Single Investment Fund

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tomd37
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Single Investment Fund

Post by tomd37 » Mon Jul 09, 2018 8:52 pm

Is there a good single balanced fund that could be used in both a traditional IRA investment and taxable investment account environment?

As we both enter our 80's I am beginning to think about my ability to handle my accounts in the future as I age and my wife's ability to handle the accounts should I pass first. I know there are various management services available (Vanguard PAS and others) at a low cost. Yet I am thinking about a single fund that could be used in the future should I feel I can no longer handle my existing three-fund account.

Our stock/bond asset allocation has changed over the years; 60/40 prior to retirement in 2002, 50/50 upon retirement, and 40/60 three years ago. I am willing to accept some change in that allocation depending on what might be available in both passive and actively managed funds that might serve us best. Although my current stock allocation consists of about 30% international allocation I would give consideration to dropping that in favor of simplification in the future.

Under current conditions about two-thirds of our annual RMD's is needed to meet our budget needs and sometimes the other one-third could go as an investment in a taxable account. That taxable account now only represents 5% of our total investments. Ideally I would like to find one fund that would fit our needs in both environments, be it at to 40/60, 50/50, 60/40 level.

I welcome your comments and thoughts on this matter.

Edited: Sand Trap just reminded me of something I omitted. I do not want to get into international bonds and as mentioned would be very willing to get out of international stocks at this point in life.
Last edited by tomd37 on Mon Jul 09, 2018 10:21 pm, edited 2 times in total.
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Sandtrap
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Re: Single Investment Fund

Post by Sandtrap » Mon Jul 09, 2018 10:04 pm

Since you prefer a "single fund", you might consider any of the Vanguard Life Strategy funds to fit your allocation preference.
Here is the Vanguard link page and info.
https://investor.vanguard.com/mutual-fu ... trategy/#/

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vineviz
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Re: Single Investment Fund

Post by vineviz » Mon Jul 09, 2018 10:21 pm

Sandtrap wrote:
Mon Jul 09, 2018 10:04 pm
Since you prefer a "single fund", you might consider any of the Vanguard Life Strategy funds to fit your allocation preference.
Here is the Vanguard link page and info.
https://investor.vanguard.com/mutual-fu ... trategy/#/
I think the LifeStrategy funds are perfect choices for someone in your situation. Choosing LifeStrategy Conservative Growth to use on both taxable and tax-deferred account would be perfectly simple, effective, and inexpensive.

You might choose different funds, one for your taxable account (e.g. LifeStrategy Moderate Growth) and a different one for your IRA (LifeStrategy Income Fund) to maintain your overall allocation if you thought doing so would make a modest reduction in your overall tax bill.

123
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Re: Single Investment Fund

Post by 123 » Tue Jul 10, 2018 1:06 am

I have migrated most of our tax-deferred accounts from a 3-fund portfolio to a single Vanguard LifeStrategy fund. Though the costs of the LIfeStrategy fund are a little higher than the 3-fund mix I decided that the extra cost is simply insurance that my spouse will be able to handle things without a financial advisor after I'm out of the picture.

I have had similar feelings as the OP about whether international equity or bonds were really essential. As an altenative to the LifeStrategy Moderate Growth (VSMGX) fund I considered Vanguard Balanced Index (VBIAX), which is also 60/40 but without international. When I compared the performance graph of the two funds over time I saw that they were pretty close. The last couple of years the US equity market has boomed so VBIAX is currently trending higher. I opted for LifeStrategy Moderate Growth because the general trends were similar but VSMGX was more diversified with international. Time will tell whether avoiding international is a good idea, we all have to make that decision for ourselves.
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averagedude
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Re: Single Investment Fund

Post by averagedude » Tue Jul 10, 2018 5:02 am

I think the life strategy fund is a prudent choice. Good for your spouse if you shall pass. These funds are good for older people who are experiences cognitive decline.

tomd37
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Re: Single Investment Fund

Post by tomd37 » Wed Jul 11, 2018 9:49 am

I just came across Vanguard's Tax-Managed Balanced fund (VTMFX) that is about a 50/50 split which is okay with me. However the bond portion is state municipal bonds and I don't know if they are appropriate in a traditional IRA or a small taxable investment situation. The investment ratio of the fund would be acceptable.

Based on all the comments received thus far maybe the LifeStrategy Conservative Growth Fund might be the easiest way to go, all things considered, even with its international stock and bond allocations. Simplicity sometimes rules.

I am not ready to pull the trigger yet but rather just want to have sometime in mind when the time arrives. I have a "file of information" for my spouse for the past fifteen years and was just reviewing and updating it. Had Portfolio Solutions (Ricks former company) as the go to but things have changed there since making that file and guidance letter.
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TheTimeLord
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Re: Single Investment Fund

Post by TheTimeLord » Wed Jul 11, 2018 9:53 am

Not sure a single fund for both an IRA and taxable. But Vanguard's Tax Managed Balanced fund seems worth a look for the taxable portion. https://money.usnews.com/funds/mutual-f ... fund/vtmfx
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tomd37
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Re: Single Investment Fund

Post by tomd37 » Sat Jul 14, 2018 4:26 pm

Since the Tax-Managed Balanced fund (VTMFX) comes closer to my desired asset allocation of 50/50, I still am asking whether or not this could be an appropriate fund for my tax deferred IRA account. I am not a higher-income individual that is referred to in their fund description, but just looking for a single balanced fund of this approximate ratio.

Any comments would be appreciated.
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grabiner
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Re: Single Investment Fund

Post by grabiner » Sun Jul 15, 2018 8:22 am

tomd37 wrote:
Sat Jul 14, 2018 4:26 pm
Since the Tax-Managed Balanced fund (VTMFX) comes closer to my desired asset allocation of 50/50, I still am asking whether or not this could be an appropriate fund for my tax deferred IRA account. I am not a higher-income individual that is referred to in their fund description, but just looking for a single balanced fund of this approximate ratio.
It is not appropriate for an IRA. The bonds are municipal bonds, which are tax-exempt; you lose this tax exemption in an IRA. In addition, the asset allocation in the stock is very different; TM Balanced has no foreign stock, and no small-cap US stock as it tracks the Russell 1000.

If you are in a low tax bracket, you can use a LifeStrategy or Target Retirement fund in a taxable account, as the bonds it holds are the bonds you would want to hold.

There is still the general issue with balanced funds in taxable; changing your allocation is more expensive. If you want to switch from LifeStrategy Moderate Growth(60% stock) to Conservative Growth (40% stock), you have to sell the whole thing. If you hold separate stock and bonds, you only have to sell a third of your stock, for a much smaller capital gain.
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Mike Scott
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Re: Single Investment Fund

Post by Mike Scott » Sun Jul 15, 2018 8:43 am

I would think that if you are keeping two accounts that it would be no more complex but a little more tax efficient to have different funds in each account; for example pick one of the life strategy funds in tax advantaged and either the tax managed balanced fund or a total stock market in the taxable account.

Dandy
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Re: Single Investment Fund

Post by Dandy » Sun Jul 15, 2018 8:56 am

There have been good suggestions in the above posts. The main drawback for most balanced funds in a taxable account is that the fixed income portion is taxable, thus generating perhaps unwanted taxable income. If that is an issue in your situation you might consider Vanguard Tax Managed Balanced Fund which is approximately 50% equities and 50% muni bonds.

I don't think it would be too confusing to have one balanced fund for tax advantaged and another for taxable accounts.

Mistermooso
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Re: Single Investment Fund

Post by Mistermooso » Sun Jul 15, 2018 4:15 pm

If there a major difference between the LifeStrategy and age-based, target date funds?

Mike Scott
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Re: Single Investment Fund

Post by Mike Scott » Sun Jul 15, 2018 4:20 pm

The Life Strategy funds have a fixed allocation. The Target Date funds have a planned change in allocation over time and you should look at the allocation not the "date" in the name of the fund.

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grabiner
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Re: Single Investment Fund

Post by grabiner » Sun Jul 15, 2018 5:12 pm

Mike Scott wrote:
Sun Jul 15, 2018 4:20 pm
The Life Strategy funds have a fixed allocation. The Target Date funds have a planned change in allocation over time and you should look at the allocation not the "date" in the name of the fund.
Therefore, it is usually better to use the Target Retirement rather than the LifeStrategy funds in a taxable account, as you would need to switch LifeStrategy funds over time, incurring capital-gains tax. You could also plan to keep LifeStrategy Conservative Growth forever.
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