Left Betterment, Need help simplifying portfolio in Vanguard

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kuro
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Joined: Mon Jun 04, 2018 1:18 am

Left Betterment, Need help simplifying portfolio in Vanguard

Post by kuro » Mon Jun 04, 2018 2:13 am

Hello everyone,

First, I want to thank you everybody here for contributing infinite financial knowledge. I have learned so much from this forum. Salute to you all.

Sorry for the long post, I have been searching the forum but still can't get a clear answer for myself. If anyone would provide any guidance, it will be greatly appreciated.

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I started a Betterment account with a small amount of money in about two years ago when I had zero knowledge about investment. At the time, I just wanted to get the investment experience and to get started ASAP (I knew I was the late starter at age 27). I thought the robot advisor will be a good guidance for me at the starting point.

Now, I have read the bogle's guide to investing and have been following the forum, I feel like Betterment is complicating my life unnecessarily.
So I decided to leave betterment and keep all my investment under Vanguard.

I m currently holding a Roth and a Trad IRA at Vanguard, with almost 90% in Vanguard Total Stock Market mutual fund Investor & Admiral Shares. The rest is in life strategy, which I plan to switch to VTSMX later on. IRA is fully funded early this year.

I just transferred all from Betterment (taxable account) to Vanguard Taxable Brokerage account. The transfer was mostly completed in-kind, so I ended holding shares from various funds. Right now, the total amount is small and I m in a 15% tax bracket. I wonder how to simplify the portfolio to benefit me in a long run. I prefer a 90% stock or even 100% stock AA, mostly domestic, just to accelerate the accumulation process. But I m open to advice and suggestion. At this point, I m not against holding bonds. It just that I don't have enough knowledge to understand bonds and other asset classes. Need more readings on that.

Here is the list of in-kind Transfer from Betterment. THIS IS A TAXABLE ACCOUNT
BNDX - VANGUARD TOTAL INTL BOND INDEX ETF - $598.07 ER 0.11%
EMB - ISHARES JPMORGAN USD EMERGING MARKETS BOND ETF - $108.00 ER N/A
LQD - ISHARES IBOXX $INVESTMENT GRADE CORP BOND ETF - $114.91 ER N/A
MUB - ISHARES NATIONAL MUNI BOND ETF - $1,413.10 ER N/A
VBR - VANGUARD SMALL CAP VALUE ETF - $409.80 ER 0.07%
VEA - VANGUARD FTSE DEVELOPED MKTS ETF - $3,337.50 ER 0.07%
VOE - VANGUARD MID CAP VALUE ETF - $442.80 ER 0.07%
VTI - VANGUARD TOTAL STOCK MARKET ETF - $1,415.00 ER 0.04%
VTV - VANGUARD VALUE ETF - $1,367.99 ER 0.05%
VWO - VANGUARD FTSE EMERGING MARKETS ETF - $676.65 ER 0.14%
VWOB - VANGUARD EMERGING MKTS GOVT BOND INDEX ETF - $75.70 ER 0.32%
CASH - $1705
Total: $11659

Major question:
1. Which fund to get rid of?
2. I have no experience in handling ETF trading and currently have little knowlegdge about the process of ask/bid, etc. All I did in my IRA was auto-invest in the VTSMX/VTSAX. The expense ratio is same in VTSAX and VTI. It is worth it to cash them and switch to the corresponding mutual fund.
3. After I transfer from Betterment, if I cash any of these, does it consider as capital gain/loss?
4. Does ETF have admiral shares?
5. Is selling the fund and buy a new one the only way to switch to a different fund?

Thank you very much.
Last edited by kuro on Wed Jun 20, 2018 9:34 pm, edited 1 time in total.

SelfEmployed123
Posts: 187
Joined: Sun Apr 15, 2018 8:57 pm

Re: Left Betterment, Need help simplifying portfolio in Vanguard

Post by SelfEmployed123 » Mon Jun 04, 2018 6:20 am

It would help if you listed the expense ratios for each fund you hold. Many in this forum would recommend a three fund portfolio. See this link for more details: https://www.bogleheads.org/wiki/Three-fund_portfolio. That would mean selling your investments and purchasing Vanguard Total Stock Market Index Fund (VTSAX), Vanguard Total Bond Market Index Fund (VBMFX), and Vanguard Total International Stock Index Fund (VGTSX) in whatever asset allocation matches your plan. At 27 you are getting started much earlier than many on this forum (including myself). There are ETF equivalents of the above funds that are also available. I myself prefer going with index funds due to their simplicity. If you have everything at Vanguard, there may be no reason to bother with ETFs. You can just buy the corresponding index funds.

Check out this thread by Taylor Larimore for more on simplicity: viewtopic.php?t=156505

It is not clear from your post which of your holdings are in retirement accounts versus which are in taxable. See this article for information on tax efficient placement of investments: https://www.bogleheads.org/wiki/Tax-eff ... _placement. For investments in your retirement accounts, you can sell whatever you wish to achieve the three fund portfolio. However, selling investments from your taxable account would trigger either short-term or long-term capital gains taxes (depending on how long you've held the investments). It may be worthwhile to simply hold the existing investments in your taxable account and just start buying into the three fund portfolio.
"Get what you can, and what you get hold, 'Tis the stone that will turn all your lead into gold." | -Benjamin Franklin

student
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Re: Left Betterment, Need help simplifying portfolio in Vanguard

Post by student » Mon Jun 04, 2018 6:39 am

They all have low expense ratio except ishare jp morgan, which is not very high either. Selling etf costs money. But selling Vanguared etf is free at Vanguard. One should also take into account of capital gain. I would do the following.

1) Sell the funds that are worth under $200. You have three of them, each of the rest is worth at least $500.
2) Sell the funds, if any, that have a capital loss.
3) Do nothing to the remaining funds, they are low cost. From this point onward, direct new money to your desired funds.

Chip
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Joined: Wed Feb 21, 2007 4:57 am

Re: Left Betterment, Need help simplifying portfolio in Vanguard

Post by Chip » Mon Jun 04, 2018 6:41 am

Hi, and welcome!

Before doing anything you should understand what taxes you will pay on selling the different assets. To figure that out we need to know your cost basis for each ETF and when you bought it. If you added to that account at any time you may have multiple "tax lots" of the same ETF. We also need to know your marginal tax rate (both federal and state). You can edit your original post to add that information.

From a tax-efficiency standpoint you probably want your bonds in your IRA or other tax-deferred account. See the wiki article on Tax efficient fund placement. You would achieve that by selling the bond funds in your taxable account and buying a bond fund in your IRA. It's likely that you'll book a tax loss selling the bond funds. That's a good thing as it will likely reduce your taxes. Or you can use that loss to balance out the likely gains from selling some of your stock funds.

Once we know the tax situation we can make some recommendations. All of the stock funds are very low expense ratio and, for the most part, tax efficient. But since you want to simplify, these are likely the two funds you'll want to keep, as they are broad-based index funds:

VEA - VANGUARD FTSE DEVELOPED MKTS ETF
VTI - VANGUARD TOTAL STOCK MARKET ETF

You may not want to pay the tax bill to sell the others, but we need the cost basis/holding period information from you to nail that down.

JoeRetire
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Re: Left Betterment, Need help simplifying portfolio in Vanguard

Post by JoeRetire » Mon Jun 04, 2018 7:19 am

kuro wrote:
Mon Jun 04, 2018 2:13 am
I feel like Betterment is complicating my life unnecessarily.
Interesting.

What part of Betterment was complicated?

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galeno
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Re: Left Betterment, Need help simplifying portfolio in Vanguard

Post by galeno » Mon Jun 04, 2018 5:07 pm

I love the 2 fund port:

X% VT (or MF equivalent) + Y% The new USD Hedged Global Bond ETF (or MF equivalent) that's coming out this month.

X% and Y% according to your risk tolerance / acceptance.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

kuro
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Joined: Mon Jun 04, 2018 1:18 am

Re: Left Betterment, Need help simplifying portfolio in Vanguard

Post by kuro » Wed Jun 20, 2018 9:34 pm

Thank you SelfEmployed123, student, Chip, JoeRetire,and galeno for your detailed answer.
I updated the post with Expense ratio.
Yes, moving to a three-fund or two-fund portfolio is what I m trying to do.
You all gave very useful advice. <3

To student:
I love your ideas a lot. I will do that for now.

To Chip:
VEA - VANGUARD FTSE DEVELOPED MKTS ETF (VEA) vs Vanguard Total International Stock ETF (VXUS
Which one is more diversified?

To JoeRetire:
1. Betterment changes its fee quite often
2. I cannot control which fund to buy/sell.
3. Betterment doesn't connect with accounts holding in other companies so it may cause conflict. Every time I add fund, it automatically invested.
4. The simple three/two fund approach just more appeal to me. Betterment fragmented the fund into small pieces. Some of them are so small that it won't make a difference but simply cost more.

To Galeno:
The new USD Hedged Global Bond ETF<== does this considered as an international bond ETF?

Chip
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Joined: Wed Feb 21, 2007 4:57 am

Re: Left Betterment, Need help simplifying portfolio in Vanguard

Post by Chip » Thu Jun 21, 2018 5:45 am

kuro wrote:
Wed Jun 20, 2018 9:34 pm
VEA - VANGUARD FTSE DEVELOPED MKTS ETF (VEA) vs Vanguard Total International Stock ETF (VXUS
Which one is more diversified?
VXUS is more diversified because it owns stocks from both developed markets like Canada and Germany as well as emerging markets like China and South Korea. VEA only owns stocks from developed markets.

bgf
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Joined: Fri Nov 10, 2017 9:35 am

Re: Left Betterment, Need help simplifying portfolio in Vanguard

Post by bgf » Thu Jun 21, 2018 7:15 am

You could do VXUS or VEA + VWO.

VXUS includes international developed and emerging markets. VEA is international developed, and VWO is emerging markets.

I do not think that VXUS = VEA + VWO, technically speaking. So there are differences, but I am not able to spell them out. I do know there have been previous threads posted about these ETFs however.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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galeno
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Re: Left Betterment, Need help simplifying portfolio in Vanguard

Post by galeno » Sat Jun 23, 2018 10:29 am

Use VT. If you want more stocks use VTI and VXUS.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

drk
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Location: Seattle

Re: Left Betterment, Need help simplifying portfolio in Vanguard

Post by drk » Sat Jun 23, 2018 8:24 pm

Chip wrote:
Thu Jun 21, 2018 5:45 am
kuro wrote:
Wed Jun 20, 2018 9:34 pm
VEA - VANGUARD FTSE DEVELOPED MKTS ETF (VEA) vs Vanguard Total International Stock ETF (VXUS
Which one is more diversified?
VXUS is more diversified because it owns stocks from both developed markets like Canada and Germany as well as emerging markets like China and South Korea. VEA only owns stocks from developed markets.
A nit: VEA includes South Korea because FTSE classifies it as a developed market. That detail does not undermine your correct answer, though.

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