22 Years Old - Portfolio Feedback After Switching to Boglehead Method

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Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by NBSteel7 » Fri Jul 31, 2020 3:21 pm

Intro: Hello, what a difference this website and four months truly made to my financial journey. On May 3rd, 2020 I posted my first thread titled: 21 College Student Investor - Feedback/ Thoughts on Portfolio (viewtopic.php?f=1&t=313877). After reading the comments and researching, I noticed that my methods were not the Boglehead style and were not something that I wanted to continue to do.

Fast forward four months later and here is my updated information. Feedback would be great on anything you see/ want to tell me. I truly appreciate it.

Key Information: I maxed out my 2019 and 2020 Roth IRAs. I have my Emergency Fund built with 6 months of expenses.

Emergency Fund: 6 Months in a "High Yield" Savings Account (1.00%)

Debt: Student Loan Debt -- $3,500 Subsidized.(Doesn't start the payment process until 2022)

Tax Status: Single

Tax Rate: 12% Federal | State 5.75%

State of Residence: Ohio

Age: 22 (Just Turned)

Porfolio Size: Around $21,000 (Includes Roth IRA and My One Taxable Account)

Taxable Account:


SWTSX - Schwab Total Stock Market Index Fund - Expense Ratio 0.03%

SWISX - Schwab International Index Fund - Expense Ratio 0.06%

Notes/ Asset Allocation: Two fund portfolio. The TSM is 80% and the International is 20% allocated each time I put money into my account for the Taxable.

-----------------------------------------

ROTH IRA

Note: Previously my ROTH IRA was with a family friend... NO more! I jumped off the Ameriprise Financial MESS and have all of my assets through Charles Schwab. It keeps everything simple and effective, in my opinion.

Positions in Roth:

SWPPX - Schwab S&P 500 Index Fund - Expense Ratio 0.03%

SWISX - Schwab International Index Fund - Expense Ratio 0.06%

Notes/ Asset Allocation: Again, two fund portfolio... 80% for the SWPPX and then 20% for the International. I MAX these out each at the $6,000 and call it a day.

Questions:

1. I maxed out my 2019 and 2020 Roth IRA. I have my emergency fund built pretty nicely. *** Should I put my extra money each month to invest in my taxable account? or is there another method you all might want me to do? (Note: Current College Student working at a restaurant. There is no 401k or anything)

2. This next question goes with the question above. Emergency Fund... Should I put a full year into this or just leave it at the 6 months I currently have?

3. How is the asset allocation? I understand you look at the asset allocation between all your accounts (which in my case would be my Taxable and my Roth.) However, is 80/20 solid for me as I listed above with my positions? (Also, I am 100/0 with no bonds as I am young and don't want any bonds at the moment)

4. Lastly, overall do you think my method is the way to go? Please feel free to tell me your thoughts/ opinions and what you think is right/ wrong. Thank you so much! I appreciate it. - NB

sfmurph
Posts: 93
Joined: Mon Aug 12, 2019 8:15 pm

Re: 22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by sfmurph » Fri Jul 31, 2020 3:32 pm

NBSteel7 wrote:
Fri Jul 31, 2020 3:21 pm
Questions:

1. I maxed out my 2019 and 2020 Roth IRA. I have my emergency fund built pretty nicely. *** Should I put my extra money each month to invest in my taxable account? or is there another method you all might want me to do? (Note: Current College Student working at a restaurant. There is no 401k or anything)
Yes, open a taxable account w/ Schwab and the extra money.
NBSteel7 wrote:
Fri Jul 31, 2020 3:21 pm
2. This next question goes with the question above. Emergency Fund... Should I put a full year into this or just leave it at the 6 months I currently have?
6 months could be fine. What would happen if your restaurant closes? Or if you get sick and are hospitalized? Would you lose your apartment?
NBSteel7 wrote:
Fri Jul 31, 2020 3:21 pm
3. How is the asset allocation? I understand you look at the asset allocation between all your accounts (which in my case would be my Taxable and my Roth.) However, is 80/20 solid for me as I listed above with my positions? (Also, I am 100/0 with no bonds as I am young and don't want any bonds at the moment)
Looks perfect to me. 20% international seems great.
NBSteel7 wrote:
Fri Jul 31, 2020 3:21 pm
4. Lastly, overall do you think my method is the way to go? Please feel free to tell me your thoughts/ opinions and what you think is right/ wrong. Thank you so much! I appreciate it. - NB
Yup.

Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

Re: 22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by NBSteel7 » Fri Jul 31, 2020 3:37 pm

sfmurph wrote:
Fri Jul 31, 2020 3:32 pm
NBSteel7 wrote:
Fri Jul 31, 2020 3:21 pm
Questions:

1. I maxed out my 2019 and 2020 Roth IRA. I have my emergency fund built pretty nicely. *** Should I put my extra money each month to invest in my taxable account? or is there another method you all might want me to do? (Note: Current College Student working at a restaurant. There is no 401k or anything)
Yes, open a taxable account w/ Schwab and the extra money.
NBSteel7 wrote:
Fri Jul 31, 2020 3:21 pm
2. This next question goes with the question above. Emergency Fund... Should I put a full year into this or just leave it at the 6 months I currently have?
6 months could be fine. What would happen if your restaurant closes? Or if you get sick and are hospitalized? Would you lose your apartment?
NBSteel7 wrote:
Fri Jul 31, 2020 3:21 pm
3. How is the asset allocation? I understand you look at the asset allocation between all your accounts (which in my case would be my Taxable and my Roth.) However, is 80/20 solid for me as I listed above with my positions? (Also, I am 100/0 with no bonds as I am young and don't want any bonds at the moment)
Looks perfect to me. 20% international seems great.
NBSteel7 wrote:
Fri Jul 31, 2020 3:21 pm
4. Lastly, overall do you think my method is the way to go? Please feel free to tell me your thoughts/ opinions and what you think is right/ wrong. Thank you so much! I appreciate it. - NB
Yup.
Response:

Thanks sfmurph!

I got that taxable account already so that is good to go. I believe the 6 months is solid for me if I were to lose my job or get hospitalized. I just didn't know if I should put more in that emergency fund or if I should do taxable. Thanks for reassuring me with your opinion on my situation/ portfolio. I appreciate it!

NB

retiredjg
Posts: 41163
Joined: Thu Jan 10, 2008 12:56 pm

Re: 22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by retiredjg » Fri Jul 31, 2020 3:40 pm

What you are doing is just fine if you are unwilling to use any bonds. If you have more money to save, taxable seems to be the only place to put it until you have some kind of work plan.

It would not hurt to continue growing your emergency fund because your expenses are going to go up some day...and your emergency fund will need to be bigger when that happens. It does not hurt anything to start that early. When you upsize (or move away from home) there are some big expenses that you will need to cover.

Keep up the good work. :happy

retired@50
Posts: 3214
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: 22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by retired@50 » Fri Jul 31, 2020 3:42 pm

NBSteel7 wrote:
Fri Jul 31, 2020 3:21 pm

Questions:

1. I maxed out my 2019 and 2020 Roth IRA. I have my emergency fund built pretty nicely. *** Should I put my extra money each month to invest in my taxable account? or is there another method you all might want me to do? (Note: Current College Student working at a restaurant. There is no 401k or anything)

2. This next question goes with the question above. Emergency Fund... Should I put a full year into this or just leave it at the 6 months I currently have?

3. How is the asset allocation? I understand you look at the asset allocation between all your accounts (which in my case would be my Taxable and my Roth.) However, is 80/20 solid for me as I listed above with my positions? (Also, I am 100/0 with no bonds as I am young and don't want any bonds at the moment)

4. Lastly, overall do you think my method is the way to go? Please feel free to tell me your thoughts/ opinions and what you think is right/ wrong. Thank you so much! I appreciate it. - NB
Answers to questions.

1. Since you don't have a 401k, Roth and Taxable are your only choices. If you've already maxed out the Roth IRA, then taxable is the only remaining choice. Unless, you have a HDHP health insurance plan and can start an HSA account. I don't know how an HSA would fit into things if you're still covered under your parents health plan. Might not work.

2. The size of the emergency fund is a bit of a personal choice. It normally depends on how susceptible you are to an income interruption, job layoff, or other bad event. The question I'd have is "How is college being paid for?". If you're potentially on the hook for tuition and fees, then having a larger emergency fund makes sense.

3. Holding mostly US stocks, and some International stocks is generally considered acceptable by many Bogleheads, me included. Some will argue for up to 50% in international, and others will argue for 0% international. My personal portion is around 20% of my stock is international.

4. I see nothing wrong with using a Roth IRA and a taxable account, especially since you don't have a 401k available. You're doing fine as far as I can tell. If it were me, I'd be focused on getting good grades and working with the placement office at my college to find an internship or full time job, depending on how far you are from graduation.

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

Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

Re: 22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by NBSteel7 » Fri Jul 31, 2020 4:27 pm

retiredjg wrote:
Fri Jul 31, 2020 3:40 pm
What you are doing is just fine if you are unwilling to use any bonds. If you have more money to save, taxable seems to be the only place to put it until you have some kind of work plan.

It would not hurt to continue growing your emergency fund because your expenses are going to go up some day...and your emergency fund will need to be bigger when that happens. It does not hurt anything to start that early. When you upsize (or move away from home) there are some big expenses that you will need to cover.

Keep up the good work. :happy
Thank you! That is true in regards to your statement about the emergency fund. I might just put $50.00 a month into that emergency fund so over time it does build up a little more for the future.

NB

Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

Re: 22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by NBSteel7 » Fri Jul 31, 2020 4:30 pm

retired@50 wrote:
Fri Jul 31, 2020 3:42 pm
NBSteel7 wrote:
Fri Jul 31, 2020 3:21 pm

Questions:

1. I maxed out my 2019 and 2020 Roth IRA. I have my emergency fund built pretty nicely. *** Should I put my extra money each month to invest in my taxable account? or is there another method you all might want me to do? (Note: Current College Student working at a restaurant. There is no 401k or anything)

2. This next question goes with the question above. Emergency Fund... Should I put a full year into this or just leave it at the 6 months I currently have?

3. How is the asset allocation? I understand you look at the asset allocation between all your accounts (which in my case would be my Taxable and my Roth.) However, is 80/20 solid for me as I listed above with my positions? (Also, I am 100/0 with no bonds as I am young and don't want any bonds at the moment)

4. Lastly, overall do you think my method is the way to go? Please feel free to tell me your thoughts/ opinions and what you think is right/ wrong. Thank you so much! I appreciate it. - NB
Answers to questions.

1. Since you don't have a 401k, Roth and Taxable are your only choices. If you've already maxed out the Roth IRA, then taxable is the only remaining choice. Unless, you have a HDHP health insurance plan and can start an HSA account. I don't know how an HSA would fit into things if you're still covered under your parents health plan. Might not work.

2. The size of the emergency fund is a bit of a personal choice. It normally depends on how susceptible you are to an income interruption, job layoff, or other bad event. The question I'd have is "How is college being paid for?". If you're potentially on the hook for tuition and fees, then having a larger emergency fund makes sense.

3. Holding mostly US stocks, and some International stocks is generally considered acceptable by many Bogleheads, me included. Some will argue for up to 50% in international, and others will argue for 0% international. My personal portion is around 20% of my stock is international.

4. I see nothing wrong with using a Roth IRA and a taxable account, especially since you don't have a 401k available. You're doing fine as far as I can tell. If it were me, I'd be focused on getting good grades and working with the placement office at my college to find an internship or full time job, depending on how far you are from graduation.

Regards,
Response:

I know I can always count on you retired@50. Thank you for your comments on my first post and this one as well. College is being mostly paid for by a family member. However, I do have that $3,500 subsidized loan which will require payments in 2022.

dvvader
Posts: 66
Joined: Fri Nov 22, 2019 7:07 pm

Re: 22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by dvvader » Fri Jul 31, 2020 4:49 pm

Congrats on maxing your Roth the past two years! Really really cool.

On emergency funds, I think the general advice should be expanded from just "6+ months expenses" to "enough money to comfortably cover your largest potential emergency expense (within reason/comfort), up to 6+ months expenses". For me, 6+ months unemployment would be my largest potential emergency expense. For you, being a college student and working part-time, your largest potential emergency expense could be replacing your vehicle or your out-of-pocket max on your health insurance. Do you have enough cash to cover things like this?

If I were in your shoes, I'd continue to max the Roth every year (again this is awesome). Beyond that, I'd consider stacking cash at least until you are done with school. Your mid to late twenties can be an expensive time in life and I think you'll appreciate the liquidity and security of cash to meet those expenses.

Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

Re: 22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by NBSteel7 » Fri Jul 31, 2020 4:58 pm

dvvader wrote:
Fri Jul 31, 2020 4:49 pm
Congrats on maxing your Roth the past two years! Really really cool.

On emergency funds, I think the general advice should be expanded from just "6+ months expenses" to "enough money to comfortably cover your largest potential emergency expense (within reason/comfort), up to 6+ months expenses". For me, 6+ months unemployment would be my largest potential emergency expense. For you, being a college student and working part-time, your largest potential emergency expense could be replacing your vehicle or your out-of-pocket max on your health insurance. Do you have enough cash to cover things like this?

If I were in your shoes, I'd continue to max the Roth every year (again this is awesome). Beyond that, I'd consider stacking cash at least until you are done with school. Your mid to late twenties can be an expensive time in life and I think you'll appreciate the liquidity and security of cash to meet those expenses.
Response:

Thank you. Maxing out the Roth is something that I now prioritize and I am glad that it is getting done.

As far as replacing my vehicle or the health insurance -- I believe I can get a solid vehicle with the amount in my emergency fund. So the answer to your question is yes. However, I like your statement about how the mid to late twenties can be an expensive time. I will continue to build my cash reserve. I appreciate your response.

retiredjg
Posts: 41163
Joined: Thu Jan 10, 2008 12:56 pm

Re: 22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by retiredjg » Fri Jul 31, 2020 5:01 pm

NBSteel7 wrote:
Fri Jul 31, 2020 4:27 pm
retiredjg wrote:
Fri Jul 31, 2020 3:40 pm
What you are doing is just fine if you are unwilling to use any bonds. If you have more money to save, taxable seems to be the only place to put it until you have some kind of work plan.

It would not hurt to continue growing your emergency fund because your expenses are going to go up some day...and your emergency fund will need to be bigger when that happens. It does not hurt anything to start that early. When you upsize (or move away from home) there are some big expenses that you will need to cover.

Keep up the good work. :happy
Thank you! That is true in regards to your statement about the emergency fund. I might just put $50.00 a month into that emergency fund so over time it does build up a little more for the future.
This is probably a good idea.

A lifestyle transition of any kind costs money. It appears you may have some transitions coming up in the next few years. Having the cash to pay for that gives you a great deal of freedom and flexibility.

It may seem like a waste right now to save money that is not making money, but you'll look back and see the wisdom in it later.

lakpr
Posts: 5810
Joined: Fri Mar 18, 2011 9:59 am

Re: 22 Years Old - Portfolio Feedback After Switching to Boglehead Method

Post by lakpr » Fri Jul 31, 2020 6:27 pm

@NBSteel7,

I am going to suggest something that you may want to consider, if not now, for the future. You may want to consider switching your Roth IRA accounts to Vanguard funds instead of Schwab funds, as I understand it Schwab allows purchases of Vanguard funds for no transaction fee.

Reason for this suggestion: advance planning for tax-loss harvesting opportunities.

IRS rules dictate that, when you sell something for a loss, you cannot buy a "substantially identical" security either 30-days before the sale that resulted in a loss, or 30 days after. Maddeningly, IRS has not clearly defined, for over 35 years, what exactly "substantially identical" means and how to define it ourselves.

One can perhaps resolve not to buy the same thing for 30-days after the sale, however, how can one change what had happened in the past?

I see that you have SWISX in both your taxable account and Roth IRA. Consider a scenario something like this:
- Feb: You bought SWISX in Roth IRA through automatic investments
- Mar: SWISX tanks. You want to sell it in your taxable account for a loss, and invest in something else that still provides you with international equities exposure. You sell it, buy VTIAX for example. You will resolve not to buy SWISX for next 30 days
- Apr: SWISX pays you dividends

Well, guess what ... even though you sold SWISX in your taxable for loss, because of Feb purchase and Mar reinvestment, your entire sale could be deemed as a wash-sale. No soup (tax-benefit) for you.

How do we prevent that scenario from occurring? By advance planning. By resolving NOT to hold same securities in both taxable and in Roth. Preferably, go with funds from different fund families.

Since selling and buying in taxable has a tax-cost for you, I suggest switching the Roth accounts to VTSAX / VTIAX. IRS did provide some guidance in the past that it does not consider mutual funds from different fund families as "substantially identical". This way, you can tax-loss-harvest in your taxable account without going into knots as to what and when purchases made in Roth IRA.

=====================

To be frank, this suggestion, even if adopted, will only add little benefit to your overall portfolio. There is no urgency to do it tomorrow, but if you plan ahead, you can take advantage of opportunities quicker.

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