33 yo Starting Late - looking for advice on portfolio construction. Help Appreciated!

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ENT24
Posts: 2
Joined: Fri Jan 12, 2018 3:29 pm

33 yo Starting Late - looking for advice on portfolio construction. Help Appreciated!

Post by ENT24 » Fri Jan 12, 2018 6:25 pm

Long time lurker, first time poster. Thanks to everyone on this forum for so much advice/information over the years. Finally time to invest. Sorry for long post, just want to be as complete as possible.

Emergency funds: 3-4 months
Debt: Student loans paid off (!!!), just bought a house, so we have a mortgage
Tax Filing Status: Married Filing Jointly
Tax Rate: 39.6% Federal, 5% State
Age: 33
Desired Asset allocation: 80-90% stocks / 10-20% bonds
Desired International allocation: 30% of stocks

Finished residency 6 months ago and now with some cash flow at age 33.

Student loans paid off. No other debt. Mortgage. Maxing out DW's 401(k) already at $54,500 (she has profit share from her practice included as well). All extra money going to Vanguard index funds. No kids/529s. No trust funds/money coming from family.

Net worth of 50k from retirement accounts.

Question is regarding my 401(k) and how to build a Boglehead-like portfolio from the funds. We are just getting started and I want to do this the right way.

Interested to hear your thoughts on both fund allocation, my analysis, and overall portfolio.

Fund choices are:

My 401(k)
Fund management fee = 0.12%

Specialty
- ABEMX - Aberdeen Emerging Markets - 1.12%
- DFISX - DFA Intl Small Company Fund - 0.53%
- RERGX - Amer Funds Europacific Growth - 0.50%
- FDGRX - Fidelity Growth Company Fund - 0.77%
- FCNTX - Fidelity Contrafund - 0.68%
- FHRRX - Franklin High Income Fund - 0.48%

Actively Managed

- DODFX - Dodge & Cox Intl Fund - 0.64%
- GWEIX - AMG GW&K Small Cap Equity Fund - 0.96%
- PMEGX - TRP Mid-Cap Equity Growth Fund - 0.61%
- PAAIX - PIMCO All Asset Fund - 1.07%
- MWTSX - Met West Total Return Bond Fund - 0.38%
- AGPXX - Invesco Short Term Investments Govt and Agency Portfolio - 0.15%

Passively Managed
- VTIAX - Vanguard Total Intl Stock Index Fund - 0.11%
- VSCIX - Vanguard Small-Cap Index Fund - 0.05%
- VMCIX - Vanguard Mid-Cap Index Fund 0.05%
- VINIX - Vanguard Institutional Index Fund - 0.02%
- VBTIX - Vanguard Total Bond Market Index Fund - 0.04%
- VIPIX - Vanguard Inflation-Protected Securities Fund - 0.07%

Target Funds
-VITRX - Vanguard Target Retirement Income Fund - 0.09%
-VITVX - Vanguard 2015 - 0.09%
- VITWX - Vanguard 2020 - 0.10%
- VRIVX - Vanguard 2025 - 0.10%
- VTTWX - Vanguard 2030 - 0.10%
- VITFX - Vanguard 2035 - 0.10%
- VIRSX - Vanguard 2040 - 0.10%
- VITLX - Vanguard 2045 - 0.10%
- VTRLX - Vanguard 2050 - 0.10%
- VIVLX - Vanguard 2055 - 0.10%
- VILVX - Vanguard 2060 - 0.10%
- VWENX - Vanguard Wellington Fund - 0.16%


Was thinking that I want to do 90/10 equities/bonds using the 120-age rule for bonds.
So for the bonds, I thought 10% VBTIX was best deal.

Want to do 70/30 US/Intl for equities.
So 0.30*0.9 = 27% VTIAX, which I thought was best deal.

Of remaining 63%, I was trying to re-create VTSAX. Bogleheads "Approximating Total Stock Market" article.
It mentioned that 500 Index Fund/Small-Cap Index Fund ratio of 82/18 approximated VTSAX.
So 0.82*0.63 = 52% VINIX
Leaving 11% VSCIX.

Total:
52% VINIX
27% VTIAX
11% VSCIX
10% VBTIX

Expense ratio overall = 0.0496%

DW 401(k) - overall expense ratio including advisor fee 1.01% - cheapest I could get this is 0.83% if all we did was Vanguard Small-Cap
- 35% large-cap (Amer Funds, Fidelity)
- 15% mid-cap (JPM)
- 20% small-cap (Vanguard Small-Cap Index)
- 30% intl (Amer Funds EuroPacific and New Perspective)

Vanguard Taxable Account
- 65% VTSAX/35% VTIAX

Questions:
1. How would you construct this 401(k) differently? Why?
2. I read that I shouldn't have bonds in my taxable accounts. Why is this? Should I have more of them in these tax-deferred accounts?
3. Any other investments I should be making?
4. Is my overall strategy OK for my situation/age?
5. Am I missing any major asset classes that you recommend?
6. Have read Bogleheads Guide to Investing - any other "starter" books I should read?
7. Does my strategy on how I (tentatively) plan to construct my portfolio make sense or is there overlap or something I'm missing?
8. Any other advice would be welcomed.

Thanks again to this great forum. I appreciate (in advance) all of your help! I look forward to learning even more!

- ENT24
Last edited by ENT24 on Fri Jan 12, 2018 9:10 pm, edited 2 times in total.

SimplicityNow
Posts: 454
Joined: Fri Aug 05, 2016 10:31 am

Re: 33 yo Starting Late - looking for advice on portfolio construction. Help Appreciated!

Post by SimplicityNow » Fri Jan 12, 2018 7:47 pm

ENT24 wrote:
Fri Jan 12, 2018 6:25 pm
Long time lurker, first time poster. Thanks to everyone on this forum for so much advice/information over the years. Finally time to invest. Sorry for long post, just want to be as complete as possible. Welcome to the forum.

Finished residency 6 months ago and now with some cash flow at age 33.

Student loans paid off. No other debt. Congrats!Mortgage. Maxing out DW's 401(k) already at $54,500 (she has profit share from her practice included as well). All extra money going to Vanguard index funds. No kids/529s. No trust funds/money coming from family.

Net worth of 50k.

Question is regarding my 401(k) and how to build a Boglehead-like portfolio from the funds. We are just getting started and I want to do this the right way.

Interested to hear your thoughts on both fund allocation, my analysis, and overall portfolio.

Fund choices are:

My 401(k)
Fund management fee = 0.12%

Specialty
- ABEMX - Aberdeen Emerging Markets - 1.12%
- DFISX - DFA Intl Small Company Fund - 0.53%
- RERGX - Amer Funds Europacific Growth - 0.50%
- FDGRX - Fidelity Growth Company Fund - 0.77%
- FCNTX - Fidelity Contrafund - 0.68%
- FHRRX - Franklin High Income Fund - 0.48%

Actively Managed

- DODFX - Dodge & Cox Intl Fund - 0.64%
- GWEIX - AMG GW&K Small Cap Equity Fund - 0.96%
- PMEGX - TRP Mid-Cap Equity Growth Fund - 0.61%
- PAAIX - PIMCO All Asset Fund - 1.07%
- MWTSX - Met West Total Return Bond Fund - 0.38%
- AGPXX - Invesco Short Term Investments Govt and Agency Portfolio - 0.15%

Passively Managed
- VTIAX - Vanguard Total Intl Stock Index Fund - 0.11%
- VSCIX - Vanguard Small-Cap Index Fund - 0.05%
- VMCIX - Vanguard Mid-Cap Index Fund 0.05%
- VINIX - Vanguard Institutional Index Fund - 0.02%
- VBTIX - Vanguard Total Bond Market Index Fund - 0.04%
- VIPIX - Vanguard Inflation-Protected Securities Fund - 0.07%

Target Funds
-VITRX - Vanguard Target Retirement Income Fund - 0.09%
-VITVX - Vanguard 2015 - 0.09%
- VITWX - Vanguard 2020 - 0.10%
- VRIVX - Vanguard 2025 - 0.10%
- VTTWX - Vanguard 2030 - 0.10%
- VITFX - Vanguard 2035 - 0.10%
- VIRSX - Vanguard 2040 - 0.10%
- VITLX - Vanguard 2045 - 0.10%
- VTRLX - Vanguard 2050 - 0.10%
- VIVLX - Vanguard 2055 - 0.10%
- VILVX - Vanguard 2060 - 0.10%
- VWENX - Vanguard Wellington Fund - 0.16%


Was thinking that I want to do 90/10 equities/bonds using the 120-age rule for bonds.
So for the bonds, I thought 10% VBTIX was best deal.

Want to do 70/30 US/Intl for equities.
So 0.30*0.9 = 27% VTIAX, which I thought was best deal.

Of remaining 63%, I was trying to re-create VTSAX. Bogleheads "Approximating Total Stock Market" article.
It mentioned that 500 Index Fund/Small-Cap Index Fund ratio of 82/18 approximated VTSAX.
So 0.82*0.63 = 52% VINIX
Leaving 11% VSCIX.

Total:
52% VINIX
27% VTIAX
11% VSCIX
10% VBTIX

Expense ratio overall = 0.0496%

DW 401(k) - overall expense ratio including advisor fee 1.01% - cheapest I could get this is 0.83% if all we did was Vanguard Small-Cap
- 35% large-cap (Amer Funds, Fidelity)
- 15% mid-cap (JPM)
- 20% small-cap (Vanguard Small-Cap Index)
- 30% intl (Amer Funds EuroPacific and New Perspective)

Vanguard Taxable Account
- 65% VTSAX/35% VTIAX

Questions:
1. How would you construct this 401(k) differently? Why? It is fine the way it is. You could tweak it a little by going all small cap in your wife's 401K and then make up the difference with more international and large cap in yours. I don't know if you want to go to that effort to save .18 in ER but it's a possibility.
2. I read that I shouldn't have bonds in my taxable accounts. Why is this? Should I have more of them in these tax-deferred accounts? The main reason is tax efficiency. The argument for bonds in a tax deferred account are that they produce dividends which are taxed in a taxable account but not in a tax deferred account. Total Stock Market or The Institutional Market Index fund in your plan is very tax efficient in that it pays out low dividends and most of them are qualified and are taxed at capital gains rates, not your marginal income tax rate.
3. Any other investments I should be making?
4. Is my overall strategy OK for my situation/age? I think you have a pretty good plan. I'd be less aggressive in my stocks bonds ratios, maybe 80/20 but what you picked would be what most here would consider reasonable.
5. Am I missing any major asset classes that you recommend? I don't think so.
6. Have read Bogleheads Guide to Investing - any other "starter" books I should read? I like Rick Ferri's All About Asset Allocation. Larry Swedroe also has a good book on Asset Allocation. Your Money and Your Brain by Jason Zweig on investing behavior.
7. Dos my strategy on how I (tentatively) plan to construct my portfolio make sense or is there overlap or something I'm missing? Makes sense.
8. Any other advice would be welcomed.

Thanks again to this great forum. I appreciate (in advance) all of your help! I look forward to learning even more!

- ENT24

ENT24
Posts: 2
Joined: Fri Jan 12, 2018 3:29 pm

Re: 33 yo Starting Late - looking for advice on portfolio construction. Help Appreciated!

Post by ENT24 » Fri Jan 12, 2018 9:13 pm

Thanks for the reply. May try to re-organize to save the 0.18%. It would make me feel a little bit better given the high ER of her 401(k) and the higher amount of money we are putting in it. Thanks for the book recommendations as well, will check them out!

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