[UPDATE] My asset allocation & Total int'l stock index?

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fcong
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[UPDATE] My asset allocation & Total int'l stock index?

Post by fcong » Fri May 22, 2020 11:31 pm

After working for three years in school, I finally got some time (thanks to COVID-19) to think about how to invest money wisely. Of course, I hate losing my hard-earned money. I think passive investment work best for me given my daily schedule, I'm thinking to allocate my assets as follows after learning from Google in the past month.

Tax-deferred account:
Vanguard Institutional Index VINIX, ER=0.04 [Total Stock Market Index is not available, use VINIX (S&P 500) instead]
Vanguard Total Bond Market Index VBTIX, ER=0.04

Taxable account (Fidelity):
Vanguard Total Int'l Market VXUS, ER=0.08

***********UPDATE on 5/25/2020***********
I'd like to seek your opinion on the "dilemma" that I'm facing. After reading the following reports from Vanguard and Fidelity: https://www.vanguard.com/pdf/ISGGEB.pdf; https://www.fidelity.com/viewpoints/inv ... ting-myths, I am more and more inclined to allocate 40% of equities into VXUS, which is also in line with the allocation strategy of Vanguard Target Retirement Fund 2045-2060 (e.g., https://investor.vanguard.com/mutual-fu ... olio/vivlx).

However, to maintain the desired asset allocation (either 90/10 or 80/20), I have to contribute far more than I can to the taxable account on a monthly basis (~triple my current contributions) because no total int'l stock index fund is available in the tax-deferred account. In this case, I have the following options:

Option 1: Choose a Vanguard Target Retirement Fund 2055 or 2060 (ER=0.09) in the tax-deferred account and then construct a similar three-fund portfolio in the taxable account (ITOT ER=0.03, AGG ER=0.05, VXUS ER=0.08).

Option 2: Use a three-fund portfolio only (i.e., VINIX and VBTIX in tax-deferred and VXUS in taxable) but start with a lower allocation to VXUS (10-15%) and then increase the allocation over the years with more disposable income (if any, with two kids).

I can see that Option 1 has a higher ER but an allocation strategy that I really like. Is it still a no-brainer that I should go with Option 2 because of the low cost? Is there an option 3 that you'd recommend?

I'd appreciate any suggestions you have.
Last edited by fcong on Mon May 25, 2020 11:22 am, edited 1 time in total.

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Re: My asset allocation & Total int'l stock index?

Post by retired@50 » Sat May 23, 2020 10:39 am

fcong wrote:
Fri May 22, 2020 11:31 pm
After working for three years in school, I finally got some time (thanks to COVID-19) to think about how to invest money wisely. Of course, I hate losing my hard-earned money. I think passive investment work best for me given my daily schedule, I'm thinking to allocate my assets as follows after learning from Google in the past month.

Tax-deferred account:
60% on Vanguard Institutional Index VINIX
20% on Vanguard Total Bond Market Index VBTIX
Taxable account:
20% on a total int'l stock index, but which one? I only have a Fidelity account which was used to buy IVV until I learned that VINIX is the same thing tracking S&P 500. So, I decided to switch to a total int'l stock index instead, any Fidelity products you'd recommend?

Currently, my tax-deferred account has about $95K in total in the money market, if I were to rebalance this money according to the above rule, what's the "best" strategy to do so?

I'd appreciate any suggestions you have.
Welcome to the forum.

For the taxable account at Fidelity, I'd suggest the Total International Stock Index fund - FTIHX.

https://fundresearch.fidelity.com/mutua ... /31635V638

As far as re-balancing the money, doing it using the lump sum method typically works out better. See this wiki page for a discussion of the lump sum versus dollar cost averaging.

https://www.bogleheads.org/wiki/Dollar_cost_averaging

In reality, you'll be doing dollar cost averaging when you use your 401k plan, since every paycheck will have a small amount set aside for the plan.

Regards,
This is one person's opinion. Nothing more.

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Re: My asset allocation & Total int'l stock index?

Post by ruralavalon » Sat May 23, 2020 10:50 am

Welcome to the forum :) .

fcong wrote:
Fri May 22, 2020 11:31 pm
After working for three years in school, I finally got some time (thanks to COVID-19) to think about how to invest money wisely. Of course, I hate losing my hard-earned money. I think passive investment work best for me given my daily schedule, I'm thinking to allocate my assets as follows after learning from Google in the past month.

Tax-deferred account:
60% on Vanguard Institutional Index VINIX
20% on Vanguard Total Bond Market Index VBTIX
Taxable account:
20% on a total int'l stock index, but which one? I only have a Fidelity account which was used to buy IVV until I learned that VINIX is the same thing tracking S&P 500. So, I decided to switch to a total int'l stock index instead, any Fidelity products you'd recommend?
For better tax-efficiency at Fidelity I suggest using an exchange traded fund (ETF) rather than a regular Fidelity stock index fund.

For international stocks in a taxable account at Fidelity I suggest either:
1) Vanguard Total International Stock ETF (VXUS) ER 0.08%; or
2) iShares Core MSCI Total International Stock ETF (IXUS) ER 0.09%.

Both of those ETFs trade commission free at Fidelity.

fcong wrote:
Fri May 22, 2020 11:31 pm
Currently, my tax-deferred account has about $95K in total in the money market, if I were to rebalance this money according to the above rule, what's the "best" strategy to do so?

I'd appreciate any suggestions you have.
Once you have decided on the funds to use in your tax-deferred account, just make the switch from cash all at once. I see no particular reason to stretch out the process.

By the way, in my opinion both Vanguard Institutional Index Fund Institutional (VINIX) and Vanguard Total Bond Market Index Fund Institutional (VBTIX) are excellent choices.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: My asset allocation & Total int'l stock index?

Post by fcong » Sat May 23, 2020 12:44 pm

Many thanks to retired@50 and ruralavalon. I benefit a lot from the wisdom of the crowd, especially by reading discussions posted in this forum. After some studies, I tend to agree with ruralavalon that it's probably better off going with ETF than Fidelity's own products because in the future if I were to switch from Fidelity to another company, I'll owe much more in taxes than with ETF <-- but, please correct me if I'm wrong.

In between VXUS and IXUS, it seems like I should go with VXUS because of the relatively lower ER although not much of a difference. So, I guess below is what I will do:
Tax-deferred account: 60% VINIX and 20% VBTIX
Taxable account (Fidelity): 20% VXUS

@ruralavalon, it seems to me that "switch from cash all at once" will expose myself to more risk in the short term than "dollar cost averaging"? Though I know I won't be touching the money until at least 20 years from now, it's hard to resist the temptation to check my account after the rebalance.

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Re: My asset allocation & Total int'l stock index?

Post by ruralavalon » Sat May 23, 2020 1:06 pm

fcong wrote:
Sat May 23, 2020 12:44 pm
Many thanks to retired@50 and ruralavalon. I benefit a lot from the wisdom of the crowd, especially by reading discussions posted in this forum. After some studies, I tend to agree with ruralavalon that it's probably better off going with ETF than Fidelity's own products because in the future if I were to switch from Fidelity to another company, I'll owe much more in taxes than with ETF <-- but, please correct me if I'm wrong.
You are correct.

Also ETFs are more tax-efficient in the sense that every year they generate lower income tax liability from annual distributions than a regular index mutual fund. Wiki article, ETFs versus mutual funds, "tax-efficiency" . Also see: ETF taxes.

fcong wrote:
Sat May 23, 2020 12:44 pm
In between VXUS and IXUS, it seems like I should go with VXUS because of the relatively lower ER although not much of a difference. So, I guess below is what I will do:
Tax-deferred account: 60% VINIX and 20% VBTIX
Taxable account (Fidelity): 20% VXUS

@ruralavalon, it seems to me that "switch from cash all at once" will expose myself to more risk in the short term than "dollar cost averaging"? Though I know I won't be touching the money until at least 20 years from now, it's hard to resist the temptation to check my account after the rebalance.
Please see this pdf Vanguard paper: "Invest now or temporarily hold your cash".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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fcong
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Re: My asset allocation & Total int'l stock index?

Post by fcong » Sat May 23, 2020 4:19 pm

ruralavalon wrote:
Sat May 23, 2020 1:06 pm
Please see this pdf Vanguard paper: "Invest now or temporarily hold your cash".
Thank you, this is very informative. You've been very helpful.

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Re: My asset allocation & Total int'l stock index?

Post by Chrono Triggered » Sat May 23, 2020 5:01 pm

What kind of international options does your workplace plan offer?

Topic Author
fcong
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Re: My asset allocation & Total int'l stock index?

Post by fcong » Sat May 23, 2020 6:02 pm

Chrono Triggered wrote:
Sat May 23, 2020 5:01 pm
What kind of international options does your workplace plan offer?
Tax-deferred account offers the following options:
DFA Emerging Markets Portfolio DFEMX: 0.43
DFA Emerging Markets Core Equity Portfolio Institutional Class DFCEX: 0.48
CREF Global Equities Account (R2) QCGLPX: 0.36
American Funds EuroPacific Growth RERGX: 0.49
American Funds New Perspective RNPGX: 0.42
Vanguard International Growth Fund - Admiral Shares VWILX: 0.32

Based on what I learned from this forum, it seems like none of the above is better than Vanguard Total International Stock ETF VXUS with 0.08 ER <-- but correct me if I am wrong.

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fcong
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Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by fcong » Mon May 25, 2020 11:25 am

Just updated the original post with further questions, any comments are appreciated.

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Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by Triple digit golfer » Mon May 25, 2020 11:32 am

fcong wrote:
Mon May 25, 2020 11:25 am
Just updated the original post with further questions, any comments are appreciated.
The international options in your tax deferred account are not awful.

In reality, for me personally, I would probably do Option 1 and probably even use a target date fund in taxable also, if none of the taxable funds are to be used and are all for retirement. The 3 fund separately in taxable doesn't save you on taxes, just a few basis points of expenses.

What is your marginal tax rate? That is important.

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Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by NerveDoc » Mon May 25, 2020 11:44 am

It seems like with that asset allocation goal, you could use the target date funds in your tax deferred account and use a combination of VTI/VXUS or VT in the taxable account (VTI/VXUS would be more beneficial for tax loss harvesting). You could then change the target date in your tax deferred account as needed in the future, thereby keeping all of your bonds there, which is more tax efficient.

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Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by retired@50 » Mon May 25, 2020 12:05 pm

I'd go with option 1.

Using a target date fund with a 9 basis point ER is fine. Asset allocation is more important than a couple of basis point savings.

Regards,
This is one person's opinion. Nothing more.

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Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by Triple digit golfer » Mon May 25, 2020 12:17 pm

NerveDoc wrote:
Mon May 25, 2020 11:44 am
It seems like with that asset allocation goal, you could use the target date funds in your tax deferred account and use a combination of VTI/VXUS or VT in the taxable account (VTI/VXUS would be more beneficial for tax loss harvesting). You could then change the target date in your tax deferred account as needed in the future, thereby keeping all of your bonds there, which is more tax efficient.
I also had that thought. A good option.

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fcong
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Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by fcong » Mon May 25, 2020 12:19 pm


The international options in your tax deferred account are not awful.

In reality, for me personally, I would probably do Option 1 and probably even use a target date fund in taxable also, if none of the taxable funds are to be used and are all for retirement. The 3 fund separately in taxable doesn't save you on taxes, just a few basis points of expenses.

What is your marginal tax rate? That is important.
Thanks for the response. Can you indicate which int'l option(s) seems to be ok in my tax deferred account? Tax rate is 22% (married), but will increase to 24% soon (within 1-2 years).

Topic Author
fcong
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Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by fcong » Mon May 25, 2020 12:23 pm

NerveDoc wrote:
Mon May 25, 2020 11:44 am
It seems like with that asset allocation goal, you could use the target date funds in your tax deferred account and use a combination of VTI/VXUS or VT in the taxable account (VTI/VXUS would be more beneficial for tax loss harvesting). You could then change the target date in your tax deferred account as needed in the future, thereby keeping all of your bonds there, which is more tax efficient.
Thanks, I do remember reading somewhere else saying that putting bond into a taxable account is not advisable. In that case, I suppose I should buy a little bit VBTIX in addition to the target fund in my tax-deferred account to maintain the overall allocation across the two accounts (given that I'm not going to buy any bond in the taxable account?

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fcong
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Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by fcong » Mon May 25, 2020 12:24 pm

retired@50 wrote:
Mon May 25, 2020 12:05 pm
I'd go with option 1.

Using a target date fund with a 9 basis point ER is fine. Asset allocation is more important than a couple of basis point savings.

Regards,
Thanks for your suggestion.

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How Millennials Can Get Rich Slowly

Post by Taylor Larimore » Mon May 25, 2020 12:32 pm

fcong:

Please read the sound investing advice from Boglehead author and advisor Dr. William Bernstein:

If You Can. How Millennials Can Get Rich Slowly

Dr. Bernstein recommends The Three-Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by ruralavalon » Mon May 25, 2020 1:27 pm

fcong wrote:
Mon May 25, 2020 11:25 am
Just updated the original post with further questions, any comments are appreciated.
Option 3, use an international stock fund in your tax-deferred account.

Although actively managed both Vanguard International Growth Fund - Admiral Shares VWILX: 0.32 and American Funds EuroPacific Growth RERGX: 0.49 are reasonable choices for investing in international stocks. They are both diversified investing stocks of companies (125 for VWILX and 328 for RERGX), in both developed and markets, and have moderate expense ratios. Both have performed well compared to a total international stock index fund. Portfolio Visualizer,1997-2020.
Last edited by ruralavalon on Mon May 25, 2020 2:23 pm, edited 3 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: How Millennials Can Get Rich Slowly

Post by fcong » Mon May 25, 2020 1:45 pm

Taylor Larimore wrote:
Mon May 25, 2020 12:32 pm
fcong:

Please read the sound investing advice from Boglehead author and advisor Dr. William Bernstein:

If You Can. How Millennials Can Get Rich Slowly

Dr. Bernstein recommends The Three-Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Thank you Taylor, I just finished your book last weekend and I really like the idea of a three-fund portfolio. Actually, my allocation strategy follows this idea but with some minor tweaks given that my tax-deferred account doesn't offer any total US stock index fund, which is substituted by S&P 500 index fund in my case.

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fcong
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Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by fcong » Mon May 25, 2020 1:52 pm

ruralavalon wrote:
Mon May 25, 2020 1:27 pm
Option 3, use an international stock fund in your tax-deferred account.

Although actively managed both Vanguard International Growth Fund - Admiral Shares VWILX: 0.32 and American Funds EuroPacific Growth RERGX: 0.49 are reasonable choices for investing in international stocks. They are both diversified investing stocks of companies (125 for VWILX and 328 for RERGX), in both developed and markets, and have moderate expense ratios. Both have performed well compared to a total international stock index fund. Portfolio Visualizer, 1997-2020.
Thanks for the suggestion.

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Adding more funds to the S&P 500 Index Fund?

Post by Taylor Larimore » Mon May 25, 2020 4:38 pm

fcong wrote: Thank you Taylor, I just finished your book last weekend and I really like the idea of a three-fund portfolio. Actually, my allocation strategy follows this idea but with some minor tweaks given that my tax-deferred account doesn't offer any total US stock index fund, which is substituted by S&P 500 index fund in my case.
fcong:

I am very pleased that you liked the Boglehead book.

Be careful about adding "minor tweaks" to The Three-Fund Portfolio. The beauty of The Three-Fund Portfolio is it's Simplicity.

In my opinion, a "S&P" 500 Index fund is a perfectly acceptable substitute to a Total Stock Market Index Fund which is seldom enhanced with additional funds. For example, anyone who added a small-cap value fund to the Three-Fund Portfolio has been badly underperforming for many years.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Adding more funds to the S&P 500 Index Fund?

Post by fcong » Mon May 25, 2020 7:23 pm

Taylor Larimore wrote:
Mon May 25, 2020 4:38 pm
Be careful about adding "minor tweaks" to The Three-Fund Portfolio. The beauty of The Three-Fund Portfolio is it's Simplicity.

In my opinion, a "S&P" 500 Index fund is a perfectly acceptable substitute to a Total Stock Market Index Fund which is seldom enhanced with additional funds. For example, anyone who added a small-cap value fund to the Three-Fund Portfolio has been badly underperforming for many years.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Thanks again Taylor and I fully agree that simplicity is the key!

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Re: Adding more funds to the S&P 500 Index Fund?

Post by nanameg » Mon May 25, 2020 7:55 pm

Taylor Larimore wrote:
Mon May 25, 2020 4:38 pm
fcong wrote: Thank you Taylor, I just finished your book last weekend and I really like the idea of a three-fund portfolio. Actually, my allocation strategy follows this idea but with some minor tweaks given that my tax-deferred account doesn't offer any total US stock index fund, which is substituted by S&P 500 index fund in my case.
fcong:

I am very pleased that you liked the Boglehead book.

Be careful about adding "minor tweaks" to The Three-Fund Portfolio. The beauty of The Three-Fund Portfolio is it's Simplicity.

In my opinion, a "S&P" 500 Index fund is a perfectly acceptable substitute to a Total Stock Market Index Fund which is seldom enhanced with additional funds. For example, anyone who added a small-cap value fund to the Three-Fund Portfolio has been badly underperforming for many years.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Taylor, I’m 64 and would like to simplify even further from the 4 fund portfolio that PAS advisors recommend to a 2 fund portfolio. I’ve read that even you no longer follow the three fund portfolio.

I’ve been reading the forum for 2 months now and the pages and pages of debate on international vs US only investing. I know it’s a personal decision but do you believe you can really hurt yourself by using the 2 fund approach?

I need simple but the TDF’s make me uncomfortable. I’d rather see a little more information than what is a available from a single blended fund.

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Re: Adding more funds to the S&P 500 Index Fund?

Post by Triple digit golfer » Mon May 25, 2020 8:17 pm

nanameg wrote:
Mon May 25, 2020 7:55 pm
Taylor Larimore wrote:
Mon May 25, 2020 4:38 pm
fcong wrote: Thank you Taylor, I just finished your book last weekend and I really like the idea of a three-fund portfolio. Actually, my allocation strategy follows this idea but with some minor tweaks given that my tax-deferred account doesn't offer any total US stock index fund, which is substituted by S&P 500 index fund in my case.
fcong:

I am very pleased that you liked the Boglehead book.

Be careful about adding "minor tweaks" to The Three-Fund Portfolio. The beauty of The Three-Fund Portfolio is it's Simplicity.

In my opinion, a "S&P" 500 Index fund is a perfectly acceptable substitute to a Total Stock Market Index Fund which is seldom enhanced with additional funds. For example, anyone who added a small-cap value fund to the Three-Fund Portfolio has been badly underperforming for many years.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Taylor, I’m 64 and would like to simplify even further from the 4 fund portfolio that PAS advisors recommend to a 2 fund portfolio. I’ve read that even you no longer follow the three fund portfolio.

I’ve been reading the forum for 2 months now and the pages and pages of debate on international vs US only investing. I know it’s a personal decision but do you believe you can really hurt yourself by using the 2 fund approach?

I need simple but the TDF’s make me uncomfortable. I’d rather see a little more information than what is a available from a single blended fund.
Taylor has stated that he only sold international because it had the lowest capital gains. Makes sense to me in his situation, as he is investing for his heirs.

You're getting caught up on the number of funds. The target date funds actually hold four funds. If you backrest the four funds vs the target fund in the appropriate percentages, the performance difference will be zero or indistinguishable. These funds are well run.

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2 funds or 3 funds?

Post by Taylor Larimore » Mon May 25, 2020 8:34 pm

Taylor, I’m 64 and would like to simplify even further from the 4 fund portfolio that PAS advisors recommend to a 2 fund portfolio. I’ve read that even you no longer follow the three fund portfolio.
nanameg:

Answers in blue.

Several years ago I needed money from my taxable account which held both the U.S. and International total market index funds. My Total U.S. stock fund had much larger capital gains to pay if I sold. Accordingly I sold my International Stock Fund. It had nothing to do with that fund's performance -- only taxes.
I’ve been reading the forum for 2 months now and the pages and pages of debate on international vs US only investing. I know it’s a personal decision but do you believe you can really hurt yourself by using the 2 fund approach?
I very much like the 2-fund approach although I slightly prefer the 3-fund portfolio for its added diversification.

International stocks represent about half the world's stocks. I hold international stocks for the same reason I hold bonds. Not to maximise returns but to minimize regret if international stocks outperform (again).


I need simple but the TDF’s make me uncomfortable. I’d rather see a little more information than what is a available from a single blended fund.

I like TDF's (Target Date Funds) for investors who have everything in tax-advantaged accounts. They are simple and designed by investment experts -- but tax-inefficient. The 3-fund (and 2-fund) portfolios allow us to place tax-inefficient funds in tax-advantaged accounts and tax-efficient funds in taxable accounts.

Best wishes
Taylor
Jack Bogle's Words of Wisdom: "The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: 2 funds or 3 funds?

Post by nanameg » Mon May 25, 2020 9:16 pm

Taylor Larimore wrote:
Mon May 25, 2020 8:34 pm
Taylor, I’m 64 and would like to simplify even further from the 4 fund portfolio that PAS advisors recommend to a 2 fund portfolio. I’ve read that even you no longer follow the three fund portfolio.
nanameg:

Answers in blue.

Several years ago I needed money from my taxable account which held both the U.S. and International total market index funds. My Total U.S. stock fund had much larger capital gains to pay if I sold. Accordingly I sold my International Stock Fund. It had nothing to do with that fund's performance -- only taxes.
I’ve been reading the forum for 2 months now and the pages and pages of debate on international vs US only investing. I know it’s a personal decision but do you believe you can really hurt yourself by using the 2 fund approach?
I very much like the 2-fund approach although I slightly prefer the 3-fund portfolio for its added diversification.

International stocks represent about half the world's stocks. I hold international stocks for the same reason I hold bonds. Not to maximise returns but to minimize regret if international stocks outperform (again).


I need simple but the TDF’s make me uncomfortable. I’d rather see a little more information than what is a available from a single blended fund.

I like TDF's (Target Date Funds) for investors who have everything in tax-advantaged accounts. They are simple and designed by investment experts -- but tax-inefficient. The 3-fund (and 2-fund) portfolios allow us to place tax-inefficient funds in tax-advantaged accounts and tax-efficient funds in taxable accounts.

Best wishes
Taylor
Jack Bogle's Words of Wisdom: "The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course."
Thanks Taylor, for responding in detail.

All our accounts are tax advantaged. I need to read about Roth IRAs and the back door Roth. Are TDF’s suitable for Roth IRAs?

nanameg
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Re: Adding more funds to the S&P 500 Index Fund?

Post by nanameg » Mon May 25, 2020 9:28 pm

Triple digit golfer wrote:
Mon May 25, 2020 8:17 pm
nanameg wrote:
Mon May 25, 2020 7:55 pm
Taylor Larimore wrote:
Mon May 25, 2020 4:38 pm
fcong wrote: Thank you Taylor, I just finished your book last weekend and I really like the idea of a three-fund portfolio. Actually, my allocation strategy follows this idea but with some minor tweaks given that my tax-deferred account doesn't offer any total US stock index fund, which is substituted by S&P 500 index fund in my case.
fcong:

I am very pleased that you liked the Boglehead book.

Be careful about adding "minor tweaks" to The Three-Fund Portfolio. The beauty of The Three-Fund Portfolio is it's Simplicity.

In my opinion, a "S&P" 500 Index fund is a perfectly acceptable substitute to a Total Stock Market Index Fund which is seldom enhanced with additional funds. For example, anyone who added a small-cap value fund to the Three-Fund Portfolio has been badly underperforming for many years.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Taylor, I’m 64 and would like to simplify even further from the 4 fund portfolio that PAS advisors recommend to a 2 fund portfolio. I’ve read that even you no longer follow the three fund portfolio.

I’ve been reading the forum for 2 months now and the pages and pages of debate on international vs US only investing. I know it’s a personal decision but do you believe you can really hurt yourself by using the 2 fund approach?

I need simple but the TDF’s make me uncomfortable. I’d rather see a little more information than what is a available from a single blended fund.
Taylor has stated that he only sold international because it had the lowest capital gains. Makes sense to me in his situation, as he is investing for his heirs.

You're getting caught up on the number of funds. The target date funds actually hold four funds. If you backrest the four funds vs the target fund in the appropriate percentages, the performance difference will be zero or indistinguishable. These funds are well run.
Yes I’m “caught up” in the number of funds because I have 3 separate accounts and tracking the 4 funds in the three accounts got to be confusing ..And will only get more confusing the older I get perhaps.

I’m trying to decide between the PAS which has 4 funds but I’m not sure is really any different that just using a target fund...probably is cheaper to just use a target fund if I’m going to 4 fund route.

Or the three fund route which is maybe too complex as well if I could do reasonably well with 2 funds.

“Reasonably” well is the key phrase. I’m not interested in squeezing out every last possible cent of return..I just don’t want to do ourselves a disservice for the 30 more years we made have investing by not buying international stocks. That’s where I’m hung up...international funds or no.

Triple digit golfer
Posts: 5146
Joined: Mon May 18, 2009 5:57 pm

Re: Adding more funds to the S&P 500 Index Fund?

Post by Triple digit golfer » Mon May 25, 2020 9:37 pm

nanameg wrote:
Mon May 25, 2020 9:28 pm
Triple digit golfer wrote:
Mon May 25, 2020 8:17 pm
nanameg wrote:
Mon May 25, 2020 7:55 pm
Taylor Larimore wrote:
Mon May 25, 2020 4:38 pm
fcong wrote: Thank you Taylor, I just finished your book last weekend and I really like the idea of a three-fund portfolio. Actually, my allocation strategy follows this idea but with some minor tweaks given that my tax-deferred account doesn't offer any total US stock index fund, which is substituted by S&P 500 index fund in my case.
fcong:

I am very pleased that you liked the Boglehead book.

Be careful about adding "minor tweaks" to The Three-Fund Portfolio. The beauty of The Three-Fund Portfolio is it's Simplicity.

In my opinion, a "S&P" 500 Index fund is a perfectly acceptable substitute to a Total Stock Market Index Fund which is seldom enhanced with additional funds. For example, anyone who added a small-cap value fund to the Three-Fund Portfolio has been badly underperforming for many years.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Taylor, I’m 64 and would like to simplify even further from the 4 fund portfolio that PAS advisors recommend to a 2 fund portfolio. I’ve read that even you no longer follow the three fund portfolio.

I’ve been reading the forum for 2 months now and the pages and pages of debate on international vs US only investing. I know it’s a personal decision but do you believe you can really hurt yourself by using the 2 fund approach?

I need simple but the TDF’s make me uncomfortable. I’d rather see a little more information than what is a available from a single blended fund.
Taylor has stated that he only sold international because it had the lowest capital gains. Makes sense to me in his situation, as he is investing for his heirs.

You're getting caught up on the number of funds. The target date funds actually hold four funds. If you backrest the four funds vs the target fund in the appropriate percentages, the performance difference will be zero or indistinguishable. These funds are well run.
Yes I’m “caught up” in the number of funds because I have 3 separate accounts and tracking the 4 funds in the three accounts got to be confusing ..And will only get more confusing the older I get perhaps.

I’m trying to decide between the PAS which has 4 funds but I’m not sure is really any different that just using a target fund...probably is cheaper to just use a target fund if I’m going to 4 fund route.

Or the three fund route which is maybe too complex as well if I could do reasonably well with 2 funds.

“Reasonably” well is the key phrase. I’m not interested in squeezing out every last possible cent of return..I just don’t want to do ourselves a disservice for the 30 more years we made have investing by not buying international stocks. That’s where I’m hung up...international funds or no.
Consider taking Taylor's long standing advice. He has said that if he were starting over now, he would hold 20% of equities in international. It's enough for some diversification, the higher end of Bogle's recommendation, and the lower end of Vanguard's recommendation. Go for it!

nanameg
Posts: 164
Joined: Fri Mar 20, 2020 10:57 am

Re: Adding more funds to the S&P 500 Index Fund?

Post by nanameg » Mon May 25, 2020 10:43 pm

Triple digit golfer wrote:
Mon May 25, 2020 9:37 pm
nanameg wrote:
Mon May 25, 2020 9:28 pm
Triple digit golfer wrote:
Mon May 25, 2020 8:17 pm
nanameg wrote:
Mon May 25, 2020 7:55 pm
Taylor Larimore wrote:
Mon May 25, 2020 4:38 pm

fcong:

I am very pleased that you liked the Boglehead book.

Be careful about adding "minor tweaks" to The Three-Fund Portfolio. The beauty of The Three-Fund Portfolio is it's Simplicity.

In my opinion, a "S&P" 500 Index fund is a perfectly acceptable substitute to a Total Stock Market Index Fund which is seldom enhanced with additional funds. For example, anyone who added a small-cap value fund to the Three-Fund Portfolio has been badly underperforming for many years.

Best wishes.
Taylor
Taylor, I’m 64 and would like to simplify even further from the 4 fund portfolio that PAS advisors recommend to a 2 fund portfolio. I’ve read that even you no longer follow the three fund portfolio.

I’ve been reading the forum for 2 months now and the pages and pages of debate on international vs US only investing. I know it’s a personal decision but do you believe you can really hurt yourself by using the 2 fund approach?

I need simple but the TDF’s make me uncomfortable. I’d rather see a little more information than what is a available from a single blended fund.
Taylor has stated that he only sold international because it had the lowest capital gains. Makes sense to me in his situation, as he is investing for his heirs.

You're getting caught up on the number of funds. The target date funds actually hold four funds. If you backrest the four funds vs the target fund in the appropriate percentages, the performance difference will be zero or indistinguishable. These funds are well run.
Yes I’m “caught up” in the number of funds because I have 3 separate accounts and tracking the 4 funds in the three accounts got to be confusing ..And will only get more confusing the older I get perhaps.

I’m trying to decide between the PAS which has 4 funds but I’m not sure is really any different that just using a target fund...probably is cheaper to just use a target fund if I’m going to 4 fund route.

Or the three fund route which is maybe too complex as well if I could do reasonably well with 2 funds.

“Reasonably” well is the key phrase. I’m not interested in squeezing out every last possible cent of return..I just don’t want to do ourselves a disservice for the 30 more years we made have investing by not buying international stocks. That’s where I’m hung up...international funds or no.
Consider taking Taylor's long standing advice. He has said that if he were starting over now, he would hold 20% of equities in international. It's enough for some diversification, the higher end of Bogle's recommendation, and the lower end of Vanguard's recommendation. Go for it!
I have to read more but I don’t understand why holding as little as 20% of an international fund matters one way or the other..how is so little going to “save “you? The “official “ Vanguard position is to hold 40% and I guess they’ll keep increasing that to 50...which actually makes more sense on the face of it to a non professional.

nanameg
Posts: 164
Joined: Fri Mar 20, 2020 10:57 am

Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by nanameg » Mon May 25, 2020 10:54 pm

I have to revisit the 2 fund portfolio idea using total world maybe?

nanameg
Posts: 164
Joined: Fri Mar 20, 2020 10:57 am

Re: [UPDATE] My asset allocation & Total int'l stock index?

Post by nanameg » Mon May 25, 2020 10:57 pm

Again, not to be too hung up on the number of funds but if you’re going to buy international funds commit to it I think...I don’t know enough but that seems the most logical.

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