Investment Advice for $50K in Taxable Account

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annthomas
Posts: 7
Joined: Sun Jan 14, 2018 1:23 pm

Investment Advice for $50K in Taxable Account

Post by annthomas » Sun Jan 14, 2018 11:04 pm

Hi All,
I have $50K additional money that I would like to invest in the market. I am planning to invest this for a long term. Basically, I want to follow a set it and forget it approach.

Here is our situation

Her Income: 129K
Her 401K: 45k (Started 401K two years back. Currently contributing the max)
Her Age: 32
Her 401K Asset Allocation:
Vanguard Target Retirement 2050 Trust Select (100% at .05 ER)
Funds within it:
1. Vanguard Total Stock Market Index Fund Institutional Plus Shares 53.8%
2. Vanguard Total International Stock Index Fund Institutional Plus Shares 36.2%
3. Total Bond Market II Index Fund Institutional Shares** 7.1%
4. Vanguard Total International Bond Index Fund Institutional Shares 2.9%


His Income: 190K
His 401K: 75K (Started 401K in 2015. Currently contributing the max)
His Age: 35
His 401K Asset Allocation ( ER is too high on these funds, but that's all his company offers)

The Growth Fund Of America-R2 (50% at 1.41 ER)
The Investment Company Of America-R2 (20% at 1.39 ER)
The New Economy Fund-R2 (15% at 1.59 ER)
Fundamental Investors-R2 (15% at 1.39 ER)

Cash Saved for Home down payment and related expenses: 200K
Emergency Fund: 50K
Location : NJ
Debts : None
Expenses : Rent/utilities/normal expenses ( around 3.5K/month)
Kids : 7 month old boy

I was looking for a sample portfolio in wealthfront and this is what I came up with.

Category ETF Fund Allocation %

Stocks VTI 35
Foreign Stocks VEA 25
Emerging Markets VWO 19
Divident Stocks VIG 10
Natural Resources VDE 5
Muncipal Bonds VTEB 6

Can you review and let me know if this allocation is good from a taxable account perspective? Please suggest if you have any other alternatives. I am planning to choose a dividend reinvestment option. Is that a good idea?

Thanks,
Ann
Last edited by annthomas on Mon Jan 15, 2018 1:16 am, edited 4 times in total.

PFInterest
Posts: 1257
Joined: Sun Jan 08, 2017 12:25 pm

Re: Investment Advice for $50K in Taxable Account

Post by PFInterest » Sun Jan 14, 2018 11:46 pm

you need a plan.
i wouldnt do that, but thats me.
you need to look at all your retirement accounts as a whole.

22twain
Posts: 1337
Joined: Thu May 10, 2012 5:42 pm

Re: Investment Advice for $50K in Taxable Account

Post by 22twain » Mon Jan 15, 2018 12:34 am

What are the 401K's invested in? The usual philosophy here is to consider all your accounts together as a single portfolio. Decide on the percentage of stocks that you want, in the total portfolio. Then decide what fraction of the stocks you want to be international versus domestic.

Then, ideally, your taxable account should be all stocks. If that would make your stock % too high, with the current makeup of your 401K's, then exchange enough of the stocks in the 401K's for bonds (or maybe a stable-value fund if you have a good one available) to make the overall stock % come out right. Then you don't have to bother with municipal bonds in your taxable account.
My investing princiPLEs do not include absolutely preserving princiPAL.

annthomas
Posts: 7
Joined: Sun Jan 14, 2018 1:23 pm

Re: Investment Advice for $50K in Taxable Account

Post by annthomas » Mon Jan 15, 2018 1:02 am

Thanks. I just updated my original post with the 401K asset allocation. Please take a look

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FiveK
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Joined: Sun Mar 16, 2014 2:43 pm

Re: Investment Advice for $50K in Taxable Account

Post by FiveK » Mon Jan 15, 2018 1:28 am

annthomas wrote:
Sun Jan 14, 2018 11:04 pm
His 401K Asset Allocation ( ER is too high on these funds, but that's all his company offers)

The Growth Fund Of America-R2 (50% at 1.41 ER)
The Investment Company Of America-R2 (20% at 1.39 ER)
The New Economy Fund-R2 (15% at 1.59 ER)
Fundamental Investors-R2 (15% at 1.39 ER)
It may well be true "that's all his company offers," but sometimes there is a lone S&P 500 index (or similar) fund with a much better ER...?

If not, see How to campaign for a better 401(k) plan - and good luck!

annthomas
Posts: 7
Joined: Sun Jan 14, 2018 1:23 pm

Re: Investment Advice for $50K in Taxable Account

Post by annthomas » Mon Jan 15, 2018 12:53 pm

Thanks for your feedback. My husband already sent an email to his employer asking for better plans. Will keep you all posted on how that goes.

JW-Retired
Posts: 6735
Joined: Sun Dec 16, 2007 12:25 pm

Re: Investment Advice for $50K in Taxable Account

Post by JW-Retired » Mon Jan 15, 2018 2:09 pm

annthomas wrote:
Sun Jan 14, 2018 11:04 pm
Her Income: 129K

His Income: 190K

ages 32 & 35
You are way over the income to make direct Roth IRA contributions, but it looks like you might be perfect for the "Backdoor Roth" maneuver. I would get going on that Roth savings of 2x$5500/year right away.

See https://www.bogleheads.org/wiki/Backdoor_Roth_IRA

You just have to be free of any other existing tIRAs, rollover IRAs, SEP IRAs, or Simple IRA accounts for it to work like a charm.
JW
Last edited by JW-Retired on Tue Jan 16, 2018 8:52 am, edited 1 time in total.
Retired at Last

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BL
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Joined: Sun Mar 01, 2009 2:28 pm

Re: Investment Advice for $50K in Taxable Account

Post by BL » Mon Jan 15, 2018 2:56 pm

Look at the 3-fund portfolio as a better sample. The Target date fund is a slight variation of that.

List all his available funds, or at least search each one carefully for 0.xx ER. Check carefully on Index, S&P 500, Vanguard, etc. funds. So many people miss that single lower-priced fund!

delgriffith
Posts: 2
Joined: Mon Jan 15, 2018 2:48 pm

Re: Investment Advice for $50K in Taxable Account

Post by delgriffith » Mon Jan 15, 2018 3:22 pm

Yes- definitely reinvest dividends, that's a no brainer in your case.

I love "her" options, "his" are kind of expensive but not terrible.

Your ETF list is a GREAT way to go for a taxable account. Personally I would scale back on the Emerge / Int'l % and put higher % in VTI. (but US market is on a high- but we're not supposed to time the market right) lol. But if you don't want to fool with watching / adjusting, I would definitely put less than the 25 & 19 in non U.S and a higher % in VTI.

The comment regarding the "backdoor Roth" is a good one- I do it every year b/c my income is too high for direct Roth. Roth IRA is another no-brainer when you are under 60 years old.

There are no exact answers but you're looking great!

Grt2bOutdoors
Posts: 18219
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Investment Advice for $50K in Taxable Account

Post by Grt2bOutdoors » Mon Jan 15, 2018 3:40 pm

annthomas wrote:
Sun Jan 14, 2018 11:04 pm
Hi All,
I have $50K additional money that I would like to invest in the market. I am planning to invest this for a long term. Basically, I want to follow a set it and forget it approach.


Cash Saved for Home down payment and related expenses: 200K
Emergency Fund: 50K
Location : NJ
Debts : None
Expenses : Rent/utilities/normal expenses ( around 3.5K/month)
Kids : 7 month old boy

I was looking for a sample portfolio in wealthfront and this is what I came up with.

Category ETF Fund Allocation %

Stocks VTI 35
Foreign Stocks VEA 25
Emerging Markets VWO 19
Divident Stocks VIG 10
Natural Resources VDE 5
Muncipal Bonds VTEB 6

Can you review and let me know if this allocation is good from a taxable account perspective? Please suggest if you have any other alternatives. I am planning to choose a dividend reinvestment option. Is that a good idea?

Thanks,
Ann
As noted above you are a perfect candidate for a 3 Fund Portfolio. You don't need to own a separate natural resources portfolio, both the Total Stock Market Index and Total International Stock Indexes own all of the major natural resource companies in the world (all the brand names you are familiar with and a bunch more you've never heard of), why select a weighing more than the market cap today? Emerging Markets is included in Total International Stock at a 20% allocation, the remainder are foreign equities. Don't waste your time with dividend equities - you are already in a high enough tax bracket, holding dividend equities is like holding out a sign asking the IRS to tax you some more. Those same dividend paying equities, yep, you guessed it - are already included in the same broad market indexes - Total Stock and Total International.

Set it and forget it? - easy enough to do, but you might have to pay slightly higher expenses to do so. Vanguard Lifestrategy Growth Fund - set it and forget it, allocated 80/20, holds Total Stock, Total International, Total International Bond, Total Bond Market - again, though holding this in a taxable account will subject you to taxable income.

Consider a 3 Fund Portfolio, you monitor it once per year for re-balancing purposes and when there is a HUGE market decline so you can take advantage of tax loss harvesting and rebalancing. You did not state your asset allocation plan, but if you were looking for maximum total return, this might work:
40% Total Stock Market Index
40% Total International Stock Market Index
20% Vanguard Tax Exempt Intermediate Term
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

annthomas
Posts: 7
Joined: Sun Jan 14, 2018 1:23 pm

Re: Investment Advice for $50K in Taxable Account

Post by annthomas » Wed Feb 07, 2018 12:05 pm

Thanks to all the experts here. Here is how i invested 50K

VTI ( 20k)
VXUS (20K)
VTEB ( 10K)

I hope this is fine
thanks

Grt2bOutdoors
Posts: 18219
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Investment Advice for $50K in Taxable Account

Post by Grt2bOutdoors » Wed Feb 07, 2018 1:13 pm

annthomas wrote:
Wed Feb 07, 2018 12:05 pm
Thanks to all the experts here. Here is how i invested 50K

VTI ( 20k)
VXUS (20K)
VTEB ( 10K)

I hope this is fine
thanks
Looks good to me. Stay the course. :sharebeer
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

RRAAYY3
Posts: 926
Joined: Thu Jan 17, 2013 12:32 pm

Re: Investment Advice for $50K in Taxable Account

Post by RRAAYY3 » Wed Feb 07, 2018 1:19 pm

50K you won't touch for awhile?

25K TOTAL US / 25 K INT'L - don't make it harder than it needs to be. When you get some more extra cash, put it in whichever is lagging that 50/50 split. Done and done.

annthomas
Posts: 7
Joined: Sun Jan 14, 2018 1:23 pm

Re: Investment Advice for $50K in Taxable Account

Post by annthomas » Mon Feb 12, 2018 10:42 pm

RRAAYY3 wrote:
Wed Feb 07, 2018 1:19 pm
50K you won't touch for awhile?

25K TOTAL US / 25 K INT'L - don't make it harder than it needs to be. When you get some more extra cash, put it in whichever is lagging that 50/50 split. Done and done.
I am not planning to touch it for another 20 years :happy unless some real emergency comes up and i need all that cash.

thanks to all the experts here for guiding me in the right direction

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