Portfolio Feedback

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Topic Author
JH88
Posts: 7
Joined: Sun Oct 12, 2014 11:51 am

Portfolio Feedback

Post by JH88 »

Good Evening,

I am currently in the process of moving my taxable investment account from Wealthfront to Vanguard, and figured I’d take the opportunity to see if I might get some feedback on my overall investment portfolio,

Emergency funds: $30k (~6 mos)

Debt: None (Renter; no mortgage)

Tax Filing Status: Single

Tax Rate: 22% Federal, 0% State

State of Residence: FL

Age: 32

Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: 40% of stocks

Please provide an approximate size of your total portfolio: $380,000

Current retirement assets

Taxable (Wealthfront—Plan to transfer in-kind to Vanguard)
1% cash
8%/ VTI/Vanguard Total Stock Market ETF/ 0.03%
4%/ SCHB/ Schwann US Broad Market ETF/ 0.03%
9%/ VEA/ Vanguard FTSE Developed Markets ETF/ 0.05%
1%/ SCHF/ Schwann International Equity ETF/ 0.06%
4%/ VWO/ Vanguard FTSE Emerging Markets ETF/ 0.11%
3%/ IEMG/ iShares Core MSCI Emerging Markets ETF/ 0.11%
2/ VIG/ Vanguard Dividend Appreciation Fund/0.06%
1%/ SCHD/ Schwann US Dividend Equity ETF/0.06%
2%/VTEB/ Vanguard Tax-Exempted Bond ETF/ 0.06%

Thrift Savings Plan (Active Duty)
33%/ C Fund/ Common Stock Index/ 0.025%
7%/ S Fund/ Small Cap Index/ 0.49%
2%/ I Fund/ Internal Stock Index/ 0.49%
Company match? No

Roth IRA at Vanguard
4%/ VTIAX/ Vanguard Total International Stock Index Fund Admiral Shares/ 0.11%
19%/ VTSAX/ Vanguard Total Stock Market Index Fund Admiral Shares/0.04%
____________________________________________________

Contributions

New annual Contributions
$19,500 TSP
$6,000 Roth IRA
$24,000 taxable

Questions:
1. My taxable account is now a bit of a mess because I went with Wealthfront (for reasons that are still unclear to me). If I had started with Vanguard i would be investing in VTIAX and VTSAX just like my R-IRA. However, since I now have these funds, and know enough that I don’t want to sell them and take a significant, CG hit, what is the best way to proceed? Should I just hold them all and start contributing to VTIAX and VTSAX? Or is there a benefit to keep dumping money into VTI and VEA/VWO/VIG?

2. Do I need to start increasing my bonds holdings?
DIYtrixie
Posts: 73
Joined: Sun Sep 13, 2020 12:11 pm

Re: Portfolio Feedback

Post by DIYtrixie »

JH88 wrote: Mon Jul 19, 2021 8:49 pm Good Evening,

I am currently in the process of moving my taxable investment account from Wealthfront to Vanguard, and figured I’d take the opportunity to see if I might get some feedback on my overall investment portfolio,

Emergency funds: $30k (~6 mos)

Debt: None (Renter; no mortgage)

Tax Filing Status: Single

Tax Rate: 22% Federal, 0% State

State of Residence: FL

Age: 32

Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: 40% of stocks

Please provide an approximate size of your total portfolio: $380,000

Current retirement assets

Taxable (Wealthfront—Plan to transfer in-kind to Vanguard)
1% cash
8%/ VTI/Vanguard Total Stock Market ETF/ 0.03%
4%/ SCHB/ Schwann US Broad Market ETF/ 0.03%
9%/ VEA/ Vanguard FTSE Developed Markets ETF/ 0.05%
1%/ SCHF/ Schwann International Equity ETF/ 0.06%
4%/ VWO/ Vanguard FTSE Emerging Markets ETF/ 0.11%
3%/ IEMG/ iShares Core MSCI Emerging Markets ETF/ 0.11%
2/ VIG/ Vanguard Dividend Appreciation Fund/0.06%
1%/ SCHD/ Schwann US Dividend Equity ETF/0.06%
2%/VTEB/ Vanguard Tax-Exempted Bond ETF/ 0.06%

Thrift Savings Plan (Active Duty)
33%/ C Fund/ Common Stock Index/ 0.025%
7%/ S Fund/ Small Cap Index/ 0.49%
2%/ I Fund/ Internal Stock Index/ 0.49%
Company match? No

Roth IRA at Vanguard
4%/ VTIAX/ Vanguard Total International Stock Index Fund Admiral Shares/ 0.11%
19%/ VTSAX/ Vanguard Total Stock Market Index Fund Admiral Shares/0.04%
____________________________________________________

Contributions

New annual Contributions
$19,500 TSP
$6,000 Roth IRA
$24,000 taxable

Questions:
1. My taxable account is now a bit of a mess because I went with Wealthfront (for reasons that are still unclear to me). If I had started with Vanguard i would be investing in VTIAX and VTSAX just like my R-IRA. However, since I now have these funds, and know enough that I don’t want to sell them and take a significant, CG hit, what is the best way to proceed? Should I just hold them all and start contributing to VTIAX and VTSAX? Or is there a benefit to keep dumping money into VTI and VEA/VWO/VIG?

2. Do I need to start increasing my bonds holdings?
1. Make sure dividend reinvestment for your former Wealthfront holdings is turned off — start buying what you want with those funds. Do you have some capital losses that can offset gains? Sell those. Work a dummy tax return to see how much of the taxable items with gains you can sell without too much of a bump in taxes. Keep your eye open for the next time the market tanks; that would be an ideal time to swap out the WF holdings for what you want moving forward, as the taxes will be low.

2. Depends. How are you sleeping with 100% equities? How secure is your job? I was 100% Vanguard Total Market until my mid-40s, but I have a super stable job
Topic Author
JH88
Posts: 7
Joined: Sun Oct 12, 2014 11:51 am

Re: Portfolio Feedback

Post by JH88 »

Thanks for the reply!

One of the reasons I got sucked into WF was my unfamiliarity with tax loss harvesting in the first place. So before I try to do any of that on my own I will have to get a lot smarter on that. Lest, I do it incorrectly and miss out on gains.

With regards to the bonds-I am active duty military so about as stable as you can get. I am comfortable at this point with having 100% stocks. Again, the only reason I am in VTEB is because of WF. I may hold on to that for a while longer and then sell it when it goes over the LTCG limit.
retiredjg
Posts: 44954
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Feedback

Post by retiredjg »

JH88 wrote: Mon Jul 19, 2021 8:49 pm 1. My taxable account is now a bit of a mess because I went with Wealthfront (for reasons that are still unclear to me). If I had started with Vanguard i would be investing in VTIAX and VTSAX just like my R-IRA. However, since I now have these funds, and know enough that I don’t want to sell them and take a significant, CG hit, what is the best way to proceed? Should I just hold them all and start contributing to VTIAX and VTSAX? Or is there a benefit to keep dumping money into VTI and VEA/VWO/VIG?
I'd transfer in kind to Vanguard, wait for the next big stock market downturn and exchange to what you want when you can do that with less tax. In the meantime, just buy the two funds you want.

What you have right now is a bit of clutter, but it is not hurting you in terms of high costs or tax-inefficiency. There is no compelling reason to fix it right now since fixing it requires paying unnecessary tax.

Do not reinvest dividends in the funds you don't want. Send the dividend to cash/money market and then use it to buy what you do want a few times a year.

2. Do I need to start increasing my bonds holdings?
I suggest having an allocation to bonds no matter what your age or job security is. Once you exchange your "mess" for just the funds you want, you can use the bonds to buy stocks as the market goes down. You'll need to watch for wash sales.

Speaking of wash sales, holding the exact same funds in taxable and in Roth IRA is going to make avoiding wash sales tricker.
tashnewbie
Posts: 1697
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Feedback

Post by tashnewbie »

I just want to make 2 comments that aren't directly related to the questions you asked:

1. I wouldn't hold VTSAX and VTIAX in both taxable and the Roth IRAs, because of potential issues with wash sales. I would hold something like VFIAX and a similar, but not substantially identical, int'l stock fund in the Roth IRAs. Turn off automatic reinvestment of dividends on the funds in taxable.

2. Your int'l stock allocation seems short of your desired percentage. You can rebalance in your TSP.
Topic Author
JH88
Posts: 7
Joined: Sun Oct 12, 2014 11:51 am

Re: Portfolio Feedback

Post by JH88 »

Speaking of wash sales, holding the exact same funds in taxable and in Roth IRA is going to make avoiding wash sales tricker.
[/quote]

Ah, yes. I didn’t consider that, but that is a great point. For this taxable account I think I will stick with VTI and try to find some other ETFs to replicate VTIAX. Thanks!
Topic Author
JH88
Posts: 7
Joined: Sun Oct 12, 2014 11:51 am

Re: Portfolio Feedback

Post by JH88 »

tashnewbie wrote: Tue Jul 20, 2021 7:32 am I just want to make 2 comments that aren't directly related to the questions you asked:

1. I wouldn't hold VTSAX and VTIAX in both taxable and the Roth IRAs, because of potential issues with wash sales. I would hold something like VFIAX and a similar, but not substantially identical, int'l stock fund in the Roth IRAs. Turn off automatic reinvestment of dividends on the funds in taxable.
Great point about that wash sales. I hadn’t considered that. Since this taxable account is already in the ETF lane, I think I will just stay with those. As far as I can tell there is no reason to add yet more clutter. I like VTI. What are your thoughts on VXUS? Worth it to add another fund for simplicity? Or should I stick with VEA and VWO since I’m already in there?
Fishing50
Posts: 523
Joined: Tue Sep 27, 2016 1:18 am

Re: Portfolio Feedback

Post by Fishing50 »

JH88 wrote: Mon Jul 19, 2021 8:49 pm I am currently in the process of moving my taxable investment account from Wealthfront to Vanguard, and figured I’d take the opportunity to see if I might get some feedback on my overall investment portfolio

Taxable (Wealthfront—Plan to transfer in-kind to Vanguard)
1% cash
8%/ VTI/Vanguard Total Stock Market ETF/ 0.03%
4%/ SCHB/ Schwann US Broad Market ETF/ 0.03%
9%/ VEA/ Vanguard FTSE Developed Markets ETF/ 0.05%
1%/ SCHF/ Schwann International Equity ETF/ 0.06%
4%/ VWO/ Vanguard FTSE Emerging Markets ETF/ 0.11%
3%/ IEMG/ iShares Core MSCI Emerging Markets ETF/ 0.11%
2/ VIG/ Vanguard Dividend Appreciation Fund/0.06%
1%/ SCHD/ Schwann US Dividend Equity ETF/0.06%
2%/VTEB/ Vanguard Tax-Exempted Bond ETF/ 0.06%
I also recommend transferring in kind from Wealthfront to Vanguard. You are correct, no need to sell the existing funds although you can consider simplifying after you have some offsetting losses from tax loss harvesting. Make new contributions to the funds you desire, then tax loss harvest (TLH) as able. You'll need to take Roth IRA dividends in cash if you want to use VTIAX and VTSAX. VTI is an ETF version of VTSAX so it is not a TLH partner for VTSAX. Good partners would be large cap index and S&P 500. VEA is a ETF for VG Developed Market Index, so it is a good TLH partner for VTIAX along with all world ex-US. I choose mutual funds instead of ETFs long ago because it allowed partial share purchases more easily. Avoid WO/VIG in taxable because they are less tax efficient. You'll likely have multiple holdings in taxable because TLH doesn't always complete the round trip back to the originally desired funds.

JH88 wrote: Mon Jul 19, 2021 8:49 pm Emergency funds: $30k (~6 mos)
You don't need this large of EF with high risk tolerance, reliable govt income, high savings rate, and significant taxable assets. Get most of this money invested. https://earlyretirementnow.com/2021/05/ ... l-useless/
JH88 wrote: Mon Jul 19, 2021 8:49 pm Tax Rate: 22% Federal, 0% State
Consider some Roth TSP contributions. Roth TSP is somewhat controversial in the 22% tax bracket, but there are probable benefits at your age. https://thefinancebuff.com/most-tsp-par ... h-tsp.html

I'd recommend at least 10% bonds in TSP split 50/50 F Fund and G Fund.
1yr from military pension. 80 equites / 20 bonds for life, ZERO emergency fund, 100% taxable in equities (dividends in cash), 33% taxable, 30% Roth, 37% tax deferred. | Gone Fishing At 52yrs old!
tashnewbie
Posts: 1697
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Feedback

Post by tashnewbie »

JH88 wrote: Tue Jul 20, 2021 1:18 pm Great point about that wash sales. I hadn’t considered that. Since this taxable account is already in the ETF lane, I think I will just stay with those. As far as I can tell there is no reason to add yet more clutter. I like VTI. What are your thoughts on VXUS? Worth it to add another fund for simplicity? Or should I stick with VEA and VWO since I’m already in there?
VXUS is a great fund; it's the ETF version of VTIAX (Total International).

I wouldn't bother adding any funds to your taxable account right now, except to tax loss harvest (TLH) into, as user @Fishing50 described.

I'd probably use VOO (S&P 500 index) and VXUS (Total International) in the Roth IRA. Then you can use VV (Large Cap US) as a TLH partner for VTI and SCHB (or something like ITOT; I don't think there's a trading fee for that ETF (or any?) at Vanguard). And VEU (All world ex US) could be a TLH partner for VEA and VWO.
Topic Author
JH88
Posts: 7
Joined: Sun Oct 12, 2014 11:51 am

Re: Portfolio Feedback

Post by JH88 »

Thanks Tash and Fishing!

After reading more and thinking about it for a bit, I think I may have identified a way forward that I feel comfortable about. Would you mind taking a look and seeing if there are any red flags?

Basically, I am trying to achieve 60% Total US Stock, 30% Total International Stock, 10% Bonds. The below is how I am attempting to achieve that:

Future Contribution Allocation:

Total US Stock (Target-60%)
20%/ VTSAX/(Roth IRA)
20%/ VTI/ (Taxable)
15%/ C Fund/ (Roth TSP)
5%/ S Fund/ (Roth TSP)

Total International Stock (Target-30%)
15%/ VTIAX/ (Roth IRA)
11.25%/ (I Fund + VEA)( I Fund until running out of room) (R-TSP then Taxable)
3.75%/ VWO/ (Taxable)

Bonds (Target-10%)
5%/ F Fund/ (Roth TSP)
5%/ G Fund/ (Roth TSP)

Notes:

1. I did the 15% C+ 5% S to try and approximate VTSAX and VTI. Is that about right?

2. I did the 11.25% I/VEA + 3.75% VWO to approximate VTIAX. Is that about right?

3. Plan to hold the remaining funds indefinitely (SCHB SCHF IEMG VIG SCHD VTEB). I’ll be sure to turn off automatic dividend reinvestment and be on the lookout for TLH opportunities. Though, if I am understanding TLH correctly, most of the shares of those funds were bought soon after the crash last year so TLH opportunities may not come around for a while.

EDIT: After thinking about it a bit more, I think this may be a better way to think about it:

Total US Stock
47.5% (VTSAX + VTI + C Fund)
12.5% (S Fund)

Total International Stock
22.5% (VTIAX + VEA + I Fund)
7.5% (VWO)

Bonds
5% G Fund
5% F Fund

Again, thank you for your invaluable insights!
Fishing50
Posts: 523
Joined: Tue Sep 27, 2016 1:18 am

Re: Portfolio Feedback

Post by Fishing50 »

You've chosen a good course.

As your investment accounts grow, future contributions will have less effect. You'll need to track your overall portfolio allocation to determine where new contributions are required to get the portfolio into target allocation. Your contribution plan looks good for now.

Vanguard total international index fund is more diversified than I Fund, so you could choose to pursue more international in Roth IRA and taxable to minimize I Fund. If it's in taxable, you'll get a small foreign tax credit on your income taxes each year.

I like to avoid intl or US funds to dominate taxable or Roth IRA because I don't want any underperformance to hurt the growth in that account. Keep some US index funds in Roth IRA, although the entire emerging market fund should be in Roth IRA for tax efficiency. https://www.bogleheads.org/wiki/Tax-eff ... _placement


1. Not quite, it should be 5:1 to approximate the entire market. https://www.bogleheads.org/wiki/Thrift_Savings_Plan

2. I'm not sure. Seems close enough, I keep 5% of overall international allocation in emerging markets.

3. You are correct, shares bought soon after the crash may never be eligible for TLH opportunities...BUT new shares will. If you TLH new shares for a loss, you can sell an equal amount of gains from shares you no longer want with no capital gains tax. :beer
1yr from military pension. 80 equites / 20 bonds for life, ZERO emergency fund, 100% taxable in equities (dividends in cash), 33% taxable, 30% Roth, 37% tax deferred. | Gone Fishing At 52yrs old!
retiredjg
Posts: 44954
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Feedback

Post by retiredjg »

https://www.bogleheads.org/wiki/Approxi ... ock_market


This Wiki page shows Developed Markets and Emerging Markets should be about 75:25 if you want something close to market weight.

These numbers do not need to be precise at all. Do not worry about getting them exactly right. In reality, you could just use developed markets and get the same performance out of your portfolio.
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