Please critique my portfolio/investment plan

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Topic Author
doctorfaust
Posts: 5
Joined: Tue May 28, 2019 2:01 pm

Please critique my portfolio/investment plan

Post by doctorfaust » Tue Jun 11, 2019 2:30 pm

Hi all,

Long-time lurker but new poster. I've been soaking up the BH way from this and other sites so I think I have a decent grasp on things but of course appreciate neutral third-party opinions. I've been at my job and thus only been making large contributions for only about 2 years now (extended education/training course) so my largest component right now is actually my Roth, which my dad helped me start in my early 20s (thanks Dad!) but that'll change as I make more contributions.

GOAL: FI(option to RE) in 15 years
Age: 37
Single - don't want kids even if I get married in the future
Tax: 35% federal, 9.3% state (CA)
Emergency Fund: yes
Debt: none outstanding (renting currently)

Gross: ~$220k with guarantee to go up to about ~$280k over next 10 years if I stay at current job
Expenses: ~$70k, likely more like ~$60k if I FI/stop working as I'd be able to drop disability insurance, licensing fees, work-conference related expenses etc.

Total Savings: ~$261k
Overall Asset Allocation: 80% Stocks (60% US 20% International), 10% Bonds/TIPS (5% each), 10% REIT
Additional wrinkle: My current job offers a pension. Due to a recent CA law, both the pension contributions I make and the eventual benefit are capped at some level below my salary (but this cap is adjusted each year for COL); because of that and the fact that I may certainly not be at this job for my whole career, I've actually left it out of my calculations completely so as to figure out the 'worst-case scenario'. If I left my current job, my other contributions would concomittantly increase (last year $12k went towards the pension plan).

Holdings and Contributions:
Roth IRA at Vanguard
Contributing max each year via Backdoor
$110k VTSAX (Total Stock)
$6.5k VBTLX (Total Bond)
$14k VIPSX (Inflation-Protected Securities)
$20.5k VGSLX (REIT Index Fund)

457(b)
Contributing max each year; I get 4% employer match. However, the match itself counts towards the limit so my portion of the contributions is less (~$11k last year)
$34k "Large Cap Equity Fund" which appears to be 100% in the SSgA S&P 500 Flagship NL Series Fund (Class A Shares) - ER 0.01%
Could not find any ticker symbol or anything on this, probably because it's institutional? This was the only good choice in the 457(b) (no total stock fund and this is the only option with an ER <0.2)

Taxable at Vanguard
Not contributing defined amount each year but rather contributing what's left after expenses; last year was $63k
$45k VTIAX (Total International Stock)
$6k VCAIX (CA Intermediate Muni Bond)
$48k VCTXX (CA Money Market Fund)** - the purpose of this towards a potential future down payment so I am not counting this in my asset allocation nor total retirement savings; plan is to contribute til it reaches $100k and then stop

401(a) at Fidelity
Leftover from old employer, no longer receiving contributions
$25k in 2045 TDF

No HDHCP so no HSA

Specific Question:
1. 80/10/10 is pretty aggressive, which I had initially planned on due to the pension; however, given that my time horizon for this goal is 15 years, should I increase bonds?
2. Due to the otherwise poor choices in my 457(b), my stocks are somewhat tilted towards large cap. I'm not interested in specifically slice-and-dicing, but should I start making contributions to a small cap fund to 'counteract' this? Or just leave it alone?
3. Are any of my funds in 'bad' locations? Taxable is currently International Stock (for foreign tax credit) and muni bonds, though if my AA changes I may also have to start adding some kind of domestic stock as well for rebalancing purposes.
4. Any other glaring errors or miscalculations on my part?

Thanks in advance for any feedback!

DarkHelmetII
Posts: 302
Joined: Mon Jul 24, 2017 12:25 pm

Re: Please critique my portfolio/investment plan

Post by DarkHelmetII » Tue Jun 11, 2019 3:00 pm

1) I would personally dial back equities a little bit if you are looking at 15 year time horizon.

2) I would not lose sleep over large-cap tilt. If and when you get better small and mid-cap options, just have that percentage documented in your plan so that you are not chasing returns based on recent performance of large cap vs. small & mid-cap.

My 2 cents.

moneybeard
Posts: 13
Joined: Mon Jun 10, 2019 7:44 am

Re: Please critique my portfolio/investment plan

Post by moneybeard » Tue Jun 11, 2019 3:30 pm

I'm also 37, was looking at age 55, but am starting to believe I can do it closer to 50, so similar to your age situation. I am presently at 85/15 stocks to bonds, and looking to increase my bond holdings to closer to 20% in the next month (sudden cash influx I will use for backdoor roths and increasing my taxable account) as I do not believe it will significantly diminish my returns but it should help smooth the ride a little bit.

My 401K options suck except for target date funds, and as a result, I'm at a 60/40 US/intl spread in my equities. So compared to your 80/10/10, I'm at 51/34/15.

I am going to increase my bond holdings and US holdings by a few percentage points each and tilt away from the international allocation of the target date funds through my roth and taxable. My goal is to end up closer to 50/30/20, or even a little higher on bonds (50/28/22?) , before the end of the year and then hold that portfolio for at least five years and see how it does.

With your aversion to international, you could still go 70/15/15 and that would give you a far better sharpe ratio for probably close to the same historical return as your 80/10/10.

User avatar
Watty
Posts: 16168
Joined: Wed Oct 10, 2007 3:55 pm

Re: Please critique my portfolio/investment plan

Post by Watty » Tue Jun 11, 2019 7:22 pm

doctorfaust wrote:
Tue Jun 11, 2019 2:30 pm
Overall Asset Allocation: 80% Stocks (60% US 20% International), 10% Bonds/TIPS (5% each), 10% REIT
DarkHelmetII wrote:
Tue Jun 11, 2019 3:00 pm
1) I would personally dial back equities a little bit if you are looking at 15 year time horizon.
For reference the Vanguard 2035 fund is about 80% stocks and 20% bonds.

https://investor.vanguard.com/mutual-fu ... file/VTTHX

The Reits are a lot different than either stocks or bonds so that is hard to compare but if you omit the Reits then the 80/10 would be like 89/11 which is pretty agressive.

Topic Author
doctorfaust
Posts: 5
Joined: Tue May 28, 2019 2:01 pm

Re: Please critique my portfolio/investment plan

Post by doctorfaust » Tue Jun 11, 2019 8:08 pm

Thanks all for the feedback so far.
moneybeard wrote:
Tue Jun 11, 2019 3:30 pm
My 401K options suck except for target date funds, and as a result, I'm at a 60/40 US/intl spread in my equities. So compared to your 80/10/10, I'm at 51/34/15.
...
With your aversion to international, you could still go 70/15/15 and that would give you a far better sharpe ratio for probably close to the same historical return as your 80/10/10.
Sorry, I realized that was ambiguous. By 80/10/10 I mean 80% stock, 10% bond, 10% REIT. The stock spread is 75/25, so still lower than your 60/40, but I don't have a particular aversion to international.

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