Portfolio Realignment Nightmare

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Topic Author
unknownsmith
Posts: 2
Joined: Thu May 02, 2019 1:56 pm

Portfolio Realignment Nightmare

Post by unknownsmith » Thu May 02, 2019 2:36 pm

First off, thank you for your sharing your priceless information with us newbies! I've spend a few daysgetting my bearings but I still find myself becoming overwhelmed with where to start. I hope I can put this in a logical post to help myself and get some advice. As of right now, I am the only one that has a Roth IRA, my wife is invested in a TSP (401k). I will only be listing out my assests.

Emergency Funds: Six+ Months
Debt: Mortgage, 4.25%
Tax Filing Status: Married Filing Jointly
Tax Rate:
State: GA
Age: 30
Desired Asset Allocation: 85% stocks / 15% bonds
Desired International allocation: ?% of stocks (not exactly sure)

Roth TSP 401k - $30k
100% - 2050 Lifecycle Fund (.47)

Roth IRA at eTrade - $49k - (Fair warning, I own a lot of miscellaneous stock, as I've purchased and let it sit. Hence the need to simplify!)
23.5% - Invesco QQQ - QQQ
19.1% - Spdr S&P 500 ETF - SPY
16.7% - Vanguard Target Fund 2055 - VFFVX
10.5% - Gabelli Utilities AAA - 1.37% - GABUX (ugh)
7.3% - Southwest - LUV
7.0% - Vanguard Sector Index - VDC
4.3% - Apple - AAPL
2.0% - Workday Inc CI A - WDAY
1.7% - Verizon Wireless - VZ
1.6% - Ishare Russell 1000 ETF - IWD
1.0% - Microsoft - MSFT
0.4% - Seagate Technologies - STX
0.1% - ishares msci Eafe ETF - EFA

You get the idea... As you can see, I'm am very Large Cap heavy, with my very small portion of international stocks and bonds coming from VFFVX (Target Fund).

I am maxing out my Roth IRA and contributing 6% of salary to TSP.

1. How do I tackle this monster of a porfolio? As I've read, I should start with the highest ER and work my way down.
2. GABUX has really caused a lot of head ache in my portfolio. Should I just cut ties or wait for the seemingly uptick during the summer months?
3. Is there anything else I should be aware of when selling? Like I mentioned, I've never actually sold any before. I recently turned off dividend reinvestments so I can allocate the funds to VFFVX.
4. Should I concentrate on VFFVX or look at the lower cost admiral mutual funds (VTSAX, VTIAX, etc)? I don't mind reallocating once I get this mess reconfigured. The flexability of doing a more agressive plan is appealing.

Thank you for reading! I apologize up front if I missed anything crucial.
Last edited by unknownsmith on Thu May 02, 2019 3:12 pm, edited 4 times in total.

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prudent
Moderator
Posts: 6881
Joined: Fri May 20, 2011 2:50 pm

Re: Portfolio Realignment

Post by prudent » Thu May 02, 2019 2:40 pm

Welcome!

Please edit your post (using the pencil icon in the upper right of your post) to include the names of the funds/stocks. It's unlikely people will know what they are from their ticker symbols.

HomeStretch
Posts: 2883
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Realignment Nightmare

Post by HomeStretch » Thu May 02, 2019 3:22 pm

If I am reading your post correctly, all of the individual stocks are in a Roth IRA. As there are no tax consequences for sales within a Roth IRA, can’t you just sell all the stocks and use the proceeds to buy low cost total market index mutual funds or ETFs according to your desired asset allocation?

bloom2708
Posts: 6953
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Portfolio Realignment Nightmare

Post by bloom2708 » Thu May 02, 2019 3:31 pm

Switch to Target 2040 in TSP. Sell everything in Roth and buy more Target 2055.

This wouldn't quite get you to 15% bonds, but TSP balance should grow faster than Roth balance.

When you get an itch to buy something, buy more of the Target funds you have. Those each have the total stock and total bond market in them.

Work toward maxing Pre-tax TSP and Roth IRA each year. Pre-tax instead of Roth unless you have a pension plan. If a good pension, then stick with Roth or a mix of Pre-tax and Roth.

An easy monster to tame inside tax advantaged accounts. No tax consequences for re-arranging. Good luck!
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

carmonkie
Posts: 149
Joined: Fri Jun 29, 2018 4:31 pm

Re: Portfolio Realignment Nightmare

Post by carmonkie » Thu May 02, 2019 3:37 pm

unknownsmith wrote:
Thu May 02, 2019 2:36 pm
First off, thank you for your sharing your priceless information with us newbies! I've spend a few daysgetting my bearings but I still find myself becoming overwhelmed with where to start. I hope I can put this in a logical post to help myself and get some advice. As of right now, I am the only one that has a Roth IRA, my wife is invested in a TSP (401k). I will only be listing out my assests.

Emergency Funds: Six+ Months
Debt: Mortgage, 4.25%
Tax Filing Status: Married Filing Jointly
Tax Rate:
State: GA
Age: 30
Desired Asset Allocation: 85% stocks / 15% bonds
Desired International allocation: ?% of stocks (not exactly sure)

Roth TSP 401k - $30k
100% - 2050 Lifecycle Fund (.47)

Roth IRA at eTrade - $49k - (Fair warning, I own a lot of miscellaneous stock, as I've purchased and let it sit. Hence the need to simplify!)
23.5% - Invesco QQQ - QQQ
19.1% - Spdr S&P 500 ETF - SPY
16.7% - Vanguard Target Fund 2055 - VFFVX
10.5% - Gabelli Utilities AAA - 1.37% - GABUX (ugh)
7.3% - Southwest - LUV
7.0% - Vanguard Sector Index - VDC
4.3% - Apple - AAPL
2.0% - Workday Inc CI A - WDAY
1.7% - Verizon Wireless - VZ
1.6% - Ishare Russell 1000 ETF - IWD
1.0% - Microsoft - MSFT
0.4% - Seagate Technologies - STX
0.1% - ishares msci Eafe ETF - EFA

You get the idea... As you can see, I'm am very Large Cap heavy, with my very small portion of international stocks and bonds coming from VFFVX (Target Fund).

I am maxing out my Roth IRA and contributing 6% of salary to TSP.

1. How do I tackle this monster of a porfolio? As I've read, I should start with the highest ER and work my way down.
2. GABUX has really caused a lot of head ache in my portfolio. Should I just cut ties or wait for the seemingly uptick during the summer months?
3. Is there anything else I should be aware of when selling? Like I mentioned, I've never actually sold any before. I recently turned off dividend reinvestments so I can allocate the funds to VFFVX.
4. Should I concentrate on VFFVX or look at the lower cost admiral mutual funds (VTSAX, VTIAX, etc)? I don't mind reallocating once I get this mess reconfigured. The flexability of doing a more agressive plan is appealing.

Thank you for reading! I apologize up front if I missed anything crucial.
Lucky you all those stocks are in Roth IRA and selling would not be a taxable event. The general boglehead philosophy is not to hold individual stocks.
You can sell your individual stock and start allocating and construct a 3-fund portfolio using space of your Roth TSP for bonds and the Roth @ e-Trade for the Total Stock and Total international.

The S&P 500 already hold Apple and Verizon, and others so you are not really diversifying your investments.
Asking if you should sell GABUX during the summer is the same as trying to time the market. Just sell today and be done.

It looks like the 2050 Lifecycle fund is about 83 stocks /17 bonds. This would be close enough to what your desired AA is, but you need to answer if you really want International as this fund holds 28% International.

VFFVX is 90/10 so not in-line with your desired AA and a bigger 35% allocated to international.

An easy way to tackle this is to sell all the stocks and then move all to the target fund and then comeback and see if you want to do a 3 fund portfolio or just hold those 2 Target funds, which would be OK to do.

livesoft
Posts: 68569
Joined: Thu Mar 01, 2007 8:00 pm

Re: Portfolio Realignment Nightmare

Post by livesoft » Thu May 02, 2019 3:40 pm

You are in luck as noted by the other respondents: You don't have a nightmare because your investments are in in Roths, so there are no tax consequences to just sell and invest in what you want.

So, do this:
1. Sell everything you don't want.
2. Invest the money in something that you want.

It is really that simple.

The idea to just make each account a single fund, namely a Lifecycle or Target Retirement fund, is outstanding. You can do that tomorrow.

Whether you should be using the Roth TSP or the straight up tax-deferred TSP is another question that will depend on your tax brackets and the deductibility of the tax-deferred TSP contributions to you.

Whether you should be using E*trade or not is another issue.
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Rus In Urbe
Posts: 520
Joined: Sat Dec 09, 2017 2:12 pm

Re: Portfolio Realignment Nightmare

Post by Rus In Urbe » Thu May 02, 2019 3:45 pm

Good advice here. You can make some sales/consolidations immediately since there will be no tax implications.

And.....slow down. You've spent a "few days"---and your head is swimming. Of course!

The BH way is to play the long game. So, don't worry overmuch about making a lot of sudden decisions and getting everything aligned up right now, pronto. Take your time. Learn. Make some good preliminary moves as suggeted. Think some more. Write out a plan/mission statement so that you don't panic and go off course when the (inevitable) downturn comes. Think some more. Learn some more.

Do this, over and over, and you will win the long game. That's the only game that really matters (ignore the short term ups and downs).

WELCOME to BHs and happy (profitable :moneybag ) investing to you!

Rus :beer
I'd like to live as a poor man with lots of money. ~Pablo Picasso

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Stinky
Posts: 2436
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Portfolio Realignment Nightmare

Post by Stinky » Thu May 02, 2019 3:50 pm

unknownsmith wrote:
Thu May 02, 2019 2:36 pm
First off, thank you for your sharing your priceless information with us newbies! I've spend a few daysgetting my bearings but I still find myself becoming overwhelmed with where to start. I hope I can put this in a logical post to help myself and get some advice. As of right now, I am the only one that has a Roth IRA, my wife is invested in a TSP (401k). I will only be listing out my assests.

Emergency Funds: Six+ Months
Debt: Mortgage, 4.25%
Tax Filing Status: Married Filing Jointly
Tax Rate:
State: GA
Age: 30
Desired Asset Allocation: 85% stocks / 15% bonds
Desired International allocation: ?% of stocks (not exactly sure)

TSP 401k - $30k
100% - 2050 Lifecycle Fund (.47)

Roth IRA at eTrade - $49k - (Fair warning, I own a lot of miscellaneous stock, as I've purchased and let it sit. Hence the need to simplify!)
23.5% - Invesco QQQ - QQQ
19.1% - Spdr S&P 500 ETF - SPY
16.7% - Vanguard Target Fund 2055 - VFFVX
10.5% - Gabelli Utilities AAA - 1.37% - GABUX (ugh)
7.3% - Southwest - LUV
7.0% - Vanguard Sector Index - VDC
4.3% - Apple - AAPL
2.0% - Workday Inc CI A - WDAY
1.7% - Verizon Wireless - VZ
1.6% - Ishare Russell 1000 ETF - IWD
1.0% - Microsoft - MSFT
0.4% - Seagate Technologies - STX
0.1% - ishares msci Eafe ETF - EFA

You get the idea... As you can see, I'm am very Large Cap heavy, with my very small portion of international stocks and bonds coming from VFFVX (Target Fund).

I am maxing out my Roth IRA and contributing 6% of salary to TSP.

1. How do I tackle this monster of a porfolio? As I've read, I should start with the highest ER and work my way down.
2. GABUX has really caused a lot of head ache in my portfolio. Should I just cut ties or wait for the seemingly uptick during the summer months?
3. Is there anything else I should be aware of when selling? Like I mentioned, I've never actually sold any before. I recently turned off dividend reinvestments so I can allocate the funds to VFFVX.
4. Should I concentrate on VFFVX or look at the lower cost admiral mutual funds (VTSAX, VTIAX, etc)? I don't mind reallocating once I get this mess reconfigured. The flexability of doing a more agressive plan is appealing.

Thank you for reading! I apologize up front if I missed anything crucial.
Welcome to the Forum!

I think that you have less of a mess than you think. It looks like all of “your” assets are in a Roth IRA, so you can trade those without being concerned about tax consequences.

The easiest way to deal with this would be to sell everything in your Roth, and invest in Total Bond Market (15%), with the remaining 85% in a combination of Total Stock Market and Total international Market. The balance between the two equity funds is yours; various posters on this Board have a range of 0% to 50% in international.
It's a GREAT day to be alive - Travis Tritt

teamDE
Posts: 265
Joined: Tue Jun 28, 2016 9:16 pm

Re: Portfolio Realignment Nightmare

Post by teamDE » Thu May 02, 2019 3:59 pm

Agree, no nightmare here. This will be extremely satisfying to clean up! :)

Topic Author
unknownsmith
Posts: 2
Joined: Thu May 02, 2019 1:56 pm

Re: Portfolio Realignment Nightmare

Post by unknownsmith » Fri May 03, 2019 9:28 am

Wow, you all are awesome. Thank you for answering my questions and giving me piece of mind. I will start working through selling most of my individual stock and trying to consolidate to 1-3 mutual funds or ETF.

Are there any negatives to using a target fund, other than being unable to adjust the allocation yourself?

Are there lower fees (I realize it’s pennies on the dollar) with the Target Fund? Are you required to pay the ER for the funds within the target funds?

Thanks again!

HomeStretch
Posts: 2883
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Realignment Nightmare

Post by HomeStretch » Fri May 03, 2019 9:40 am

unknownsmith wrote:
Fri May 03, 2019 9:28 am
Are there any negatives to using a target fund, other than being unable to adjust the allocation yourself?

Are there lower fees (I realize it’s pennies on the dollar) with the Target Fund? Are you required to pay the ER for the funds within the target funds?
I don’t use target funds in a taxable account as it is more tax efficient for me to hold all bonds in 401k/IRA.

Vanguard Target Funds have a low ER which is a bit higher than if you instead held the underlying funds. That small premium would not stop me from using Target Funds.

YoungBogle
Posts: 107
Joined: Thu Nov 08, 2018 10:04 pm

Re: Portfolio Realignment Nightmare

Post by YoungBogle » Fri May 03, 2019 9:44 am

I would opt for the target fund as opposed to adjusting the allocation itself. As you have stated the incremental cost is marginal, but more importantly it rebalances itself daily. The problem with rebalancing yourself, if that you have to have rebalance with no emotion whether the market is performing very well or very poorly.

Let's say the stock market tanks 33%, now you have to sell some bonds to buy more stocks. However, being the emotional investors we tend to be, we believe stocks are doomed and decide to make our AA more conservative, therefore locking in our losses. Many including myself, would like to think we are emotionless/rational investors, however if you truly want to stick to your IPS, I think you are a fool to not recognize that DIY rebalancing could be a potential distractor from "staying the course".

Also not to mention the priceless benefit of simplicity.

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