My portfolio is a mess - need to simplify

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
bartbill
Posts: 44
Joined: Fri Apr 02, 2010 11:52 pm

My portfolio is a mess - need to simplify

Post by bartbill » Tue Apr 06, 2010 9:18 pm

I'm retiring this week, age 61, married. We have about $3500/mo in retirement and Social Security Disability income.

The part I need guidance on as follow:

Hers
1. Vanguard IRA (traditional) - $67000
a. Vanguard BondTotal Mkt Index fund (investor) - $15,000
b. Vanguard Total International Stock Index Fund - $52,000

2. NetBenefits managed 401K IBM - $119,000
a. 40% Large Company Index fund
b. 40% moderate life strategy growth (composite)
c. 20% small cap index fund.

She has not contributed to this fund beginning SSD in 1996.


Mine
1. Vanguard Traditional IRA - 59,000
Vanguard Total Market Index Fund (investor) - $59,000

2. Federal Gov TSP 401k - $143,000
a. Common stock index fund - 68,000
b. gov securities - 37,000
c. International stock index fund - 14,000
d. Small cap index fund - 24,000


Ours

IBM stock - 52,000

Non-retirement funds
a. Vanguard Money Mkt fund - 98,000
b. Vanguard Total International Stock fund index (VGTSX) - 5,000
c. Vanguard Life strategy growth index fund (VASGX) - 152,000
d. Vanguard Total Stock Mkt Index fund (admiral) - 163,000

Cash - 30,000

I plan to take the cash,mma and sell the Lifestrategy growth fund and buy a house within a month when we relocate back to Colorado. Estimated house expense is 275,000. Plan to pay cash.

Questions:

1. I want to simplify the above mess into approximately 55%stock/45%bonds.

I began with a consult with a Vanguard advisor last December, where by I sold some funds and acquired about $11,000 in capital loss carry over.
I did follow through with all the recommendations as I my situation changed.

2. What is your opinion of REITS now.

3. What is the most efficient way to transition stock percentage to bonds. How might TIPS fit into the equation.

4. Want to try some EFTS but not sure of the best way.

I know I've thrown a lot of data out here. Hope someone takes some time to comment on it.

We've been following posts here since we found it last month and sure seems like a lot of really bright folks comment.

Thanks much in advance.

campanellas
Posts: 23
Joined: Fri Apr 03, 2009 1:15 am

Re: My portfolio is a mess - need to simplify

Post by campanellas » Wed Apr 07, 2010 1:09 am

bartbill wrote:I'm retiring this week, age 61, married. We have about $3500/mo in retirement and Social Security Disability income.

The part I need guidance on as follow:

Hers
1. Vanguard IRA (traditional) - $67000
a. Vanguard BondTotal Mkt Index fund (investor) - $15,000
b. Vanguard Total International Stock Index Fund - $52,000

2. NetBenefits managed 401K IBM - $119,000
a. 40% Large Company Index fund
b. 40% moderate life strategy growth (composite)
c. 20% small cap index fund.

She has not contributed to this fund beginning SSD in 1996.


Mine
1. Vanguard Traditional IRA - 59,000
Vanguard Total Market Index Fund (investor) - $59,000

2. Federal Gov TSP 401k - $143,000
a. Common stock index fund - 68,000
b. gov securities - 37,000
c. International stock index fund - 14,000
d. Small cap index fund - 24,000


Ours

IBM stock - 52,000

Non-retirement funds
a. Vanguard Money Mkt fund - 98,000
b. Vanguard Total International Stock fund index (VGTSX) - 5,000
c. Vanguard Life strategy growth index fund (VASGX) - 152,000
d. Vanguard Total Stock Mkt Index fund (admiral) - 163,000

Cash - 30,000

I plan to take the cash,mma and sell the Lifestrategy growth fund and buy a house within a month when we relocate back to Colorado. Estimated house expense is 275,000. Plan to pay cash.

Questions:

1. I want to simplify the above mess into approximately 55%stock/45%bonds.

I began with a consult with a Vanguard advisor last December, where by I sold some funds and acquired about $11,000 in capital loss carry over.
I did follow through with all the recommendations as I my situation changed.

2. What is your opinion of REITS now.

3. What is the most efficient way to transition stock percentage to bonds. How might TIPS fit into the equation.

4. Want to try some EFTS but not sure of the best way.

I know I've thrown a lot of data out here. Hope someone takes some time to comment on it.

We've been following posts here since we found it last month and sure seems like a lot of really bright folks comment.

Thanks much in advance.
1. For your 55% stock holding it depends on how much US vs. Int'l you want to hold. Perhaps you might want something like this:

40.0% Total US Stock Market
15.0% International
22.5% TIPS
22.5% Total Bond Market

Since you have some funds where you will have an S&P 500 type fund and small cap fund, here's a boglehead link to approximate the total market: http://www.bogleheads.org/wiki/Approxim ... ock_Market

2. I've heard REITs might be over-priced right now by 20-30%. Whether there's some sort of correction or not is anyone's guess.

3. You may want to split your bond allocation 50% TIPS /50% Total Bond Market.

4. If I were in your place just starting out, I'd start with the standard open-end fund to get your feet wet. Once you get used to index funds, you can look into ETFs. There are some things you need to learn about how ETF's first to know if they're right for your situation.

YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: My portfolio is a mess - need to simplify

Post by YDNAL » Wed Apr 07, 2010 2:33 am

bartbill wrote:Questions:

1. I want to simplify the above mess into approximately 55%stock/45%bonds.

I began with a consult with a Vanguard advisor last December, where by I sold some funds and acquired about $11,000 in capital loss carry over. I did follow through with all the recommendations as my situation changed.

2. What is your opinion of REITS now. <- Skip them

3. What is the most efficient way to transition stock percentage to bonds. How might TIPS fit into the equation.

4. Want to try some EFTS but not sure of the best way. <- I don't see a need for ETFs
Bill,

You should consolidate Her accounts at Vanguard. Did you ever ask the VG Advisor when you talked?

Her Vanguard IRA (traditional) - combined $186,000
Vanguard TIPS (Admiral) - $134,000
Vanguard Total International Stock Index Fund - $52,000

His Vanguard Traditional IRA - 59,000
Vanguard FTSE ex US Large (VFWIX) - $59,000 <- if you sell IBM, this should then stay in VTSMX (current)

His Federal Gov TSP 401k - $143,000
G Fund $143,000

Taxable
IBM stock - 52,000 <- this should be sold (use available cap loss) and put in VGTSX
Vanguard Total International Stock fund index (VGTSX) - 5,000
Vanguard Total Stock Mkt Index fund (admiral) - 163,000

Overall: 55/45 Stocks/Bonds (includes G Fund)
Stocks: 65/35 Domestic/Foreign
I plan to take the cash,mma and sell the Lifestrategy growth fund and buy a house within a month when we relocate back to Colorado. Estimated house expense is 275,000. Plan to pay cash.
House fund:
Cash - 30,000
Vanguard Money Mkt fund - 98,000
Vanguard Life strategy growth index fund (VASGX) - 152,000
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

bartbill
Posts: 44
Joined: Fri Apr 02, 2010 11:52 pm

Post by bartbill » Wed Apr 07, 2010 9:18 pm

Thanks much for the responses. Think I will study on it all for a while before I do anything else.

Valuethinker
Posts: 35017
Joined: Fri May 11, 2007 11:07 am

Post by Valuethinker » Thu Apr 08, 2010 8:36 am

bartbill wrote:I'm retiring this week, age 61, married. We have about $3500/mo in retirement and Social Security Disability income.

The part I need guidance on as follow:

Hers
1. Vanguard IRA (traditional) - $67000
a. Vanguard BondTotal Mkt Index fund (investor) - $15,000
b. Vanguard Total International Stock Index Fund - $52,000

2. NetBenefits managed 401K IBM - $119,000
a. 40% Large Company Index fund
b. 40% moderate life strategy growth (composite)
c. 20% small cap index fund.

She has not contributed to this fund beginning SSD in 1996.


Mine
1. Vanguard Traditional IRA - 59,000
Vanguard Total Market Index Fund (investor) - $59,000

2. Federal Gov TSP 401k - $143,000
a. Common stock index fund - 68,000
b. gov securities - 37,000
c. International stock index fund - 14,000
d. Small cap index fund - 24,000


Ours

IBM stock - 52,000

Non-retirement funds
a. Vanguard Money Mkt fund - 98,000
b. Vanguard Total International Stock fund index (VGTSX) - 5,000
c. Vanguard Life strategy growth index fund (VASGX) - 152,000
d. Vanguard Total Stock Mkt Index fund (admiral) - 163,000

Cash - 30,000

I plan to take the cash,mma and sell the Lifestrategy growth fund and buy a house within a month when we relocate back to Colorado. Estimated house expense is 275,000. Plan to pay cash.

Questions:

1. I want to simplify the above mess into approximately 55%stock/45%bonds.

I began with a consult with a Vanguard advisor last December, where by I sold some funds and acquired about $11,000 in capital loss carry over.
I did follow through with all the recommendations as I my situation changed.

2. What is your opinion of REITS now.

3. What is the most efficient way to transition stock percentage to bonds. How might TIPS fit into the equation.

4. Want to try some EFTS but not sure of the best way.

I know I've thrown a lot of data out here. Hope someone takes some time to comment on it.

We've been following posts here since we found it last month and sure seems like a lot of really bright folks comment.

Thanks much in advance.
Bart

Without a deep analysis of your portfolio, your single biggest risk there is 50k in IBM stock. In one stock.

So you should look to reduce that. Tax plays a big role, you want to minimize tax in doing so (eg spreading over more than 1 tax year). But you have to ask yourself 'how would I feel if that halved in the next 12 months?'. And single company can have that kind of price move, very easily, even an apparently 'stable' one like IBM. (of course it could double, but that would be a quality problem). Information Technology is a very volatile sector.

This is something you should be looking to reduce. By at least 50% fairly quickly (subject to tax issues). We cannot know the future of capital gains tax rates, but they might well go up, as well.

REITs have a couple of issues:

- they are very tax inefficient unless you have the space

- the case for REITs was that they paid a steady dividend return, were not fully correlated with stocks, and had a degree of inflation protection.

However the volatility of the REIT share price in the last 3 years (up and down) has led many to reassess the attractions. If you are a frequent rebalancer, this is not necessarily a bad thing. Conversely many REITs have cut dividend payouts due to financial stress. There is a lot of commercial property that is 'underwater' (debt more than the value of the property) in the USA and at least some authorities are calling for an extended period of weak performance. Conversely, there is evidence that prime blue chip properties, with good tenants, are attracting a lot of investor interest, and the top REITs do own a lot of such property.

But many (I lean this way myself) have come to see this as a form of small cap value investing, with quite a high degree of risk, and therefore more of a 'bell and whistle' than a core long term holding.

bartbill
Posts: 44
Joined: Fri Apr 02, 2010 11:52 pm

Post by bartbill » Thu Apr 08, 2010 6:47 pm

Thanks Bart,

Just the kind of information I am looking for. I'm thinking, sell half the IBM stock and use half of the proceeds for Total Bond Mkt Ind Fund and half in TIPS.

I'm going to start and ETF account, then I can use the brokerage to sell the IBM stock. Actually when I did the account review with the Vanguard rep last December she recommended selling half the IBM stock. Comforting to see two experts arrive at the same conclusion.

Thanks again.

Die Hard
Posts: 772
Joined: Wed Jan 02, 2008 9:51 pm
Location: West of the Pacific

Post by Die Hard » Thu Apr 08, 2010 7:17 pm

Valuethinker

Without a deep analysis of your portfolio, your single biggest risk there is 50k in IBM stock. In one stock.

So you should look to reduce that. Tax plays a big role, you want to minimize tax in doing so (eg spreading over more than 1 tax year). But you have to ask yourself 'how would I feel if that halved in the next 12 months?'. And single company can have that kind of price move, very easily, even an apparently 'stable' one like IBM. (of course it could double, but that would be a quality problem). Information Technology is a very volatile sector.
Valuethinker:
Although, does not specifically pertain to this post, I am curious. What do you mean by "quality problem" in the above paragraph.
Just educationg myself, that's all.
Thanks in advance for teaching
Die Hard
The best way to teach your children about money is to not have any.............

Post Reply