Portfolio review and rebalance suggestions

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stockandawe
Posts: 1
Joined: Sun Feb 02, 2025 1:41 pm

Portfolio review and rebalance suggestions

Post by stockandawe »

Emergency funds: Six months

Debt: None

Tax Filing Status: Single

Tax Rate: 32% Federal, 6.4% State

State of Residence: NJ

Age: 34

Desired Asset allocation: 100% stocks
Desired International allocation: 30% of stocks

Total Portfolio: ~700K

Current retirement assets

Currently employer 401K
18.00% - Fidelity Freedom Index 2055 FFLDX (0.08%)

Previous employer 401K
11.33% - FID GROWTH CO K6 (FGKFX) (0.45%)
9.30% - FID 500 INDEX (FXAIX) (0.015%)
7.66% - FID MID CAP STOCK K6 (FNKFX) (0.45%)
7.19% - MFS RESEARCH INTL R6 (MRSKX) (0.64%)
5.95% - MFS VALUE R6 (MEIKX) (0.45%)
3.60% - FID LOW-PRICED ST K6 (FLKSX) (0.5%)
1.93% - FID INTL INDEX (FSPSX) (0.035%)
1.91% - FID WORLDWIDE (FWWFX) (0.69%)
0.43% - ARTISAN MID CAP INST (APHMX) (0.97%)
0.17% - GLENMEDE SMCAP EQ IS (GTSCX) (0.75%)

Roth
1.78% - VANGUARD TOTAL STOCK MARKET INDEX ADMIRAL CL (VTSAX) (0.04%)
0.76% - VANGUARD TOTAL WORLD STOCK INDEX ADMIRAL CL (VTWAX) (0.1%)

Fidelity HSA
~8k in uninvested cash recently rolled over from high min investment limit employer HSA

Taxable
1.89% - VOO (0.03%)
4.10% - VTI (0.03%)
1.11% - VXUS (0.08%)
4.36% - UNITED STATES TREASURY BILL

Individual stocks I’ve held for years but no longer invest in additional shares:
1.98% - AAPL
1.03% - AMD
2.78% - AMZN
1.01% - META
10.81% - TSLA
0.94% - V

Contributions

New annual Contributions
$23500 his 401k (no match)
$4300 his HSA
$7000 his IRA/Roth IRA
$25000 taxable (towards VTI, VOO, VXUS)

Available funds

Funds available in his previous employer 401(k)
FID 500 INDEX (FXAIX) (0.02%)
FID CONTRAFUND K6 (FLCNX) (0.45%)
FID GROWTH CO K6 (FGKFX) (0.45%)
MFS VALUE R6 (MEIKX) (0.45%)
ARTISAN MID CAP INST (APHMX) (0.97%)
FID EXTD MKT IDX (FSMAX) (0.04%)
FID LOW-PRICED ST K6 (FLKSX) (0.50%)
FID MID CAP STOCK K6 (FNKFX) (0.45%)
GLENMEDE SMCAP EQ IS (GTSCX) (0.75%)
FID INTL INDEX (FSPSX) (0.04%)
FID WORLDWIDE (FWWFX) (0.69%)
MFS RESEARCH INTL R6 (MRSKX) (0.64%)
FID FREEDOM INC K6 (FYTKX) (0.24%)
FID PURITAN K6 (FPKFX) (0.32%)
MIP CL 2 (0.35%)
FID US BOND IDX (FXNAX) (0.03%)
PIM TOTAL RT INST (PTTRX) (0.51%)
FID GOVT MMKT K6 (FNBXX) (0.27%)
BROKERAGELINK (no fee)

Funds available in his current employer 401(k)
AB LG CAP GRTH Z (APGZX) (0.51%)
FID 500 INDEX (FXAIX) (0.015%)
FID TOTAL MKT IDX (FSKAX) (0.015%)
JPM EQUITY INCOME R6 (OIEJX) (0.45%)
BR MID-CAP VALUE IS (MARFX) (0.83%)
FID MID CAP IDX (FSMDX) (0.025%)
MGL MD CP GRTH R6 (IGRFX) (0.86%)
AM CENT SM CAP GR R6 (ANODX) (0.82%)
AM CENT SMCAP VAL R6 (ASVDX) (0.74%)
FID EMERGING MKTS K (FKEMX) (0.74%)
PIF REAL EST SEC R6 (PFRSX) (0.81%)
FT BEHAV SM-CPEQ R6 (FTHFX) (0.64%)
PRMTRC INTL EQ R6 (ESISX) (0.55%)
FID FDM IDX 2055 IPR (FFLDX) (0.08%)
FID FDM IDX INC IPR (FFGZX) (0.08%)
FID US BOND IDX (FXNAX) (0.025%)
PGIM HIGH YIELD R6 (PHYQX) (0.38%)
PIM INTL BD US$H I (PFORX) (0.75%)
FID GOVT MMKT K6 (FNBXX) (0.27%)

Questions:

I’d like to simplify and rebalance where possible since a decent portion of my previous employer 401k holdings have higher expense ratios. It’s also becoming more difficult to determine fund overlap. For additional context, I opted not to roll over my previous 401k because it offers brokerage link and my thought was I could get access to additional lower expense fund options. For my current employer 401k I opted for a target date fund for simplicity and because many of the funds have much higher expense ratios.

Should I keep my previous employer 401k and rebalance into FXAIX and FSPSX or opt for brokerage link funds? Roll over?

Any comments on tax efficiency?

Open to any and all suggestions. Thank you!
Last edited by stockandawe on Thu Feb 06, 2025 5:57 pm, edited 1 time in total.
invest4
Posts: 2316
Joined: Wed Apr 24, 2019 2:19 am

Re: Portfolio review and rebalance suggestions

Post by invest4 »

Welcome!

Some initial comments / questions:


Asset Allocation: 100% for your age is perfectly fine as long as you know yourself and will not succumb to bad behaviors like selling in a panic when severe volatility shows up.

Current guidance for International is no less than 20% and not more than 40%. You are good to go.


Current Employer 401k: reasonable choice.


Previous employer 401k: You have way too many investments and highly recommend you trim them significantly. You did not list all of the options available to you, but see that you have a FID INTL INDEX...do you also have a FID US INDEX? Otherwise, I didn't look at it closely, but maybe the World Wide might also be an option? If so, I would dump everything else and simply keep those two or the World Wide. Also, you want your investments to "move the needle" in your portfolio. Having small investments is essentially just "clutter" and should be gotten rid of. Do not under estimate the value of simplicity in your portfolio. Easier to understand and manage for the long term win.

Also, please also remember that you should think about your portfolio as a whole. For example, you do not need to have the same investments in each account. For example, I have 100% US Stock Market (VXUS) in my Roth IRA and HSA...and nothing else. I have US Stock Market and Intl Stock Market and Total Bond (BND) in my 401k. Ultimately, I am focused on the overall mix being where I want it to be.


Roth: If the total world gives you the INTL (ex: no VXUS)...looks ok to me.


Fidelity HSA: If you are able, I would keep stuffing money in this tax advantaged account.


Taxable: Strongly encourage you to reconsider individual stocks. My view is this is simply "guessing and hoping" you will get lucky and see excess returns beyond what the market provides. Needless complexity and you are just as likely to do worse than better.


Annual Contributions: Wonderful.


Your Questions

1. Simplification: as noted in comments further above.


2. Keep previous employer 401k: Unless your previous 401k has something special / of value that you can not find yourself, I would roll it over and give yourself full control of those investments and not be limited by what your previous employer offers.


3. Tax Efficiency: Thus far, I have always have more tax advantaged space than money to fill them all (also have Mega Backdoor Roth which is $76K by itself including catch-up contributions). Thus, no taxable account for me thus far.

Otherwise, I have a reasonably simple portfolio of:

Total US Stock (VTI)

Total Intl Stock (VXUS)

Total US Bond (BND)

Total Intl Bond (BNDX)

That's it...simple enough.


Aside from the excess amount of investments and individual stocks, you are doing well. My unscientific observation is that if you have a $1M portfolio by age 40, you are in good shape. Of course, it also depends on how much you think you will actually need / want when you are no longer working. If you want 100K per year, you will need a portfolio $2.5M to support a retirement that will last you for 30 years (assumes you retire at age 62). If you desire more or less, or sooner vs later, then you will adjust accordingly.


Best wishes.
tashnewbie
Posts: 4548
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio review and rebalance suggestions

Post by tashnewbie »

stockandawe wrote: Sun Feb 02, 2025 7:45 pm Funds available in his previous employer 401(k)
FID 500 INDEX (FXAIX) (0.02%)
FID INTL INDEX (FSPSX) (0.04%)
FID US BOND IDX (FXNAX) (0.03%)

Funds available in his current employer 401(k)
FID TOTAL MKT IDX (FSKAX) (0.015%)
FID US BOND IDX (FXNAX) (0.025%)
These are the funds I'd use in these accounts.

The current 401k does not appear to have a low-cost international stock fund. If not, then I would opt to leave the old 401k where it is so that you can purchase FSPSX there for desired international stock allocation.

If current 401k does have a cheap international stock fund, then I would transfer old 401k into it for simplicity, assuming current 401k will accept it (I think most plans allow this type of rollover).

I see no need to use the brokerage link at this stage because you have access to your desired asset classes at really low prices in the main platforms. I wouldn't use the BL unless and until that changes. Be aware of any fees associated with using BL.

Consider the tax efficiency of holding VXUS in taxable. For people in higher tax brackets, holding international stock funds is more efficient in tax-advantaged accounts, because of the higher dividends of a lot of international stock funds and the higher percentage of non-qualified dividends. There are a lot of forum threads about this. This thread is one of them: viewtopic.php?t=446071

If possible, I would hold all desired asset classes in the current or past 401k. You can do all rebalancing in that account without tax consequences.
sailaway
Posts: 9574
Joined: Fri May 12, 2017 1:11 pm

Re: Portfolio review and rebalance suggestions

Post by sailaway »

There is no 19© federal tax rate. If this is your effective rate, I am guessing you are in the 32% bracket?
bonesly
Posts: 2505
Joined: Mon Dec 18, 2017 9:28 pm
Location: WA

Re: Portfolio review and rebalance suggestions

Post by bonesly »

stockandawe wrote: Sun Feb 02, 2025 7:45 pm Emergency funds: Six months
Typical recommendation is 6-18 months of expenses, with the sizing related to how long it would take to find a replacement job at similar salary (often the higher the salary, the longer it takes to find a replacement job). If you're pretty confident you could find another job in 6 months or less then this is fine, otherwise you might want to increase to match the job-search time in your industry with your experience, education, and salary.
stockandawe wrote: Sun Feb 02, 2025 7:45 pm Tax Filing Status: Single
Tax Rate: 19% Federal, 6% State
State of Residence: NJ
Engaging Data's Tax Visualization suggests 19% effective tax rate on gross income for a single-filer is a 32% Federal bracket and that's the number we ask for in the template for Asking Portfolio Questions. At the 32% Fed bracket, you probably should be concerned about tax-efficient placement (and you asked about that... answered below).
stockandawe wrote: Sun Feb 02, 2025 7:45 pm Desired Asset allocation: 100% stocks
Desired International allocation: 30% of stocks
Total Portfolio: ~700K
...
I’d like to simplify and rebalance where possible since a decent portion of my previous employer 401k holdings have higher expense ratios.
Any comments on tax efficiency?
Your Current layout has a whopping 24 holdings which is just way more than necessary! You're holding both S&P-500 (VOO) and Total Stock Market (VTI) in Taxable which has lead to potential Wash Sales with S&P-500 in the Old 401k and Total Stock Market in the Roth IRA (highlighted in red). You have some relatively high-cost funds (>0.30%), which are highlighted in yellow with ERs in red. The cash in Taxable and in the HSA is not tax-efficient (highlighted in purple); the Wiki topic on Tax-Efficient Fund Placement suggests Taxable and Tax-Free accounts (e.g., Roth & HSA) should be 100% stocks (no bonds nor cash). Finally, you have a half-dozen individual stock picks, which is just gambling on those picks outperforming the index for decades, because they're all included in both the S&P-500 and Total Stock Market (highlighted in blue).

"Simplicity is the master key to financial success." -- John C. Bogle

Proposed-1 is greatly simplified down to only 5 holdings, but it includes rolling the Old 401k into the new 401k and using the 2055 TDF (since you don't have a low-cost int'l stock index). The plus side is that there's no tax-cost to swap funds in Taxable (I only sold off the T-Bills and re-deployed that cash to VXUS). On the down-side you wanted 100/0 and the TDF will have bonds, so you're about 6.7% off target.

Proposed-2 is still much simpler with only 7 holdings, but I've cleaned up Taxable to put everything in VTI which frees you up from wash sales if you put S&P-500 in the tax-advantaged accounts. On the plus side you're not trying to play Warren Buffet and pick individual stocks to hold for 20y (you will likely fail at that endeavor), but the down-side is the tax-cost to cleanup Taxable.

Image

A template spreadsheet (not your data) to help with asset allocation assessment and rebalance planning is linked below. Make a copy in your local GoogleSheets space to edit (or download to your local machine if you have Excel).
Asset Allocation Sheet
AA Current and Proposed

On the topic of picking individual stocks, the reason I say you'll likely fail is that professional fund managers, often with a degree in finance or economics and some with a CFA designation, try and yet fail often.
80% of Active Managers Fail to Beat the Market in 2021
94% of Active Managers Failed to Beat the Market for 20 Years

Why should you as a non-professional think you can do better? A paper from Berkely suggests individual traders are, in fact, no better than the pros.
Berkeley Research Paper on Individual Traders Underperforming

Also, are you prepared to dump these 6 tech stocks when you know (in advance) they are going to tank? Or do you plan to buy and hold like the folks that picked "top-10" stocks back in 1972 (like Exxon & Kodak), that eventually fell off the leader-board? See How the Top-10 of the S&P-500 Have Changed Over Time.
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).
NYstrip
Posts: 42
Joined: Fri Mar 11, 2022 10:14 am

Re: Portfolio review and rebalance suggestions

Post by NYstrip »

Great name Stockandawe. I like it. And congrats on a $700k portfolio by age 34. I was nowhere near that back then.

As to your portfolio, I like to think of investing strategies based on an age range so for your age band of 34-40 years old, I'd go 100% equities til 40 if you are OK with that. Add 10% in bonds if need be.

I'm not a guy who likes International so I'm in the 0-15% camp but that's personal preference so your call.

Simplification and not tinkering are keys. Set up your portfolio how you like it and then roll with it. S&P 500 and Total Stock Market are all you need if going 100% equities (excl your individual stocks you may not want to sell).

Once you get to 40 then you can re-evaluate. Maybe stay at 100% equities or add some bonds if you think you might retire early, i.e at 50 or 55.

For context, I was 100% equities until age 48 then moved to 80/20 in one fell swoop. Currently around 75/25.

Good luck to you.
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