Invest in target date fund or do myself? Poor return Schwab Private Client

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
TopCat123
Posts: 7
Joined: Thu Oct 11, 2018 10:19 am

Invest in target date fund or do myself? Poor return Schwab Private Client

Post by TopCat123 » Sat Oct 13, 2018 9:33 am

I am new member. Low 60's age, should be mod aggressive investor. Have one million to invest and don't need money for at least 10,to 15 years. Schwab Private Client for 4 years and lagged against all benchmarks. Am now down -4.3% YTD w 67% stock. Husband in Vanguard 2020 target fund only 1%.
No one is able to recommend good advisor. Is my best get a Vanguard Target say 2030? Or what?
Really appreciate input!

User avatar
Duckie
Posts: 6009
Joined: Thu Mar 08, 2007 2:55 pm

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by Duckie » Sat Oct 13, 2018 3:48 pm

TopCat123, welcome to the forum.
TopCat123 wrote:I am new member. Low 60's age, should be mod aggressive investor. Have one million to invest and don't need money for at least 10,to 15 years. Schwab Private Client for 4 years and lagged against all benchmarks. Am now down -4.3% YTD w 67% stock. Husband in Vanguard 2020 target fund only 1%.
No one is able to recommend good advisor. Is my best get a Vanguard Target say 2030? Or what?
It depends on what kind of account this is. If taxable, 2030 is not suitable. If tax-sheltered, it is.

We need a lot more information. See Asking Portfolio Questions.

delamer
Posts: 6270
Joined: Tue Feb 08, 2011 6:13 pm

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by delamer » Sat Oct 13, 2018 5:02 pm

You could implement one of these portfolios on your own: https://www.bogleheads.org/wiki/Lazy_portfolios

However, you should be considering your overall risk tolerance and make your decisions keeping in mind your husband’s portfolio.

ShowMeTheER
Posts: 392
Joined: Mon May 24, 2010 9:12 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by ShowMeTheER » Sat Oct 13, 2018 5:15 pm

VG2030 should be fine. At least for the moment. Get it out of Schwab and throw it in VG2030 and then change investments further when you feel comfortable to do so.

Freefallin
Posts: 24
Joined: Thu Oct 04, 2018 1:12 pm

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by Freefallin » Sat Oct 13, 2018 5:27 pm

You could stay with Schwab and move it to SWYEX Schwab 2030 target index with an expense ratio of .08% if your $ is in a tax advantaged account.
"Pain is the touchstone of all growth." - Bill W.

arf30
Posts: 280
Joined: Sat Dec 28, 2013 11:55 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by arf30 » Sat Oct 13, 2018 5:32 pm

Schwab has good target funds, you could just convert to those instead of moving everything to another brokerage.

4nwestsaylng
Posts: 302
Joined: Thu Jun 15, 2017 2:03 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by 4nwestsaylng » Sat Oct 13, 2018 8:30 pm

I would get out of Private Client as others have recommended. You could stay with Schwab and go into either a target fund, or maybe better do a two or three fund Bogle approach. I prefer the customer service at Schwab, and you should be able to find similar funds.

Also first look at your desired Asset Allocation for your age, comfort and risk tolerance. I am 65 and have gone with at 40% equity/60% fixed income ratio, down from 50/50. If the market went down a lot I might go up to 50/50 but not more. But that's just me, everyone is different.

I have given up on owning individual equities, which I think is the Private Client approach. I am primarily VTI for equities, for the fixed side, I buy individual Treasuries with Schwab, fee free. With rising rates the principal has stayed secure, and short term rates have been as good as long term without the duration risk to principal. That will of course change with time.

First thing though, address your asset allocation right now and get that right.

TopCat123
Posts: 7
Joined: Thu Oct 11, 2018 10:19 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by TopCat123 » Sun Oct 14, 2018 4:53 pm

Thanks everyone for input. Replies to questions:
$550K is in IRA $450 in taxable
Total now is 38% US Stock; 31% intl; 5 core bond; 14 in muni bond
Thomas Partners $160 K (owned by Schwab)has done fine but the rest managed by Private Client not good
So sounds like my option is to move IRA into a VTI or Schwab TI so issue is with the taxable and how to figure that out.
Taxable to move around is the challenge.
Do I need an advisor to help me do that or can you do that by the suggested low risk model portfolios fr input I got from you all
I see if with Vanguard and have $1.0 M they will manage for you--but not sure what that fee would be.
Question: why bad idea to have taxable account in V 2030--obviously must bring too much in taxes and where you would put muni's and other bonds?

Perplexed--sounds like I do need advisor and just can't find a good person through word of mouth which amazes me.
Thanks!

Freefallin
Posts: 24
Joined: Thu Oct 04, 2018 1:12 pm

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by Freefallin » Sun Oct 14, 2018 6:03 pm

I hate to see folks pay for a financial advisor.... With your 550k IRA you could move to Vanguard 2030 target date fund. With your 450k in taxable, only hold total US stock index and total international stock index to be more tax efficient. You could replicate the 2030 fund in your taxable account, but hold the bond percentage in your IRA. So once you have this set up, you would sell some of your 2030 fund in your IRA to buy Vanguard total bond market to make up your bond allocation in your taxable account. It is more tax efficient to hold bonds in an IRA compared to a taxable account.
"Pain is the touchstone of all growth." - Bill W.

User avatar
Duckie
Posts: 6009
Joined: Thu Mar 08, 2007 2:55 pm

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by Duckie » Sun Oct 14, 2018 6:58 pm

TopCat123 wrote:Question: why bad idea to have taxable account in V 2030--obviously must bring too much in taxes and where you would put muni's and other bonds?
2030 has 25% bonds now and will eventually shift to 70% bonds. These bonds are taxable, kicking out a lot of non-qualified dividends. At your asset level put all taxable bonds in your IRA. If you need more bonds than your IRA can hold then munis are suitable for a taxable account.
Total now is 38% US Stock; 31% intl; 5 core bond; 14 in muni bond
That only adds up to 88%. What is the rest?

19% bonds seems very low for age 60s. I'd be at least 40%.

In your taxable account what exactly do you have?

typical.investor
Posts: 346
Joined: Mon Jun 11, 2018 3:17 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by typical.investor » Sun Oct 14, 2018 7:31 pm

TopCat123 wrote:
Sun Oct 14, 2018 4:53 pm
Thanks everyone for input. Replies to questions:
$550K is in IRA $450 in taxable
Total now is 38% US Stock; 31% intl; 5 core bond; 14 in muni bond
Thomas Partners $160 K (owned by Schwab)has done fine but the rest managed by Private Client not good
So sounds like my option is to move IRA into a VTI or Schwab TI so issue is with the taxable and how to figure that out.
Taxable to move around is the challenge.
Do I need an advisor to help me do that or can you do that by the suggested low risk model portfolios fr input I got from you all
I see if with Vanguard and have $1.0 M they will manage for you--but not sure what that fee would be.
Question: why bad idea to have taxable account in V 2030--obviously must bring too much in taxes and where you would put muni's and other bonds?

Perplexed--sounds like I do need advisor and just can't find a good person through word of mouth which amazes me.
Thanks!
For a portfolio in taxable at Schwab, ETFs are the best (1).

To a market cap weighted portfolio using Schwab ETFs, I put a simple calculator here. https://docs.google.com/spreadsheets/d/ ... sp=sharing

You now seem to have 55% US equities and 45% International. That is global market cap weighted. (You said 38% US and 31% Intl, so your share of US stocks is 38%/69% or 55%).

International has really underperformed lately since 2008. Husband's Vanguard 2020 is about 36% (of stocks) in international and less equity exposure so that's one reason it did better.

I don't recommend changing your international allocation at this point because selling assets after underperformance isn't good. To get the three fund equivalent at Schwab do the following:

Anyway, if you plug 70% stocks, 30% bonds and 55% US, 45% International and $1m to add, you can see how many shares of each fund you need. SCHZ is the bond allocation. Use your muni fund instead in taxable instead. You could keep your core bond funds or use SCHZ. Place the taxable bonds where you best see tax wise.

That is now showing me:
FUND + SHARES + AMT
SCHB + 5792 + $385,000 (US total market)
SCHF + 6972 + $219,351 (Intl developed large)
SCHC + 940 + $31,336 (Intl dev small)
SCHE + 2634 + $64,313 (Emerging)
SCHZ + 6016 + $300,000 (bonds)

An alternative way would be to copy the allocation in Target Index fund (Schwab's Target Index funds -0.08% ER use those ETFs. Schwab's Target Retirement funds are older, more expensive, and don't use the ETFs). So copy the Target Index if you want. You'll notice they don't use small cap international (schc) and reduce EM exposure (SCHE) to zero by retirement. Also, the allocations are changing over time which makes it more work to keep your portfolio on balance. Reducing small caps and EM will reduce volatility, but EM has really not done well recently and I don't know the wisdom of getting out of an asset that hasn't done well recently. I guess they are doing it gradually, but I would prefer to have a set allocation.

(1) Mutual funds will typically issue a yearly capital gains distribution. ETFs generally don't. Many Vanguard mutual funds are dual share and don't.

User avatar
nedsaid
Posts: 10500
Joined: Fri Nov 23, 2012 12:33 pm

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by nedsaid » Sun Oct 14, 2018 8:07 pm

TopCat123 wrote:
Sat Oct 13, 2018 9:33 am
I am new member. Low 60's age, should be mod aggressive investor. Have one million to invest and don't need money for at least 10,to 15 years. Schwab Private Client for 4 years and lagged against all benchmarks. Am now down -4.3% YTD w 67% stock. Husband in Vanguard 2020 target fund only 1%.
No one is able to recommend good advisor. Is my best get a Vanguard Target say 2030? Or what?
Really appreciate input!
First of all, you have to accurately benchmark your portfolio. If it isn't allocated in similar fashion to Vanguard 2020 Target Retirement Fund, it isn't a fair comparison. If the portfolio has a mixture of investments, you need a blended index. If you need help wondering how to properly benchmark your portfolio, just ask and I will post here.

Secondly, what strategy is your advisor using? Strategies tend to work well at certain times and tend to trail the market at other times. For example, any Value based strategy would have been disappointing since Value has been on an extended vacation since the 2008-2009 financial crisis. If your advisor has a good strategy that isn't working right now, it isn't his fault, you just aren't patient enough.

Third, you have to take a good look at whatever fees you are paying. If you are paying an Assets Under Management fee, that could be the culprit. Many charge 1.0% Annual AUM fee and that is a big drag on performance. If you are underperforming by 1% a year, that is your culprit.

Fourth, a Target Date Retirement fund in tax deferred accounts is a good alternative to an Advisor Managed Portfolio. You get professional management for your portfolio with a Target Date Retirement fund at a fraction of the cost of having an Advisor do it.
A fool and his money are good for business.

typical.investor
Posts: 346
Joined: Mon Jun 11, 2018 3:17 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by typical.investor » Sun Oct 14, 2018 8:16 pm

nedsaid wrote:
Sun Oct 14, 2018 8:07 pm
TopCat123 wrote:
Sat Oct 13, 2018 9:33 am
I am new member. Low 60's age, should be mod aggressive investor. Have one million to invest and don't need money for at least 10,to 15 years. Schwab Private Client for 4 years and lagged against all benchmarks. Am now down -4.3% YTD w 67% stock. Husband in Vanguard 2020 target fund only 1%.
No one is able to recommend good advisor. Is my best get a Vanguard Target say 2030? Or what?
Really appreciate input!
First of all, you have to accurately benchmark your portfolio. If it isn't allocated in similar fashion to Vanguard 2020 Target Retirement Fund, it isn't a fair comparison. If the portfolio has a mixture of investments, you need a blended index. If you need help wondering how to properly benchmark your portfolio, just ask and I will post here.

Secondly, what strategy is your advisor using? Strategies tend to work well at certain times and tend to trail the market at other times. For example, any Value based strategy would have been disappointing since Value has been on an extended vacation since the 2008-2009 financial crisis. If your advisor has a good strategy that isn't working right now, it isn't his fault, you just aren't patient enough.

Third, you have to take a good look at whatever fees you are paying. If you are paying an Assets Under Management fee, that could be the culprit. Many charge 1.0% Annual AUM fee and that is a big drag on performance. If you are underperforming by 1% a year, that is your culprit.

Fourth, a Target Date Retirement fund in tax deferred accounts is a good alternative to an Advisor Managed Portfolio. You get professional management for your portfolio with a Target Date Retirement fund at a fraction of the cost of having an Advisor do it.
I think the issue with Target funds was bonds in taxable. And by extension, if used in tax deferred, that occupies the sheltered space that might hold the taxable accounts portion of bonds.

In any case, the best way to get advice is use this format.
viewtopic.php?t=6212

User avatar
nedsaid
Posts: 10500
Joined: Fri Nov 23, 2012 12:33 pm

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by nedsaid » Sun Oct 14, 2018 8:31 pm

TopCat123 wrote:
Sun Oct 14, 2018 4:53 pm
Thanks everyone for input. Replies to questions:
$550K is in IRA $450 in taxable
Total now is 38% US Stock; 31% intl; 5 core bond; 14 in muni bond
Thomas Partners $160 K (owned by Schwab)has done fine but the rest managed by Private Client not good
So sounds like my option is to move IRA into a VTI or Schwab TI so issue is with the taxable and how to figure that out.
Taxable to move around is the challenge.
Do I need an advisor to help me do that or can you do that by the suggested low risk model portfolios fr input I got from you all
I see if with Vanguard and have $1.0 M they will manage for you--but not sure what that fee would be.
Question: why bad idea to have taxable account in V 2030--obviously must bring too much in taxes and where you would put muni's and other bonds?

Perplexed--sounds like I do need advisor and just can't find a good person through word of mouth which amazes me.
Thanks!
Good advisors are not so easy to find. Another issue is how much the advice is really worth. My advice is to pay for advice by the hour and not pay an Assets Under Management fee. Once the portfolio is set, pretty much what is needed after that is rebalancing. Do you really need to pay somebody $10,000 a year to rebalance your portfolio?

Another solution is to use a risk based portfolio like a Vanguard LifeStrategy Fund or an age based portfolio like a Target Date Fund to be a model portfolio. Once you have picked a good model fund, just copy what they do. In a taxable account, if you are in a high enough tax bracket, you can substitute more tax efficient US Treasury and/or Municipal Bond Funds for the bond funds in the model portfolio. Where the advice would come in handy would be tax planning for your taxable portfolio and determining the most tax efficient placement of assets among your different accounts. Lots of threads that discuss this.

I am telling you to do some study and learn how investments are taxed. Then learn what investments are most tax efficient. Learn about various investment types of accounts: the various workplace savings accounts, IRA accounts, Roth IRA accounts, Annuities, and taxable accounts. This would make your discussions with your advisor more efficient and you can ask better questions.
A fool and his money are good for business.

TopCat123
Posts: 7
Joined: Thu Oct 11, 2018 10:19 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by TopCat123 » Mon Oct 15, 2018 8:27 pm

Freefallin wrote:
Sun Oct 14, 2018 6:03 pm
I hate to see folks pay for a financial advisor.... With your 550k IRA you could move to Vanguard 2030 target date fund. With your 450k in taxable, only hold total US stock index and total international stock index to be more tax efficient. You could replicate the 2030 fund in your taxable account, but hold the bond percentage in your IRA. So once you have this set up, you would sell some of your 2030 fund in your IRA to buy Vanguard total bond market to make up your bond allocation in your taxable account. It is more tax efficient to hold bonds in an IRA compared to a taxable account.
TopCat: I have had 7 + advisors over 40 years and all at one time or another needed to be changed for poor results etc.
1. is it best to move away fr Private Client now and then just do above with no fee Schwab?
2. Easy to move $550K to VTI 2030
3. Bond % in 2030 is21% Total Bond and about 9% Total Intl Bond-so confused by above. The selling in IRA to put more bonds for tax efficiency.
Thank you and sorry very complex for me.
TopCat

TopCat123
Posts: 7
Joined: Thu Oct 11, 2018 10:19 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by TopCat123 » Mon Oct 15, 2018 9:03 pm

$550K is in IRA $450 in taxable
Total now is 38% US Stock; 31% intl; 5 core bond; 14 in muni bond
Thomas Partners $160 K (owned by Schwab)has done fine but the rest managed by Private Client not good
So sounds like my option is to move IRA into a VTI or Schwab TI so issue is with the taxable and how to figure that out.
Taxable to move around is the challenge.
Do I need an advisor to help me do that or can you do that by the suggested low risk model portfolios fr input I got from you all
I see if with Vanguard and have $1.0 M they will manage for you--but not sure what that fee would be.
Question: why bad idea to have taxable account in V 2030--obviously must bring too much in taxes and where you would put muni's and other bonds?

Perplexed--sounds like I do need advisor and just can't find a good person through word of mouth which amazes me.
Thanks!
[/quote]
***********************
For a portfolio in taxable at Schwab, ETFs are the best (1).

To a market cap weighted portfolio using Schwab ETFs, I put a simple calculator here. https://docs.google.com/spreadsheets/d/ ... sp=sharing

You now seem to have 55% US equities and 45% International. That is global market cap weighted. (You said 38% US and 31% Intl, so your share of US stocks is 38%/69% or 55%).

International has really underperformed lately since 2008. Husband's Vanguard 2020 is about 36% (of stocks) in international and less equity exposure so that's one reason it did better.

I don't recommend changing your international allocation at this point because selling assets after underperformance isn't good. To get the three fund equivalent at Schwab do the following:

Anyway, if you plug 70% stocks, 30% bonds and 55% US, 45% International and $1m to add, you can see how many shares of each fund you need. SCHZ is the bond allocation. Use your muni fund instead in taxable instead. You could keep your core bond funds or use SCHZ. Place the taxable bonds where you best see tax wise.

That is now showing me:
FUND + SHARES + AMT
SCHB + 5792 + $385,000 (US total market)
SCHF + 6972 + $219,351 (Intl developed large)
SCHC + 940 + $31,336 (Intl dev small)
SCHE + 2634 + $64,313 (Emerging)
SCHZ + 6016 + $300,000 (bonds)

An alternative way would be to copy the allocation in Target Index fund (Schwab's Target Index funds -0.08% ER use those ETFs. Schwab's Target Retirement funds are older, more expensive, and don't use the ETFs). So copy the Target Index if you want. You'll notice they don't use small cap international (schc) and reduce EM exposure (SCHE) to zero by retirement. Also, the allocations are changing over time which makes it more work to keep your portfolio on balance. Reducing small caps and EM will reduce volatility, but EM has really not done well recently and I don't know the wisdom of getting out of an asset that hasn't done well recently. I guess they are doing it gradually, but I would prefer to have a set allocation.

(1) Mutual funds will typically issue a yearly capital gains distribution. ETFs generally don't. Many Vanguard mutual funds are dual share and don't.
[/quote]
TopCat Reply: I am not sure how to distinguish between what goes in IRA vs. Taxable. Other comments here have it separated.

TopCat123
Posts: 7
Joined: Thu Oct 11, 2018 10:19 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by TopCat123 » Mon Oct 15, 2018 9:56 pm

TopCat123 wrote:Question: why bad idea to have taxable account in V 2030--obviously must bring too much in taxes and where you would put muni's and other bonds?
2030 has 25% bonds now and will eventually shift to 70% bonds. These bonds are taxable, kicking out a lot of non-qualified dividends. At your asset level put all taxable bonds in your IRA. If you need more bonds than your IRA can hold then munis are suitable for a taxable account.
TOPCAT: OK GOT THAT
Total now is 38% US Stock; 31% intl; 5 core bond; 14 in muni bond
That only adds up to 88%. What is the rest?
TOPCAT: UPDATED TOTAL FIGURES TODAY: 36% US STOCK,31 INTL STOCK;5 CORE BONDS, 1.5 INFLATION PROTECTED BONDS,15 MUNI,1.4 INTL DEVEL COUNTRY BONDS,1.5 US CORP HIGH YIELD,BANK LOAN 2%, ALTERNATIVE 1.16, CASH 5.2

19% bonds seems very low for age 60s. I'd be at least 40%.

In your taxable account what exactly do you have?
I ONLY KNOW TOTAL WHICH IS $277 K--SCHWAB DOES NOT GIVE THAT BY ACCOUNT--ONLY AS TOTAL PICTURE.
THANKS!
TOPCAT
.

TopCat123
Posts: 7
Joined: Thu Oct 11, 2018 10:19 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by TopCat123 » Mon Oct 15, 2018 9:59 pm

TopCat123 wrote:
Mon Oct 15, 2018 8:27 pm
Freefallin wrote:
Sun Oct 14, 2018 6:03 pm
I hate to see folks pay for a financial advisor.... With your 550k IRA you could move to Vanguard 2030 target date fund. With your 450k in taxable, only hold total US stock index and total international stock index to be more tax efficient. You could replicate the 2030 fund in your taxable account, but hold the bond percentage in your IRA. So once you have this set up, you would sell some of your 2030 fund in your IRA to buy Vanguard total bond market to make up your bond allocation in your taxable account. It is more tax efficient to hold bonds in an IRA compared to a taxable account.
TopCat: I have had 7 + advisors over 40 years and all at one time or another needed to be changed for poor results etc.
1. is it best to move away fr Private Client now and then just do above with no fee Schwab?
2. Easy to move $550K to VTI 2030
3. Bond % in 2030 is21% Total Bond and about 9% Total Intl Bond-so confused by above. The selling in IRA to put more bonds for tax efficiency.
Thank you and sorry very complex for me.
TopCat
UPDATE: JUST REALIZED OF MY 3 ACCOUNTS 2 ARE IRA'S SO $277 K IS TAXABLE (THOMAS PARTNERS IS IN IRA) SO REST 770 K IS IRA. TKS/TOPCAT

typical.investor
Posts: 346
Joined: Mon Jun 11, 2018 3:17 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by typical.investor » Mon Oct 15, 2018 10:04 pm

The munis are in taxable, but what about the other bonds? You should be able to see what’s in each account. I’m at Schwab too so I believe this should be true for you too.

I’ll post a suggestion about what to put in each account in a little bit.

In the meantime, 1) where are those bond holdings and 2) if you sold the stocks in taxable to switch funds would there be capital gains that get taxed.

You should be able to see both by logging into your Schwab account. You’ll need to be familiar with it to do this yourself which I think you can.

typical.investor
Posts: 346
Joined: Mon Jun 11, 2018 3:17 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by typical.investor » Mon Oct 15, 2018 10:25 pm

TopCat123 wrote:
Mon Oct 15, 2018 9:59 pm
TopCat123 wrote:
Mon Oct 15, 2018 8:27 pm
Freefallin wrote:
Sun Oct 14, 2018 6:03 pm
I hate to see folks pay for a financial advisor.... With your 550k IRA you could move to Vanguard 2030 target date fund. With your 450k in taxable, only hold total US stock index and total international stock index to be more tax efficient. You could replicate the 2030 fund in your taxable account, but hold the bond percentage in your IRA. So once you have this set up, you would sell some of your 2030 fund in your IRA to buy Vanguard total bond market to make up your bond allocation in your taxable account. It is more tax efficient to hold bonds in an IRA compared to a taxable account.
TopCat: I have had 7 + advisors over 40 years and all at one time or another needed to be changed for poor results etc.
1. is it best to move away fr Private Client now and then just do above with no fee Schwab?
2. Easy to move $550K to VTI 2030
3. Bond % in 2030 is21% Total Bond and about 9% Total Intl Bond-so confused by above. The selling in IRA to put more bonds for tax efficiency.
Thank you and sorry very complex for me.
TopCat
UPDATE: JUST REALIZED OF MY 3 ACCOUNTS 2 ARE IRA'S SO $277 K IS TAXABLE (THOMAS PARTNERS IS IN IRA) SO REST 770 K IS IRA. TKS/TOPCAT
And $160k of the $277k in taxable is in munis, is that correct? What else is in taxable?

typical.investor
Posts: 346
Joined: Mon Jun 11, 2018 3:17 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by typical.investor » Tue Oct 16, 2018 5:47 am

TopCat123 wrote:
Mon Oct 15, 2018 9:03 pm
TopCat Reply: I am not sure how to distinguish between what goes in IRA vs. Taxable. Other comments here have it separated.
Ok, basically we are looking at something like this. I am not 100% where you have stuff now - correct me if I am wrong, but I would suggest something like:

TAXABLE (about) 26.5% ($277k)
  • 16% municipal bonds
  • 5% SCHB (US stocks)
  • 5.5% SCHF (Intl large cap stock)
IRAS 73.% ($770k)
  • 25% SCHB (US stocks)
  • 24.5% SCHZ (total bond)
  • 14.5% SCHF (Intl large cap stock)
  • 5% SCHE (Emerging markets)
  • 1.4% dev country bonds
  • 1.5% corp high yield
  • 1.5% bank loan
  • 1.6% alt
[Or is that not where these things are? I am just assuming that fixed income type stuff is in the IRA. Please let us know if it's not]

Notes:

A] I am not simplifying your fixed income holdings because I don't know what they are. If they are individual bonds, it may be difficult to sell small holdings at a good price. So I will leave that alone for now.

B] I used 24.5% SCHZ which is an intermediate bond fund (total market). SCHP is a good fund for inflation protection but the durations is 7 years meaning it's better than a short fund for yield but will lose more (temporarily) if rates rise. So maybe something like SCHO which is short term treasures and easy to sell at anytime would be good. You can fine tune this later.

C] Your US stock percent is 55% and international is 45%. It's what you had before and is about the world's current global weighting. So that's good. But international has underperformed since 2008 so that's bad. But international doesn't have the high valuations that US stocks do, and one of these days knock-on-wood who-knows-when should have better performance that the US. So I would just leave it alone.

D] My suggestion is 55% equities and 45% bonds. It's less equities than the 70% you have now and more in line with a target retirement fund for someone your age. That's a 15% reduction in equities. Some prefer to ramp down more slowly.

E] I didn't use SCHC (small international) which is more volatile. SCHE (emerging) is also volatile. Both are less correlated with the US market, so they add diversification. The Schwab retirement funds don't use SCHC and reduce SCHE to zero by retirement. Emerging hasn't done well recently but sometimes it does very well. Your husband has exposure to emerging markets in his Vanguard target retirement fund, and I agree it could be useful to have. I just added the SCHC (international small cap) allocation to the SCHF (international large cap) amount. It'd only be 3% if you held it.

F] I put SCHF in taxable because that's the most tax friendly place for it. You can claim a foreign tax credit (because you pay taxes on the companies overseas and don't have to pay the US for that amount). It's better to put SCHF there than SCHE as more dividends in SCHF get the friendliest tax treatment.

I hope Duckie chimes in again. I have seen Duckie and many others give great advice here. We are always contradicting each other a little bit because of personal preferences, but you just need a good plan that you will stick to. Changing advisor after adviser isn't good.

simas
Posts: 287
Joined: Wed Apr 04, 2007 5:50 pm

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by simas » Tue Oct 16, 2018 7:40 am

TopCat123 wrote:
Sat Oct 13, 2018 9:33 am
No one is able to recommend good advisor.
Really appreciate input!
I would step back from very minute details and ask a bigger question - what are your expectations of the advisor? what you want advisor to do/not do? are you confusing advisor with investment/portfolio manager and either of those with stock/fund pickers? Are you willing to think of advisor as any other highly qualified professional (i.e. attorney, accountant, etc.) where you buying specific expertise at X/hour and professional advising you on specific questions (risk tolerance, allocation , tax strategy and planning ,etc.) ? Or are you thinking of sales people who will somehow magicaly be delivering 'investment performance'?

Define that first and then it would be easier.
Getting various salespersons , paying them with assets under management which gets expensive fast at higher asset levels, and then droping them will only repeat the cycle. you are getting neither advice, good price, or have realistic expectations.

Freefallin
Posts: 24
Joined: Thu Oct 04, 2018 1:12 pm

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by Freefallin » Tue Oct 16, 2018 6:56 pm

TopCat123 wrote:
Mon Oct 15, 2018 8:27 pm
Freefallin wrote:
Sun Oct 14, 2018 6:03 pm
I hate to see folks pay for a financial advisor.... With your 550k IRA you could move to Vanguard 2030 target date fund. With your 450k in taxable, only hold total US stock index and total international stock index to be more tax efficient. You could replicate the 2030 fund in your taxable account, but hold the bond percentage in your IRA. So once you have this set up, you would sell some of your 2030 fund in your IRA to buy Vanguard total bond market to make up your bond allocation in your taxable account. It is more tax efficient to hold bonds in an IRA compared to a taxable account.
TopCat: I have had 7 + advisors over 40 years and all at one time or another needed to be changed for poor results etc.
1. is it best to move away fr Private Client now and then just do above with no fee Schwab?
2. Easy to move $550K to VTI 2030
3. Bond % in 2030 is21% Total Bond and about 9% Total Intl Bond-so confused by above. The selling in IRA to put more bonds for tax efficiency.
Thank you and sorry very complex for me.
TopCat
You could move the 550k to the Vanguard 2030 target fund and then let Vanguard manage your taxable account. If I was in your position, that's what I would do to keep it simple. You are blessed to have a million dollars to worry about. Check out this link below. To manage your taxable account, it would only be .3% that may be a small price to pay for peace of mind with your taxable account.

https://investor.vanguard.com/financial ... ial-advice
"Pain is the touchstone of all growth." - Bill W.

TopCat123
Posts: 7
Joined: Thu Oct 11, 2018 10:19 am

Re: Invest in target date fund or do myself? Poor return Schwab Private Client

Post by TopCat123 » Wed Oct 17, 2018 12:50 pm

Thanks for that idea--I like it--keep it simple and yet get some low cost advice. And yes I save the million by always "paying myself first" and banking all pay raises and bonuses.... :)

Post Reply