Need investment advise for 7 figure portfolio

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
InvestVS
Posts: 41
Joined: Fri Jan 05, 2018 3:19 pm

Need investment advise for 7 figure portfolio

Post by InvestVS » Tue Sep 11, 2018 4:30 pm

Emergency funds: Six months of expenses
Debt: Mortgage 7 Year ARM - $950,000 at 2.875% till 05/2023, Car Loan - $59,000 at 0.99% till 08/2022
Tax Filing Status: Married Filing Jointly
Tax Rate: 35% Federal Marginal Tax Rate, 10.30% State
State of Residence: California
Age: 44
Kids: 2 Kids, 1 kid will go to college in 2022, another in 2027
Desired Asset allocation: 90% stocks / 10% bonds (open for advice on what it should be)
Desired International allocation: 25% of stocks

Current Portfolio is in Stocks, Index Funds, RollOver IRAs and 401K accounts. The total portfolio is low 7 figures.
I used to have my accounts at Wealthfront and some other places and transferred them to eTrade, so currently there are many securities and ETFs in
my accounts.


Current retirement assets

Taxable
13.00% Cash (Keeping some cash for either market downturn or some investment in real-estate)
23.00% Intuit Stocks (INTU)
03.65% ICICI Bank ADR (IBN)
03.43% Facebook (FB)
04.21% Salesforce (CRM)
02.60% Google (GOOG)
03.67% ICICI Bank ADR (IBN)
06.30% Vanguard S&P 500 ETF (VOO)
04.26% VANGUARD FTSE EMERGING MARKETS ETF (VWO)

Rest in different index funds (ETFs), their percentage is below 1% for each of them for total assets%.


Her 401k
0.30% Fidelity® Contrafund® K6 (FLCNX)
1.00% Fidelity® International Index Fund Institutional Class (FSPNX)
0.15% Fidelity® U.S. Bond Index Fund Institutional Class (FXSTX)
Company match 5000 Each Year

His 401k
0.82% SSgA U.S. Bond Index Fund Class C
3.60% SSgA S&P 500 Idx NL Ser N
Company match 10000 Each Year

His Rollover IRA at eTrade
9.34% VANGUARD INDEX FUNDS VANGUARD HIGH DIVIDEND YIELD ETF (VYM)
2.38% VANGUARD TOTAL INTERNATIONAL BOND ETF (BNDX)
1.82% VANGUARD SHORT TERM INFLATION PROTECTED SECURITIES INDEX FUND (VTIP)
0.20% VANGUARD SECTOR INDEX FDS VANGUARD REAL ESTATE ETF (VNQ)

Her Rollover IRA at eTrade
3.73% VANGUARD FTSE DEVELOPED MARKETS ETF (VEA)
3.17% VANGUARD SECTOR INDEX FDS VANGUARD REAL ESTATE ETF (VNQ)
1.91% VANGUARD INDEX FUNDeferredARD HIGH DIVIDEND YIELD ETF (VYM)


His Deferred Income account
2.40% Large Cap Blend
0.64% Mid Cap Blend
0.32% Small Cap Blend
1.73% International Large Cap Blend
1.28% Bonds

Kids Education:
* 160K in a 2% Annual CD for first Kid, will reinvest into new CD every year as the rate is increasing (Open for better options, please suggest). As there are only 4 years left for college and market is very high right now, did not open a 529 as does not want to risk this Money.
* Will be opening a new 529 for younger one. I can save money in the next couple years to get 150K by the time this kid is ready to go to college.

Contributions

New annual Contributions
$18500 his 401k (10000 Employer Match)
$18500 her 401k (5000 Employer Match)

Available funds

Funds available in his 401(k)
SSgA U.S. Bond Index Fund Class C - 20% of the new contribution goes in this
SSgA S&P 500 Idx NL Ser N - 80% of the new contribution goes in this

Funds available in her 401(k)
Fidelity® Contrafund® K6 (FLCNX) - 40% of the new contribution goes in this
Fidelity® International Index Fund Institutional Class (FSPNX) - 30% of new contribution goes in this
Fidelity® U.S. Bond Index Fund Institutional Class (FXSTX) - 30% of the new contribution goes in this

Questions:
1. I have a large % of my portfolio in one stock, and overall large % in tech stocks. I want to diverisfy to reduce risk but everything is so high right now, not sure what to buy. Separate Stocks or Index Funds? Also, I will be paying the good amount of Capital Gain Tax also if I sell those stocks. Please suggest what should be the course of action and what portfolio you guys suggest to keep or invest in?

2. Is my situation complex enough to hire a financial consultant to help me as Market may be heading down sooner or later and look like I need a good diversification and rebalancing? My investment span is long term, 8-10 years or longer. I do not have a lot of stocks knowledge, just picked some bits about ETFs, diversification, and rebalancing from these forums. Any advice to use Personal Capital for as I will be charged 0.79% fee (they even offered to manage my money free for first 6 months). Vanguard is another option as they will charge just .30% for phone-based advise or should I look for a Fee-based advisor as even .30% will be a couple of thousands for my portfolio?

3. As my first kids is going to college in 4 years, I have saved 160K for that and have them in a 2% CD. Any better investment suggestion than CD as CD return will be taxed based upon my high Tax bracket.

Bot403
Posts: 2
Joined: Tue Sep 11, 2018 5:48 pm

Re: Need investment advise for 7 figure portfolio

Post by Bot403 » Tue Sep 11, 2018 5:53 pm

As my first kids is going to college in 4 years, I have saved 160K for that and have them in a 2% CD. Any better investment suggestion than CD as CD return will be taxed based upon my high Tax bracket.
Sounds like a good case for a tax exempt municipal bond fund.

coinflip
Posts: 95
Joined: Thu Nov 18, 2010 3:39 pm

Re: Need investment advise for 7 figure portfolio

Post by coinflip » Tue Sep 11, 2018 6:19 pm

A few thoughts:

First, as you point out you have a large portion of your portfolio in a single stock. Even with capital gains, it is probably worth taking the hit now and diversifying into a total stock, total international, or total bond fund as needed to get to your desired allocation.

Second, you are in a high tax bracket, but have only listed 401(k) contributions for tax-advantaged space. Consider using more tax advantaged options, such as backdoor Roth, mega-backdoor Roth (if available), HSA, 529, I-bonds, etc.

Third, you ask a good question about your overall stock/bond split. A lot of people here will recommend weighting more towards bonds, but ultimately your risk tolerance is something only you can answer.

chessknt
Posts: 76
Joined: Wed Jul 13, 2016 3:15 am

Re: Need investment advise for 7 figure portfolio

Post by chessknt » Tue Sep 11, 2018 6:26 pm

You need to come up with an investing philosophy. Having cash on hand and talking about market downturns is market timing which has been shown time and time again to not work unless you're lucky. Remember people were saying the market was going to go down 2 years ago and we've had some great returns since then. It might go down tomorrow or in another 2 years but it wont matter once you have a philosophy you adhere to.

nasrullah
Posts: 152
Joined: Fri Feb 10, 2017 11:40 am

Re: Need investment advise for 7 figure portfolio

Post by nasrullah » Tue Sep 11, 2018 7:52 pm

Woah, this gives me flashbacks.

First things first. You should write your IPS and figure out your AA at the same time. This is most of the battle. When you get these two things worked out, the rest is just implementing the plan.

By the books your 90/10 is a very aggressive AA for your age - also by the books you shouldn't have more than 5% of your portfolio concentrated in a single stock. This is a personal risk/return matter, and all I say to people now is do you understand what that means for you if the market corrects and are you comfortable with it?

So based on your IPS and AA you get a roadmap. After there it's just about tax efficient placement of holdings.

I was in a similar position after leaving Wealthfront. I ended up with VPAS to help me get out of hundreds of stock positions and figure out the most efficient plan related to taxes. Right now I'm 75/25 (39 years old) with 18 positions (less if you remove the ETF/Mutual Fund duplicates) and only one individual stock left (FB). My IPS has me taking the tax hit and simplifying further in January 2nd, 2019. The only thing I'm working out now is do I stick with VPAS and a four fund with 40% International, or am I switching to a three fund and 20% International. Thanks to this site, that's the last decision I have left to make with my IPS for the foreseeable future.
"We have a lot to do, and very little time, so we must work slowly." Liviu Ciulei | | Thanks vineviz (https://www.bogleheads.org/forum/memberlist.php?mode=viewprofile&u=134698) for the quote.

nasrullah
Posts: 152
Joined: Fri Feb 10, 2017 11:40 am

Re: Need investment advise for 7 figure portfolio

Post by nasrullah » Tue Sep 11, 2018 7:56 pm

chessknt wrote:
Tue Sep 11, 2018 6:26 pm
You need to come up with an investing philosophy. Having cash on hand and talking about market downturns is market timing which has been shown time and time again to not work unless you're lucky. Remember people were saying the market was going to go down 2 years ago and we've had some great returns since then. It might go down tomorrow or in another 2 years but it wont matter once you have a philosophy you adhere to.
+1 on this. Devise your IPS, your AA and your EF and then stick to it. You cannot time the market, missing just a few days in the market can kill your overall return:

https://www.marketwatch.com/story/think ... 2017-12-08
https://www.businessinsider.com/cost-of ... 500-2015-3
https://www.putnam.com/literature/pdf/II508.pdf
"We have a lot to do, and very little time, so we must work slowly." Liviu Ciulei | | Thanks vineviz (https://www.bogleheads.org/forum/memberlist.php?mode=viewprofile&u=134698) for the quote.

Juice3
Posts: 71
Joined: Sun Nov 05, 2017 7:40 am

Re: Need investment advise for 7 figure portfolio

Post by Juice3 » Tue Sep 11, 2018 8:06 pm

Ignoring account type and a quick hack classification, I get this:

Equity 76.9%
33.6% Large Cap Individuals
24.1% Large Index
00.9% Mid/Small Index
18.2% International Large, some individual some Index

Fixed Income 19.7%
4.1% Bond
2.4% International Bond
13.1% cash

REIT 3.4%
3.4% REIT

As others have said, you have some very concentrated risk in individual stocks. You may want to order them from most to least risky and plan diversification of that risk.

You probably want to look for opportunities to add Roth to you Tax advantaged account types, Mega Back Door?

You should be sure to fill 15% LTCG if this portfolio is large as you have alluded and that is possible. You probably should create a lifetime income projection to see what opportunities could arise or be engineered in the future to control taxes without taking on unacceptable near term risk. You will need to weigh your risks around your concentrated individual equity positions against tax implications of changing those positions.

Based on not being able to detect an underlying plan in your investments and your comment about large size of this portfolio, yes a good fee based planner may provide significant value to you. This is a board populated mostly with DIYers that use a pretty clear cut strategy that includes simplification.

You may want to take a look at the investment placement wiki on this site. Your current strategy seems somewhat random.

InvestVS
Posts: 41
Joined: Fri Jan 05, 2018 3:19 pm

Re: Need investment advise for 7 figure portfolio

Post by InvestVS » Tue Sep 11, 2018 9:16 pm

Thanks everyone for the responses and suggestions!

Couple more data points -
- I do have a IPS and AA strategy. Recently a large portion of my companies RSU got vested which make the AA not balanced as per IPS, hence that’s why this post for help and advise.
- I did used tax efficient placement based upon what I read in the boglehead wiki, so I have dividend ETF, Bond ETF in IRA accounts.
- I used the qs. Template so target asset allocation I mentioned was not 100% correct. My target allocation is 60% US Stock Market, 20% International Stock Market, 10% Bonds, 10% Alternatives (REITs)
- I am not starting to time the market with my cash, that is mainly for potential real estate investments which may come in 1-2 years or if market goes down I can then repurpose that money to buy more ETF based upon my AA.

As I am not very wells versed with (yet) all expertise of managing my 7 figure portfolio, I am also considering using some adviser (Vangaurd Personal Advisor Service or Personal Capital or Charles Schwab Intelligent Advisory). Any feedback about any of these 3 or other advisor will be appreciated! I am planning to use some advisor for couple of months, till I am not well versed to managed my portfolio myself without loosing the gains and risking too much.

rolandtorres
Posts: 85
Joined: Sat Jan 09, 2016 8:44 pm

Re: Need investment advise for 7 figure portfolio

Post by rolandtorres » Tue Sep 11, 2018 11:19 pm

It sounds like you want some help to execute your IPS in a tax efficient way and then you want to DIY. I think a better fit would be an independent fee-only advisor like Garrett network or Allan Roth (CPA as well as a CFP) who bills hourly and NOT by AUM and who would advise you no matter where your assets are held and wouldn't unnaturally move your investments to their own brokerage to manage and collect AUM %. You could be fine with consolidating assets at Vanguard or Schwab and you could always specify that to your hourly advisor to figure out a path to do that and preserve that optionality for VPAS or Schwab to manage for you later.

Post Reply