Portfolio Review & Timing with Coronavirus

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Topic Author
adventuregirl
Posts: 7
Joined: Sat Feb 08, 2020 5:19 pm

Portfolio Review & Timing with Coronavirus

Post by adventuregirl » Sat Feb 08, 2020 6:49 pm

Emergency funds: We have 6 months of emergency funds set aside
Debt: No debt
Tax Filing Status: Married Filing Jointly
Tax Rate: 24% Federal, 6.65% State (Not 100% sure this is correct)
State of Residence: NY
Age: 32
Desired Asset allocation:
Domestic Stocks – 50%
Int’l Stocks – 25%
Bonds – 25%

Current Investment Balances:
401k:
Her: $151,000
His: $218,000

Roth IRA:
Her: $35,000
His: $36,000

HSA:
Her: $3,000
His: $2,000

Taxable:
Her & His Joint Account: $100,000


Taxable Account – Opened a taxable account with Fidelity. Have not funded yet, but will be adding $100k once funds are selected (as reflected above in “Current Investment Balances”.

Fund Options:
Her 401k
Investment name Ticker symbol Expense Ratio
Vanguard GNMA Adm VFIJX 0.11%
PGIM Total Return Bond R6 PTRQX 0.41%
Loomis Sayles Strategic Income N NEZNX 0.63%
American Funds American Balanced R6 RLBGX 0.28%
Vanguard Target Retirement Income Inv VTINX 0.12%
Vanguard Target Retirement 2020 Inv VTWNX 0.13%
Vanguard Target Retirement 2030 Inv VTHRX 0.14%
Vanguard Target Retirement 2040 Inv VFORX 0.14%
Vanguard Target Retirement 2050 Inv VFIFX 0.15%
Vanguard Target Retirement 2060 Inv VTTSX 0.15%
Vanguard Equity-Income Adm VEIRX 0.18%
Vanguard Growth & Income Adm VGIAX 0.23%
Fidelity® 500 Index FXAIX 0.02%
Alger Capital Appreciation Z ACAZX 0.87%
American Century Mid Cap Value R6 AMDVX 0.63%
Vanguard Mid Cap Index Admiral VIMAX 0.05%
Wells Fargo Discovery R6 WFDRX 0.78%
Vanguard Small Cap Value Index Admiral VSIAX 0.07%
Vanguard Small Cap Index Adm VSMAX 0.05%
Janus Henderson Triton N JGMNX 0.66%
Artisan International Institutional APHIX 0.96%
Invesco Oppenheimer Global Opports R6 OGIIX 0.69%
Invesco Oppenheimer Developing Mkts R6 ODVIX 0.85%

His 401k
Investment name Ticker symbol Expense Ratio
FIAM INX TD 2005 - 0.07%
FIAM INX TD 2010 - 0.07%
FIAM INX TD 2015 - 0.07%
FIAM INX TD 2020 - 0.07%
FIAM INX TD 2025 - 0.07%
FIAM INX TD 2030 - 0.07%
FIAM INX TD 2035 - 0.07%
FIAM INX TD 2040 - 0.07%
FIAM INX TD 2045 - 0.07%
FIAM INX TD 2050 - 0.07%
FIAM INX TD 2055 - 0.07%
FIAM INX TD 2060 - 0.07%
FIAM INX TD INCOME - 0.07%
FID 500 INDEX FXAIX 0.02%
BTC MSCI ACWI IMI - 0.06%
FID TOTAL INTL IDX FTIHX 0.06%
BTC EXTND EQ MKT IDX - 0.04%
BTC US DEBT INDEX M DEBTM 0.03%
NB SUSTAIN EQ R6 NRSRX 0.59%
TRP BLUE CHIP GR T4 - 0.40%
FID LOW PR STK POOL - 0.48%
ABF SM CAP VAL INST (A) VFIX 0.81%
AF NEW PERSPECT R6 RNPGX 0.42%
ARTISAN INTL GROWTH - 0.90%
MIP CL 2 - 0.52%
DODGE & COX INCOME DODIX 0.42%

Her HSA
Investment name Ticker symbol Expense Ratio
Dodge & Cox Income DODIX 0.52%
Metropolitan West Total Return Bond MWTRX 0.67%
American Funds 2020 TRGT Retire RRCTX 0.31%
American Funds 2025 TRGT Retire RFDTX 0.33%
American Funds 2030 TRGT Retire RFETX 0.35%
American Funds 2035 TRGT Retire RFFTX 0.37%
American Funds 2040 TRGT Retire RFGTX 0.38%
VG LifeStrategy Conservative Growth Investor VSCGX 0.12%
VG LifeStrategy Moderate Growth Investor VSMGX 0.13%
VG Developed Markets Index Fund VTMGX 0.07%
VG Emerging Markets Stock Index Fund VEMAX 0.14%
VG 500 Index Fund Admiral Shares VFIAX 0.04%
JPMorgan Large Cap Growth SEEGX 1.06%
Davis New York Venture Fund Class Y DNVYX 0.89%
Thornburg International Value TGVIX 0.97%
Dodge & Cox International Stock Fund DODFX 0.52%
American Funds 2045 TRGT Retire RFHTX 0.38%
American Funds 2050 TRGT Retire RFITX 0.39%
American Funds 2055 TRGT Retire RFKTX 0.40%
American Funds 2060 TRGT Retire RFUTX 0.41%
VG Dividend Appreciation Fund Admiral VDADX 0.08%
Schwab Fundamental US Large Co. Index Fund SFLNX 0.25%
Parnassus Mid Cap Fund Institutional Shares PFPMX 0.99%
American Cent Mid Cap Value Fund Instnl Class AVUAX 0.78%
Artisan Small Cap Fund Institutional Shares APHSX 1.21%
Invesco-Oppenheimer Main Street Fund Class Y MIGYX 0.62%
VG Small Cap Index Fund VSMAX 0.05%

His HSA
Investment name Ticker symbol Expense Ratio
American Funds Capital World Gr&Inc F2 WGIFX 0.53%
BlackRock Equity Dividend K MKDVX 0.60%
Dodge & Cox Income DODIX 0.42%
Fidelity Low-Priced Stock FLPSX 0.52%
Invesco Oppenheimer Dvlp Mrkt Inst ODVIX 0.83%
John Hancock Fdmlt Large Cap Core JLVIX 0.78%
Lord Abbett High Yield - I LHYFX 0.80%
Neuberger Berman Genesis Fund - INST NBGIX 0.85%
Schwab Target 2020 Index Fund I SWYLX 0.08%
Schwab Target 2030 Index Fund I SWYEX 0.08%
Schwab Target 2040 Index Fund I SWYGX 0.08%
Schwab Target 2050 Index Fund I SWYMX 0.08%
Schwab Target 2060 Index Fund I SWYNX 0.08%
T. Rowe Price Blue Chip - I TBCIX 0.57%
Vanguard Equity-Income - A VEIRX 0.18%
Vanguard Extended Market Index Inst VIEIX 0.06%
Vanguard Global Equity VHGEX 0.48%
Vanguard Healthcare VGHAX 0.28%
Vanguard Inflation-Protected Inst VIPIX 0.07%
Vanguard LifeStrat-Growth VASGX 0.14%
Vanguard LifeStrat-Conservative Growth VSCGX 0.12%
Vanguard LifeStrat-Moderate Growth VSMGX 0.13%
Vanguard Mid Cap Index Inst VMCIX 0.04%
Vanguard REIT Index Inst VGSNX 0.10%
Vanguard S&P 500 Index - A VFIAX 0.04%
Vanguard Short-Term Federal Adm VSGDX 0.10%
Vanguard Short-Term Invest Grade Inst VFSIX 0.07%
Vanguard Small Cap Index Inst VSCIX 0.04%
Vanguard Total Bond Mkt Port VBTIX 0.04%
Vanguard Total Stock Market Inst VITSX 0.03%
Vanguard Wellington - A VWENX 0.17%

Questions:
1. Given our desired asset allocation (Dom:Intl:Bond, 50:25:25) and taking into account tax-efficient fund placement, what is your recommended portfolio?

Note: We’ve never had a taxable account before and we want to ensure there’s enough flexibility in our 401k, Roth IRA, and HSA to allow for adequate re-balancing in the future so that we can prevent any accidental taxable events in our taxable account in the near future.

Note: Keep in mind that we are leaning towards looking at our portfolio as a whole to simplify things versus setting an allocation in each of our own respective account holdings.

2. With the $100,000 that we are looking to add to a taxable account I understand that Bogleheads investment philosophy is against timing the market, however, with all of the unknowns in the market now with Coronavirus and the fact that this has been the longest bull run in history – if you were in our shoes, would YOU personally lump sum deposit or would you do some form of DCA? I understand that most of the time lump sum yields better results.

Thanks in advance!

-AdventureGirl

User avatar
Dale_G
Posts: 3316
Joined: Tue Feb 20, 2007 5:43 pm
Location: Central Florida - on the grown up side of 82

Re: Portfolio Review & Timing with Coronavirus

Post by Dale_G » Sat Feb 08, 2020 8:13 pm

Agirl, you have a lot of great options.

First I would pay no attention to coronavirus or other current events. I would invest your 100K immediately in the taxable account 75/25 in a Total US Market and Total International fund. It is "only" 25% of your assets, and the world will survive the current problems.

You don't say what your other accounts are currently invested in. And except for a GNMA fund, you don't list much in the way of recognizable bond funds in your deferred accounts. But, you have a bunch of low cost Target Date funds available.

The easiest thing to do is to pick Target Date funds in the tax deferred accounts that give you your desired asset allocation for the entire portfolio. So, 100% equities in taxable, then you have to choose TD funds in tax deferred that will have enough bonds to make your asset allocation right.

Rebalancing is easy. You won't be starting with the "income" funds, but some Target Date funds with higher equity allocations. To rebalance you can simply exchange one TD fund for another with either a higher or lower equity allocation.

In a 401k for a son that I manage, he has both a Life Strategy Income fund with 20% equities and and Life Strategy Growth fund with 80% equities. If the need arises for any rebalancing, there is simply a partial move from one fund to another. Rebalancing can also be done by changing contributions from one fund to another.

You have a lot of good choices. It could be fine tuned if there are other good bond funds available, but this is an easy solution.

Dale
Volatility is my friend

User avatar
Dale_G
Posts: 3316
Joined: Tue Feb 20, 2007 5:43 pm
Location: Central Florida - on the grown up side of 82

Re: Portfolio Review & Timing with Coronavirus

Post by Dale_G » Sun Feb 09, 2020 2:11 pm

Bump for other replies to adventuregirl
Volatility is my friend

Jermbo
Posts: 61
Joined: Tue Sep 19, 2017 1:06 pm

Re: Portfolio Review & Timing with Coronavirus

Post by Jermbo » Sun Feb 09, 2020 2:37 pm

adventuregirl wrote:
Sat Feb 08, 2020 6:49 pm
Emergency funds: We have 6 months of emergency funds set aside
Debt: No debt
Tax Filing Status: Married Filing Jointly
Tax Rate: 24% Federal, 6.65% State (Not 100% sure this is correct)
State of Residence: NY
Age: 32
Desired Asset allocation:
Domestic Stocks – 50%
Int’l Stocks – 25%
Bonds – 25%

Current Investment Balances:
401k:
Her: $151,000
His: $218,000

Roth IRA:
Her: $35,000
His: $36,000

HSA:
Her: $3,000
His: $2,000

Taxable:
Her & His Joint Account: $100,000


Taxable Account – Opened a taxable account with Fidelity. Have not funded yet, but will be adding $100k once funds are selected (as reflected above in “Current Investment Balances”.


Questions:
1. Given our desired asset allocation (Dom:Intl:Bond, 50:25:25) and taking into account tax-efficient fund placement, what is your recommended portfolio?

Note: We’ve never had a taxable account before and we want to ensure there’s enough flexibility in our 401k, Roth IRA, and HSA to allow for adequate re-balancing in the future so that we can prevent any accidental taxable events in our taxable account in the near future.

Note: Keep in mind that we are leaning towards looking at our portfolio as a whole to simplify things versus setting an allocation in each of our own respective account holdings.

2. With the $100,000 that we are looking to add to a taxable account I understand that Bogleheads investment philosophy is against timing the market, however, with all of the unknowns in the market now with Coronavirus and the fact that this has been the longest bull run in history – if you were in our shoes, would YOU personally lump sum deposit or would you do some form of DCA? I understand that most of the time lump sum yields better results. You have 6 months of cash in an emergency fund. I wouldn't worry about investing your taxable in all stock per my comments below. Lump sum it and don't worry because your overall asset allocation across all accounts matters. Lump sum wins more often than DCA. "Time in the market, not timing the market."

Thanks in advance!

-AdventureGirl
You have a very good plan going. I wouldn't worry about anything with market conditions and coronavirus. 75/25 allocation at your age is actually really good. Nice mix of aggressive but also conservative enough for anything to happen. In fact I am the same age, with similiar financial picture as you and I'm also 75/25 with the same split of 50/25/25.

Here is what I would do with your investments if I were you.

Domestic: Total should be ~272.5K
International Total should be ~$136.25K
Bonds Total should be ~$136.25K

Her HSA: Invest all $3K in VG 500 Index Fund VFIAX
His HSA: Invest all $2K in Vanguard Total Stock Market VITSX $2K
Her and His Roth: Invest both accounts in a US total market or S&P 500 fund (Total is $71K across both accounts)

Her 401K:
Invest all $151K in Fidelity 500 Index FXAIX

His 401K:
Invest your 25% of allocation for bonds in BTC US Debt Index M DEBTM ($136.25K) - lowest cost option in both 401Ks and seems to track Barclays aggregate bond (AGG)
Invest $81.75K in FTIHX (total International index)

Taxable:
I would put $45.5K in ITOT (US Total Market) and $54.5K in IXUS (US total International) at Fidelity.

I would use the two 401ks as your rebalancing accounts. If you need to rebalance out of bonds or international stocks you can do that in his 401k. If you need to rebalance out of US stocks and into international stocks or bonds you can do that in her 401k. Over time, if you add total US to his 401k, that could end up being the only 401k you use to rebalance.

I do that with my accounts where my 401k holds US stock, International Stock and Bonds. I do all rebalancing in there and only add US stock to Roths/HSAs and US/Int stock to Taxable.

Hope that helps.

Topic Author
adventuregirl
Posts: 7
Joined: Sat Feb 08, 2020 5:19 pm

Re: Portfolio Review & Timing with Coronavirus

Post by adventuregirl » Mon Feb 10, 2020 7:18 pm

Dale_G wrote:
Sat Feb 08, 2020 8:13 pm
Agirl, you have a lot of great options.

First I would pay no attention to coronavirus or other current events. I would invest your 100K immediately in the taxable account 75/25 in a Total US Market and Total International fund. It is "only" 25% of your assets, and the world will survive the current problems.

You don't say what your other accounts are currently invested in. And except for a GNMA fund, you don't list much in the way of recognizable bond funds in your deferred accounts. But, you have a bunch of low cost Target Date funds available.

The easiest thing to do is to pick Target Date funds in the tax deferred accounts that give you your desired asset allocation for the entire portfolio. So, 100% equities in taxable, then you have to choose TD funds in tax deferred that will have enough bonds to make your asset allocation right.

Rebalancing is easy. You won't be starting with the "income" funds, but some Target Date funds with higher equity allocations. To rebalance you can simply exchange one TD fund for another with either a higher or lower equity allocation.

In a 401k for a son that I manage, he has both a Life Strategy Income fund with 20% equities and and Life Strategy Growth fund with 80% equities. If the need arises for any rebalancing, there is simply a partial move from one fund to another. Rebalancing can also be done by changing contributions from one fund to another.

You have a lot of good choices. It could be fine tuned if there are other good bond funds available, but this is an easy solution.

Dale
Thanks Dale_G! We are definitely going to just invest the 100k immediately into the taxable account.

The only reason I didn't say what our other accounts are currently invested in - we want a completely clean set of eyes to review our portfolio with no outside influences. With the new taxable account, and with HSA's that we've only just started investing it, we feel these changes are significant enough that we want to do a complete overhaul and to build our new AA from the ground up.

Topic Author
adventuregirl
Posts: 7
Joined: Sat Feb 08, 2020 5:19 pm

Re: Portfolio Review & Timing with Coronavirus

Post by adventuregirl » Mon Feb 10, 2020 9:27 pm

Jermbo wrote:
Sun Feb 09, 2020 2:37 pm

You have a very good plan going. I wouldn't worry about anything with market conditions and coronavirus. 75/25 allocation at your age is actually really good. Nice mix of aggressive but also conservative enough for anything to happen. In fact I am the same age, with similiar financial picture as you and I'm also 75/25 with the same split of 50/25/25.

Here is what I would do with your investments if I were you.

Domestic: Total should be ~272.5K
International Total should be ~$136.25K
Bonds Total should be ~$136.25K

Her HSA: Invest all $3K in VG 500 Index Fund VFIAX
His HSA: Invest all $2K in Vanguard Total Stock Market VITSX $2K
Her and His Roth: Invest both accounts in a US total market or S&P 500 fund (Total is $71K across both accounts)

Her 401K:
Invest all $151K in Fidelity 500 Index FXAIX

His 401K:
Invest your 25% of allocation for bonds in BTC US Debt Index M DEBTM ($136.25K) - lowest cost option in both 401Ks and seems to track Barclays aggregate bond (AGG)
Invest $81.75K in FTIHX (total International index)

Taxable:
I would put $45.5K in ITOT (US Total Market) and $54.5K in IXUS (US total International) at Fidelity.

I would use the two 401ks as your rebalancing accounts. If you need to rebalance out of bonds or international stocks you can do that in his 401k. If you need to rebalance out of US stocks and into international stocks or bonds you can do that in her 401k. Over time, if you add total US to his 401k, that could end up being the only 401k you use to rebalance.

I do that with my accounts where my 401k holds US stock, International Stock and Bonds. I do all rebalancing in there and only add US stock to Roths/HSAs and US/Int stock to Taxable.

Hope that helps.
Thank you for the detailed reply and recommendations on AA/Fund Selection!

I have a few questions:
1) Per Bogleheads Video #8 (Minimize Taxes), it says that foreign stocks should be held in taxable account where you can get a foreign tax credit. Because of this, I'm curious - why did you choose to put FTIHX in His 401k? Would it be more advantageous to increase the IXUS in the taxable account (decreasing ITOT) and instead invest in FXAIX in His 401k?

~To be honest, I'm not sure how the whole foreign tax credit works. I need to read up on it.~

2) For the Roth IRA's would you recommend selecting ITOT again or something different?

3) You've recommended a mixture of Total and 500 Index funds for US stock funds. Do you think it would be beneficial to include some mid/small cap funds to balance out the 500 Index funds to act as Total or is this futile?

Jermbo
Posts: 61
Joined: Tue Sep 19, 2017 1:06 pm

Re: Portfolio Review & Timing with Coronavirus

Post by Jermbo » Mon Feb 10, 2020 9:44 pm

To your questions, please see responses below. These are all very good questions and hopefully this clears up a bit.

I have a few questions:
1) Per Bogleheads Video #8 (Minimize Taxes), it says that foreign stocks should be held in taxable account where you can get a foreign tax credit. Because of this, I'm curious - why did you choose to put FTIHX in His 401k? Would it be more advantageous to increase the IXUS in the taxable account (decreasing ITOT) and instead invest in FXAIX in His 401k? You are correct that foreign stocks receive a foreign tax credit. However i wouldn't focus on trying to get all your international in taxable. The benefit of ITOT in your taxable is it kicks off less dividends so it's more tax efficient. Also, since you have a higher allocation to US stocks, you will generally need to invest in some US stocks in taxable over time with your Foreign stocks.

~To be honest, I'm not sure how the whole foreign tax credit works. I need to read up on it.~

2) For the Roth IRA's would you recommend selecting ITOT again or something different? If the Roth is at Fidelity, I would actually recommend FSKAX. It's the total US Market index fund and is very low cost. The only reason I chose ITOT and IXUS for taxable account is they are ETFs and with Fidelity, the ishare ETFs are more tax efficient than Fidelity index funds since they don't kick off any capital gains. I personally use ITOT and IXUS in my taxable. Only drawback is you can't set it to automatically invest in them, you need to invest in them manually during the market trading hours. Takes about a minute to do and you can now buy fractional shares of these!

3) You've recommended a mixture of Total and 500 Index funds for US stock funds. Do you think it would be beneficial to include some mid/small cap funds to balance out the 500 Index funds to act as Total or is this futile? I was mainly going by your lowest cost fund options. And since some of your accounts only had S&P 500 I chose that. In general total market funds are more diversified as you mention investing in small and mid cap but I wouldn't worry about complicating it. S&P 500 is close enough and will track the total market very close. In my opinion the complexity of extra funds to worry about and keep it maintained isn't worth it for very little difference in returns. In fact as a disclaimer, I do the same in my 401k. I don't have a total market fund and so I only invest in the S&P 500 fund. I have the option of mid cap and small cap but I don't bother.

Topic Author
adventuregirl
Posts: 7
Joined: Sat Feb 08, 2020 5:19 pm

Re: Portfolio Review & Timing with Coronavirus

Post by adventuregirl » Tue Feb 11, 2020 8:29 pm

Jermbo wrote:
Mon Feb 10, 2020 9:44 pm
To your questions, please see responses below. These are all very good questions and hopefully this clears up a bit.

I have a few questions:
1) Per Bogleheads Video #8 (Minimize Taxes), it says that foreign stocks should be held in taxable account where you can get a foreign tax credit. Because of this, I'm curious - why did you choose to put FTIHX in His 401k? Would it be more advantageous to increase the IXUS in the taxable account (decreasing ITOT) and instead invest in FXAIX in His 401k? You are correct that foreign stocks receive a foreign tax credit. However i wouldn't focus on trying to get all your international in taxable. The benefit of ITOT in your taxable is it kicks off less dividends so it's more tax efficient. Also, since you have a higher allocation to US stocks, you will generally need to invest in some US stocks in taxable over time with your Foreign stocks.

Perfect, that explains it. Thank you!

~To be honest, I'm not sure how the whole foreign tax credit works. I need to read up on it.~

2) For the Roth IRA's would you recommend selecting ITOT again or something different? If the Roth is at Fidelity, I would actually recommend FSKAX. It's the total US Market index fund and is very low cost. The only reason I chose ITOT and IXUS for taxable account is they are ETFs and with Fidelity, the ishare ETFs are more tax efficient than Fidelity index funds since they don't kick off any capital gains. I personally use ITOT and IXUS in my taxable. Only drawback is you can't set it to automatically invest in them, you need to invest in them manually during the market trading hours. Takes about a minute to do and you can now buy fractional shares of these!

I was wondering if you'd suggest FSKAX, you read my mind.

3) You've recommended a mixture of Total and 500 Index funds for US stock funds. Do you think it would be beneficial to include some mid/small cap funds to balance out the 500 Index funds to act as Total or is this futile? I was mainly going by your lowest cost fund options. And since some of your accounts only had S&P 500 I chose that. In general total market funds are more diversified as you mention investing in small and mid cap but I wouldn't worry about complicating it. S&P 500 is close enough and will track the total market very close. In my opinion the complexity of extra funds to worry about and keep it maintained isn't worth it for very little difference in returns. In fact as a disclaimer, I do the same in my 401k. I don't have a total market fund and so I only invest in the S&P 500 fund. I have the option of mid cap and small cap but I don't bother.

Makes sense. Keeping things simple is definitely important and I agree with you.


One more question for you - how did you figure out all of the dollar amounts and percentages so effortlessly and so that they worked out so perfectly?

You replied to the bumped post in only about 20 minutes which I'm amazed by. It would've probably taken me hours to try and figure everything out in an excel spreadsheet with lots of guessing and checking. I'm looking at potentially adding only $50,000 to taxable and holding the other $50,000 in a bank CD since I may need to access it in the next few years and it would be helpful to know your trick so I can play with the numbers. Hopefully I'm not missing some easy math.

Jermbo
Posts: 61
Joined: Tue Sep 19, 2017 1:06 pm

Re: Portfolio Review & Timing with Coronavirus

Post by Jermbo » Tue Feb 11, 2020 9:16 pm

One more question for you - how did you figure out all of the dollar amounts and percentages so effortlessly and so that they worked out so perfectly?
The easiest way I find accomplishing this is to start with the total portfolio amount. So I added up your total amounts between 401K, Roth, HSA and Taxable. Assuming the $100K in taxable this was a total of $545K in your overall portfolio. Then to figure out domestic stock, international stock, and bonds, I multiply that total by 0.5 for domestic and 0.25 for both international and bonds. That gave me the amounts below and then I just split that across the accounts to make it work.

Domestic: Total should be ~272.5K
International: Total should be ~$136.25K
Bonds Total: Total should be ~$136.25K

You replied to the bumped post in only about 20 minutes which I'm amazed by. It would've probably taken me hours to try and figure everything out in an excel spreadsheet with lots of guessing and checking. I'm looking at potentially adding only $50,000 to taxable and holding the other $50,000 in a bank CD since I may need to access it in the next few years and it would be helpful to know your trick so I can play with the numbers. Hopefully I'm not missing some easy math.
**Also, note that the below assumption was that the $50K you are holding in a bank CD isn't going to be part of the asset allocation. Since you plan to use in a few years, I wouldn't try to include it in the fixed income side of your portfolio. I would treat it as part of emergency fund or cash reserves ear marked for something. If you meant to have it included in the portfolio as the bond/fixed income/CD/cash portion of 25% the assumptions below would change.

With the change for $50K not being included in the allocation in taxable, total portfolio is now $495K. So now with $50K less, you would have 0.5*$50K less in domestic, or in another words, reduce amount in domestic by $25K. Then with international and bonds since they are 25% allocation each, they are actually $12.5K less on each (half of domestic). Thats why the beauty of 50/25/25 is so great. International and Bonds change by half the amount as domestic does. New amounts below written out for clarity.

Domestic: Total should be ~247.5K ($25K less than original)
International: Total should be ~$123.75K ($12.5K less than original)
Bonds Total: Total should be ~$123.75K ($12.5K less than original)

This would result in below with green for what changed:

Her HSA: Invest all $3K in VG 500 Index Fund VFIAX
His HSA: Invest all $2K in Vanguard Total Stock Market VITSX $2K
Her and His Roth: Invest both accounts in a US total market or S&P 500 fund (Total is $71K across both accounts)

Her 401K:
Invest all $151K in Fidelity 500 Index FXAIX

His 401K:
Invest your 25% of allocation for bonds in BTC US Debt Index M DEBTM ($123.75K) - lowest cost option in both 401Ks and seems to track Barclays aggregate bond (AGG) (subtracting the $12.5K out of here which was added to international)
Invest $94.25K in FTIHX (total International index) (adding $12.5K here that I moved out of bonds in this account)

Taxable:
I would put $20.5K in ITOT (US Total Market) and $29.5K in IXUS (US total International) at Fidelity. (removing $50K from here so easiest and keeping both domestic/international in taxable is take $25K out of ITOT and IXUS each. Doing this though took an extra $12.5K from international, so need to add that back in 401K. Easiest is to pull it from bonds and add it to international in his 401K since I have to take $12.5K out of bonds anyway.)

Topic Author
adventuregirl
Posts: 7
Joined: Sat Feb 08, 2020 5:19 pm

Re: Portfolio Review & Timing with Coronavirus

Post by adventuregirl » Wed Feb 12, 2020 11:15 am

Jermbo wrote:
Tue Feb 11, 2020 9:16 pm
One more question for you - how did you figure out all of the dollar amounts and percentages so effortlessly and so that they worked out so perfectly?
The easiest way I find accomplishing this is to start with the total portfolio amount. So I added up your total amounts between 401K, Roth, HSA and Taxable. Assuming the $100K in taxable this was a total of $545K in your overall portfolio. Then to figure out domestic stock, international stock, and bonds, I multiply that total by 0.5 for domestic and 0.25 for both international and bonds. That gave me the amounts below and then I just split that across the accounts to make it work.

Domestic: Total should be ~272.5K
International: Total should be ~$136.25K
Bonds Total: Total should be ~$136.25K

You replied to the bumped post in only about 20 minutes which I'm amazed by. It would've probably taken me hours to try and figure everything out in an excel spreadsheet with lots of guessing and checking. I'm looking at potentially adding only $50,000 to taxable and holding the other $50,000 in a bank CD since I may need to access it in the next few years and it would be helpful to know your trick so I can play with the numbers. Hopefully I'm not missing some easy math.
**Also, note that the below assumption was that the $50K you are holding in a bank CD isn't going to be part of the asset allocation. Since you plan to use in a few years, I wouldn't try to include it in the fixed income side of your portfolio. I would treat it as part of emergency fund or cash reserves ear marked for something. If you meant to have it included in the portfolio as the bond/fixed income/CD/cash portion of 25% the assumptions below would change.

With the change for $50K not being included in the allocation in taxable, total portfolio is now $495K. So now with $50K less, you would have 0.5*$50K less in domestic, or in another words, reduce amount in domestic by $25K. Then with international and bonds since they are 25% allocation each, they are actually $12.5K less on each (half of domestic). Thats why the beauty of 50/25/25 is so great. International and Bonds change by half the amount as domestic does. New amounts below written out for clarity.

Domestic: Total should be ~247.5K ($25K less than original)
International: Total should be ~$123.75K ($12.5K less than original)
Bonds Total: Total should be ~$123.75K ($12.5K less than original)

This would result in below with green for what changed:

Her HSA: Invest all $3K in VG 500 Index Fund VFIAX
His HSA: Invest all $2K in Vanguard Total Stock Market VITSX $2K
Her and His Roth: Invest both accounts in a US total market or S&P 500 fund (Total is $71K across both accounts)

Her 401K:
Invest all $151K in Fidelity 500 Index FXAIX

His 401K:
Invest your 25% of allocation for bonds in BTC US Debt Index M DEBTM ($123.75K) - lowest cost option in both 401Ks and seems to track Barclays aggregate bond (AGG) (subtracting the $12.5K out of here which was added to international)
Invest $94.25K in FTIHX (total International index) (adding $12.5K here that I moved out of bonds in this account)

Taxable:
I would put $20.5K in ITOT (US Total Market) and $29.5K in IXUS (US total International) at Fidelity. (removing $50K from here so easiest and keeping both domestic/international in taxable is take $25K out of ITOT and IXUS each. Doing this though took an extra $12.5K from international, so need to add that back in 401K. Easiest is to pull it from bonds and add it to international in his 401K since I have to take $12.5K out of bonds anyway.)
This was incredibly helpful, thank you for walking me through this exercise. Now supposed we wanted to be more aggressive and have dom:int'l:bond be 65:25:15 instead of 50:25:25, I think we would end up having to add a domestic stock to his 401k (probably FXAIX). I've included a screenshot below to represent this.

But with both domestic and international now in both the taxable account as well as his 401k, how would you determine how much of each should be in the taxable versus in his 401k? How would you balance the funds highlighted in yellow below and why? Really appreciate your patience!

Imageclosest diesel gas to me

Jermbo
Posts: 61
Joined: Tue Sep 19, 2017 1:06 pm

Re: Portfolio Review & Timing with Coronavirus

Post by Jermbo » Thu Feb 13, 2020 3:25 pm

This was incredibly helpful, thank you for walking me through this exercise. Now supposed we wanted to be more aggressive and have dom:int'l:bond be 65:25:15 instead of 50:25:25, I think we would end up having to add a domestic stock to his 401k (probably FXAIX). I've included a screenshot below to represent this.

But with both domestic and international now in both the taxable account as well as his 401k, how would you determine how much of each should be in the taxable versus in his 401k? How would you balance the funds highlighted in yellow below and why? Really appreciate your patience!
So you have some things going on here that need clarification:
1) Your allocation needs to add up to 100%. Currently you have an extra 5%. Something that could be intended is 60/25/15 (not 65)
2) However if this is the intention, now your international allocation isn't 33% of stock. It would be ~29.5% of equity. If you wanted 33% of equity in international maintained, you would need an allocation of 57/28/15.
3) If though 60/25/15 is intended, all you need to do is shift 10% of bonds in his 401k, into FID 500 INDEX FXAIX 0.02%
4) Revised allocation below with changes in red
5) Just an FYI, the allocation setup I am specifying initially is not so much about where or how much is in each account. Notice I don't really care about moving things out of international or domestic from taxable account. I also don't make changes to Roth's and HSA. I really use those first to fill up most of domestic equity allocation since it's the highest allocation in your portfolio. The rest (international goes into taxable and 401k) and bonds are put in 401ks. This page here: https://www.bogleheads.org/wiki/Tax-eff ... _placement is the best site to clarify what I am trying to do.

Her HSA: Invest all $3K in VG 500 Index Fund VFIAX
His HSA: Invest all $2K in Vanguard Total Stock Market VITSX $2K
Her and His Roth: Invest both accounts in a US total market or S&P 500 fund (Total is $71K across both accounts)

Her 401K:
Invest all $151K in Fidelity 500 Index FXAIX

His 401K:
Invest your 15% of allocation for bonds in BTC US Debt Index M DEBTM ($74.25K)
Invest $94.25K in FTIHX (total International index)
Invest $49.5K in FID 500 INDEX FXAIX

Taxable:
I would put $20.5K in ITOT (US Total Market) and $29.5K in IXUS (US total International) at Fidelity.

Jermbo
Posts: 61
Joined: Tue Sep 19, 2017 1:06 pm

Re: Portfolio Review & Timing with Coronavirus

Post by Jermbo » Thu Feb 13, 2020 7:13 pm

Was able to see the image in your post just now and yes the way you did it works too. Looks like you have it mapped out now.

Topic Author
adventuregirl
Posts: 7
Joined: Sat Feb 08, 2020 5:19 pm

Re: Portfolio Review & Timing with Coronavirus

Post by adventuregirl » Sat Feb 15, 2020 3:19 pm

Jermbo wrote:
Thu Feb 13, 2020 3:25 pm
This was incredibly helpful, thank you for walking me through this exercise. Now supposed we wanted to be more aggressive and have dom:int'l:bond be 65:25:15 instead of 50:25:25, I think we would end up having to add a domestic stock to his 401k (probably FXAIX). I've included a screenshot below to represent this.

But with both domestic and international now in both the taxable account as well as his 401k, how would you determine how much of each should be in the taxable versus in his 401k? How would you balance the funds highlighted in yellow below and why? Really appreciate your patience!
So you have some things going on here that need clarification:
1) Your allocation needs to add up to 100%. Currently you have an extra 5%. Something that could be intended is 60/25/15 (not 65)
2) However if this is the intention, now your international allocation isn't 33% of stock. It would be ~29.5% of equity. If you wanted 33% of equity in international maintained, you would need an allocation of 57/28/15.
3) If though 60/25/15 is intended, all you need to do is shift 10% of bonds in his 401k, into FID 500 INDEX FXAIX 0.02%
4) Revised allocation below with changes in red
5) Just an FYI, the allocation setup I am specifying initially is not so much about where or how much is in each account. Notice I don't really care about moving things out of international or domestic from taxable account. I also don't make changes to Roth's and HSA. I really use those first to fill up most of domestic equity allocation since it's the highest allocation in your portfolio. The rest (international goes into taxable and 401k) and bonds are put in 401ks. This page here: https://www.bogleheads.org/wiki/Tax-eff ... _placement is the best site to clarify what I am trying to do.

Her HSA: Invest all $3K in VG 500 Index Fund VFIAX
His HSA: Invest all $2K in Vanguard Total Stock Market VITSX $2K
Her and His Roth: Invest both accounts in a US total market or S&P 500 fund (Total is $71K across both accounts)

Her 401K:
Invest all $151K in Fidelity 500 Index FXAIX

His 401K:
Invest your 15% of allocation for bonds in BTC US Debt Index M DEBTM ($74.25K)
Invest $94.25K in FTIHX (total International index)
Invest $49.5K in FID 500 INDEX FXAIX

Taxable:
I would put $20.5K in ITOT (US Total Market) and $29.5K in IXUS (US total International) at Fidelity.
Even after reviewing the tax-efficient fund placement link you provided I'm still confused about the following. Put all of the other numbers aside. The advantages and disadvantages of Options 1,2,3 below still aren't 100% clear to me. Is one the stand-out best option?

This goes back to my earlier question about foreign tax credits (included below). If it is advantageous to hold foreign funds in taxable then Option 1 seems to be best. But then you pointed out that the benefit of ITOT in taxable is that it kicks off less dividends so it's more tax efficient, so then why isn't Option 2 best? Or is your view that it's best to balance out both of the above and then have something similar to Option 3?

See images below.

Option 1: Taxable holds IXUS only. This increases FXAIX in his 401k
Image

Option 2: Taxable holds ITOT only. This decreases FXAIX in his 401k
Image

Option 3: Taxable holds approximately 50% ITOT and 50% IXUS (~25,000 each) and his 401k is balanced accordingly to get to desired overall AA.
Image

My earlier question and your response:
1) Per Bogleheads Video #8 (Minimize Taxes), it says that foreign stocks should be held in taxable account where you can get a foreign tax credit. Because of this, I'm curious - why did you choose to put FTIHX in His 401k? Would it be more advantageous to increase the IXUS in the taxable account (decreasing ITOT) and instead invest in FXAIX in His 401k? You are correct that foreign stocks receive a foreign tax credit. However i wouldn't focus on trying to get all your international in taxable. The benefit of ITOT in your taxable is it kicks off less dividends so it's more tax efficient. Also, since you have a higher allocation to US stocks, you will generally need to invest in some US stocks in taxable over time with your Foreign stocks.

Topic Author
adventuregirl
Posts: 7
Joined: Sat Feb 08, 2020 5:19 pm

Re: Portfolio Review & Timing with Coronavirus

Post by adventuregirl » Tue Feb 18, 2020 12:13 pm

Hi fellow Bogleheads. Just reaching out to see if anyone knows the answer to my question from my previous post regarding options 1,2,3.

Jermbo
Posts: 61
Joined: Tue Sep 19, 2017 1:06 pm

Re: Portfolio Review & Timing with Coronavirus

Post by Jermbo » Tue Feb 18, 2020 1:07 pm

Hi Adventuregirl,

I think either three of those options work, but keep in mind, that it shouldn't really matter overtime. We are only talking about this one time setup for your portfolio, so once you put something in your taxable, over time it will need to gravitate toward having domestic and international stock in it. Reason is with contributions, the limits on retirement accounts necessitates it. See below.

Limit on Roths is $6K each ($12K total)
HSA limit for married filing jointly is ($7K total)
401k limits are $19.5K each ($39K) total.
Total across these accounts not considering taxable yet is $58K

So if you are contributing to these per your allocation, lets still assume 75/25, you would end up having below.

Total Roth contribution of $12K in Domestic equity
HSA contribution of $7K in domestic equity
Since all your bonds are in 401k, 25% of $58K in retirement accounts is $14.5K in bonds

So now of the $58K contributions in retirement accounts you have $24.5K left to allocate, If you put it all in domestic, your allocation is out of whack so you would need to load up taxable with international to compensate for that. If you load up in international in 401k, you would need to heavily contribute to domestic equity in taxable to compensate. Easiest is to just put the mix of domestic and international to get to your 50% of allocation to domestic and 25% of allocation to international.

50% of $58K is $29K and since you already put $19K of domestic in HSA and Roth, you would load up one of the 401Ks with $10K domestic equity. You already contributed to bonds with 14.5K so the other $14.5K left goes to international.

With this, new contributions have to go to domestic and international in taxable account to keep your domestic/international allocation split correct. You would just need to rebalance into bonds if you contribute to taxable so much so that you become equity heavy.

That's just my perspective, but there is definitely other ways to do this depending on when you are contributing to roths/HSA/401k throughout the year. You could do all domestic in those retirement accounts and then try to make up for the international allocation lagging by contributing to taxable in international until it's back to allocation. The flipside is only contribute rest of 401k to international so this would be 14.5K bonds, 24.5K international in 401k, and domestic equity in roth and HSA of 19K. With this scenario, domestic equity would only be 44% of your stock allocation instead of 66.6% so you'd need to contribute heavily to domestic equity in taxable at first to get it closer to the stock allocation split but overtime you'd need to eventually contribute to international in taxable again if you added enough to your taxable account.

I guess this is a long response to indicate it really shouldn't matter too much in the scheme of things. Pick where you want the funds and just load up your accounts according to your asset allocation.

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