you one thing though, based on your post. Just something to think about.
Why aren't you maxing your 401k and just living off of some of the taxable account? Say you need another 10k to fill your 401k but don't have the budget to do this, simply increase your payroll contributions and sell 10k out of the taxable account every year. You can likely do this until the day you retire, or perhaps someday you get raises and the budget doesn't require this anymore?

This gets your tax deferred space up greatly over time.

Great point. I have been doing this four two years. In 2017, My contribution were 90% and I maxed out the 401K and brought my Tax rate down. In 2018, I am contributing 60% and have added several more thousand dollars. But here is the toss up......where would I do better.....

This year, I took out like 10K for expenses and put it into my checking account that earns no interest (even if I had put it into a money market, I would have only earned a few hundred dollars. That money could have otherwise been invested in a stock market index fund and growing.

I never really pay much on taxes as it is. It seems like a toss up.

Thoughts?

sco
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Re: DIY: Three versus One! Are the Advantages Worth it?

Post by sco » Thu Sep 06, 2018 11:42 am

JustWantToGetItRight wrote:
Thu Sep 06, 2018 9:23 am
sco wrote:
Wed Sep 05, 2018 9:33 pm
This makes sense, we all agree for the most part what Ideal is... But you have to do what works in your situation.

I would ask you one thing though, based on your post. Just something to think about.
Why aren't you maxing your 401k and just living off of some of the taxable account? Say you need another 10k to fill your 401k but don't have the budget to do this, simply increase your payroll contributions and sell 10k out of the taxable account every year. You can likely do this until the day you retire, or perhaps someday you get raises and the budget doesn't require this anymore?

This gets your tax deferred space up greatly over time.

Great point. I have been doing this four two years. In 2017, My contribution were 90% and I maxed out the 401K and brought my Tax rate down. In 2018, I am contributing 60% and have added several more thousand dollars. But here is the toss up......where would I do better.....

This year, I took out like 10K for expenses and put it into my checking account that earns no interest (even if I had put it into a money market, I would have only earned a few hundred dollars. That money could have otherwise been invested in a stock market index fund and growing.

I never really pay much on taxes as it is. It seems like a toss up.

Thoughts?
I don’t think the timing of when you take the 10k out matters much

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