All-In-One Fund vs. VTSAX+VBTLX

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kpeercy
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All-In-One Fund vs. VTSAX+VBTLX

Post by kpeercy » Tue Jan 14, 2020 8:29 am

I'm exploring the pros and cons of an All-In-One fund (target date, life strategy) vs. deposits to two individual index funds (VTSAX, VBTLX). I understand that many of the All-In-One funds have international stock and bond funds and the two individual funds do not, but I'm not wondering about that particular difference.

I'm thinking that the two individual funds are superior since I could actually sell the bond shares if I need cash and stocks are in a dip, whereas I can't do that with a Target Date or Life Strategy fund since everything is baked into those and you inevitably sell slumping stocks when you redeem shares.

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dunkmachine
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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by dunkmachine » Tue Jan 14, 2020 8:49 am

Target date and life strategy are a bit different. Target date will follow a glide path. Life Strategy will not change allocations with time. However they make it difficult to rebalance at a later time, but they should do that within the fund. And if you want to change asset allocations (and international) in the future it would be difficult to do so. I see their advantage being if you don't want to be too involved in managing your portfolio, it's set it and forget it on auto-pilot. If you don't have the minimum investment required for the two individual funds, you can start investing in a Target date or a life strategy with less money.

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by 3funder » Tue Jan 14, 2020 8:51 am

dunkmachine wrote:
Tue Jan 14, 2020 8:49 am
Target date and life strategy are a bit different. Target date will follow a glide path. Life Strategy will not change allocations with time. However they make it difficult to rebalance at a later time, but they should do that within the fund. And if you want to change asset allocations (and international) in the future it would be difficult to do so. I see their advantage being if you don't want to be too involved in managing your portfolio, it's set it and forget it on auto-pilot. If you don't have the minimum investment required for the two individual funds, you can start investing in a Target date or a life strategy with less money.
+1

RadAudit
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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by RadAudit » Tue Jan 14, 2020 8:53 am

Funny you should ask. I've recently been going through a similar question. Actually, I've been going through various iterations of the same question for the last 45+ years.

Don't know your age or situation. I doubt if one or the other proposed paths is clearly superior to the other. It sort of depends on where you are in the accumulation / decumulation cycle, taxable - tax deferred space available, target AA, emergency fund available, etc. Suggest you start here. https://www.bogleheads.org/wiki/Main_Page Alternatively, a condensed version is here. https://www.firstlinks.com.au/william-j ... f-you-can/ Slightly less condensed version is here. viewtopic.php?f=1&t=6212

Best of luck.
Last edited by RadAudit on Tue Jan 14, 2020 9:23 am, edited 2 times in total.
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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by skeptical » Tue Jan 14, 2020 8:53 am

kpeercy wrote:
Tue Jan 14, 2020 8:29 am
I'm exploring the pros and cons of an All-In-One fund (target date, life strategy) vs. deposits to two individual index funds (VTSAX, VBTLX). I understand that many of the All-In-One funds have international stock and bond funds and the two individual funds do not, but I'm not wondering about that particular difference.

I'm thinking that the two individual funds are superior since I could actually sell the bond shares if I need cash and stocks are in a dip, whereas I can't do that with a Target Date or Life Strategy fund since everything is baked into those and you inevitably sell slumping stocks when you redeem shares.
There are mostly advantages with separate funds, and usually outweigh a combined fund

Two potential disadvantages for separate funds :
- Some work and mental fortitude needed to rebalance - don't want to be bothered, old enough where you should not be making decisions, or uncertain in the face of selling an asset that is going up (greed), or buying an asset that is plummeting during a downturn (fear)
- If the funds are in a taxable account there could be tax costs in rebalancing a taxable account if your contributions are not enough to do so on their own, for example, wither retired or have a large account relative to your income.

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by Arlington2019 » Tue Jan 14, 2020 12:16 pm

I am also pondering this as I near the end of the accumulation phase. I am currently in TRRBX, VWINX and VBIAX. I am thinking if I want to consolidate to a single fund for the decumulation phase. I have been reading a great deal lately about the various glide paths of target dates and the percentage of stocks advisable for a long-term decumulation. In view of the lack of any true 50/50 Vanguard balanced index fund, I may end up going 100% in VBIAX, since it seems I could do worse.

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by KlangFool » Tue Jan 14, 2020 12:25 pm

OP and others,

Can you rebalance if the stock market drops 50%? Or, you will freeze and do nothing. How do you know that you will rebalance? That is the problem of the separate funds: rebalancing.

I was 50% Wellington (65/35) Fund and 50% LifeStrategy Moderate Growth Fund (60/40) during 2008/2009. On 1/1/2009, my employer laid off 50% of its employees at my location. I was fighting hard to keep my job. The last thing that I want to think about my portfolio and do any rebalancing. My all-in-one fund took the emotion and work out of the rebalancing.

KlangFool

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Taylor Larimore
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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by Taylor Larimore » Tue Jan 14, 2020 12:49 pm

kpeercy wrote:
Tue Jan 14, 2020 8:29 am
I'm exploring the pros and cons of an All-In-One fund (target date, life strategy) vs. deposits to two individual index funds (VTSAX, VBTLX).
kpeercy:

In my opinion the answer is simple:

If all your accounts are tax-advantaged (IRA, 401k, 403b, etc.) use an All-In-One fund.

If you have both tax-advantaged and taxable accounts use separate funds. This allows you to put your tax-inefficient funds (bonds) in your tax-advantaged accounts and your tax-efficient funds (stocks) in your taxable account.

I am aware that there are special cases where the opposite fund placement may prove beneficial, but the truth is that no one can be sure. Keep investing simple.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Armed with a tax-efficient stock fund (Total Stock Market Index Fund) investors can accumulate more capital -- by holding taxable bond funds inside their pension accounts and tax-efficient stock funds outside their pension accounts."
"Simplicity is the master key to financial success." -- Jack Bogle

mimiesg
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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by mimiesg » Tue Jan 14, 2020 1:07 pm

Taylor Larimore wrote:
Tue Jan 14, 2020 12:49 pm
kpeercy wrote:
Tue Jan 14, 2020 8:29 am
I'm exploring the pros and cons of an All-In-One fund (target date, life strategy) vs. deposits to two individual index funds (VTSAX, VBTLX).
kpeercy:

In my opinion the answer is simple:

If all your accounts are tax-advantaged (IRA, 401k, 403b, etc.) use an All-In-One fund.

If you have both tax-advantaged and taxable accounts use separate funds. This allows you to put your tax-inefficient funds (bonds) in your tax-advantaged accounts and your tax-efficient funds (stocks) in your taxable account.

I am aware that there are special cases where the opposite fund placement may prove beneficial, but the truth is that no one can be sure.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Armed with a tax-efficient stock fund (Total Stock Market Index Fund) investors can accumulate more capital -- by holding taxable bond funds inside their pension accounts and tax-efficient stock funds outside their pension accounts."
thank you very much Taylor! First of all thank you so much for this site it is such an amazing resource for new investors I would have never thought of doing anything with stocks had I not come across this site. It's a testament to how humanity still has hope and goodness of people and the power of community :D

I am a new bogglehead so excuse me if my question is too basic since I have been struggling with the same confusion.

The way I went is:

1. I do a all-in-one fund for my tax advantaged account. As a novice, this frees me from rebalancing and makes sure I don't do anything silly there and get the free pass of diversification and rebalancing.

2. For my taxable account, I went with the three fund portfolio, (just went for the social fund VFTAX) and just replaced the bonds with muni fund. the reason for this is I will tap into the tax able portfolio 5-10 years before I retire.

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by Taylor Larimore » Tue Jan 14, 2020 1:17 pm

mimiesg:

Thank you for your kind words.

I believe your plan should work well. But keep in mind that at death all capital-gains in a taxable account are eliminated.

Taylor
Jack Bogle's Words of Wisdom: "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk."
"Simplicity is the master key to financial success." -- Jack Bogle

mimiesg
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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by mimiesg » Tue Jan 14, 2020 1:35 pm

Thank you again very much Taylor for the wonderful teachings.

With much gratitude, I will always be thankful and treasure this post (and share with my kids when they start their investing) as a great memory to have interacted with you albeit via a forum online!

Now hopefully, I will just "stay the course" !

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by bgf » Tue Jan 14, 2020 1:37 pm

KlangFool wrote:
Tue Jan 14, 2020 12:25 pm
OP and others,

Can you rebalance if the stock market drops 50%? Or, you will freeze and do nothing. How do you know that you will rebalance? That is the problem of the separate funds: rebalancing.

I was 50% Wellington (65/35) Fund and 50% LifeStrategy Moderate Growth Fund (60/40) during 2008/2009. On 1/1/2009, my employer laid off 50% of its employees at my location. I was fighting hard to keep my job. The last thing that I want to think about my portfolio and do any rebalancing. My all-in-one fund took the emotion and work out of the rebalancing.

KlangFool
this is one of the more important aspects of an all in one fund like lifestrategy or target date. with separate funds, you need to be able to stick to your plan. when people talk about the need to rebalance, its not so much the effort to log in and make a few clicks, its the mental and emotional stress associated with doing rebalancing in difficult markets. its also about the mental and emotional stress of coming up with your own rebalancing strategy.

spend some time around this forum and you'll see that the difficulty non-bogleheads have with true buy and hold investing of individual stocks is shared by bogleheads when it comes to their own strategies that need to be implemented.

strategies, allocations, rebalancing bands, etc etc all change around here. 5 years is a very long time to not change anything... and for one's investing horizon, 5 years is a very short time.

i've noticed with myself that over the years my strategies have changed... too often in fact. an all-in-one fund is an excellent strategy. i wish i could implement them in all our accounts.

this is a great advantage of all-in-one funds.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by Synyster » Tue Jan 14, 2020 3:33 pm

I started my Target date 2055 fund with Vanguard at age 27. A side from a profit sharing account supplied by my company, this is my wife (she has profit sharing as well) and I only retirement. Its expensive to live decently in the Peoples Republic of Massachusetts.

It wasn't until just a few months ago at age 32, I realized the expense ratio was a bit higher than I would like to be paying. It also wasn't aggressive enough for my age with a fair amount in bonds and international stock.

I exchanged it all for one fund VTSAX. I have about 25 years until I retire, maybe 20 if I am lucky. Getting all my chips in now and will ride the bull and bears. I can begin exchanging some of the fund towards bonds as I get closer to retirement in 20-25 years. If you want to be safe there is nothing wrong with a 90% VTSAX and 10% VBTLX. You will still be beating the fees for a Target Retirement account with both of those accounts separate.

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by Wiggums » Tue Jan 14, 2020 3:37 pm

dunkmachine wrote:
Tue Jan 14, 2020 8:49 am
Target date and life strategy are a bit different. Target date will follow a glide path. Life Strategy will not change allocations with time. However they make it difficult to rebalance at a later time, but they should do that within the fund. And if you want to change asset allocations (and international) in the future it would be difficult to do so. I see their advantage being if you don't want to be too involved in managing your portfolio, it's set it and forget it on auto-pilot. If you don't have the minimum investment required for the two individual funds, you can start investing in a Target date or a life strategy with less money.
+1
Well stated...

I’d would recommend an all-in-one before sending you to a FA with high fees, because you don’t want yo do it yourself.

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by sixtyforty » Tue Jan 14, 2020 4:37 pm

KlangFool wrote:
Tue Jan 14, 2020 12:25 pm
OP and others,

Can you rebalance if the stock market drops 50%? Or, you will freeze and do nothing. How do you know that you will rebalance? That is the problem of the separate funds: rebalancing.

I was 50% Wellington (65/35) Fund and 50% LifeStrategy Moderate Growth Fund (60/40) during 2008/2009. On 1/1/2009, my employer laid off 50% of its employees at my location. I was fighting hard to keep my job. The last thing that I want to think about my portfolio and do any rebalancing. My all-in-one fund took the emotion and work out of the rebalancing.

KlangFool
This. The majority of people probably overestimate their ability to make unemotional re balancing decisions in the face of a correction, bear market or otherwise. I'm all in with all-in-one funds. Love simplicity.
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci

Razasharpz
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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by Razasharpz » Tue Jan 14, 2020 6:01 pm

Not a fan of the target date funds they put too much in bonds too early.
Age 31: | 70% VTSAX | 20% VTIAX | 10% VBTLX

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Taylor Larimore
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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by Taylor Larimore » Tue Jan 14, 2020 8:54 pm

Razasharpz wrote:
Tue Jan 14, 2020 6:01 pm
Not a fan of the target date funds they put too much in bonds too early.
Razasharpz:

This is not a problem. Vanguard Target Date funds offer 12 different stock/bond allocations. Knowledgeable investors ignore the Fund's target date and choose the Target fund with the stock/bond allocation they desire. In tax-advantaged accounts (where Target funds belong) it is easy to exchange to another Target fund with a different bond allocation without tax or other costs.

Strive for Simplicity -- not complexity.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Target-date funds have proved to be the most powerful fund-industry-changing concept since the money market mutual fund and the index mutual fund."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by abuss368 » Tue Jan 14, 2020 9:02 pm

Jack Bogle reminds us: "Simplicity is the master key to financial success".
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by abuss368 » Tue Jan 14, 2020 9:05 pm

kpeercy wrote:
Tue Jan 14, 2020 8:29 am
I'm exploring the pros and cons of an All-In-One fund (target date, life strategy) vs. deposits to two individual index funds (VTSAX, VBTLX). I understand that many of the All-In-One funds have international stock and bond funds and the two individual funds do not, but I'm not wondering about that particular difference.

I'm thinking that the two individual funds are superior since I could actually sell the bond shares if I need cash and stocks are in a dip, whereas I can't do that with a Target Date or Life Strategy fund since everything is baked into those and you inevitably sell slumping stocks when you redeem shares.
Welcome to the forum!

I prefer the simplicity and effectiveness of the Two Fund Portfolio as recommended by Jack Bogle and Warren Buffett. Total Stock (or S&P 500) and Total Bond is all that is needed.

Please consider this excellent thread with a lot fo information and ask questions: viewtopic.php?f=10&t=188176
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by abuss368 » Tue Jan 14, 2020 9:06 pm

Jack Bogle noted that since 1994 or so international has resulted in 280% or so return. US has been over 700%. This was as a few years ago so the gap is probably wider.

Thus far, Mr. Bogle has been correct about international.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by hope25 » Wed Jan 15, 2020 11:12 pm

Dear Taylor Larimore,

Could you please clarify what you meant by statement:

".... But keep in mind that at death all capital-gains in a taxable account are eliminated." ?


Thank you for your time and for all the information you have provided to investors, such as myself, over the years.

Gratefully,
HC

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Taxes at Death

Post by Taylor Larimore » Thu Jan 16, 2020 3:03 pm

hope25 wrote:
Wed Jan 15, 2020 11:12 pm
Dear Taylor Larimore,

Could you please clarify what you meant by statement:

".... But keep in mind that at death all capital-gains in a taxable account are eliminated." ?


Thank you for your time and for all the information you have provided to investors, such as myself, over the years.

Gratefully,
HC
HC:

This article should help:

Taxes on Stocks After A Death

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The profound impact of taxes on fund returns is a subject too long ignored."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by abuss368 » Thu Jan 16, 2020 3:10 pm

At death there is a "step up" in cost basis where the cost basis to your heirs is market value (on the date of death) and not your cost basis.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

hope25
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Re: All-In-One Fund vs. VTSAX+VBTLX

Post by hope25 » Wed Jan 22, 2020 2:27 pm

Thank you Taylor Larimore and abuss368 for your responses to my inquiry about "capital gains loss after death"

In other words, beneficiaries would benefit as the capital gains would be included in the stepped-up basis, but if the portfolio was left to an estate, the capital gains would disappear?

Hope

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