Help on Personal Investment Portfolio

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Topic Author
kevinxzh
Posts: 9
Joined: Thu Jul 03, 2008 3:30 pm

Help on Personal Investment Portfolio

Post by kevinxzh » Sun Nov 02, 2008 4:28 pm

I have read this forum for some time, and is a fan of Vanguard index investing. Yet my investment portfolio seems not aligned with my goal. I truly appreciate any advice/suggestions on my asset allocation.

I have emergency funds = 3-6 months of expenses
I have car loan = $28105
Tax Filing Status: Married filing Jointly
Tax Rate: about 28% Federal for 2008 (2009's estimated tax rate is 33%), 9.3% CA, living in CA.
Age: I am about 35, my wife 27, without kid

Currently plan to buy house in the next 6 month to 2 years. The down payment amount is excluded from investment portfolio listed here.

Desired Asset allocation: (80% stocks/20% bonds)
My total assets is low 6 figures, maybe ineligible to contribute to Roth IRA in 2009 and later years
Currently my stock investment portfolio is down about 35% since Jan 2008

Taxable (Vanguard Mutual Fund)
4.94% Vanguard Total Stock Index (VTSMX)
7.55% Vanguard Middle Cap Index (VIMSX)
6.87% Vanguard Small Cap Index (NAESX)
7.55% Vanguard Emerging Market Index (VEIEX)
subtotal: 26.92%

His Roth IRA at Vanguard
2.06% Vanguard Total In'l Stock Index (VGTSX)
10.3% Vanguard REIT Index (VGSIX)
subtotal: 12.36%

Her Roth IRA at Vanguard
1.85% Vanguard Total In'l Stock Index (VGTSX)
3.30% Vanguard SmallCap Value Index (VISVX)
subtotal: 5.15%

N/A = ticket symbol could not be found, mostly likely they are not publicly traded mutual fund

His 401k
1.58% S&P 500 Index Fund (N/A) (0.005%)
1.58% Dow Index Fund (N/A) (0.06%)
8.74% Vanguard PRIMECAP Fund (VPMAX) (0.31%)
3.36% Columbia Value&Restructuring (UMBIX) (0.94%)
1.17% Hartford Capital Appreciation (HIACX) (0.67%)
2.62% Hartford MidCap Fund (HIACX) (0.69%)
1.55% Turner Emerging Growth (TMCGX) (1.55%)
2.88% BGI EAFE Equity Index (N/A) (0.1%)
3.09% Dodge&Cox Int'l Stock Fund (DODFX) (0.65%)
2.82% Int'l Equity Blend Fund (N/A) (0.73%)
4.46% First Eagle Overseas fund (SGOIX) (0.88%)
0.89% Oppenheimer Int'l Small Fund (OSMYX) (0.79%)
0.00% BGI US Debt Index Fund (N/A) (0.10%)
1.10% Fidelity Money Market (FMPXX) (0.22%)
0.70% Company Individual Stock (N/A) (0.00%)
subtotal: 36.55%

Her 401K (she started in 2008)
0.89% Total Domestic Stock Market Index Fund (N/A) (0.13%)
0.00% S&P 500 Index Fund (N/A) (0.08%)
1.44% S&P MidCap 400 Index (N/A) (0.10%)
1.37% Russel 2000 Index (N/A) (0.11%)
1.58% MSCI EAFE Index (N/A) (0.15%)
subtotal: 5.29%

13.73% Company Profit Sharing (N/A) (commission on selling company stock)

New annual Contributions in 2009 (estimated):
his 401k $16,500 (personal contribution) + $5000 (employee match)
her 401k $16,500 (personal contribution) + $5000 (employee match)

New saving in 2009 (estimated)
$40000

Funds available in his/her 401(k)
Too many to list here. The favorite/good ones are listed on his/her 401k list (including 0% at time being)

My own computation on current asset allocation is as follows:
Domestic Large Cap 23%
Domestic Middle Cap 12%
Domestic Small Cap 13%
Int'l Large Cap 15%
Int'l Small Cap 5%
Int'l Emerging Cap 8%
REIT 10%
Employer Stock 14%


Questions:
1) I am thinking about put most domestic big cap, foreign big cap, blend bond into his 401k's index fund due to the low expense ratio, while preserving some good actively managed fund (i.e. VPMAX,SGOIX). Put most domestic middle and small cap to her 401k's index fund due to the low expense ratio.
2) Moving the taxable bond to his/her Roth IRA fund while maintaining REIT (I can't move VWEHX due to one year limitation) to avoid taxing on dividend.
3) Relocating some index fund (big/middle/small cap) to ETF fund through Wells Fargo trading account (100 trading per year) to save cost after taking loss. There is no capital gain in this case.

Thank you for your reading. Any shared thoughts is warmly welcomed.

Truthfully yours
kevin
Last edited by kevinxzh on Mon Nov 03, 2008 2:24 am, edited 6 times in total.

Laura
Posts: 7973
Joined: Mon Feb 19, 2007 7:40 pm

Questions

Post by Laura » Sun Nov 02, 2008 4:39 pm

Kevin,

Is your house down payment money separate from your current taxable holdings? If you are saving for a short term goal but using equities that isn't a good idea. You should also separate out money needed in a short period of time from your retirement portfolio or it can throw your asset allocation out of balance. Please edit your original post to remove any house money from the list and then total everything else to 100%.

The limits for 401k contributions are going up to $16,500 in 2009. You also mention matching funds. What is the total amount that you will add to each 401k in 2009?

You have way too many funds here and it appears you were building a separate portfolio in each of your different accounts. You can easily cut this down to something like this:

taxable

house money - money market fund (even bonds are too volatile for a short term goal)

Investments
FTSE World ex/US

his roth
REIT

her roth
small cap value

his 401k
BGI EAFE Equity Index N/A 0.10 1.56%
S&P 500 Index Fund N/A 0.005 0.85%
BGI US Debt Index Fund N/A 0.10 0.00%

her 401k
DowJonesWilshire4500Index N/A 0.13 0.48%
S&P 500 Index Fund N/A 0.08 0.00%

This is obviously not a specific recommendation because we don't have the correct percentages without house money and we don't have the amount of new contributions.

Hopefully this is enough to help get you started.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

Topic Author
kevinxzh
Posts: 9
Joined: Thu Jul 03, 2008 3:30 pm

Post by kevinxzh » Mon Nov 03, 2008 12:07 am

Thank you very much Laura for your "general" but pinpointing suggestions.

I have already updated my posting to exclude house down payment amount, add estimated contribution amount to 401k in 2009 and projected saving amount in 2009.

If anyone could provide a little bit more detailed suggestions/advice, I truly appreciate it.

BTW, her 401K has excellent mid and small cap index mutual fund, is it a good idea to own some of them?

The last but not the least, I spend time to format nicely (fund name, expenses ratio, percentage), yet it displayed in an unacceptable way, anyone has clue to fix it?

your truthfully
kevin

User avatar
PiperWarrior
Posts: 4068
Joined: Fri Dec 21, 2007 4:55 am
Location: right on course

Post by PiperWarrior » Mon Nov 03, 2008 12:56 am

Welcome to the forum!
kevinxzh wrote:If anyone could provide a little bit more detailed suggestions/advice, I truly appreciate it.
I would be happy to do that, but your percentages add up to 87.06% right now if I am adding them up correctly. Should I assume that that's everything?
kevinxzh wrote:BTW, her 401K has excellent mid and small cap index mutual fund, is it a good idea to own some of them?
Sure. In fact, Laura suggested "DowJonesWilshire4500Index N/A 0.13 0.48%".

This is basically the entire domestic stock market with S&P 500 removed. So, if you do something like:

80% S&P 500 Index Fund
20% DowJonesWilshire4500Index

You get an equivalent of Total Stock Market. "DowJonesWilshire4500Index" is also called Extended Market. See Approximating Total Stock Market for details.
kevinxzh wrote:The last but not the least, I spend time to format nicely (fund name, expenses ratio, percentage), yet it displayed in an unacceptable way, anyone has clue to fix it?
One way is to use a [ code ] blah blah [ /code ]. Here is an example.

Code: Select all

the typewriter font rocks!
Another way is to follow Laura's format, which is:

X.XX% Fund name (ABCDX) (Y.YY%)

where X.XX% represents the position size and Y.YY% represents the expense ratio. I sort of like this because the position sizes appear all lined up at the first column without use of special tags.

In any event, you might want to use the preview feature as you write to avoid wasting a lot of time on formatting.

Topic Author
kevinxzh
Posts: 9
Joined: Thu Jul 03, 2008 3:30 pm

Post by kevinxzh » Mon Nov 03, 2008 2:19 am

PiperWarrior: I am astonished that you really spend minutes to add my percentage. Shame on me for my carelessness and ignorance.

I updated the format for easy reading and recomputed the percentage to add up to 100%.

There is typo in her 401k. It should "total domestic market index fund" instead of "DJ Wildfire 4500 index". So it might make sense to invest in mid/small cap index fund.

After reading your and Laura's postings, I just wonder whether I should keep a small percentage on some attractive actively managed mutual fund, such as VPMAX(PrimeCap), SGOIX(overseas small value) in addition to the low cost index fund in his 401K

In the process of implementing your suggestions, is it better to transition slowly in a few month time frame, or just one shot in one day? Plus I am inclined to buy VEU ETF through free brokerage instead of traditional mutual fund.

Cheers!
kevin

Laura
Posts: 7973
Joined: Mon Feb 19, 2007 7:40 pm

Confusion

Post by Laura » Mon Nov 03, 2008 6:33 am

Kevin,

You seem to be a little confused about the US stock market so let me try to clarify it. Funds labeled Total Stock market or something similar include US large companies, mid sized companies, and small companies, usually in the percentage they represent in the market. This means that you will usually find something like 70% large companies, 20% mid sized companies, and 10% small companies.

Funds like the S&P 500 fund cover large companies. The DJ Wilshire 4500 includes the Mid and small sized companies and can be combined with the S&P 500 to create holdings that are equal to the total market. If you also invest in mid and small cap index funds all you do is duplicate exactly funds you already have and you do not add any further diversification to your portfolio. Your current portfolio has huge overlap. For example in the her 401k you hold Total market then duplicate it with holdings in the S&P 500, Midcap 400, and Russel 2000 index. All you needed was the total stock market index.

I am not clear on something you posted. You mention for new contributions:

New annual Contributions in 2009 (estimated):
his 401k $16,500 (personal contribution) + $5000 (employee match)
her 401k $16,500 (personal contribution) + $5000 (employee match)

New saving in 2009 (estimated)
$40000


Is the $40k figure going into your taxable investment account for a total of $83k including the two 401k accounts?

Your profit sharing plan seems to be invested only in your company stock. This is very, very risky and you need to diversify it as much as possible. If you can sell the stock after a certain time you should do so immediately. Having 13% of your retirement portfolio locked into your company is a really bad idea.

I am suggesting the extended market index fund in the roths because you only have a low cost S&P 500 fund in your 401k. You now have mid/small and large covered although in different accounts. You start out overweight in mid/small cap but because you are not adding to the roths anymore then will quickly become a smaller and smaller piece of your portfolio.

taxable
16% FTSE World ex/US (includes developed and emerging markets)
10.92% Total Stock Market

his roth
12.36% Extended market index (mid and small cap funds)

her roth
5.15% Extended market index (mid and small cap funds)

his 401k
16.55% S&P 500 Index Fund (N/A) (0.005%)
20% BGI US Debt Index Fund N/A 0.10 0.00%

her 401k
5.29% Total Domestic Stock Market Index Fund

Profit Sharing
13.73% Company stock (this is way too large a percentage of your portfolio and you need to sell it possible)

New contributions:

taxable
$13.2k FTSE World ex/US
$26.8k Total Stock Market

his 401k
$16.6k BGI US Debt Index Fund N/A 0.10 0.00%
$5k S&P 500 Index Fund (N/A) (0.005%)

her 401k
$21.5k Total Domestic Stock Market Index Fund

I didn't include Primecap or overseas small value because they don't add any thing but costs to your portfolio. You already have everything covered with the funds listed above.

Since the market is down right now I would make the change in your accounts immediately. You can harvest losses and use them to offset any gains. You immediately start benefiting from the lower costs and reduced complexity and overlap. There is no reason at all to wait.

If you want to use ETFs do so but they may not save you a lot of money over time. Read some of the comments of posters here who have found the process of buying and selling to be more cumbersome than anticipated.

I hope this helps.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

Topic Author
kevinxzh
Posts: 9
Joined: Thu Jul 03, 2008 3:30 pm

Post by kevinxzh » Tue Nov 04, 2008 1:42 pm

It is crystal clear for me. Thanks for your comments and your contributions, which will benefit me in the long run.

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