AA Question - Vangaurd Portfolio Watch

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JasonA1987
Posts: 25
Joined: Tue Dec 06, 2016 5:56 pm

AA Question - Vangaurd Portfolio Watch

Post by JasonA1987 »

I have what I am guessing is a fairly simple question. (TLDR: Is what I am doing reasonable?) I have a 401 through my work, my wife has a 401 and a 457 through her work, and then I have an IRA with Vanguard. A while ago I was trying to figure out a simple way to make sure the asset allocation was correct across all four accounts. I want to mimic something like Vanguard Total Stock Market as close as I can, but am obviously constrained by what is offered through our retirement accounts. So my basic plan was to use a small, mid, and large cap that was offered in each account and then use the Vanguard Portfolio Watch to get the proportions right. I check it once or twice a year and adjust new investments to tweak the ratios.

We have 100% stocks in: VFIAX, VIIIX, VIMAX, VMCIX, VSCIX, and VSMAX. The IRA with Vanguard is VGSTX.

Do you think what I am doing is reasonable and fairly closely mimics a Total Stock Market fund?

Portfolio Watch currently has the following numbers:

*Edit: The formatting got messed up. These numbers are the difference from my portfolio to market in percentage.
Large cap 4.2
Mid cap –8.5
Small cap 4.3

Basic materials –1.5
Communication services 0.2
Consumer cyclical 0.4
Consumer defensive 0.1
Energy –0.1
Financial services –0.5
Health care –0.1
Industrials 1.1
Real estate –0.2
Technology 0.0
Utilities 0.6
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happenstance
Posts: 178
Joined: Sun Jul 26, 2015 11:24 am
Location: NYC

Re: AA Question - Vangaurd Portfolio Watch

Post by happenstance »

Yes, approximating the Total Stock Market is a totally reasonable and normal thing to do in an employer plan, where you're constrained by the fund choices. The wiki has a page dedicated to approximating TSM with various fund choices. Based on that, if you held the funds in roughly these percentages, you'll come pretty close:

S&P 500 (VFIAX/VIIIX): 81%
Mid Cap (VIMAX/VMCIX): 4%
Small-Cap (VSCIX/VSMAX): 15%

You didn't post your current percentages in these funds, but you may have drifted a little based off what Portfolio Watch says.

In the IRA, do you have more options than VGSTX (STAR Fund, ER 0.32%)? If you want a balanced fund, a cheaper alternative is LifeStrategy Moderate Growth (VSMGX), ER 0.13%. Or you could go TSM or replicated TSM in the IRA as well.

I would also recommend you have at least a small allocation to bonds, like 10-20%. They help dampen portfolio volatility, which over time increases compound growth.
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