Am I on the right track???

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Joined: Sat Dec 10, 2011 11:09 am

Am I on the right track???

Post by teacherinok » Sun Dec 11, 2011 8:39 am

Where is the overlap? Do I need to buy more international equities? Should I buy a small\mid international? I am 40 years old and thinking of cranking up to 70\30 allocation? Any suggestions or comments are most certainly welcome!

Total assets invested=50k 60/40 stock/bond
STOCKS (33k)
Vanguard Total International stock (vgtsx)= 13%
Vanguard Value Index Fund Inv (vivax) =10%
Vanguard 500 Index Fund Inv(vfinx) =10%
Vanguard Small-Cap Index Fund Inv(naesx) =10%
Vanguard REIT Index Fund Inv(vgsix) =7%
Vanguard Small-Cap Value Index(visvx) =10%
BONDS (14k)
Vanguard Total Bond (vbmfx)= 20%
Vanguard inflation protection (vipsx) =20%

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Re: Am I on the right track???

Post by investor.saver1 » Sun Dec 11, 2011 9:20 am

Hello teacherinok,

Your portfolio looks fine to me. Why take on the added risk of 70/30? I like your 60/40 allocation better. You've taken a value tilt and overweighted small caps, but not excessively. You've diversified internationally. Your expense ratio is .25% which is very good. Your allocation to inflation protected bonds is a little high (for your age) IMO, but not excessive. Overall a good portfolio.

I have found that simplicity is always better. If this were my portfolio, I'd probably eliminate 3 or 4 of the domestic stock funds and just buy total stock market (admiral class)...but that's just me. The benefit would be even lower costs with simplicity. In 20 years, I doubt you would see much difference in the outcome.

Investor.Saver1 | | Experience is something you don't get until just after you need it.

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Joined: Sun Sep 12, 2010 10:58 am

Re: Am I on the right track???

Post by tpm871 » Sun Dec 11, 2011 9:35 am

Looks fairly good. A few suggestions:

1. Think about what kind of tax style account you're using for each. REITs, bonds, TIPS should go in tax deferred accounts. But you should use your Roth IRA for the higher expected return assets of these, since you won't pay any taxes on future returns. So I'd put the REITs in the Roth IRA.

2. I prefer a Treasury Bond fund to TBM. You asked where the overlap was -- TBM have corporate bonds and other investments that are more correlated with the return of equities. It's better to have treasuries, which do better while equities take a dive.

3. I prefer Total Stock Market to S&P 500. The return of both is similar, but the actual cost of ownership of TSM is lower due to less turnover and avoiding "front running" that can work against S&P 500. Slightly more overlap with the others, but it's probably worth it. Hold this in a taxable account.

4. REITs and small value are known to overlap (i.e., small value may hold quite a bit of REITs). However, personally I have a similar allocation as you.

5. Many people say that large US companies overlap with international investments, since large companies have an international presence. They argue that there's no need to have international funds because of this. But that's a personal choice -- I have international funds, in a much higher allocation than you.

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