2-fund portfolio (+ Savings Account)?

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brutzel1
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Joined: Mon Jun 10, 2019 2:52 pm

2-fund portfolio (+ Savings Account)?

Post by brutzel1 » Mon Jun 10, 2019 3:05 pm

Hi guys,

new here but have been reading for a while. I am familiar with the 3-fund portfolio and basically follow that strategy - with the difference being that I currently don't have any bonds in my portfolio, but a savings account that in theory is taking that place.

About me: I am 35 so still quite comfortable with having a large % in stocks. I understand that I have a lower rate of return but the key thing for me there is liquidity. It acts as my emergency fund AND money I want to be able to draw from within a few years time.

My question: Am I overlooking something here with my current approach? I essentially am 100% stocks with Vanguard currently and using my savings account as my 'peace of mind' money. I guess - and correct me if I'm wrong here - whether or not I am adding bonds to the portfolio solely depends on how much risk I want to take, and has no implications on using the bond piece in my portfolio as savings or emergency fund money. Correct?

Everybody is different of course but I want to make sure I am not overlooking something here besides the obvious about my investment portfolio (more risk with 100% stocks etc).

thanks guys!

barnaclebob
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Re: 2-fund portfolio (+ Savings Account)?

Post by barnaclebob » Mon Jun 10, 2019 3:49 pm

Sounds like you have the right idea. Vanguards prime money market is paying a couple of % right now with pretty much zero risk so that might be a better option for that portion of your portfolio.

dbr
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Re: 2-fund portfolio (+ Savings Account)?

Post by dbr » Mon Jun 10, 2019 7:36 pm

brutzel1 wrote:
Mon Jun 10, 2019 3:05 pm


My question: Am I overlooking something here with my current approach? I essentially am 100% stocks with Vanguard currently and using my savings account as my 'peace of mind' money. I guess - and correct me if I'm wrong here - whether or not I am adding bonds to the portfolio solely depends on how much risk I want to take, and has no implications on using the bond piece in my portfolio as savings or emergency fund money. Correct?

I don't see a problem with thinking and your plan.

As far as implementing the general idea of a three fund portfolio cash savings are bonds. That is a practical alternative especially when the allocation is high in stocks.

All of the assets are "savings" so it isn't clear what you mean by calling that out as a category.

Emergency fund is in amount and type of asset as needed to not have to do something really undesirable in case the financial situation runs into trouble. Cash can work but different kinds of actual bonds can also work. People may differ but I am in favor of counting emergency assets as part of the asset allocation.

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Wiggums
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Re: 2-fund portfolio (+ Savings Account)?

Post by Wiggums » Mon Jun 10, 2019 8:08 pm

I agree

MotoTrojan
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Re: 2-fund portfolio (+ Savings Account)?

Post by MotoTrojan » Mon Jun 10, 2019 8:11 pm

Some longer duration treasuries could help with overall efficiency and return.

If in a high tax state you could auto-roll t-bills to get more return too. Fidelity does this and has a great CMA setup which can get you >2% on checking and saving combined, and t-bills settle in 1 day.

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Taylor Larimore
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Re: 2-fund portfolio (+ Savings Account)?

Post by Taylor Larimore » Mon Jun 10, 2019 8:45 pm

dbr wrote: People may differ but I am in favor of counting emergency assets as part of the asset allocation.
brutzel1:

Welcome to the Bogleheads Forum!

I agree with dbr primarily because there is little sense maintaining separate, low-yielding, "emergency assets" which may never be used.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

arf30
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Re: 2-fund portfolio (+ Savings Account)?

Post by arf30 » Mon Jun 10, 2019 10:02 pm

We do this as well: 2 stock funds + a single combined emergency fund/fixed income allocation in VUSXX.

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