100% equities and looking to keep it simple

[OneWingedGull]

Emergency funds: $54k
Debt: $105k mortgage at 2.75%
Tax Filing Status: Single
Age: 32
Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: 45% of stocks

I have a 100% equities portfolio that I'm looking to hold for awhile before slowly adding bonds. I'm self-employed ($100-150k/yr income), and it's possible one of my businesses will be sold within the next three years for a mid-six figures windfall. Ideally I'd like to retire in the next 10-15 years, but I'm flexible and enjoy my work a lot.

Current portfolio value: $270k

Allocation: 55% US (61% of this is VTSAX, and 39% is VSIAX) / 45% international (VTIAX)

My Roth ($57k) is entirely small cap value, VSIAX. My thinking (based on some advice I received from a CFP) is go aggressive with a historically strong asset class here, since this is money I'll likely be touching last. Therefore, the current tilt of my portfolio is hard to SCV, but that would decrease since I'll be contributing much more annually to my 401k and brokerage, in which I exclusively buy and hold VTSAX and VTIAX.

Is my approach with the small cap tilt unnecessarily risky? I like the idea of staying close to market weight with my international allocation. I'm happy to hear any ideas for further diversification as well as any other recommendations

[minimalistmarc]

The simplest portfolio for market weight would be 100% vanguard all world

[nix4me]

I’m sure you used past performance to determine VTSAX was the main engine, curious in what you used to determine international was a good investment?

I like your aggressive approach.

Simplest approach to me would be to follow JL Collins’ advice in Simple Path to Wealth and go 100% VTSAX.

[wassabi]

If you want simple and you want 45% international then you should just buy 100% Vanguard Total World (VTWAX) and be done with it.

[lostdog]

If you want simple and you want 45% international then you should just buy 100% Vanguard Total World (VTWAX) and be done with it.

+1

If you want super simple and 100% equites go with VTWAX(Vanguard Total World Admiral) and then concentrate all of your efforts into your business.

[tea_pirate]

I’m sure you used past performance to determine VTSAX was the main engine, curious in what you used to determine international was a good investment?

I like your aggressive approach.

Simplest approach to me would be to follow JL Collins’ advice in Simple Path to Wealth and go 100% VTSAX.

JL who? That guy with no qualifications other than starting a blog? 100% VTSAX is the complete antithesis of OP's stated objective to stay close to market weight with international.

To the OP, I would not consider your small cap tilt to be "unnecessarily risky," but it may be "needlessly complex." I have a similar investment philosophy to you (international at market cap weight) and I've considering switching to Vanguard Total World Admiral for simplicity. However, I did see the benefit of keeping US and international separate in 2018 when I was able to get some nice tax loss harvesting with international in my taxable account, so I will likely stick with the 2 fund approach.

[lostdog]

If you want simple and you want 45% international then you should just buy 100% Vanguard Total World (VTWAX) and be done with it.

+1

If you want super simple and 100% equites go with VTWAX(Vanguard Total World Admiral) and then concentrate all of your efforts into your business.

I forgot to mention. You can TLH with ACWI ishares etf at Vanguard. It's BlackRock's Total World fund.

[nix4me]

I’m sure you used past performance to determine VTSAX was the main engine, curious in what you used to determine international was a good investment?

I like your aggressive approach.

Simplest approach to me would be to follow JL Collins’ advice in Simple Path to Wealth and go 100% VTSAX.

JL who? That guy with no qualifications other than starting a blog? 100% VTSAX is the complete antithesis of OP's stated objective to stay close to market weight with international.

To the OP, I would not consider your small cap tilt to be "unnecessarily risky," but it may be "needlessly complex." I have a similar investment philosophy to you (international at market cap weight) and I've considering switching to Vanguard Total World Admiral for simplicity. However, I did see the benefit of keeping US and international separate in 2018 when I was able to get some nice tax loss harvesting with international in my taxable account, so I will likely stick with the 2 fund approach.

100% in VTWAX? You mean the fund that is 4 days old?

[palaheel]

100% in VTWAX? You mean the fund that is 4 days old?

That's just the Admiral share class, I think. The ETF version, VT, has been around long enough. It's the total world allocation fund, including EM.

100% stocks at your age is fine, if you can weather the storms. It'll be a bumpy ride. Have a plan on when you're going to start shifting to a more conservative allocation.

[Ben Mathew]

My Roth ($57k) is entirely small cap value, VSIAX. My thinking (based on some advice I received from a CFP) is go aggressive with a historically strong asset class here, since this is money I'll likely be touching last. Therefore, the current tilt of my portfolio is hard to SCV, but that would decrease since I'll be contributing much more annually to my 401k and brokerage, in which I exclusively buy and hold VTSAX and VTIAX.

Is my approach with the small cap tilt unnecessarily risky?

You have a good portfolio. I tilt towards small cap value as well. I view it as a bet on underpriced stocks, and so the tilt gets me closer to the risk-return frontier. Whether it will work out to be a net positive can only be known in hindsight. But it's a bet that looks attractive to me now.

[Hukedonfonix4me]

*This white paper by Vanguard is a good read on international diversification:

https://www.vanguard.com/pdf/flgiecr.pdf

*Taylor Larimore also has an (how much international: a suggestion?) thread on bogleheads that would be worth a search.

*I like the thinking behind small cap value in the Roth IRA. We opened my wife's Roth IRA and fund it 100% VSIAX small cap value. Our other Roth IRA, my existing account was already 100% S&P 500 index and we left that alone. Our asset allocation is spread across all of our retirement vehicles and it sounds like you do the same. I wouldn't change anything.

[dbr]

Is my approach with the small cap tilt unnecessarily risky?

Not for a person who is already 100% stock, in my opinion. You need a significant tilt or there is no point to tilting at all. You could consider that a risky tilt combined with adding some bonds to that 100% equity allocation is a possible strategy. Personally I don't do stuff like that, but lots of people do, and it is your choice. I don't like the SCV tilt because the benefits are highly uncertain.

[tea_pirate]

I’m sure you used past performance to determine VTSAX was the main engine, curious in what you used to determine international was a good investment?

I like your aggressive approach.

Simplest approach to me would be to follow JL Collins’ advice in Simple Path to Wealth and go 100% VTSAX.

JL who? That guy with no qualifications other than starting a blog? 100% VTSAX is the complete antithesis of OP's stated objective to stay close to market weight with international.

To the OP, I would not consider your small cap tilt to be "unnecessarily risky," but it may be "needlessly complex." I have a similar investment philosophy to you (international at market cap weight) and I've considering switching to Vanguard Total World Admiral for simplicity. However, I did see the benefit of keeping US and international separate in 2018 when I was able to get some nice tax loss harvesting with international in my taxable account, so I will likely stick with the 2 fund approach.

100% in VTWAX? You mean the fund that is 4 days old?

VTWSX (Total World Investor) used to be the only option along with its ETF VT. The former is now closed with the creation of Total World Admiral which coincided with Vanguard lowering the minimum for Admiral Shares to $3k, making VTWSX redundant.

The age of the fund doesn't matter if you understand the underlying investments.

[bg5]

I am 38 years old and have my entire retirement into VTSAX and I have loved it so far. The idea that I will get what the market does is really cool to me. Best of luck!