Portfolio Feedback Please

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
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Topic Author
scommander7
Posts: 17
Joined: Thu Jan 30, 2020 1:02 pm

Portfolio Feedback Please

Post by scommander7 » Mon Jun 29, 2020 4:11 pm

Hi Bogleheads! Could you please give me feedback on my attempt to simplify our investment accounts to an easy(ish)-to-manage 3-fund portfolio?

I got lost in a wormhole of recent (and not so recent) “bonds in taxable” threads. You all have taught me that bonds are of course better in tax-deferred space, but that it also doesn’t matter much when interest rates are so low. Until we have 401k/HSA access again and can shift bond weight to those spaces, I kept them in our Roth IRAs (per advice on an earlier post) for now. Looking to KISS. It’s all so interesting, but I’m as beginner as they come.

Emergency funds: Yes, 6 months + future house down payment in a laddered CD
Debt: none
Tax Filing Status: Married Filing Jointly
Age: Both 32
Tax Rate: Federal 22%
Desired Asset Allocation: 75% stocks / 25% bonds
Desired International Allocation: 20%
Portfolio size: mid 200k

Current Retirement Assets

Her Roth IRA at Fidelity:
(18%) FSKAX Fidelity Total Market Index Fund – 0.015%
(10%) FXNAX Fidelity U.S. Bond Index - 0.025%

His Roth IRA at Vanguard
(11%) VTSAX Vanguard Total Stock Market Index Fund - 0.04%
(12%) VBTLX Vanguard Total Bond Market Fund – 0.05%

Her HSA
(1%) CORE, cash for medical reimbursements if needed

His HSA
(2%) VBMPX Vanguard Total Bond Market IDX INSTLPLS – 0.03%

Her Taxable at TD Ameritrade:
(20%) SPTM, SPDR Portfolio Total Stock Market ETF – 0.03%

His Taxable at E-trade:
(26%) Domestic Stock (Employee Purchased Shares/Vesting Stock Grants) – we sell as soon as we can, to be replaced with VTSAX
(2%) Husband’s fun money – (keeping this at or under 3% of our total portfolio, per earlier advice)

Additional
Coverdell with Schwab - (90/10 AA, 20% International): $2000
Schwab U.S. Broad Market ETF, SCHB - 0.03%
International Equity Index ETF, SCHF - 0.06%
Schwab U.S. Aggregate Bond ETF, SCHZ – 0.05%

His 529B for Future Kid 1 - $5000
Utah / Age-based Aggressive Plan - 0.175%

Her 529B for Future Kid 2 - $5000
Utah / Age-based Aggressive - 0.175%


New Annual Contributions:
[*] $6,000/each Roth IRA contributions (or via backdoor)
[*] I’ll have about $7000 in freelance income via our husband/wife Partnership LLC that I could invest in a Solo 401k (more bond space!) but even typing that makes me tired. I have a bunch more reading to do (slash stalking Spirit Rider) :^)


Questions:
  • Is this as easy as I could make things (in lieu of target date funds) to easily rebalance each year?
  • Any suggestions for different funds than my choices?
  • I started to get bleary-eyed with the Bond descriptions in the Bogleheads’ Guide to Investing, but I’ve gathered from other threads that maybe tax-exempt bonds in the taxable accounts may be a better option?
  • Any historical learnings/suggestions I could apply to this plan during the current COVID State of the Union?

I have already read the Getting Started, rebalancing, tax efficient fund placement, 3-fund portfolio, book recommendations, and IPS Wikis. Huge thanks to this great, kind community.
Last edited by scommander7 on Mon Jun 29, 2020 5:00 pm, edited 1 time in total.

retired@50
Posts: 2986
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Portfolio Simplification / Feedback

Post by retired@50 » Mon Jun 29, 2020 4:28 pm

scommander7 wrote:
Mon Jun 29, 2020 4:11 pm

Questions:
  • Is this as easy as I could make things (in lieu of target date funds) to easily rebalance each year?
  • Any suggestions for different funds than my choices?
  • I started to get bleary-eyed with the Bond descriptions in the Bogleheads’ Guide to Investing, but I’ve gathered from other threads that maybe tax-exempt bonds in the taxable accounts may be a better option?
  • Any historical learnings/suggestions I could apply to this plan during the current COVID State of the Union?
To make things easier, you could consider using fewer financial custodians.

I don't see any problems with the funds you're using.

Using tax exempt bonds is okay but I wouldn't suggest you use municipal bonds exclusively. Maybe half of your bonds at most, possibly less if you're using a state-specific fund. Vanguard typically has the lowest ER municipal bond funds.

Nothing to say about COVID except that this too shall pass.

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

tashnewbie
Posts: 331
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Simplification / Feedback

Post by tashnewbie » Mon Jun 29, 2020 4:34 pm

Welcome!

I'm a newbie too, so please forgive me if this comment is misguided, but why do you have two 529s for future kids? Do you have concrete plans to have those children in the near future? Would it make sense to save that money in regular retirement/taxable brokerage accounts now, and shift to 529 after a child is born (or wife is in second trimester)?

I second the comment that reducing the number of custodians would help simplify. I don't know if you arranged things the way they are in an attempt to avoid wash sales. If so, you don't need to have different custodians across all 4 accounts. You could keep the Roth IRAs at one custodian and the brokerage accounts at another and basically eliminate the risk of a wash sale, as long as you comply with other rules.

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Duckie
Posts: 7365
Joined: Thu Mar 08, 2007 2:55 pm

Re: Portfolio Feedback Please

Post by Duckie » Mon Jun 29, 2020 7:23 pm

tashnewbie wrote:I don't know if you arranged things the way they are in an attempt to avoid wash sales. If so, you don't need to have different custodians across all 4 accounts. You could keep the Roth IRAs at one custodian and the brokerage accounts at another and basically eliminate the risk of a wash sale, as long as you comply with other rules.
This makes no sense. If you hold all your assets at one custodian and a sale and purchase creates a wash sale, then holding assets at multiple custodians and doing the same thing would also create a wash sale. Just because one custodian doesn't know about the other transaction does not mean a wash sale did not happen. You know it happened and are required to report it.

tashnewbie
Posts: 331
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Feedback Please

Post by tashnewbie » Mon Jun 29, 2020 8:06 pm

Duckie wrote:
Mon Jun 29, 2020 7:23 pm
tashnewbie wrote:I don't know if you arranged things the way they are in an attempt to avoid wash sales. If so, you don't need to have different custodians across all 4 accounts. You could keep the Roth IRAs at one custodian and the brokerage accounts at another and basically eliminate the risk of a wash sale, as long as you comply with other rules.
This makes no sense. If you hold all your assets at one custodian and a sale and purchase creates a wash sale, then holding assets at multiple custodians and doing the same thing would also create a wash sale. Just because one custodian doesn't know about the other transaction does not mean a wash sale did not happen. You know it happened and are required to report it.
I’m confused about whether you’re saying my comment makes no sense or the OP’s account configuration doesn’t. I understand (in a basic way) the rule prohibiting wash sales. I’ve heard some people keep IRAs at a different custodian than brokerage accounts, to allow automatic reinvestment of dividends and capital gains in the IRAs, without concern of interference with TLH strategy in the brokerage account. This is based upon the proposition that funds across custodians aren’t substantially identical and so would not implicate the wash sale rule. I alerted OP that he still has to comply with the contours of TLH rules to avoid the wash sale rule.

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Duckie
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Re: Portfolio Feedback Please

Post by Duckie » Mon Jun 29, 2020 8:42 pm

tashnewbie wrote:I’m confused about whether you’re saying my comment makes no sense or the OP’s account configuration doesn’t.
I meant your comment as I understood it made no sense.
I’ve heard some people keep IRAs at a different custodian than brokerage accounts, to allow automatic reinvestment of dividends and capital gains in the IRAs, without concern of interference with TLH strategy in the brokerage account. This is based upon the proposition that funds across custodians aren’t substantially identical and so would not implicate the wash sale rule.
So you are saying that because people don't buy the same funds/ETFs in a different brokerage there is no wash sale. That is true if they don't buy the same fund. My argument was based on the strong possibility that they do buy the same fund/ETF. You looked at the situation from one angle, I looked at it from another.

Topic Author
scommander7
Posts: 17
Joined: Thu Jan 30, 2020 1:02 pm

Re: Portfolio Simplification / Feedback

Post by scommander7 » Tue Jun 30, 2020 2:30 am

tashnewbie wrote:
Mon Jun 29, 2020 4:34 pm
I'm a newbie too, so please forgive me if this comment is misguided, but why do you have two 529s for future kids? Do you have concrete plans to have those children in the near future? Would it make sense to save that money in regular retirement/taxable brokerage accounts now, and shift to 529 after a child is born (or wife is in second trimester)?
Hi Tash! Thanks for the warm welcome.

A few thoughts on this: yes, we definitely want to have kids within the next 2-3 years. We recently pulled the goalie (woo!), and we want to take advantage of potential dual citizenship while my husband and I are temporarily living abroad. I didn't want that comment to go down the "investing while abroad"/"tax implications" rabbit holes, so I didn't mention it in the OP. :wink: More generally, I've read on other threads that many people don't count ESAs/529bs as part of their overall portfolio. On my husband's end, there's a clear willingness to be more aggressive with the AA for that money (even 100% equities for now). And finally, that $10k was being held in a Meryl Lynch account he's had since college (and just wanted to let sit there for our future kids). I've now convinced him the ML fees were silly with the help of some Boglehead posts, and immediately moving it into 529s helped me win the discussion.

tashnewbie wrote:
Mon Jun 29, 2020 4:34 pm
I don't know if you arranged things the way they are in an attempt to avoid wash sales. If so, you don't need to have different custodians across all 4 accounts. You could keep the Roth IRAs at one custodian and the brokerage accounts at another and basically eliminate the risk of a wash sale, as long as you comply with other rules.
Nope, thinking about wash sales gives me way too much credit. We just had these individual accounts open before we got married.

Topic Author
scommander7
Posts: 17
Joined: Thu Jan 30, 2020 1:02 pm

Re: Portfolio Simplification / Feedback

Post by scommander7 » Tue Jun 30, 2020 2:53 am

Hi retired@50, thanks for chiming in!
retired@50 wrote:
Mon Jun 29, 2020 4:28 pm
Using tax exempt bonds is okay but I wouldn't suggest you use municipal bonds exclusively. Maybe half of your bonds at most, possibly less if you're using a state-specific fund. Vanguard typically has the lowest ER municipal bond funds.
If it were you, would you still keep Bonds in the Roth IRAs and HSA, or have them all in taxable for now (then slowly move them to over to our 401ks when we have one again, probably ~5 years from now)? Knowing that capital gains won't be such a big deal with the current low interest rates. I feel like every new term means another few hours of reading (as I had to look up municipal bonds again), but it's good for me.

I can easily move the dollars allocated for my TD Ameritrade taxable over to his Vanguard, and do our International + some Bond funds there. Maybe 20% of our overall bonds in Vanguard’s Intermediate Tax Exempt Fund (VWIUX)? Or the Index ETF (VTEB)?

Or would it be better to stick to the Total Market Bond fund until I have a better grasp of Bonds Funds as a whole...

Thank you very much for your time.
Last edited by scommander7 on Tue Jun 30, 2020 3:03 am, edited 1 time in total.

Topic Author
scommander7
Posts: 17
Joined: Thu Jan 30, 2020 1:02 pm

Re: Portfolio Feedback Please

Post by scommander7 » Tue Jun 30, 2020 3:01 am

Duckie wrote:
Mon Jun 29, 2020 7:23 pm
tashnewbie wrote:I don't know if you arranged things the way they are in an attempt to avoid wash sales. If so, you don't need to have different custodians across all 4 accounts. You could keep the Roth IRAs at one custodian and the brokerage accounts at another and basically eliminate the risk of a wash sale, as long as you comply with other rules.
This makes no sense. If you hold all your assets at one custodian and a sale and purchase creates a wash sale, then holding assets at multiple custodians and doing the same thing would also create a wash sale. Just because one custodian doesn't know about the other transaction does not mean a wash sale did not happen. You know it happened and are required to report it.
Haha, my minimal research of wash sales seemed terrifying. If I am ever savvy enough to understand and take advantage of TLH I figured I'd just wait 31 days to do anything because that's the kind of chicken I am.

retired@50
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Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Portfolio Simplification / Feedback

Post by retired@50 » Tue Jun 30, 2020 9:56 am

scommander7 wrote:
Tue Jun 30, 2020 2:53 am
Hi retired@50, thanks for chiming in!
retired@50 wrote:
Mon Jun 29, 2020 4:28 pm
Using tax exempt bonds is okay but I wouldn't suggest you use municipal bonds exclusively. Maybe half of your bonds at most, possibly less if you're using a state-specific fund. Vanguard typically has the lowest ER municipal bond funds.
If it were you, would you still keep Bonds in the Roth IRAs and HSA, or have them all in taxable for now (then slowly move them to over to our 401ks when we have one again, probably ~5 years from now)? Knowing that capital gains won't be such a big deal with the current low interest rates. I feel like every new term means another few hours of reading (as I had to look up municipal bonds again), but it's good for me.

I can easily move the dollars allocated for my TD Ameritrade taxable over to his Vanguard, and do our International + some Bond funds there. Maybe 20% of our overall bonds in Vanguard’s Intermediate Tax Exempt Fund (VWIUX)? Or the Index ETF (VTEB)?

Or would it be better to stick to the Total Market Bond fund until I have a better grasp of Bonds Funds as a whole...

Thank you very much for your time.
If it were me, I'd leave the bonds you already hold just as they are until you can put them in a tax-deferred account. If you need to add bonds to your portfolio because things are not aligned with your 75/25 allocation then adding some bonds into your taxable space would be okay. I don't see any big need to transplant the bond holdings twice. Moving the bonds out of Roth or HSA to move them to taxable, knowing that you'll need to move them again in the future to a tax-deferred 401k just seems like more work. Whether or not you need to bother with municipal bonds depends on your tax bracket, and what state you're in. Vanguard offers a variety of state-specific municipal bond funds if you decide to move in that direction. To determine if municipal bonds are right for you, you'll need to get familiar with the term "taxable equivalent yield". Sorry, more reading.

See link: https://www.calcxml.com/do/inc11

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

Topic Author
scommander7
Posts: 17
Joined: Thu Jan 30, 2020 1:02 pm

Re: Portfolio Simplification / Feedback

Post by scommander7 » Tue Jun 30, 2020 12:50 pm

retired@50 wrote:
Tue Jun 30, 2020 9:56 am
If it were me, I'd leave the bonds you already hold just as they are until you can put them in a tax-deferred account. If you need to add bonds to your portfolio because things are not aligned with your 75/25 allocation then adding some bonds into your taxable space would be okay. I don't see any big need to transplant the bond holdings twice. Moving the bonds out of Roth or HSA to move them to taxable, knowing that you'll need to move them again in the future to a tax-deferred 401k just seems like more work. Whether or not you need to bother with municipal bonds depends on your tax bracket, and what state you're in. Vanguard offers a variety of state-specific municipal bond funds if you decide to move in that direction. To determine if municipal bonds are right for you, you'll need to get familiar with the term "taxable equivalent yield". Sorry, more reading.

See link: https://www.calcxml.com/do/inc1
Knowledge is power. Thank you!! <3

Best,
Elizabeth

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