AA/Portfolio Advice for Newlyweds in their 30s

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
ARBear
Posts: 16
Joined: Sat Oct 29, 2011 4:43 pm

AA/Portfolio Advice for Newlyweds in their 30s

Post by ARBear » Sun Jan 01, 2012 5:02 pm

Hi Bogleheads - We hope that we entered in all the information below in the correct manner after reading Laura's "Asking Portfolio Questions" post. Let us know if you need clarification. Our questions/concerns are at the bottom of the post. Thanks in advance for your help!

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
Desired Asset allocation: (90/10) [Not sure if this too risky, see below for comment]

Hypothetical Portfolio:
50% Large Cap
- Chase Growth Fund (CHASX), American Funds American Mutual (AEPCX), Vanguard Star (VGSTX)
10% Mid Cap
- Vanguard Mid-Cap Index (VIMSX)
10% Small Cap
- Vanguard Small-Cap Index (NAESX)

10% International stocks
- Vanguard Total International Stock Index (VGTSX) (currently in ROTH Ira)
10% Bonds
- Vanguard Inflation Protected Securities (VIPSX) (would put in ROTH Ira)
10% Cash



Current Portfolio:

Her Taxable Investment Account:

$8,000 cash – 17%

Davis New York Venture Fund B (NYVBX) – 10%

His Taxable Investment Account:

Chase (CHASX): 39% of portfolio
$3,000 cash – 3%

Her Roth:

American Mutual Fund (AMFCX) – 7% of portfolio
American EuroPacific Growth (AEPCX) – 7% of portfolio
Vanguard Star (VGSTX) – 8% of portfolio

His Roth:

Vanguard Total International Stock (VGTSX) – 9%

Hi Bogleheads – We bought a copy of the Bogleheads book and we’ve come up with a rough AA and portfolio, but we know it needs some adjusting.
We’ve included our desired AA and holdings and provided our current portfolio. We plan on selling off the American EuroPacific (AEPCX) when it finally bounces back and using the money to get to our desired allocation. The expenses for AEPCX are high and we will rely on the Vanguard Total Intl Stock Index to serve as our foreign large blend.

Right now we’re thinking 90 stock/10 bonds, but is that too risky in today’s market? Should we look for 15-20% in bonds?

Are we putting too much emphasis on large caps?

Also, the small cap, mid cap, and bonds that we’ve listed in our AA/desired portfolio would be purchased with the cash currently sitting in our accounts. We’re torn between Vanguard Inflation Protected Securities (VIPSX) and Vanguard Total Bond Market Index (VBMFX).

Your thoughts and comments are very much appreciated as we are just starting out our financial lives together. We want to avoid ever going to a "financial advisor" again.

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: AA/Portfolio Advice for Newlyweds in their 30s

Post by dbr » Sun Jan 01, 2012 5:22 pm

ARBear wrote: Right now we’re thinking 90 stock/10 bonds, but is that too risky in today’s market? Should we look for 15-20% in bonds?
A lot of people think 90% stocks is too risky for anyone, anytime. Others beg to differ. I think the 90% vice 80% vice 75%* can be a hot debate that in fact is not very meaningful. 75% is a good maximum in my opinion. A different issue which is less debatable here is that which day's market we are in has nothing to do with it.

*Advice from a very famous old timer in investing, Benjamin Graham is that stock allocation should be between 25% and 75%. The point is that neither relying entirely on stocks nor entirely eliminating stocks from the portfolio is wise.

Bob's not my name
Posts: 7405
Joined: Sun Nov 15, 2009 9:24 am

Re: AA/Portfolio Advice for Newlyweds in their 30s

Post by Bob's not my name » Sun Jan 01, 2012 5:37 pm

Neither of you has an employer retirement plan?

retiredjg
Posts: 32944
Joined: Thu Jan 10, 2008 12:56 pm

Re: AA/Portfolio Advice for Newlyweds in their 30s

Post by retiredjg » Sun Jan 01, 2012 6:03 pm

I think some of your choices could be improved on a lot. Also you are mixing balanced funds (which contain more than one asset class) with plain funds which makes it much more difficult to monitor your portfolio ratios. There is no need to do that.
Hypothetical Portfolio:
50% Large Cap
- Chase Growth Fund (CHASX), American Funds American Mutual (AEPCX), Vanguard Star (VGSTX)
10% Mid Cap
- Vanguard Mid-Cap Index (VIMSX)
10% Small Cap
- Vanguard Small-Cap Index (NAESX)

10% International stocks
- Vanguard Total International Stock Index (VGTSX) (currently in ROTH Ira)
10% Bonds
- Vanguard Inflation Protected Securities (VIPSX) (would put in ROTH Ira)
10% Cash
This is not a 90/10 portfolio. The cash counts as a fixed asset, so this is an 80/20 portfolio.

It is not clear where you plan to hold each of these things so it's difficult to say if this is a good plan or not. However, I have comments on some of the funds chosen.

Davis New York Venture Fund B (NYVBX) – 10% <--this fund has an expense ratio of 1.77% (it's a deferred load fund). An expense ratio that high is not acceptable if you are trying to follow a Boglehead philosophy. It also mixes both US and Foreign stocks which makes it more difficult to monitor your ratios.

Chase (CHASX): 39% of portfolio <--this fund has an expense ratio of 1.18% - much too high

Vanguard Star (VGSTX) – 8% of portfolio <--this fund mixes US and foreign stocks as well as bonds; the stocks and bonds don't care, but it just confuses things and makes keeping up with your percentages more difficult.
We plan on selling off the American EuroPacific (AEPCX) when it finally bounces back and using the money to get to our desired allocation.
There is no need to wait for this fund to bounce back. When it does, the fund you want to replace it will with have also bounced back and nothing will have been accomplished by waiting. Sell low now and buy low now.
Right now we’re thinking 90 stock/10 bonds, but is that too risky in today’s market? Should we look for 15-20% in bonds?
Today's market has nothing to do with it.

I'm one who believes that a portfolio needs at least 20% bonds (some say 25%). You may be able to make a little more money if you have 90% stock, but you also get more risk. And you get more risk than you get more money. Not much bang for the buck.
We’re torn between Vanguard Inflation Protected Securities (VIPSX) and Vanguard Total Bond Market Index (VBMFX).
No need to be torn - just hold half and half.

Here's a simple portfolio that you might want to consider.

His and Her Taxable 66%
42% Vanguard Total Stock Market
24% Vanguard Total International

Her Roth 22% <-- just pay the closing fee and move to Vanguard
11% Total Stock Market
11% Total Bond Market

His Roth 9%
9% TIPS fund

This idea is 80% stock, 20% bonds with 30% of stock (24% of portfolio) in international. It is low cost and tax efficient.

You don't list a 401k or 403b or similar plan for either of you. That would be the place to start if you have one available.

In order to get from where you are today to this idea, you'd need to take a close look at selling your holdings in your taxable accounts. It may or may not be able to be done without triggering taxes (we can help you work through this). However, that would be preferable to keeping the high expense ratio funds your currently have.

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

Re: AA/Portfolio Advice for Newlyweds in their 30s

Post by ARBear » Wed Jan 04, 2012 7:39 pm

Thanks to everyone who replied.

@retiredjg: We forgot to mention that we will be selling the Davis fund and plan on lowering our stake in Chase.

@bob's not my name: As far as employer retirement plan, no. One of us works for a government entity that requires employees to work at least 5 years before vesting into its very modest retirement plan, but that is our only option.

@dbr: Thanks for your comment. After discussing the matter, we plan on raising the percentage of bonds in our portfolio.

Thanks again!

Post Reply