First Time Portfolio Review

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
apple44
Posts: 60
Joined: Tue Feb 19, 2019 3:22 pm

First Time Portfolio Review

Post by apple44 » Wed Mar 20, 2019 1:58 pm

Hello,

Below please find our information and current asset allocation. Would you please help us make adjustments and help us answer the questions listed?

Emergency funds: we have this.
Debt: only Mortgage, maturity date 10/1/2030, interest rate 2.75%.
Tax Filing Status: Married filing jointly with two children and one parent as dependents.
Tax Rate: highest bracket.
State of Residence: Texas.
Age: 38, 35.
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 10% of stocks (or none, don't mind having it but it's not important to us)

Current portfolio size: $1,085,000.

Current retirement assets:

Taxable accounts in Schwab and TDAmeritrade:
$10,000 cash for investing (thanks to tax refund)
33% of the entire portfolio in brokerage accounts, of which:
28% in Vanguard Information Technology ETF (VGT, 0.10)
18% in SPDR S&P 500 etf (SPY, 0.09)
15.5% in Fidelity Select IT Services Portfolio (FBSOX,0. 77)
12.5% in Schwab S&P 500 Index Fund (SWPPX, 0.02)
8% in iShares Russell 3000 Growth Index (IUSG, 0.04)
6% in Innovation Shares nEXTGENERATION (KOIN, 0.65)
4.5% in iShares core S&P small cap (IJR, 0.07)
3.2% in Schwab US Large cap ETF (SCHX, 0.03)
2.8% in Charles Schwab US REIT ETF (SCHH, 0.07)
0.7% in individual company stocks
0.4% in Schwab US small cap ETF (SCHA, 0.04)
only $170 in Schwab fundamental emerging (SFENX, 0.39)

Taxable private placement investments: 13.8% of the entire portfolio.

His 401k (Thrift Savings Plan, no match):
23% of our entire portfolio, of which:
80% in common stock index fund (VFINX, 0.14%)
10% in small cap stock index fund (VTMSX, 0.09%)
10% in international stock index fund (VTIAX, 0.11)

His Roth IRA at Schwab
3.3% of the entire portfolio, of which:
23% in individual stock
23% in Fidelity Magellan Fund Large Growth (FMAGX, 0.69)
23% in Fidelity OTC Portfolio Large Growth (FOCPX, 0.88)
23% in Shelton NASDAQ 100 Index large non-financial (NASDX, 0.51)
7% in Schwab Fundamental emerging (SFENX, 0.39)

His Traditional IRA at Schwab
$5,500 to be invested: We used to backdoor Roth IRA conversion, but since we got IRS inquiry, we've decided not to do it anymore, so now he has $5,500 in the traditional IRA that hasn't been invested.

Her 401k at Fidelity (no match)
7.5% of the entire portfolio, all of which is in BTC Lifepath 2050 Fund Q, which is 56% domestic stock, 39% foreign stock, 1% bond and 4% short term.
It's selected by the employer and we don't have a choice here.

Her Roth IRA at TDAmeritrade
2.6% of the entire portfolio, of which:
2.5% in Alger Capital Appreciation Institutional Fund Class (ALARX, 1.15)
97.5% in Fidelity Select IT Services Portfolio (FBSOX,0. 77)

Her Traditional IRA at TDAmeritrade (including rollover 401K)
15% of the entire portfolio, of which:
All but $5,500 is in Schwab S&P500 Index Fund (SWPPX, 0.02)
$5,500 to be invested.

529 Plan:
$2,850 for the older kid, haven't set up an account for the second kid, of which:
25% in Vanguard total stock market index (VITPX, 0.02)
25% in Vanguard mid-cap index (VMCPX, 0.03)
25% in Vanguard small cap index (VSCPX, 0.03)
25% in Vanguard small cap value index (VSIIX, 0.06)

HSA at Fidelity
$6,900 in total, of which:
65% in Vanguard total international stock index (VTIAX, 0.11)
35% in Innovation Shares Nextgeneration (KOIN, 0.65)

New annual Contributions:
We'll max out the 401k contributions and IRA contributions allowed by IRSA. No match from the employer.
Not sure how much to contribute to the 529 plan for the two children.
If we have the high deductible medical insurance we'll do HSA, but depending on what insurance we decide to have, sometimes we don't have this option.
Savings will go to the taxable accounts.

Questions:

1. As you can see, we have money in a lot of different accounts/funds. Should we try to clean it up, if so, what would you suggest? Especially with those that have higher expense ratio, and I've bolded them above.

2. As to asset allocation, what suggestion do you have? I don't want to make it complicated but also don't want to do too much movement -- mainly don't want to generate too much tax.

3. Is there any other issue you saw with our portfolio or things I should be aware/questions I should be asking?

Thanks a lot for your time and advice!

Carl53
Posts: 1877
Joined: Sun Mar 07, 2010 8:26 pm

Re: First Time Portfolio Review

Post by Carl53 » Thu Mar 21, 2019 4:55 am

1. It would be good to simplify and in particular eliminate funds with higher expense ratios. If you want to maintain one or two very minor single positions to speculate in because you just want to there is likely little harm.

2 You might want to consider slightly bumping up your bond allocation over the next several years. What is the private placement investment allocation? Sounds like something risky. You have a significant amount of money in this.

3. I’m not knowledgeable about 529s. Suggest noting children’s ages so that others might chime in. While you do not mention your income level, you have an enviable start on your financial futures. Do consider some substantial term life insurance for both spouses.

FederalFIRE
Posts: 216
Joined: Thu Jan 17, 2019 11:40 am

Re: First Time Portfolio Review

Post by FederalFIRE » Thu Mar 21, 2019 5:34 am

apple44 wrote:
Wed Mar 20, 2019 1:58 pm
1. As you can see, we have money in a lot of different accounts/funds. Should we try to clean it up, if so, what would you suggest? Especially with those that have higher expense ratio, and I've bolded them above.
I expect the overwhelming response here will be that yes, you should clean these up and get down to a 3 or 4 fund portfolio total. It would also make your life a lot easier if you're able to put all the brokerage accounts at one firm - Vanguard and Fidelity are common choices here. This can also make things more straightforward in choosing funds, because you would have access to commission-free trades for their own internal funds.

Think about your portfolio as one across all of these accounts. The more the funds in available in the accounts reflect each other, the easier it is to rebalance and also quickly review and understand your allocations. This can be made easier if you consolidate at a single brokerage.

With regard to your taxable account, you have a lot of overlap in these funds such as a Russell index fund and separate small cap funds, multiple S&P funds, and the Vanguard IT fund. You may have good reason to have such a large weighting toward IT funds, but you should certainly be aware and conscious of that decision, since many of the top holdings in VGT will also be top holdings in your other SP500 index funds. Of course making these changes have tax implications, so that should be considered before doing anything.

If I was in your shoes I would consolidate all of the tax-advantaged accounts at a single brokerage, liquidate the assets, and the rebalance into an easy, lazy portfolio (below).
apple44 wrote:
Wed Mar 20, 2019 1:58 pm
2. As to asset allocation, what suggestion do you have? I don't want to make it complicated but also don't want to do too much movement -- mainly don't want to generate too much tax.
This page on the wiki is your bible for asset allocation: https://www.bogleheads.org/wiki/Asset_a ... llocations

My suggestion: keep it simple. Make new purchases in your taxable account as ETFs to reduce tax burden. You can easily use VTI (total stock market), VXUS (ex-us stock market) and BND (total bond) to build a highly diversified portfolio using Vanguard funds. Other options exist at Fidelity and other brokerages.

Here are some other examples of "lazy portfolios". Read and understand these, and then you can make an informed decision for yourself and your preferences: https://www.bogleheads.org/wiki/Lazy_portfolios
apple44 wrote:
Wed Mar 20, 2019 1:58 pm
3. Is there any other issue you saw with our portfolio or things I should be aware/questions I should be asking?
It's worth understanding more about the value of the G-fund in your TSP and using it as your sole allocation for bonds.

Topic Author
apple44
Posts: 60
Joined: Tue Feb 19, 2019 3:22 pm

Re: First Time Portfolio Review

Post by apple44 » Thu Mar 21, 2019 9:15 am

Thank you both for having the patience to read my long post and for giving me valuable advice! So action items are:

1. Move accounts from TDAmeritrade to Schwab. This may sound very ignorant, but the reason that we have so many accounts is that we never moved anything out of any bank, so here's the question: I think we just need to tell Schwab and TDAmeritrade about our decision, and with some forms that we'll need to fill in and sign, they will start the process on their end right? Is there any tax implication? I understand that they'll probably answer my questions too, but just want to generally understand what's involved.

2. Liquidate assets in funds with higher expense ratio.

3. Consolidate funds in the same category.

4. Mindful of high concentration of IT funds, private placement investment and low bond allocation (there's no particular reason for using the TSP as the sole bond investment vehicle -- bonds were simply not on our radar before but now we'll start to allocate more money to bonds).

ExitStageLeft
Posts: 1782
Joined: Sat Jan 20, 2018 4:02 pm

Re: First Time Portfolio Review

Post by ExitStageLeft » Thu Mar 21, 2019 9:37 am

To move accounts the easiest thing is to have the receiving brokerage initiate the transfer. You want a custodian-to-custodian transfer, with assets moving in-kind. That's important for the taxable accounts because you don't want to liquidate everything at once.

Jack FFR1846
Posts: 10779
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: First Time Portfolio Review

Post by Jack FFR1846 » Thu Mar 21, 2019 10:02 am

Yes, you have way too many funds that overlap, are overly expensive for no reason and that have good, low cost alternatives that you're not taking advantage of. Others have good suggestions already, so I'm going to be focused.

All accounts: Go to each site where the account is held. Get a listing of funds and then ETFs ranked by ER only. Write down the lowest ER US Equity fund and ETF, lowest ER bond fund and ETF, lowest ER international equity fund and ETF.

Between the fund and ETF, cross off whichever has a higher ER.

From those funds and ETFs, build your portfolio to match the AA you desire. This won't be all that hard. If you end up with a bunch of accounts that only have one fund or ETF in them, that's absolutely fine.

An example of where you're not utilizing the lowest cost where it's available for you is TDAmeritrade. I have an account there. First, call your local TDA guy. Tell him you want some free trades. They'll give them to you. Ok....so now, if you want VTI, you can get it with an ER of 0.04% with no cost to do so. I personally have about $300k at TDA and my only holdings are VTI and VEA. I don't pay to trade. If you absolutely have to pay, it's what? $5 or $7 to make your one trade and be done?

It's not a bad thing to have a bunch of different funds for a reason. I hold VTI, SCHB, FZROX, FSKAX, FSAIX and SPTM. Why? They're all at different brokerages or in different type accounts (401k, roth, taxables) but are all large cap US company-like. But they're all low cost with VTI at 0.04% being the most expensive. But you don't want to hold all of these in one brokerage along with Contrafund, SPY and VTSAX for no real reason.

If you don't already have a spread sheet to keep track of your investments, build one.
Bogle: Smart Beta is stupid

Post Reply