Setting up New Portfolio / Transferred to Vanguard from Robo-Adviser

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PennyWise7
Posts: 35
Joined: Mon Nov 16, 2020 9:13 pm

Setting up New Portfolio / Transferred to Vanguard from Robo-Adviser

Post by PennyWise7 »

Introduction: I am new at this because I had some accounts at Wealth Front and consolidated everything to Vanguard six months ago after getting inspired by JL Collins A Simple Path to Wealth. The current allocation described below is after reading and researching and figuring out a plan. I kept most of the money in taxable in bonds and treasuries over the last 6 months as I did not feel comfortable making long term allocations. My proposed allocation is at Question 2 below. I would greatly appreciate your help and thoughts.

Emergency funds: Three to six months of expenses Yes, have this in an online savings account.

Debt: $300,000 mortgage debt on an investment property at 3.75% interest. Plan to sell in next 1-3 years so no plan to refinance.

Tax Filing Status: Single
Tax Rate: 24% Federal, 9.3% State
State of Residence: CA
Age:48

Amount to invest more than some and less than others

Desired Asset allocation: 75% stocks / 25% bonds
Desired International allocation: 33% of stocks

Current retirement assets 28% of Portfolio: SEP IRA (11%) and a Roth IRA (17%)

A. Taxable
9% CASH (to be invested – does not include emergency funds)
9% VANGUARD TOTAL STOCK MARKET ETF (VTI) (.03%)
54% VANGUARD INTERMEDIATE TERM TREASURY INDEX ETF (VGIT) (.05%)

B. His SEP IRA at Vanguard
1% VANGUARD FTSE ALL WORLD EX US SMALL CAP ETF (VSS) (.11)
1% VANGUARD FTSE DEVELOPED MKTS ETF (VEA) (.05%)
1% VANGUARD FTSE EMERGING MARKETS ETF (VWO) (.10%)
1% VANGUARD INTL DIVID APPREC ETF (VIGI) (.20%)
1% VANGUARD INTL HIGH DIVID YIELD INDEX ETF (VYMI) (.27%)
1% VANGUARD TOTAL INTL STOCK INDEX FUND ETF (VXUS) (.08%)
1% VANGUARD SMALL CAP VALUE ETF ETF(VBR) (.07%)
1% VANGUARD VALUE ETF (VTV) (.04%)
3% VANGUARD TOTAL STOCK MARKET ETF (VTI) (.03%)
Self Employed/No Company Match

C. His Roth IRA at Vanguard
17% VANGUARD TOTAL STOCK MARKET ETF (VTI) (.03%)
————————————————————————————————————
Contributions

New annual Contributions
$6,000 Roth IRA approximate to be contributed in 2021 for 2020 / Self Employed
$0/year taxable (all savings is intended for a short term purchase held in Vanguard Short Term Bond (BSV) (.05%) within next 1-3 years)

Available funds
No retirement funds are available without penalty for early withdrawal.

Questions:

1. Short Term Cash. Do you agree that mid-six figures savings (not emergency funds and not included in the investment details because it is short term money to be used in 1-3 years) are properly allocated to VANGUARD SHORT TERM BOND ETF (BSV) (.05%)?

2. Proposed Allocation. 50% US Stock (30% Total Stock Market, 10% Large Cap Value, 10% Small Cap Value); 25% International Stock; 25% Treasuries. Details below.

A. Proposed Taxable

30% VANGUARD TOTAL STOCK MARKET ETF (VTI) (.03%)
25% VANGUARD INTERMEDIATE TERM TREASURY INDEX ETF (VGIT) (.05%)
17% VANGUARD TOTAL INTL STOCK INDEX FUND ETF (VXUS) (.08%)

B. Proposed SEP IRA at Vanguard
1.5% VANGUARD FTSE ALL WORLD EX US SMALL CAP ETF (VSS) (.11)
1.5% VANGUARD FTSE DEVELOPED MKTS ETF (VEA) (.05%)
1.5% VANGUARD FTSE EMERGING MARKETS ETF (VWO) (.10%)
1.5% VANGUARD INTL DIVID APPREC ETF (VIGI) (.20%)
1.5% VANGUARD INTL HIGH DIVID YIELD INDEX ETF (VYMI) (.27%)
1.25% VANGUARD SMALL CAP VALUE ETF ETF(VBR) (.07%)
1.25% VANGUARD VALUE ETF (VTV) (.04%)

C. Proposed Roth IRA at Vanguard
9% VANGUARD SMALL CAP VALUE ETF ETF(VBR) (.07%)
9% VANGUARD VALUE ETF (VTV) (.04%)

3. International SEP. I realize the simple path would be to combine all international (in the SEP) into VXUS instead of the individual parts of VXUS however I want to tilt from the market cap to different sectors (size and geography) of the international allocation and see what performs best. Also, I am curious about VIGI as a go to International ETF as it screens for high quality international holdings. In the taxable, I resigned to allocate the international portion to one ETF, VXUS, because it is unwieldly to manage five international ETFs in one taxable account as well as any changes would have unfavorable tax consequences. No tax consequences and smaller amounts in the SEP, so not a big deal to play around until I decide on an international allocation, which I could then implement in the SEP and possibly sell VXUS to implement in the taxable. Is this SEP experiment reasonable (for learning purposes or otherwise)?

4. International Taxable. Is it reasonable to allocate to VXUS in the taxable if I am not certain I will hold that particular ETF forever? I might prefer another one or a combo [size tilt, EM tilt, geographic etc.], such as VIGI/VXUS/VSS.

Thank you for reading this post and I welcome your recommendations :)
Last edited by PennyWise7 on Mon Nov 23, 2020 8:46 pm, edited 2 times in total.
User avatar
Duckie
Posts: 7668
Joined: Thu Mar 08, 2007 2:55 pm

Re: Setting up New Portfolio / Transferred to Vanguard from Robo-Adviser

Post by Duckie »

PennyWise7 wrote:New annual Contributions
$32,000 His SEP IRA approximate to be contributed in 2021 for 2020 / Self Employed/ No Matching
Do you have employees?
$0 his IRA/Roth IRA as the maximum contribution to both a SEP and Roth is $6,000 total, so I will contribute to my SEP
A SEP IRA is an employer plan. Are you planning to make your personal IRA contribution to your SEP IRA? Although allowed that is not recommended. Do you make too much to contribute to a Roth IRA directly?
Short Term Cash. Do you agree that mid-six figures savings (not emergency funds and not included in the investment details because it is short term money to be used in 1-3 years) are properly allocated to VANGUARD SHORT TERM BOND ETF (BSV) (.05%)?
BSV is a reasonable option. So is a CD or high-yield savings account (although nothing is high-yield right now).
Proposed Allocation. 50% US Stock (30% Total Stock Market, 10% Large Cap Value, 10% Small Cap Value); 25% International Stock; 25% Treasuries.
I can somewhat see tilting to small cap value but see no point in large cap value.
B. Proposed SEP IRA at Vanguard
1.5% VANGUARD FTSE ALL WORLD EX US SMALL CAP ETF (VSS) (.11)
1.5% VANGUARD FTSE DEVELOPED MKTS ETF (VEA) (.05%)
1.5% VANGUARD FTSE EMERGING MARKETS ETF (VWO) (.10%)
1.5% VANGUARD INTL DIVID APPREC ETF (VIGI) (.20%)
1.5% VANGUARD INTL HIGH DIVID YIELD INDEX ETF (VYMI) (.27%)
1.25% VANGUARD SMALL CAP VALUE ETF ETF(VBR) (.07%)
1.25% VANGUARD VALUE ETF (VTV) (.04%)
This is way too complicated and anything under 5% is a waste of time. Put just one fund/ETF here. If holding VXUS in taxable I recommend VEU in the SEP IRA. Having a different fund avoids any potential wash sale issue.
C. Proposed Roth IRA at Vanguard
9% VANGUARD SMALL CAP VALUE ETF ETF(VBR) (.07%)
9% VANGUARD VALUE ETF (VTV) (.04%)
Your current VTI is a better choice, although VOO would prevent wash sales.
Is this SEP experiment reasonable (for learning purposes or otherwise)?
Not to me.
International Taxable. Is it reasonable to allocate to VXUS in the taxable if I am not certain I will hold that particular ETF forever? I might prefer another one or a combo [size tilt, EM tilt, geographic etc.], such as VIGI/VXUS/VSS.
It is reasonable. Selling in taxable might mean more taxes, but the fund itself is reasonable.
Topic Author
PennyWise7
Posts: 35
Joined: Mon Nov 16, 2020 9:13 pm

Re: Setting up New Portfolio / Transferred to Vanguard from Robo-Adviser

Post by PennyWise7 »

Duckie, Appreciate the help.

Re: the SEP, I don’t have employees. You might be right about where the IRA contribution goes. I’ll look into which account it goes this year.

I get your take on the SEP INT experiment. Also like the idea of choosing a different INT ETF other than VXUS. Had not considered choosing one but different. That may satisfy my craving for a little while 🙌

Re the US Stock in Roth-agree VTI is a good choice. But think LCV would reduce exposure to tech in VTI and not so bad an idea.

Had not considered the wash sale issues. How would that apply here?
CZjc1330
Posts: 107
Joined: Sun Feb 12, 2017 12:15 am
Location: Palm Beach , FL

Re: Setting up New Portfolio / Transferred to Vanguard from Robo-Adviser

Post by CZjc1330 »

IMHO you have far, far too many funds. Don't complicate your life. You have a business to run and a life to live!
Have you studied, not just skimmed, the Three Fund Portfolio.
I know it's not easy -- I am in transition myself. I started by closing out the smallest accounts and moving funds to the Three Funds.
A bit gut-wrenching at times but I think it's worth it. Good Luck!!
User avatar
Duckie
Posts: 7668
Joined: Thu Mar 08, 2007 2:55 pm

Re: Setting up New Portfolio / Transferred to Vanguard from Robo-Adviser

Post by Duckie »

PennyWise7 wrote:You might be right about where the IRA contribution goes. I’ll look into which account it goes this year.
What do you mean you'll "look into which account it goes this year"? Does someone else make the contribution? What have you done in past years?
Had not considered the wash sale issues. How would that apply here?
If you sell something in taxable for a loss and purchase it (including dividend reinvestment) within a 61 day window in an IRA you will have a wash sale and part or all of the loss may be disallowed. By holding different funds in your IRAs (VOO & VEU) than in taxable (VTI & VXUS) you avoid that problem.
Topic Author
PennyWise7
Posts: 35
Joined: Mon Nov 16, 2020 9:13 pm

Re: Setting up New Portfolio / Transferred to Vanguard from Robo-Adviser

Post by PennyWise7 »

Duckie wrote: Fri Nov 20, 2020 9:51 pm
PennyWise7 wrote:You might be right about where the IRA contribution goes. I’ll look into which account it goes this year.
What do you mean you'll "look into which account it goes this year"? Does someone else make the contribution? What have you done in past years?
Had not considered the wash sale issues. How would that apply here?
If you sell something in taxable for a loss and purchase it (including dividend reinvestment) within a 61 day window in an IRA you will have a wash sale and part or all of the loss may be disallowed. By holding different funds in your IRAs (VOO & VEU) than in taxable (VTI & VXUS) you avoid that problem.
Thanks, helpful.

It will be a $6,000 Roth IRA Contribution for 2020. Some years, I have been eligible to make SEP contributions. Not this year. [Edited]
Topic Author
PennyWise7
Posts: 35
Joined: Mon Nov 16, 2020 9:13 pm

Re: Setting up New Portfolio / Transferred to Vanguard from Robo-Adviser

Post by PennyWise7 »

CZjc1330 wrote: Fri Nov 20, 2020 9:22 pm IMHO you have far, far too many funds. Don't complicate your life. You have a business to run and a life to live!
Have you studied, not just skimmed, the Three Fund Portfolio.
I know it's not easy -- I am in transition myself. I started by closing out the smallest accounts and moving funds to the Three Funds.
A bit gut-wrenching at times but I think it's worth it. Good Luck!!
Thank you for commenting. I’m listening to Taylor’s book on the 3 fund portfolio, I will make sure to finish it! What has been your experience with managing more than 3 funds?
CZjc1330
Posts: 107
Joined: Sun Feb 12, 2017 12:15 am
Location: Palm Beach , FL

Re: Setting up New Portfolio / Transferred to Vanguard from Robo-Adviser

Post by CZjc1330 »

When I had a lot of funds -- I was tempted to buy even more. The next hot field. Spent a lot of time searching for better funds, trying to follow trends, etc. Unbeknownst to me I was paying fees for a bucket of funds, had a lot of duplication, sleepless nights, AND am not sure the effort was worth it financially. I don't want a "rush" anymore. Just want a steady income without the angst.
But we are all different.
Not that I know, but I think once the prez election is settled, once another stimulus bill is enacted, and once several vaccines are available the market, the whole market, is going to take off. I don't want to pick and guess anymore. So 3 fund portfolio suits me.
Others will point out that the travel industry, entertainment, restaurants, etc. will boom. But which ones? And which ones will just not make it? I don't know and I'm not going to try and guess which ones.
My money is on the total market.
Just my ramblings. Stay safe.
wokkawokkawokka
Posts: 17
Joined: Mon Nov 12, 2018 12:11 am

Re: Setting up New Portfolio / Transferred to Vanguard from Robo-Adviser

Post by wokkawokkawokka »

just an observation, in the year you turn 50, 2021 or 22, your contribution to roth can be $6000 at current limits.
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