Portfolio Analysis

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Topic Author
tactically_rich
Posts: 6
Joined: Mon Oct 08, 2018 8:27 pm

Portfolio Analysis

Post by tactically_rich » Mon Oct 08, 2018 10:11 pm

Hello everyone, I've been a BH lurker for a year now and feel like I've learned a lot. I would appreciate if you all could provide some thoughts on my portfolio and if I should make some changes to increase it's efficiency. Some of my concerns would be...should I invest more? Should I change my taxable fund to something different? Should I switch my 401k from being managed by Securian to managed by myself? If I manage it myself what funds should I choose? Any advice would be truly welcomed. Thank you so much in advance!

Age: 30
State of residence: Kansas
Salary: $50,000
Emergency funds: $10,000 (Ally savings account)
Cash: $19,500 (Checking account)
Debt: Mortgage $58,500 at 4.375% fixed (30 year, 26 years remaining)
Home estimated value: $85,000
Tax filing status: Single
Tax rate: 22% Federal, 5.25% State

Annual contributions
$5,500 Roth IRA
10% Roth 401k (not including 100% company match up to 6% Pre-tax)

Current retirement assets
Taxable - $35,000
Vanguard Growth Index Fund Admiral Shares (VIGAX) (ER 0.05%)

Vanguard Roth IRA - $18,500
Vanguard Target Retirement 2055 Fund (VFFVX) (ER 0.15%)

Securian 401k - $50,700 (Managed by Securian, Target Age Portfolio)
US Stock:
30% T. Rowe Price Large Cap Growth (TRLGX) (ER 0.50%)
30% T. Rowe Price Large Cap Value (TILCX) (ER 0.51%)
10% DFA US Targeted Value I (DFFVX) (ER 0.53%)
10% Disciplined Growth Small Cap Growth (DGIFX) (ER 0.96%)
International Stock:
10% Invesco International Growth R5 (AIEVX) (ER 0.72%)
10% Dodge & Cox International Stock (DODFX) (ER 0.55%)

Other 401k options available
General Bond:
Hotchkis & Wiley High Yield I (HWHIX) (ER 0.71%)
Loomis Sayles Investment Grade Bond Adm (LIGAX) (ER 0.49%)
Loomis Sayles Bond Instl (LSBDX) (ER 0.62%)
US Stock:
Advantus S&P 500® Index (SFT) (0.2%)
American Funds Growth Fund of Amer R6 (RGAGX) (ER 0.49%)
DFA US Large Cap Value I (DFLVX) (ER 0.43%)
Vanguard Mid Cap Index Adm (VIMAX) (ER 0.21%)
International Stock:
Vanguard Total Intl Stock Index Admiral (VTIAX) (ER 0.17%)
American Funds New Perspective R6 (ANWPX) (ER 0.6%)

Thanks!

User avatar
Watty
Posts: 17599
Joined: Wed Oct 10, 2007 3:55 pm

Re: Portfolio Analysis

Post by Watty » Mon Oct 08, 2018 11:11 pm

tactically_rich wrote:
Mon Oct 08, 2018 10:11 pm
Salary: $50,000
...
Tax rate: 22% Federal, 5.25% State

Annual contributions
$5,500 Roth IRA
10% Roth 401k (not including 100% company match up to 6% Pre-tax)
In the 22% Federal tax bracket I would normally use a deductible 401k or IRA instead of the Roth versions unless you have some compelling reason to think you will be in a higher tax bracket in retirement.

With your income you are likely eligible to make deductible IRA contributions even though you have a retirement plan at work.

https://www.irs.gov/retirement-plans/pl ... an-at-work

When I say this I am assuming that you would be contributing more to the deductible account, for example your choice might be;
1) Contribute $1,000 to a deductible 401k.
2) Pay 270 in state and federal taxes and contribute $730 to a Roth 401k.

Once you contribute enough to get down to the 12% federal tax bracket the choice would be less clear so you may want to do a combination of Roth and deductible contributions to keep your taxable income right at the top of the 12% federal tax bracket. There is a wiki on this choice.

https://www.bogleheads.org/wiki/Traditional_versus_Roth
tactically_rich wrote:
Mon Oct 08, 2018 10:11 pm
...should I invest more?
If I understand it right your are contributing these percentages of your income.

11% Roth IRA, and paying maybe another 3% on taxes on the Roth IRA contribution
10% Roth 401K and maybe 3% in taxes on the Roth 401k contribution
6% employer match that goes into a traditional 401K

That is about 33% of your income that you are saving or prepaying the taxes on retirement savings.

That is amazing!

Other than maybe using traditional deductible retirement accounts some I would not change that.
tactically_rich wrote:
Mon Oct 08, 2018 10:11 pm
Should I change my taxable fund to something different?
A lot depends on what the money in the taxable fund will eventually be used for. If it is really intended for retirement decades from now the growth index fund is not an unreasonable choice but a total stock market index fund might be better.

The big question is if you might have some other goal that the money is more likely to be used for. If it is likely to be used for something else in say five years, then you would want to use an asset allocation that would be appropriate for that time frame.

There are all sorts of opinions and no real consensus on the "Should I pay off the mortage?" question but between your taxable account and your cash you have just about enough to pay off your mortage. Doing it all at once would leave you a bit "house poor" but if I was in your situation I would consider paying it off in the next few years.


There is a wiki on this choice.

https://www.bogleheads.org/wiki/Paying_ ... _investing

One option is to contact your lender and ask if they will "recast your mortage" (Google this) if you make a large prepayment. They are not required to do this but they often will for a processing fee of a few hundred dollars. The way this works is that if you pay off 50% of the loan balance(or whatever makes sense) then your required monthly payment would be reduced by the same percentage.
tactically_rich wrote:
Mon Oct 08, 2018 10:11 pm
Should I switch my 401k from being managed by Securian to managed by myself? If I manage it myself what funds should I choose?
You could use a three fund portfolio instead.

https://www.bogleheads.org/wiki/Three-fund_portfolio

In the 401k;

Advantus S&P 500® Index (SFT) (0.2%)
Vanguard Mid Cap Index Adm (VIMAX) (ER 0.21%)
Vanguard Total Intl Stock Index Admiral (VTIAX) (ER 0.17%)

You don't have a good small cap or bond fund in the 401k so in your Roth account you could buy;

A low cost bond index fund
A low cost small cap fund.

This would lower your expense ratio in the 401k by roughly 0.3% or maybe $200 a year and more in future years as your 401k grows. That will really add up over time.

Flyer24
Moderator
Posts: 1201
Joined: Sun Apr 08, 2018 4:21 pm

Re: Portfolio Analysis

Post by Flyer24 » Tue Oct 09, 2018 12:50 am

You are doing a great job managing debt and savings rate. Why do you keep so much cash in your checking account? I would at least want to earn some interest on it.

Topic Author
tactically_rich
Posts: 6
Joined: Mon Oct 08, 2018 8:27 pm

Re: Portfolio Analysis

Post by tactically_rich » Tue Oct 09, 2018 8:45 pm

Flyer24 wrote:
Tue Oct 09, 2018 12:50 am
You are doing a great job managing debt and savings rate. Why do you keep so much cash in your checking account? I would at least want to earn some interest on it.
Thank you! Yes, I agree on the cash. One of the reasons I have too much cash is that my current bank requires a $10,000 minimum for my account. Maybe I need to look for a different bank with no minimum. But I do get some nice benefits with the account. I also have been debating on where to put the extra cash. I could either place it in my taxable account or at the minimum place it in my savings account for a higher interest rate.

Topic Author
tactically_rich
Posts: 6
Joined: Mon Oct 08, 2018 8:27 pm

Re: Portfolio Analysis

Post by tactically_rich » Tue Oct 09, 2018 8:56 pm

Watty wrote:
Mon Oct 08, 2018 11:11 pm
tactically_rich wrote:
Mon Oct 08, 2018 10:11 pm
Salary: $50,000
...
Tax rate: 22% Federal, 5.25% State

Annual contributions
$5,500 Roth IRA
10% Roth 401k (not including 100% company match up to 6% Pre-tax)
In the 22% Federal tax bracket I would normally use a deductible 401k or IRA instead of the Roth versions unless you have some compelling reason to think you will be in a higher tax bracket in retirement.

With your income you are likely eligible to make deductible IRA contributions even though you have a retirement plan at work.

https://www.irs.gov/retirement-plans/pl ... an-at-work

When I say this I am assuming that you would be contributing more to the deductible account, for example your choice might be;
1) Contribute $1,000 to a deductible 401k.
2) Pay 270 in state and federal taxes and contribute $730 to a Roth 401k.

Once you contribute enough to get down to the 12% federal tax bracket the choice would be less clear so you may want to do a combination of Roth and deductible contributions to keep your taxable income right at the top of the 12% federal tax bracket. There is a wiki on this choice.

https://www.bogleheads.org/wiki/Traditional_versus_Roth
tactically_rich wrote:
Mon Oct 08, 2018 10:11 pm
...should I invest more?
If I understand it right your are contributing these percentages of your income.

11% Roth IRA, and paying maybe another 3% on taxes on the Roth IRA contribution
10% Roth 401K and maybe 3% in taxes on the Roth 401k contribution
6% employer match that goes into a traditional 401K

That is about 33% of your income that you are saving or prepaying the taxes on retirement savings.

That is amazing!

Other than maybe using traditional deductible retirement accounts some I would not change that.
tactically_rich wrote:
Mon Oct 08, 2018 10:11 pm
Should I change my taxable fund to something different?
A lot depends on what the money in the taxable fund will eventually be used for. If it is really intended for retirement decades from now the growth index fund is not an unreasonable choice but a total stock market index fund might be better.

The big question is if you might have some other goal that the money is more likely to be used for. If it is likely to be used for something else in say five years, then you would want to use an asset allocation that would be appropriate for that time frame.

There are all sorts of opinions and no real consensus on the "Should I pay off the mortage?" question but between your taxable account and your cash you have just about enough to pay off your mortage. Doing it all at once would leave you a bit "house poor" but if I was in your situation I would consider paying it off in the next few years.


There is a wiki on this choice.

https://www.bogleheads.org/wiki/Paying_ ... _investing

One option is to contact your lender and ask if they will "recast your mortage" (Google this) if you make a large prepayment. They are not required to do this but they often will for a processing fee of a few hundred dollars. The way this works is that if you pay off 50% of the loan balance(or whatever makes sense) then your required monthly payment would be reduced by the same percentage.
tactically_rich wrote:
Mon Oct 08, 2018 10:11 pm
Should I switch my 401k from being managed by Securian to managed by myself? If I manage it myself what funds should I choose?
You could use a three fund portfolio instead.

https://www.bogleheads.org/wiki/Three-fund_portfolio

In the 401k;

Advantus S&P 500® Index (SFT) (0.2%)
Vanguard Mid Cap Index Adm (VIMAX) (ER 0.21%)
Vanguard Total Intl Stock Index Admiral (VTIAX) (ER 0.17%)

You don't have a good small cap or bond fund in the 401k so in your Roth account you could buy;

A low cost bond index fund
A low cost small cap fund.

This would lower your expense ratio in the 401k by roughly 0.3% or maybe $200 a year and more in future years as your 401k grows. That will really add up over time.
Thank you so much for the analysis and advice! I truly appreciate it.

I intended for my taxable account to be somewhat of a short term place for my cash. I wanted to either pay off my current mortgage or use it for a down payment on another home in the future and then rent out my first home. I didn't look at it as a long term investment for retirement but rather a short term spot to place it for bigger purchases in the next several years. What type of asset allocation would you recommend for a shorter time frame?

User avatar
Watty
Posts: 17599
Joined: Wed Oct 10, 2007 3:55 pm

Re: Portfolio Analysis

Post by Watty » Tue Oct 09, 2018 9:42 pm

tactically_rich wrote:
Tue Oct 09, 2018 8:56 pm
What type of asset allocation would you recommend for a shorter time frame?
You can look at the Vanguard Lifestrategy funds use for different timeframes to see what they use.

https://investor.vanguard.com/mutual-fu ... estrategy/#/

ProfWengen
Posts: 20
Joined: Sat Oct 06, 2018 9:15 pm

Re: Portfolio Analysis

Post by ProfWengen » Tue Oct 09, 2018 11:21 pm

Nice job, looks like you're doing pretty good. :happy

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