Advice [change to 3 fund?]

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Fishing2retire
Posts: 1
Joined: Mon Jun 10, 2019 2:02 pm

Advice [change to 3 fund?]

Post by Fishing2retire » Tue Jun 11, 2019 6:52 am

First time posting. Been reading many posts here the past few months, lots of helpful info.
I switched to vanguard from EJ a year ago. So seeking advice if I should go to a 3 fund portfolio from my current setup. I currently have all this in a Roth IRA I’m 40 filling jointly 25% tax bracket and I will also receive a pension when I retire. Wife has Roth IRA still with EJ lower Six Figures in hers she’s 36 self employed.

Vtsax=55%
Vimax=10%
Vsmax=5%
Vgtsx=10%
Vbtlx=20%

Thank you!
Last edited by Fishing2retire on Tue Jun 11, 2019 9:07 am, edited 1 time in total.

Olemiss540
Posts: 971
Joined: Fri Aug 18, 2017 8:46 pm

Re: Advice [change to 3 fund?]

Post by Olemiss540 » Tue Jun 11, 2019 7:24 am

I recommend a target date fund if all of your investments reside in tax advantaged accounts. Keep it simple and keep the urge to tinker as low as possible!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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CyclingDuo
Posts: 2311
Joined: Fri Jan 06, 2017 9:07 am

Re: Advice [change to 3 fund?]

Post by CyclingDuo » Tue Jun 11, 2019 8:00 am

Fishing2retire wrote:
Tue Jun 11, 2019 6:52 am
First time posting. Been reading many posts here the past few months, lots of helpful info.
I switched to vanguard from EJ a year ago. So seeking advice if I should go to a 3 fund portfolio from my current setup. I currently have: $97K I’m 40 and I will also receive a nice pension when I retire.

Vtsax=55%
Vimax=10%
Vsmax=5%
Vgtsx=10%
Vbtlx=20%

Thank you!
Best to follow the requested format when posting so appropriate comments can be given. Format is here:

viewtopic.php?f=1&t=6212
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nedsaid
Posts: 11549
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Re: Advice [change to 3 fund?]

Post by nedsaid » Tue Jun 11, 2019 10:43 am

Fishing2retire wrote:
Tue Jun 11, 2019 6:52 am
First time posting. Been reading many posts here the past few months, lots of helpful info.
I switched to vanguard from EJ a year ago. So seeking advice if I should go to a 3 fund portfolio from my current setup. I currently have all this in a Roth IRA I’m 40 filling jointly 25% tax bracket and I will also receive a pension when I retire. Wife has Roth IRA still with EJ lower Six Figures in hers she’s 36 self employed.

Vtsax=55% Vanguard Total Stock Market Admiral
Vimax=10% Vanguard Mid-Cap Index Admiral
Vsmax=5% Vanguard Small-Cap Index Admiral
Vgtsx=10% Vanguard Total International Stock Admiral
Vbtlx=20% Vanguard Total Bond Market Index Admiral

Thank you!
Were I managing money for others, I would invest the money in both a simpler and more conservative fashion than I would my own. I think you have a very good portfolio, you are doing a US Mid-Cap/Small-Cap tilt, which is what I have been doing.

I think the 3 fund portfolio is a very good one but its success has been driven by the High Tech sector, and the very large Internet stocks, particularly the FAANG (Facebook, Apple, Amazon, Netflix, and Google) stocks. These stocks are now about 25-26% of the S&P 500. Essentially, the 3 fund is a bet tilted heavily towards high tech and internet. I see lots of parallels with the late 1990's. Not predicting disaster, but if High Tech/Internet stops leading the stock market, the performance of US Total Stock Market could be flat for a while. You are also light with International stocks. A US heavy stock portfolio has done very well as the US has been outperforming International for 10 years now, I don't think that is going to continue forever.

You have a portfolio exposed to the Market factor and the Size factor. I would add a Value tilt to that.

Here is an idea:

50% Total Stock Market Index
15% Small/Value Index (The Vanguard version contains lots of Mid-Caps)
15% Total International Index
20% Total Bond Market Index

This would both simplify your portfolio and add more factor diversification. You could also tweak your International allocation, go with maybe 20% Total International Stock Market and 45% Total Stock Market. For you, 15% Total International would be the minimum were I advising you.

If you decide on a 3 fund, that is a perfectly fine portfolio. People are flocking to it because it has been doing so well lately.
A fool and his money are good for business.

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