Help understanding asset allocation

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NH3930
Posts: 7
Joined: Sun Sep 02, 2018 12:20 pm

Help understanding asset allocation

Post by NH3930 » Fri Sep 14, 2018 11:19 am

Hi, I recently started updating my asset allocation thanks to the help of this board. I’m 38 and have decided 80/20 for myself. 30% in international, so 56, 24,20 is percentages I’m shooting for. I have my 401k setup this way now with 3 investments ( 4 if you include my company stock which is where my employers match goes). My thought is to keep that one in a range of 5-10% so I set it at 5%, so my domestic allocation to 56-5=51%. I contribute the maximum $18,500 and my employer matches 5% of my salary.

I also have a HSA and RIRA that I just funded. Each of which are in a low cost target date index fund (FIOFX). The amounts are obviously low at this time since just opened.

I also have a taxable acct where I participate with 5% of my salary with a ESPP. We get 5% discount on average of high and low price every 6 months. I hold it a year and then sell. It’s just been accumulating in my core cash position. I want to invest this money.

My question is about AA overall. Am I to maintain AA overall all accounts? Or make each acct have the same 80/20 allocation?

My gut tells me to spread it across all accounts. Meaning I will have to add bonds to my 401k or HSA, RIRA to make up. At this time it means only my 401k since not enough in my HSA or RIRA.

I also am considering getting out of the target date funds even though it’s the lower cost one (FIOFX versus FFFGX). Only because I could get the ER down.

If I did this, from my limited research I would put it in FSTVX. Is it risky to have both my HSA, RIRA, and tax acct all in FSTVX? I would hold FXAIX, FSGSX, and DODIX) in my 401k since those are the ones I got recommended to use on this board from my all 29 options I had.

Thesaints
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Joined: Tue Jun 20, 2017 12:25 am

Re: Help understanding asset allocation

Post by Thesaints » Fri Sep 14, 2018 11:25 am

It’s the overall AA that counts. In fact, you should subdivide assets between accounts in the most cost efficient way.

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David Jay
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Location: Michigan

Re: Help understanding asset allocation

Post by David Jay » Fri Sep 14, 2018 1:14 pm

Certain accounts are better for different asset classes, so it is normal that your individual accounts are NOT 80/20.

For instance, bonds should not be in a taxable account if you have tax-advantaged space (401K, etc.) available. Following this advice, a taxable account would be 100/0.

It is the overall that matters.

Here is the WIKI on tax-efficient fund placement: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

NH3930
Posts: 7
Joined: Sun Sep 02, 2018 12:20 pm

Re: Help understanding asset allocation

Post by NH3930 » Fri Sep 14, 2018 7:34 pm

Thank y’all. It seems I should be taking the AA across all accounts like y’all say. I will not have any bonds in my taxable.

Thesaints
Posts: 1513
Joined: Tue Jun 20, 2017 12:25 am

Re: Help understanding asset allocation

Post by Thesaints » Fri Sep 14, 2018 7:43 pm

NH3930 wrote:
Fri Sep 14, 2018 7:34 pm
Thank y’all. It seems I should be taking the AA across all accounts like y’all say. I will not have any bonds in my taxable.
You should search for an old thread discussing where to keep various assets. Lots of food for thought; it's not a trivial issue.
It is true that bonds continuously generate taxable income, but their appreciation is a lot smaller than stocks.
Under certain conditions, it might be better to keep stocks in tax-free accounts.
On the other hand, stocks enjoy special long term cg rates...

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