Help with Newlywed Portfolio

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ARBear
Posts: 16
Joined: Sat Oct 29, 2011 4:43 pm

Help with Newlywed Portfolio

Post by ARBear » Sat Oct 29, 2011 4:50 pm

Hi - We are new to the Bogleheads forum and want to learn from your investing experience. We hope that we entered in all the information below in the correct manner after reading Laura's "Asking Portfolio Questions" post.

Total Portfolio Value: $60,000

Emergency Fund: 8-10 months expenses

Debt: $0 debt

Tax Filing Status: Married filing Jointly

Tax Rate: 15% Federal 6% State -- State of Missouri

Age: Him 32, Her 30

Her Taxable Investment Account:

$8,000 cash (CDs just expired)

Empire District Electric (EDE) – 1.37% of portfolio bought at 18
General Electric (GE) – 2.25% of portfolio bought at 15
Intel (INTC) – 0.04% of portfolio bought at 17

Davis New York Venture Fund B (NYVBX) – 10.17% of portfolio bought at 30 in 2005

His Taxable Investment Account:

Chase (CHASX): 53.87% of portfolio

Her Roth:

General Electric (GE) – 2.25% of portfolio bought at 19
Intel (INTC) – 0.04% of portfolio bought at 25

American Mutual Fund (AMFCX) – 5.99% of portfolio; bought in 2010
American EuroPacific Growth (AEPCX) – 5.99% of portfolio; bought in 2010
Vanguard Star (VGSTX) – 7.9% of portfolio; bought in 2010

His Roth:

Vanguard Total International Stock (VGTSX) – 9.98%; bought in 2011


Question 1: We’re afraid we do not have enough diversification. What should we be looking to add to our portfolio?

Question 2: That said, what do we do with the $8,000 in cash in her taxable account?

Question 3: Is our stock/bond allocation (93/3) too risky? We want growth, but not at a high cost of risk. If so, what should we do?

Question 4: We will finish the full $5k contribution to his Roth soon. Should we add to VGTSX or should we add something less risky like Wellington?

Additional info:

We do not have 401ks, 403bs, etc.

We want to go Vanguard with any future fund purchases. We fully fund both Roth accounts each year. Right now we rent, but would like to purchase a home in the next ten years.

Thanks in advance for your comments and advice.

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mhc
Posts: 3811
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Location: NoCo

Re: Help with Newlywed Portfolio

Post by mhc » Sat Oct 29, 2011 8:40 pm

Welcome.

I agree that you do need more diversification. Over half your portfolio is in Chase. That would scare me to death. I would recommend spending some time reading the Wiki and some of the books on the reading list. After you do this, develop a plan. Without a plan, it is difficult to help you.

Spend some time educating yourselves and decide if you want to take the low cost, diversified, index investing route. If you decide that is what you want, then you can find a lot of help here. Currently, it is difficult to tell what you are trying to accomplish because you have so much in individual stocks. It doesn't align with the Bogle philosophy of investing.

ARBear
Posts: 16
Joined: Sat Oct 29, 2011 4:43 pm

Re: Help with Newlywed Portfolio

Post by ARBear » Sat Oct 29, 2011 8:54 pm

Hi mhc - Thanks for your reply.

I think you make a good point about CHASX. We have CHASX as the result of an inheritance the husband received as a teenager in the 1990s. It has remained untouched since that time. We admittedly have no idea what to do with it. I know that you can't put faith in Morningstar's ratings, but in the last few years it has slid from a five star fund to a three star fund. We were thinking of investing in Vanguard Large Cap Growth (VLACX) - perhaps in the wife's taxable account.

We would not be opposed to selling off the stocks and putting the money towards funds. The stocks were acquired before the wife found Vanguard and saw the light.

It seems like bogleheads are mixed about American funds - do you have a opinion?

Thanks again for your reply and we will try to read up on this subject, but we are both come from the arts and humanities, so it will be a challenge.

pkcrafter
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Location: CA
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Re: Help with Newlywed Portfolio

Post by pkcrafter » Sat Oct 29, 2011 8:59 pm

AR, welcome to the forum. On first glance, it appears you have a somewhat random selection of stocks and funds and no real cohesive investment strategy. Did someone at Chase 'assist' you with your stocks and CHASX? If you are investing through a bank, you will pay high fees and get poor investment choices. No company plans? Do you own your own business?

The first thing you need to do is educate yourself in regards to a plan and appropriate risk control (overall asset allocation to stocks/ non stocks). Here's where to start--

http://www.bogleheads.org/forum/viewtopic.php?t=6211

And here is an intro to the Bogleheads Wiki--

http://www.bogleheads.org/wiki/Boglehea ... art-up_kit
Question 1: We’re afraid we do not have enough diversification. What should we be looking to add to our portfolio?
No, you are not well diversified. You can read ch 3 and 4 in this online book, but don't get overloaded or you might end up more confused. Take it slow. Adding funds is the last step in the portfolio-building process, so don't change anything until it's all figured out.

http://investingroadmap.wordpress.com/
Question 2: That said, what do we do with the $8,000 in cash in her taxable account?
Nothing yet. Plan is first priority.
Question 3: Is our stock/bond allocation (93/3) too risky? We want growth, but not at a high cost of risk. If so, what should we do?
Yes, it's too risky.
Question 4: We will finish the full $5k contribution to his Roth soon. Should we add to VGTSX or should we add something less risky like Wellington?
Where are the Roths held? How much is in these--enough for more than one fund with 3k minimum? The problem goes back to planning. International should be between ~20% and 40% of equity and since we don't know your AA yet (hope it's not going to be 93%) we don't know how much to allocate to international. If you can invest at least 3k more this year, then you can just put it in a money market fund in the Roth. In January you can start 2012 contributions.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

pkcrafter
Posts: 13135
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Re: Help with Newlywed Portfolio

Post by pkcrafter » Sat Oct 29, 2011 9:09 pm

Thanks again for your reply and we will try to read up on this subject, but we are both come from the arts and humanities, so it will be a challenge.
It may be a bit overwhelming with all the input, but it really is not difficult. Here's how to be a successful investor:

1. Understand risk and correctly develop an asset allocation that manages that risk. Asset Allocation is simply the percentages of your money you plan to place (allocate) into stocks, bonds and cash. It determines most of your investing risk.
2. Diversify your holdings. Diversifying means placing some money in different kinds of investments in order to spread the risk.
3. Keep costs as low as possible. Whatever you spend on buying and maintaining your investments comes directly out of the returns you receive. Costs are the second major reason for unnecessary losses.
4. Rebalance your portfolio when necessary. Rebalancing is simply readjusting your allocation percentages back to where you originally set them so you can maintain your chosen exposure to risk.
5. Formalize your investment plan. Developing a plan and then writing it down is a way of
demonstrating your commitment and clarifying your objective. It also serves as a compass to insure you stay on course.
6. Understand and avoid common behavioral mistakes

You can do this.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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mhc
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Re: Help with Newlywed Portfolio

Post by mhc » Sat Oct 29, 2011 10:41 pm

ARBear,

here is a word of encouragement. In January of this year, I decided I needed to get my portfolio straightened out. Even though I had been investing since 1988, I had no idea what I was doing. I started following this forum. I read some on the Wiki, and a couple of the recommended books. After about 3 months and maybe a total of 40 hours of easy reading, I had a good plan in place. I finally understand what to do.

Don't make any big changes until you get educated and your plan in place. There are a lot of knowledgable and helpful people on this site that will help you. Once you have a plan, post it and let people give you their feedback.

Stick with it and soon you will see how easy it really is. You are still young. Your number one asset is your ability to earn income. Live below your means and save and invest. Once you get your plan in place, it probably only take a couple of hours a month to maintain it. If you want to be hands off, you could probably do very well with just a few hours a year.

I recommend you get this figured out now so that you don't waste any of your hard earned money. I wish you well.

ARBear
Posts: 16
Joined: Sat Oct 29, 2011 4:43 pm

Re: Help with Newlywed Portfolio

Post by ARBear » Sun Oct 30, 2011 5:45 pm

Hi Paul - thank you for your advice. We will pick up some of the books on the list and start working on developing a plan. The wife's portfolio is in shambles because her much older brother originally recommended she invest with a big brokerage firm when she was in her teens. The only "smart" thing the broker did was invest some of her money in a CD paying just over 5% that recently expired. The rest was all a mess.

To both Paul and mhc: Thank you for flat out saying we don't have to invest the money and/or make any changes right away until a plan is in place. We have got caught up in worrying about our future and sometimes it is good to hear someone tell you to stop and take your time. We'll work on a plan and then come back for advice.

Your time and insight are very much appreciated by both of us - thank you.

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