My Portfolio Review -- Fund Advice

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AJC408
Posts: 55
Joined: Mon Nov 16, 2015 12:24 am

My Portfolio Review -- Fund Advice

Post by AJC408 » Sat Sep 22, 2018 4:02 pm

Hi Everyone,

My wife and I both recently changed jobs and it’s been about a year since my last rebalance and so I wanted to get feedback on my portfolio and also advise on picking a fund for my wife’s IRA and my company 401k.

Emergency funds: $85,000

Debt: $482k mortgage @ 4.25%; $3562.77 car loan 1 @ 4%; $1319.88 car loan 2 @ 0%.
Tax Filing Status: Married Filing Jointly
Tax Rate: 33% Federal 11% State (Not sure if this is correct?)
State of Residence: CA
Age: 30
Income: Him: $191,000 Her: $230,000
Desired Asset allocation: 60% stocks / 25% bonds / 15% international stock

Current retirement assets:
about $153,000

Size of the portfolio:
about $275,000

Taxable
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) - $32,896 (expense ratio: 0.04%)

Vanguard Total International Stock Index Fund Investor Shares (VGTSX) - $11,055 (expense ratio: 0.17%)

His 401k at Company
TBD - $80,434 (expense ratio: TBD)


Her Rollover IRA at Vanguard
TBD - $69,022 (expense ratio: TBD)


Questions:
1. My wife has $69,022 left over from her 401k she had with her previous company. This has been rolled over into a Vanguard IRA. Which Vanguard fund should we invest in to meet asset allocation goals? Is there any disadvantage to investing in the VTSAX fund I already invest in through my taxable account (ie. less diversification)?
2. The new company 401k is only accessed through the company’s website (not through Vanguard.com, Fidelity.com, etc. for example). I am a bit confused on which asset allocation to pick since I never have had to choose between large/small cap/gov. securities/etc. funds as options at past employer plans. In order to stay consistent with my asset allocation plan, can I get advise on which funds/percentages to put into the following offered funds?

Funds Available in His 401k
Stable Value
-US Government Securities (ER: 0.11%)
1) Name of company managing fund: State Street Global Advisors
2) Fees charged the plan participant:
-Investment Management Fee: 0.08%
-Total Fund Expenses: 0.11%
-Per $1,000 Investment ($): $1.10
3) Investment strategy, including the index or benchmark used:
"The fund invests in high quality, short-term obliga ons issued or backed by the U.S. Government or its agencies. The average credit quality of the bonds as rated by S&P is A1+ and by Moody’s is P1. These ra ngs are the highest ra ng category signifying a very strong capacity to pay interest and repay principal. The average maturity of the por$olio is typically 90 days or less which makes the vola lity of this fund very low. Investments in this fund include U.S. Treasury bills, agency securi es, and repurchase agreements backed by Treasury or Agency securi es.
The interest income of the U.S. Government Securi es Fund will fluctuate similarly to interest income in a money market fund. While the fund seeks to preserve the value of your investment, the preserva on of principal is not guaranteed. The fund is subject to interest rate risk.
4) Comparison of the fund performance to the index or benchmark
(link: https://leplb0260.portal.hewitt.com/web ... tor=Client)

-Fixed Interest (ER: 0.19%)
1) Name of company managing fund: NA
2) Fees charged the plan participant:
-Investment Management Fee: 0.16%
-Total Fund Expenses: 0.19%
-Per $1,000 Investment ($): $1.90
3) Investment strategy, including the index or benchmark used:
The objecve of this fund is to make investments that offer a stable rate of return on investments, while emphasizing preservaon of principal. The fund invests in contracts with various maturies issued by carefully selected, high quality life insurance companies that offer excellent financial security. The fund invests in both tradional contracts that pay a fixed rate for a specified period of me, and other contracts that pay a rate of return which is linked to the performance of an underlying por3olio of high quality fixed income investments held by the fund. In addion, a small amount of cash or cash equivalents is held in the fund to provide daily liquidity. The total rate of return of the fund is a blend of the rates of the various insurance contracts held by the fund and changes as maturing contracts are reinvested as well as from the impact of parcipants’ cash flows.
While the fund seeks to preserve principal, the preservaon of principal is not guaranteed. Interest earnings and repayment of your contribuons are backed by the underlying contracts, not by Johnson & Johnson. Parcipants are also exposed to income risk, which is the possibility that the fund’s yield will lag current interest rates during some me periods.
Based on esmates for the period July 1, 2018 through December 31, 2018, the blended rate of the Fixed Interest Fund is projected to be in the range of 2.00% to 2.10%, a<er expenses. This is strictly an esmate based on in- formaon available on July 1, 2018 and is subject to change.
4) Comparison of the fund performance to the index or benchmark:
(link: https://leplb0260.portal.hewitt.com/web ... tor=Client)

Bond
-Intermediate Bond (ER: 0.20%)

1) Name of company managing fund: Dodge & Cox, GIA Partners, LLC, Pacific Investment Mgmt. Company, State Street Global Advisors, Western Asset Mgmt. Company
2) Fees charged the plan participant:
-Investment Management Fee: 0.16%
-Total Fund Expenses: 0.20%
-Per $1,000 Investment ($): $2.00
3) Investment strategy, including the index or benchmark used: The objective of this fund is to outperform the Barclays Capital U.S. Aggregate Bond Index. The fund seeks to provide compe ve fixed income returns from interest income and capital apprecia on. Over thelongterm,thefundoffersthepoten alforhigherreturns(but also greater risk of losses) than the U.S. Government Securi es Fund and the Fixed Interest Fund. The fund invests in a wide range of bonds. Holdings are primarily U.S. dollar-denominated bonds and include U.S. Government, agen- cy, corporate, mortgage-backed and asset-backed fixed income se- curi es. A limited number of non-U.S. denominated bonds may be purchased for the fund on a 95% hedged basis and at the discre on of the investment managers selected to manage the fund. The fund typically has an average dura on of 3 to 6 years. The bonds in the fund have an average life of about 3 to 10 years.
Although most of the holdings in this fund are U.S. Government, agency, corporate, mortgage-backed and asset-backed bonds, the fund may also invest in Eurodollar bonds, money market instru- ments,exchange-tradedfuturesandop ons,non-U.S.dollardenom- inated bonds that are at least 95% hedged, privately placed mort- gages and private debt not traded on an exchange. The average credit quality of the bonds as rated by S&P is AA- and by Moody’s is Aa3, signifying a strong capacity to meet financial commitments. Investments in this fund are subject to interest rate risk and credit risk and could increase or decrease in value.
The bond investments in the Intermediate Bond Fund and the bond investments of the Balanced Fund are the same. However, the Bal- anced Fund also has other types of investments.
4) Comparison of the fund performance to the index or benchmark:
(link: https://leplb0260.portal.hewitt.com/web ... tor=Client)

Balanced
-Balanced (ER: 0.35%)

1) Name of company managing fund: Baillie Gifford Overseas, Ltd.
Barrow, Hanley, Mewhinney & Strauss, LLC Capital Group Internaonal, Inc., Dodge & Cox, Genesis Asset Managers, LLP, GIA Partners, LLC, Goldman Sachs Asset Management, LP Hotchkis & Wiley Capital Management, LLC Jackson, Square Partners, LLC, J.P. Morgan Investment Management, Inc., Marathon Asset Management, LP, Morgan Stanley Investment Management, Inc. Pacific Investment Management Company, LLC PRIMECAP Management Company, State Street Global Advisors, T. Rowe Price Associates, Inc., Voya Investment Management, Wells Fargo Asset Management, Western Asset Management Company
2) Fees charged the plan participant:
-Investment Management Fee: 0.31%
-Total Fund Expenses: 0.35%
-Per $1,000 Investment ($): $3.50
3) Investment strategy, including the index or benchmark used: The objecve of this fund is to provide balance of long-term capital growth and income – the opportunity for growth which stocks offer combined with the greater stability and income that bonds offer. The fund seeks to provide a return greater than the rate of inflaon while dampening the impact of stock market declines. The Balanced Fund is a diversified mix of investments consisng mainly of U.S. stocks (including J&J stock), non-U.S. stocks, and fixed income securies. In addion, a small amount of cash or cash equivalents is held in the fund to provide daily liquidity. Over the long-term, the target asset allocaon of the fund is 55% U.S. equies, 20% non-U.S. equies, and 25% fixed income securies.
A large part of the Balanced Fund is invested in various types of stocks, including J&J stock. In addion to U.S. stocks, the Balanced Fund makes significant investments in stocks of non-U.S. companies traded on foreign exchanges, including stocks of companies in emerging markets such as Thai- land and Brazil.
The Balanced Fund also invests in bonds. Although most of the holdings in the fund are U.S. Government, agency, corporate, mortgage-backed and asset-backed bonds, the fund may also invest in Eurodollar bonds, money- market instruments, exchange-traded futures and opons, non-U.S. dollar denominated bonds that are at least 95% hedged, privately placed mortgages and private debt not traded on an exchange. The average credit quality of the bonds as rated by S&P is AA- and Moody’s is Aa3, signifying a strong capacity to meet financial commitments. The bonds in the fund typi- cally have an average duraon of 3 to 6 years and an average life of about 3 to 10 years.
The asset mix of the Balanced Fund may shiI within specified strategic rang- es as market condions change. Investments in this fund are subject to market and credit risk and could increase or decrease in value.
4) Comparison of the fund performance to the index or benchmark:
(link: https://leplb0260.portal.hewitt.com/web ... tor=Client)

Large Cap Equity
-Diversified Equity (ER: 0.34%)

1) Name of company managing fund: Barrow, Hanley, Mewhinney & Strauss, LLC Hotchkis & Wiley Capital Management, LLC J.P. Morgan Investment Management, Inc., PRIMECAP Management Company State Street Global Advisors, T. Rowe Price Associates, Inc.
2) Fees charged the plan participant:
-Investment Management Fee: 0.30%
-Total Fund Expenses: 0.34%
-Per $1,000 Investment ($): $3.40
3) Investment strategy, including the index or benchmark used: This fund consists primarily of stocks and securi+es of various high quality U.S. companies, other than Johnson & Johnson. A small por+on of the fund may be invested in the S&P 500 Index Fund (which includes Johnson and Johnson stock) in order to provide daily liquidity. The stocks are selected by independent professional investment managers who are selected for their demonstrated skill of equity inves+ng.
The stocks in this fund tend to be diversified across a variety of industries. The investment managers are con+nuously analyzing companies and looking for the most a<rac+ve stocks to own in the fund. Therefore, the individual companies owned are constantly changing as the managers sell and re-invest.
The value of investments in this fund can increase or decrease at any +me due to the risk of capital loss from fluctua+ng prices, which are inherent in any investment in equity securi+es.
4) Comparison of the fund performance to the index or benchmark:

(link: https://leplb0260.portal.hewitt.com/web ... tor=Client)

-Russell 3000 (ER: 0.05%)
1) Name of company managing fund: State Street Global Advisors
2) Fees charged the plan participant:
-Investment Management Fee: 0.02%
-Total Fund Expenses: 0.05%
-Per $1,000 Investment ($): $0.50
3) Investment strategy, including the index or benchmark used: The Russell 3000 Index is widely used to measure the stock perfor- mance of the 3,000 largest companies in the U.S. market. The Rus- sell 3000 Index Fund consists of stocks of the same companies that comprise the Russell 3000 Index.
The companies in both the Russell 3000 Index and the fund are weighted by total market capitaliza on. The amount of stock held for an individual company is propor onal to the company’s size, as compared to all the companies in the index. The fund is con nually monitored and adjusted to maintain a close match between the weights of the stocks in the fund and the weights of the stocks in the Russell 3000 Index.
The value of investments in this fund can increase or decrease at any me due to the risk of capital loss from fluctua ng prices, which are
inherent in any investment in equity securi es.
4) Comparison of the fund performance to the index or benchmark:
(link: https://leplb0260.portal.hewitt.com/web ... tor=Client)

Mid/Small Cap Equity
-U.S. Small Cap (ER: 0.62%)

1) Name of company managing fund: Delaware Investments, Inc. State Street Global Advisors Goldman Sachs Asset Management, LP T. Rowe Price Associates, Inc.
2) Fees charged the plan participant:
-Investment Management Fee: 0.58%
-Total Fund Expenses: 0.62%
-Per $1,000 Investment ($): $6.20
3) Investment strategy, including the index or benchmark used:
The U.S. Small Cap Fund is a stock fund that emphasizes companies with a capitaliza"on of between approximately $50 million and $1.5 billion at the "me the stock is purchased, and whose principal mar- kets are in the United States.
The fund emphasizes smaller, rapidly growing companies, o>en con- centrated in the most dynamic sectors of the economy. The stocks tend to be diversified across a number of industries. The fund holds stocks in several hundred different companies. The large numbers ensure liquidity and avoid concentra"on of risk in any one company.
Small company stocks o>en experience more fluctua"on in price and returns than stocks of medium to large size, more established companies and are therefore considered to pose greater risk. How- ever, they also have the poten"al to grow more rapidly than medi- um to large size companies and so may provide greater long-term returns. The value of investments in this fund can increase or de- crease at any "me due to the risk of capital loss from fluctua"ng prices, which are inherent in any investment in equity securi"es.
4) Comparison of the fund performance to the index or benchmark:
(link: https://leplb0260.portal.hewitt.com/web ... tor=Client)

International Equity
-International Equity (ER: .44%)

1) Name of company managing fund: Baillie Gifford Overseas, Ltd. Capital Group Internaonal, Inc. Genesis Asset Managers, LLP, Dodge & Cox, Marathon Asset Management, LP State, Street Global Advisors, Investment managers are subject to change.*
2) Fees charged the plan participant:
-Investment Management Fee: 0.35%
-Total Fund Expenses: .44%
-Per $1,000 Investment ($): $4.40
3) Investment strategy, including the index or benchmark used: The Internaonal Equity Fund invests primarily in stocks of companies locat- ed outside of the United States. Its holdings are diversified across a variety of industries.
The fund invests primarily in stocks listed on foreign stock markets, such as the Tokyo Stock Exchange and the London Stock Exchange. The companies selected can range in size from large mulnaonal companies to start-ups with prospects for growth. The majority of the investments are in the larg- er, more developed markets such as the United Kingdom and Japan. A por- on of the fund may also be invested in the less developed, “emerging” markets, such as Brazil or Thailand, at the discreon of the investment man- agers.
In addion to the risk of losses generally associated with investments in stocks, internaonal equity investments have certain unique risks not nor- mally associated with U.S. equity investments. These include polical risk and currency risk. The value of investments in this fund can increase or de- crease at any me due to the risk of capital loss from fluctuang prices, which are inherent in any investment in equity securies. The internaonal equity investments in the Internaonal Equity Fund and a poron of the internaonal equity investments in the Balanced Fund are the same, alt- hough the Balanced Fund also has other types of investments.
4) Comparison of the fund performance to the index or benchmark:
(link: https://leplb0260.portal.hewitt.com/web ... tor=Client)


Company Stock
-Company Stock (ER: 0.04%)

1) Name of company managing fund: NA
2) Fees charged the plan participant:
-Investment Management Fee: 0.01%
-Total Fund Expenses: 0.04%
-Per $1,000 Investment ($): $0.40
3) Investment strategy, including the index or benchmark used:
4) Comparison of the fund performance to the index or benchmark:

3. Any other glaring concerns?

Thanks in advance everyone!

AJC408
Last edited by AJC408 on Fri Sep 28, 2018 9:44 am, edited 1 time in total.

PFInterest
Posts: 2252
Joined: Sun Jan 08, 2017 12:25 pm

Re: My Portfolio Review -- Fund Advice

Post by PFInterest » Sat Sep 22, 2018 4:54 pm

- pay off the car loan at 4%...you have 85K in cash.
- you need to roll her tIRA to her workplace plan
- so then you can do the backdoor rIRA for both of you.

Living Free
Posts: 80
Joined: Thu Jul 19, 2018 7:31 pm

Re: My Portfolio Review -- Fund Advice

Post by Living Free » Sat Sep 22, 2018 9:08 pm

because you look like big savers who do taxable investing, you could just do the russell 3000 in your 401k (this should be a broad US stock index fund and the ER is good) + probably some sort of bonds (not clear to me what the best choice would be do you have the fund names/ticker symbols??). Then you could avoid having to do the international fund with the 44 basis point ER in your 401k and just use your taxable or other accounts to invest in your international stocks

AJC408
Posts: 55
Joined: Mon Nov 16, 2015 12:24 am

Re: My Portfolio Review -- Fund Advice

Post by AJC408 » Tue Sep 25, 2018 3:11 pm

PFInterest wrote:
Sat Sep 22, 2018 4:54 pm
- pay off the car loan at 4%...you have 85K in cash.
- you need to roll her tIRA to her workplace plan
- so then you can do the backdoor rIRA for both of you.
Hi PFInterest,

My wife had a 401k which we rolled over into a tIRA but her new company does not offer a retirement plan or matching unfortunately. Ill look into doing a backdoor roth IRA for her funds.. I remember looking at how to do this in the past but for reasons that I can't remember it seemed complicated. Ill do a search on the forum to see if we can convert though. Thanks for feedback!

AJC408
Posts: 55
Joined: Mon Nov 16, 2015 12:24 am

Re: My Portfolio Review -- Fund Advice

Post by AJC408 » Wed Sep 26, 2018 8:38 pm

Living Free wrote:
Sat Sep 22, 2018 9:08 pm
because you look like big savers who do taxable investing, you could just do the russell 3000 in your 401k (this should be a broad US stock index fund and the ER is good) + probably some sort of bonds (not clear to me what the best choice would be do you have the fund names/ticker symbols??). Then you could avoid having to do the international fund with the 44 basis point ER in your 401k and just use your taxable or other accounts to invest in your international stocks

Living Free,

Sorry for delay--it took me some time to get through to our customer service, but when I called they said that these are private funds and there are no fund names or ticker symbols. I did find a prospectus but not sure which info would be helpful...

Assuming I should avoid all other funds besides the Russell 3000 in my 401k plan, should I just invest in a Vanguard Bond Fund in my wife's tIRA? I can always open a Vanguard tIRA for myself as well.

Thanks in advance!

AJC408 :happy

Living Free
Posts: 80
Joined: Thu Jul 19, 2018 7:31 pm

Re: My Portfolio Review -- Fund Advice

Post by Living Free » Thu Sep 27, 2018 8:55 am

AJC408 wrote:
Wed Sep 26, 2018 8:38 pm
Living Free wrote:
Sat Sep 22, 2018 9:08 pm
because you look like big savers who do taxable investing, you could just do the russell 3000 in your 401k (this should be a broad US stock index fund and the ER is good) + probably some sort of bonds (not clear to me what the best choice would be do you have the fund names/ticker symbols??). Then you could avoid having to do the international fund with the 44 basis point ER in your 401k and just use your taxable or other accounts to invest in your international stocks

Living Free,

Sorry for delay--it took me some time to get through to our customer service, but when I called they said that these are private funds and there are no fund names or ticker symbols. I did find a prospectus but not sure which info would be helpful...

Assuming I should avoid all other funds besides the Russell 3000 in my 401k plan, should I just invest in a Vanguard Bond Fund in my wife's tIRA? I can always open a Vanguard tIRA for myself as well.

Thanks in advance!

AJC408 :happy
At your incomes i'm not sure that it would be wise to open a traditional IRA (unless funding it temporarily for backdoor roth as below). I don't think you'll get a tax deduction (see https://www.irs.gov/retirement-plans/pl ... an-at-work). Then your gains will be taxed at ordinary income levels upon withdrawal rather than long term capital gains rates (such as for gains in a total stock market index funds in a taxable account). So probably more tax efficient to use a taxable account with tax efficient investments rather than the traditional IRA if you cannot get the tax deduction upfront

If you do not have a traditional IRA consider the advice of PFInterest above to do the backdoor roth IRA at least for yourself. For your wife if she has a workplace retirement plan that accepts rollovers from IRAs then you could try to get rid of her traditional IRA and do backdoor roth IRA for her too.

Yes doing just US stock in your workplace retirement account if that is the only good fund available and then using other accounts (such as spouse's retirement account) for bonds and taxable account for international stocks (keeping in mind tax efficient fund placement: https://www.bogleheads.org/wiki/Tax-eff ... _placement) would be a fine strategy.

User avatar
ruralavalon
Posts: 13943
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: My Portfolio Review -- Fund Advice

Post by ruralavalon » Thu Sep 27, 2018 10:59 am

Congratulations on your new jobs.

I agree with the suggestion to just pay off your $3.5k car loan @ 4%.

In my opinion your desired asset allocation (25% bonds, 15% international stocks, and 60% domestic stocks) is within the range of what is reasonable for age 30.

In my opinion you made good choices for funds to use in your taxable account. Both are very tax-efficient stock index funds.


AJC408 wrote:
Wed Sep 26, 2018 8:38 pm
Living Free wrote:
Sat Sep 22, 2018 9:08 pm
because you look like big savers who do taxable investing, you could just do the russell 3000 in your 401k (this should be a broad US stock index fund and the ER is good) + probably some sort of bonds (not clear to me what the best choice would be do you have the fund names/ticker symbols??). Then you could avoid having to do the international fund with the 44 basis point ER in your 401k and just use your taxable or other accounts to invest in your international stocks

Living Free,

Sorry for delay--it took me some time to get through to our customer service, but when I called they said that these are private funds and there are no fund names or ticker symbols. I did find a prospectus but not sure which info would be helpful...

Assuming I should avoid all other funds besides the Russell 3000 in my 401k plan, should I just invest in a Vanguard Bond Fund in my wife's tIRA? I can always open a Vanguard tIRA for myself as well.

Thanks in advance!

AJC408 :happy
The private funds in his 401k are not traditional mutual funds. They are probably Commingled Investment Trusts (CITs) or Separate Accounts, which would not have ticker symbols.

In his 401k materials or on the plan website there should be a short fact sheet (perhaps just 1-2 pages) which states the:
1) name of the company (like BlackRock, State Street, Fidelity, Vanguard, etc.) managing the fund;
2) fees charged the plan participant;
3) investment strategy, including the index or benchmark used; and
4) a comparison of the fund performance to the index or benchmark.

What is the name of the fund company managing the Russell 3000 Fund, ER 0.05%. Because of the use of "Russell 3000" in the fund name and the very low expense ratio, I assume that this is an index fund. That will almost certainly be a good fund to use for your domestic stock allocation. The Russell 3000 index is a total market index of U.S. stocks.

What is the company managing these funds, and the index or benchmark used by each fund:
2) International Equity Fund, ER 0.44%; and
3) Intermediate Bond Fund, ER 0.20%.
Those expense ratios are low enough that the funds may be useable in his 401k.

Also can you please link the fact sheets for each of those three funds?

How much do you contribute annually to each account? About how much (in dollars) do you believe you might be able to contribute annually (total all accounts) in the future?

Is there an employer match offered in his 401k? If so what is it?

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

I would not want to suggest a fund for her IRA until first figuring out what exactly to suggest for his 401k. It's often better to coordinate investments among all accounts, treating all accounts together as a single unified portfolio, rather than look at each account separately.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

AJC408
Posts: 55
Joined: Mon Nov 16, 2015 12:24 am

Re: My Portfolio Review -- Fund Advice

Post by AJC408 » Fri Sep 28, 2018 10:29 am

ruralavalon wrote:
Thu Sep 27, 2018 10:59 am
Congratulations on your new jobs.

I agree with the suggestion to just pay off your $3.5k car loan @ 4%.

In my opinion your desired asset allocation (25% bonds, 15% international stocks, and 60% domestic stocks) is within the range of what is reasonable for age 30.

In my opinion you made good choices for funds to use in your taxable account. Both are very tax-efficient stock index funds.


AJC408 wrote:
Wed Sep 26, 2018 8:38 pm
Living Free wrote:
Sat Sep 22, 2018 9:08 pm
because you look like big savers who do taxable investing, you could just do the russell 3000 in your 401k (this should be a broad US stock index fund and the ER is good) + probably some sort of bonds (not clear to me what the best choice would be do you have the fund names/ticker symbols??). Then you could avoid having to do the international fund with the 44 basis point ER in your 401k and just use your taxable or other accounts to invest in your international stocks

Living Free,

Sorry for delay--it took me some time to get through to our customer service, but when I called they said that these are private funds and there are no fund names or ticker symbols. I did find a prospectus but not sure which info would be helpful...

Assuming I should avoid all other funds besides the Russell 3000 in my 401k plan, should I just invest in a Vanguard Bond Fund in my wife's tIRA? I can always open a Vanguard tIRA for myself as well.

Thanks in advance!

AJC408 :happy
The private funds in his 401k are not traditional mutual funds. They are probably Commingled Investment Trusts (CITs) or Separate Accounts, which would not have ticker symbols.

In his 401k materials or on the plan website there should be a short fact sheet (perhaps just 1-2 pages) which states the:
1) name of the company (like BlackRock, State Street, Fidelity, Vanguard, etc.) managing the fund;
2) fees charged the plan participant;
3) investment strategy, including the index or benchmark used; and
4) a comparison of the fund performance to the index or benchmark.

What is the name of the fund company managing the Russell 3000 Fund, ER 0.05%. Because of the use of "Russell 3000" in the fund name and the very low expense ratio, I assume that this is an index fund. That will almost certainly be a good fund to use for your domestic stock allocation. The Russell 3000 index is a total market index of U.S. stocks.

What is the company managing these funds, and the index or benchmark used by each fund:
2) International Equity Fund, ER 0.44%; and
3) Intermediate Bond Fund, ER 0.20%.
Those expense ratios are low enough that the funds may be useable in his 401k.

Also can you please link the fact sheets for each of those three funds?

How much do you contribute annually to each account? About how much (in dollars) do you believe you might be able to contribute annually (total all accounts) in the future?

Is there an employer match offered in his 401k? If so what is it?

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

I would not want to suggest a fund for her IRA until first figuring out what exactly to suggest for his 401k. It's often better to coordinate investments among all accounts, treating all accounts together as a single unified portfolio, rather than look at each account separately.
Thanks for your reply! Please see above for detailed info and links for each of the funds.

My wife and I are both in sales so contributions can fluctuate based off how good/bad our year is. That being said, last year we both maxed out our 401k's ($37,000) and contribute around $3k per month towards our Taxable account. My 401k will match .75 cents for every dollar up to 6% of contributions. We also have an HSA that my company contributes $1,000 per year and then I also do the maximum contributions allowed. Since my wife no longer has a 401k through her company, we have been aggressively paying off our mortgage (about $10k per month) but I am reevaluating this strategy as it may be more beneficial to contribute $5k towards extra mortgage payment per month and then $5k towards Taxable account.

This may be bad, but I don't have that great of an idea how much we save per month except that we try to live off of her income and save/invest mine.

AJC408
Posts: 55
Joined: Mon Nov 16, 2015 12:24 am

Re: My Portfolio Review -- Fund Advice

Post by AJC408 » Fri Sep 28, 2018 12:06 pm

PFInterest wrote:
Sat Sep 22, 2018 4:54 pm
- pay off the car loan at 4%...you have 85K in cash.
- you need to roll her tIRA to her workplace plan
- so then you can do the backdoor rIRA for both of you.
Not to get off on a rabbit trail but...

Suppose I wanted to convert my wife tIRA to backdoor rIRA, what if we don't remember where all of the money came from? Some of the money was from former jobs that offered 401k, some MAY be from Roth IRA's we had earlier in our career, etc. How can I find this information? I don't even remember the companies we used to use..

I may need to take more time researching this before pulling the trigger.

User avatar
ruralavalon
Posts: 13943
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: My Portfolio Review -- Fund Advice

Post by ruralavalon » Fri Sep 28, 2018 7:04 pm

Thanks for your reply! Please see above for detailed info and links for each of the funds.

My wife and I are both in sales so contributions can fluctuate based off how good/bad our year is. That being said, last year we both maxed out our 401k's ($37,000) and contribute around $3k per month towards our Taxable account. My 401k will match .75 cents for every dollar up to 6% of contributions. We also have an HSA that my company contributes $1,000 per year and then I also do the maximum contributions allowed. Since my wife no longer has a 401k through her company, we have been aggressively paying off our mortgage (about $10k per month) but I am reevaluating this strategy as it may be more beneficial to contribute $5k towards extra mortgage payment per month and then $5k towards Taxable account.

This may be bad, but I don't have that great of an idea how much we save per month except that we try to live off of her income and save/invest mine.
Annual contributions.
If I understand correctly, it looks like your new annual contributions will total about $68.5k.
His 401k, $18.5k??
Employer match, $1.1k??
Taxable account, $36k
Taxable, another $5k
HSA, $6.9k
Employer to HSA, $1k

Is that correct?

I understand the issue of the erratic income, my own income was always extremely variable. I understand that these are estimates.


Mortgage note.
The additional information supplied is very useful.

With the new tax law capping certain deductions, will you benefit from the tax deduction for your mortgage interest ($482k @ 4.25% interest)?

If you are losing the benefit of the mortgage interest deduction, then I think it makes a lot of sense to shift to contribute $5k towards extra mortgage payment per month and then $5k towards the taxable account.



Asset allocation.
As I mentioned before, at age 30 in my opinion your desired asset allocation (25% bonds, 15% international stocks, and 60% domestic stocks) is within the range of what is reasonable.

Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk



Fund selection and placement.
In selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".

It is often better coordinate investments across all accounts, in other words treat all accounts together as a single unified portfolio, rather than view each account separately. Select just one or two of the better funds (most diversified + lower expense ratio) in the work-based account (401k, 403b, 457, TSP etc.), where the choices offered are limited. Then complete the rest of the asset allocation using the nearly unlimited or choices available in a taxable account or any IRAs. This approach lets you avoid having to use sub-par funds often found in work-based accounts like 401ks. Don’t try to put all components of the asset allocation in every account.

In my opinion the funds to consider using in your 401k are:
1) Russell 3000 Fund (index fund, total U.S. stock market), ER 0.05%;
2) International Equity Fund (actively managed, international stocks in both developed and emerging markets) ER 0.44%; and
3) Intermediate Bond Fund (actively managed, intermediate-term bonds), ER 0.20%.

Domestic stocks
Russell 3000 Fund, ER 0.05%, is an index fund, broadly diversified covering all sizes of U.S. companies, with a very low expense ratio. State Street Global Advisors (SSgA) is an experienced and knowledgeable manager of index funds. I suggest that you use this fund in your 401k.


International stocks.
International Equity Fund, ER 0.44%, is an actively managed international stock fund, is diversified investing in both developed and emerging markets at about market weight and the fact sheet says it invests in all sizes of companies without any specifics, with a modest expense ratio. I recognize only two of the fund managers (i.e. Dodge & Cox, Street Global Advisors [SSgA]) both of which are experienced and knowledgeable fund manages. I suggest that you use this fund in your 401k later if necessary. I do not see a current need to use the fund.


Bonds.
Intermediate Bond Fund, ER 0.20%, is an actively managed bond fund with a low expense ratio. It is intermediate-term with "average duration of 3 to 6 years", and has good credit quality "average credit quality of the bonds as rated by S&P is AA- and by Moody’s is Aa3". The fund seems well diversified with 35% government bonds, 31% corporate bonds, and 22% securitized (the fact sheet numbers are hard to read). I recognize most of the fund mangers (i.e. Dodge & Cox, . . . , Pacific Investment Mgmt. Company [PIMCO], State Street Global Advisors [SSgA], Western Asset Mgmt. Company) and all 4 are experienced and knowledgeable managers of actively managed bond funds. I suggest that you use this fund in your 401k.


In the taxable account I suggest that you continue using Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% and Vanguard Total International Stock Index FundInvestor Shares (VGTSX) ER 0.17%. Both are very tax-efficient. Wiki article "Tax-efficient fund placement". Those funds are also well suited to any type of account. Both are very diversified with very low expense ratios.


To make portfolio management and rebalancing easy it is often better to have at least one large tax-advantaged account which contains all three basic asset types (bonds, international stocks, and domestic stocks). Don’t try to put all components of the asset allocation in every account.


Example portfolio.
Here is an example portfolio that you could consider. This is a three-fund type portfolio, modified as necessary to accommodate the fund offerings in your 401k. Current portfolio size = $193.4k (not counting emergency fund). New annual contributions = about $68.5k. The asset allocation is: 25% bonds; 15% international stocks; and 60% domestic stocks. The percentages given are percentages of the total portfolio, not of a given account. The suggestion is to switch both the existing balances and the new contributions to the funds indicated. All percentages and dollar amounts are rounded off, so may not add up exactly. Sometimes I state 00% to indicate funds you might want to add in the future.

Taxable account @ Vanguard (23% of current portfolio; $44k; adds $41k/yr = 60% of new annual contributions)
18%, $34.8k,Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%
05%. $09.4k,Vanguard Total International Stock Index Fund Investor Shares (VGTSX) ER 0.17%

His 401k at Company (42% of current portfolio, $80.4k; adds $18.5k + $1.1k match = $19.6k/yr total = 29% of new annul contributions)
17%, $32.9k, Russell 3000 Fund (index fund, total U.S. stock market), ER 0.05%;
00%, $00.0k, International Equity Fund (actively managed, international stocks in both developed and emerging markets) ER 0.44%; and
25%, $48.4k, Intermediate Bond Fund (actively managed, intermediate-term bonds), ER 0.20%.

Her Rollover IRA @ Vanguard (36% of current portfolio; $69k)
26%, $50.3k, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%
10%, $19.3k, Vanguard Total International Stock Index Fund Investor Shares (VTIAX) ER 0.11%

HSA (00% of current total; $00k; adds $6.9k + $1k employer contribution = $7.9k/yr total = 12% of new annual contributions)
(Available funds not known.)



Rebalancing.
Because the funds will grow at different and unpredictable rates, it may be necessary every few years to rebalance in order to maintain the desired asset allocation. Wiki article, "Rebalancing". You can easily adjust the asset allocation by exchanging between funds inside the 401k.

Avoid exchanging between funds in the taxable account, which can create income tax liability. If you need to adjust the allocation in the taxable account, do that by how you invest the new annual contributions.

. . . . .

I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom". Also take a look at the Boglehead’s wiki, the "getting started" link I give below.

If you have any questions just ask.

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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