My updated AA

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InvestInLife
Posts: 88
Joined: Mon Aug 22, 2016 2:36 pm

My updated AA

Post by InvestInLife » Tue Mar 13, 2018 11:18 am

I have been a boglehead for about one year now. After a few running starts, this is where my portfolio currently is at. Let me have it, good or bad:

STOCKS 85.5%
US Total Market. 28.5%. SCHB, FSTVX.
US Small Cap Value. 28.5%. VBR, VIOV, VTWV.
Total International. 28.5%. FTIPX, IXUS.

BONDS 14.5%
Total Bond Market. 7.25%. FSITX.
Long-term US Treasury. 7.25%. FLBAX.

Notes.
I will rebalance between Total Intl FTIPX/IXUS to maintain 50% between each, to reap rebalancing gains. The other asset class funds can be any percentage, determined by which accounts they are in... ie. the Fidelity ones are in my 401k, some of the VBR is in a Roth IRA, the rest are taxable accounts.
I note that Total Bond Market FSITX is 7.xx% Intl.

I still have 27k between four individual stocks, three of them REITs with acceptable dividend yields, plus SWN which I hope bounces back from its 80%+loss once the oil crisis blows over. which I have held on to out of "anchoring". Still not sure what to do with these, so I have kept them as lingering experiments but not included them in my AA, and am diverting dividends toward the index funds.

I am 36, in a highly volatile profession, so no reliable income. 2016 gross income was over 300k, but then approximately zero in the last year. I just picked up a $10/hr side job at 20 hrs per week for now, which covers about 65% of my minimalist overhead. It is extremely tempting for me to "invest for current income" and chase yields, however I understand successful market investing is long-term only. I am currently replenishing cash holdings which after 2016 I emptied into the markets. Currently checking and money market accounts are at 3400 combined, plus 40k in CDs as emergency savings. Target: 22k in liquid checking and savings, plus 53k in CDs.

magicrat
Posts: 516
Joined: Sat Nov 29, 2014 7:04 pm

Re: My updated AA

Post by magicrat » Tue Mar 13, 2018 11:46 am

Seems fine overall. Too much small cap value for my taste, and I don't get the point of long-term treasuries, but as long as you made the choices purposefully and are sticking to it, then to each his own.

I'd clean up those stocks and REITs and get over the emotion. Tax efficiently of course.

Continue to resist the temptation to tap your portfolio. You have a nice cushion with those low expenses (looks like <$20k/yr ?) and that big emergency fund.

MotoTrojan
Posts: 2608
Joined: Wed Feb 01, 2017 8:39 pm

Re: My updated AA

Post by MotoTrojan » Tue Mar 13, 2018 11:47 am

Why so many different funds for the same asset class out of curiosity? VIOV is my preferred SCV, VBR is my TLH partner (and 401k fund) but not as big a fan of Russell.

Not sure what you are talking about with regards to the two Total International funds and a rebalancing bonus for similar indexes. Is this in tax-advantaged at-least?

You mentioned the size of your 4 stocks but not rest of portfolio.

Also curious strategy with the long-term bonds. I would personally keep it simple with Total Bond Market.

Tax-efficiency is important, for example VIOV >> than VBR in taxable. Bonds are best in 401k. Etc. That would be the final leg of optimization.

WanderingDoc
Posts: 1273
Joined: Sat Aug 05, 2017 8:21 pm

Re: My updated AA

Post by WanderingDoc » Tue Mar 13, 2018 12:22 pm

InvestInLife wrote:
Tue Mar 13, 2018 11:18 am
I have been a boglehead for about one year now. After a few running starts, this is where my portfolio currently is at. Let me have it, good or bad:

STOCKS 85.5%
US Total Market. 28.5%. SCHB, FSTVX.
US Small Cap Value. 28.5%. VBR, VIOV, VTWV.
Total International. 28.5%. FTIPX, IXUS.

BONDS 14.5%
Total Bond Market. 7.25%. FSITX.
Long-term US Treasury. 7.25%. FLBAX.

Notes.
I will rebalance between Total Intl FTIPX/IXUS to maintain 50% between each, to reap rebalancing gains. The other asset class funds can be any percentage, determined by which accounts they are in... ie. the Fidelity ones are in my 401k, some of the VBR is in a Roth IRA, the rest are taxable accounts.
I note that Total Bond Market FSITX is 7.xx% Intl.

I still have 27k between four individual stocks, three of them REITs with acceptable dividend yields, plus SWN which I hope bounces back from its 80%+loss once the oil crisis blows over. which I have held on to out of "anchoring". Still not sure what to do with these, so I have kept them as lingering experiments but not included them in my AA, and am diverting dividends toward the index funds.

I am 36, in a highly volatile profession, so no reliable income. 2016 gross income was over 300k, but then approximately zero in the last year. I just picked up a $10/hr side job at 20 hrs per week for now, which covers about 65% of my minimalist overhead. It is extremely tempting for me to "invest for current income" and chase yields, however I understand successful market investing is long-term only. I am currently replenishing cash holdings which after 2016 I emptied into the markets. Currently checking and money market accounts are at 3400 combined, plus 40k in CDs as emergency savings. Target: 22k in liquid checking and savings, plus 53k in CDs.
You sound like the ideal candidate for income-producing real estate. It pays you money NOW and regularly that you could use during lean years, unlike your 401k where you wouldn't use it until you are old or dead. Would save you the trouble of looking for $10/hr. jobs too.
I'm not looking to get rich quick (stocks), I'm not looking to get rich slow (indexing), I'm looking to get rich, for sure (real estate) | Don't wait to buy real estate. Buy real estate.. and wait.

InvestInLife
Posts: 88
Joined: Mon Aug 22, 2016 2:36 pm

Re: My updated AA

Post by InvestInLife » Tue Mar 13, 2018 1:06 pm

Great feedback so far, thanks. Here are my replies:

Magicrat,
My SCV tilt was from researching Merriman and running past performance comparisons on PortfolioVisualizer. I expect SCV and TSM to have comparable performance overall, but SCV has done better than TSM for a while. Liking them both but not reaching a firm decision between the two, I decided to split them evenly so I don't worry about which is doing better. International, actually, is the latest one to the table. I was influenced by Jack Bogle's apathy towards international stocks, but considering the economists I trust emphasizing the importance of being globally diversified, and an extra-long forum post ("Why International Again?"), I've decided to try it.

MotoTrojan,
FTIPX is brand new but IXUS is more established and more highly funded, and seems to track the index more closely for the immediate present. They follow the same index but have varied performance, so as they interlace over time, if I rebalance between the two I'll expect to reap some small gains (sell one when it is slightly higher than the other). I haven't bothered to try "rebalancing for gain" within the other asset classes. The SCV funds were a result of tax-loss harvesting this past year. My favorite is VBR, because of the lowest expense ratio. Why do you prefer VIOV for taxable? All of my SCV is currently held in taxable accounts.

BONDS I admittedly do not understand. I am unusually dense in my brain when it comes to bonds. I initially chose long-term bonds when starting my portfolio, since its performance has gone up the most over time. I later discovered the total market bond fund. I read on here somewhere that long-term bonds actually provide better diversification for a higher stock allocation (I think), so decided to leave them in and rebalance equally between long-term and total bonds. ALSO, the "rule" of choosing bonds that match your estimated withdrawal time… thirty years sounds about right. I am not convinced that my bond allocation is perfect, and I have heard a lot of differing opinions, and FLBAX looks like it returns more over time, so between all of this I've decided to leave it 50/50. I am very open to hearing otherwise.

WanderingDoc,
Yes! I have often considered direct real estate. Considering as I am somewhat desperate for an income floor to cover expenses in the face of income volatility. I even made an offer on a single-family home in 2016, but my realtor was pressuring me to do something illegal which would have secured me the home at a low price. I did not want to start out that way and so I backed away from the offer, and watched the home sell at just 2500 higher than my offer was. My business spiked then too, and I would not have had time to manage the new RE at the same time, especially with the added stress of keeping a low profile for the first year so as to not get caught. It was totally weird. I know I made the right choice by backing out.

BUT, now the RE market has skyrocketed where I live; that particular location has almost doubled. And just like a beginner choosing stocks, this makes me hesitant to invest when I "could have" done so at much lower rates a couple of years ago. Getting in now would make my cap rate lower and less appealing, when compared to 10% historical CAGR in a 85/15 portfolio with 50/50 TSM/SCV. BUT new projections of stocks performing lower over the next decade have got me thinking about RE again. I lack the technical expertise and cash for the moment to jump in confidently. I plan to hold off until I have a solid (1m) portfolio, with more cash freed up for expenses, and then revisit the idea of a fourplex in an established neighborhood.

bloom2708
Posts: 5005
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: My updated AA

Post by bloom2708 » Tue Mar 13, 2018 1:24 pm

Lower the small cap value tilt. Dump the long treasuries. Stick with int-term Total US Bond.

Take the risk on the stock side of your portfolio. Long bonds in this environment is not a great idea.

You are assuming some premium for small cap value will continue. It might, but it brings with it much more risk. 10% seems more reasonable. Add 5% to US and International.

I would do 20% bonds at your age. I like 20% as the floor.

Just some ideas and my thoughts. It is easy to get too gimmicky. Less is more.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

3funder
Posts: 786
Joined: Sun Oct 15, 2017 9:35 pm

Re: My updated AA

Post by 3funder » Tue Mar 13, 2018 1:36 pm

bloom2708 wrote:
Tue Mar 13, 2018 1:24 pm
Lower the small cap value tilt. Dump the long treasuries. Stick with int-term Total US Bond.

Take the risk on the stock side of your portfolio. Long bonds in this environment is not a great idea.

You are assuming some premium for small cap value will continue. It might, but it brings with it much more risk. 10% seems more reasonable. Add 5% to US and International.

I would do 20% bonds at your age. I like 20% as the floor.

Just some ideas and my thoughts. It is easy to get too gimmicky. Less is more.
+1. I couldn't have said it better myself.

PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: My updated AA

Post by PFInterest » Tue Mar 13, 2018 1:37 pm

Really? 85.5.....bogleheads know you have to go out to at least 2 decimals to matter.

InvestInLife
Posts: 88
Joined: Mon Aug 22, 2016 2:36 pm

Re: My updated AA

Post by InvestInLife » Tue Mar 13, 2018 1:43 pm

PFInterest wrote:
Tue Mar 13, 2018 1:37 pm
Really? 85.5.....bogleheads know you have to go out to at least 2 decimals to matter.
Lol, nice. I've been at 85% but splitting it evenly between all three results in 28.33333. I just rounded up to 28.5% and let it spill over.

InvestInLife
Posts: 88
Joined: Mon Aug 22, 2016 2:36 pm

Re: My updated AA

Post by InvestInLife » Wed Mar 14, 2018 12:37 am

[Note: replies from the other thread were merged into here. Only one thread remains - moderator prudent]

It appears my original post was posted twice, for unknown reasons. Responders on that side suggested I lower my SCV and dump the Long-Term Treasuries (and all individual stocks). I've proposed the following revision, and will plan to change it to this if it passes public scrutiny:

STOCKS 85%
US Total Market. 42.5% (50% of equity). SCHB.
US Small Cap Value. 17% (20% of equity). VBR, VIOV, VTWV.
Total International. 25.5% (30% of equity). FTIPX, VTIAX.

BONDS 15%
Total Bond Market. 10%. FSITX.
Long-term US Treasury. 5%. FLBAX.

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