18 Year Old Portfolio Final

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Topic Author
investingforbank
Posts: 34
Joined: Tue Jan 12, 2021 8:28 pm

18 Year Old Portfolio Final

Post by investingforbank »

Hey guys. After lots of research and mental turmoil, I have decided that I want to have a small cap value tilt. This is not so much about receiving higher return for higher risk, which I do want since I am only 18, but more about diversification, seeing as the total market composition is practically 75% large caps. (I have had a small cap value tilt since January, and it has worked out great so far, but I implemented it in a poor manner and am now rearranging how I do it as well as locking in my conviction for the next few decades.) The portfolio is as follows:

Total US Stock Market Index Fund (FSKAX): 45%
US Small Cap Value ETF (AVUV): 15%
Total International Index Fund (FTIHX): 30%
International Small Cap Value ETF (AVDV): 10%

I would like your guys' thoughts on the portfolio and if it is worth it for me to hold certain funds in my Roth IRA account and others in my brokerage, or if it is simpler to just have them evenly distributed between the two accounts.

Also, the total ER is 0.09825%. If I had no small cap value tilt, it would come out to 0.033%. Is this extra cost worth it for meaningful and quality exposure to small cap value?

Some quick math: The extra ER would be worth it if the SCV tilted portfolio returned, for example, 9.2% and the non-tilted portfolio returned 9.13%.

Thanks
Bama12
Posts: 431
Joined: Fri Aug 30, 2019 11:48 pm

Re: 18 Year Old Portfolio Final

Post by Bama12 »

I'm glad to see and 18 year old thinking about money.

Your Portfolio looks good to me. Remember it's more about sticking with it.
lazynovice
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Re: 18 Year Old Portfolio Final

Post by lazynovice »

Looks good for your stated IPS. To the extent you want to hedge against changing your mind later, you might put the small cap funds in the Roth where you can sell tax free anytime.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
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retired@50
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Re: 18 Year Old Portfolio Final

Post by retired@50 »

investingforbank wrote: Mon Apr 05, 2021 9:15 pm
Total US Stock Market Index Fund (FSKAX): 45%

US Small Cap Value ETF (AVUV): 15%
Total International Index Fund (FTIHX): 30%
International Small Cap Value ETF (AVDV): 10%

I would like your guys' thoughts on the portfolio and if it is worth it for me to hold certain funds in my Roth IRA account and others in my brokerage, or if it is simpler to just have them evenly distributed between the two accounts.
I'd suggest you have all 4 funds in the Roth account to make re-balancing easy.

I'd hold the total US market fund in the taxable brokerage account for any remaining money.

Technically speaking, you might be better off using VTI in taxable instead of FSKAX, but that's a different lesson, having to do with income taxes.

Regards,
This is one person's opinion. Nothing more.
Topic Author
investingforbank
Posts: 34
Joined: Tue Jan 12, 2021 8:28 pm

Re: 18 Year Old Portfolio Final

Post by investingforbank »

retired@50 wrote: Tue Apr 06, 2021 10:48 am
investingforbank wrote: Mon Apr 05, 2021 9:15 pm
Total US Stock Market Index Fund (FSKAX): 45%

US Small Cap Value ETF (AVUV): 15%
Total International Index Fund (FTIHX): 30%
International Small Cap Value ETF (AVDV): 10%

I would like your guys' thoughts on the portfolio and if it is worth it for me to hold certain funds in my Roth IRA account and others in my brokerage, or if it is simpler to just have them evenly distributed between the two accounts.
I'd suggest you have all 4 funds in the Roth account to make re-balancing easy.

I'd hold the total US market fund in the taxable brokerage account for any remaining money.

Technically speaking, you might be better off using VTI in taxable instead of FSKAX, but that's a different lesson, having to do with income taxes.

Regards,
Even if FSKAX has half the ER?
lazynovice
Posts: 961
Joined: Mon Apr 16, 2012 10:48 pm

Re: 18 Year Old Portfolio Final

Post by lazynovice »

investingforbank wrote: Tue Apr 06, 2021 11:58 am
retired@50 wrote: Tue Apr 06, 2021 10:48 am
investingforbank wrote: Mon Apr 05, 2021 9:15 pm
Total US Stock Market Index Fund (FSKAX): 45%

US Small Cap Value ETF (AVUV): 15%
Total International Index Fund (FTIHX): 30%
International Small Cap Value ETF (AVDV): 10%

I would like your guys' thoughts on the portfolio and if it is worth it for me to hold certain funds in my Roth IRA account and others in my brokerage, or if it is simpler to just have them evenly distributed between the two accounts.
I'd suggest you have all 4 funds in the Roth account to make re-balancing easy.

I'd hold the total US market fund in the taxable brokerage account for any remaining money.

Technically speaking, you might be better off using VTI in taxable instead of FSKAX, but that's a different lesson, having to do with income taxes.

Regards,
Even if FSKAX has half the ER?
Maybe, maybe not. FSKAX has distributed capital gains in the past but not since 2019. But in 2019, FSKAX had 100% qualified dividends while VTI had 95%. BUT...VTI had a section 199A dividend which gets favorable tax treatment. For 2020, FSKAX had the section 199A dividend too. Who knows what 2021 and the future will look like?
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
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arcticpineapplecorp.
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Re: 18 Year Old Portfolio Final

Post by arcticpineapplecorp. »

investingforbank wrote: Mon Apr 05, 2021 9:15 pm I would like your guys' thoughts on the portfolio and if it is worth it for me to hold certain funds in my Roth IRA account and others in my brokerage, or if it is simpler to just have them evenly distributed between the two accounts.
see this regarding tax efficient placement:
https://www.bogleheads.org/wiki/Tax-eff ... et_classes
investingforbank wrote: Mon Apr 05, 2021 9:15 pm Also, the total ER is 0.09825%. If I had no small cap value tilt, it would come out to 0.033%. Is this extra cost worth it for meaningful and quality exposure to small cap value?
only if it pays off. don't know if it will because no one knows the future.

as was mentioned, you'll need to stick with it through thick and thin. The reason it doesn't work for so many is because people are generally impatient and bail before the outperformance shows up in short, quick bursts (sometimes you have to deal with the 19.5 years of underperformance to get the outperformance that comes over just the next three years (see below):

Image
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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retired@50
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Re: 18 Year Old Portfolio Final

Post by retired@50 »

lazynovice wrote: Tue Apr 06, 2021 12:21 pm
investingforbank wrote: Tue Apr 06, 2021 11:58 am
retired@50 wrote: Tue Apr 06, 2021 10:48 am
investingforbank wrote: Mon Apr 05, 2021 9:15 pm
Total US Stock Market Index Fund (FSKAX): 45%

US Small Cap Value ETF (AVUV): 15%
Total International Index Fund (FTIHX): 30%
International Small Cap Value ETF (AVDV): 10%

I would like your guys' thoughts on the portfolio and if it is worth it for me to hold certain funds in my Roth IRA account and others in my brokerage, or if it is simpler to just have them evenly distributed between the two accounts.
I'd suggest you have all 4 funds in the Roth account to make re-balancing easy.

I'd hold the total US market fund in the taxable brokerage account for any remaining money.

Technically speaking, you might be better off using VTI in taxable instead of FSKAX, but that's a different lesson, having to do with income taxes.

Regards,
Even if FSKAX has half the ER?
Maybe, maybe not. FSKAX has distributed capital gains in the past but not since 2019. But in 2019, FSKAX had 100% qualified dividends while VTI had 95%. BUT...VTI had a section 199A dividend which gets favorable tax treatment. For 2020, FSKAX had the section 199A dividend too. Who knows what 2021 and the future will look like?
I agree with lazynovice... In other words, it's complicated. Which is why I used the word "might" in my post.

Don't let our silliness in discussing fractions of a percent in taxes derail your investing plan. You've got a decent plan, put all 4 in the Roth and Total US Market in the taxable brokerage account. Now go out and SAVE.

Regards,
This is one person's opinion. Nothing more.
retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: 18 Year Old Portfolio Final

Post by retiredjg »

How did you pick your funds/ETFs?

Suggest you look at Vanguard's Small Cap Value and their International Small Cap for lower costs...unless you think there is something special about the funds you picked.
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calmaniac
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Re: 18 Year Old Portfolio Final

Post by calmaniac »

retiredjg wrote: Tue Apr 06, 2021 3:02 pm
Suggest you look at Vanguard's Small Cap Value
Vanguard has 2 different SCV funds:
1. VBR (ETF, 0.07% ER), VSIAX (Admiral)
2. VIOV (ETF, 0.15% ER), VEMAX (Admiral)

These 2 funds are not equivalent. VIOV has a Price/Book of 1.53 and average company market cap of $1.8 B. VBR has a Price/Book of 1.80 and average market cap of $5.8 B. VIOV has more small cap weighting and is the better choice, despite higher fees.

Above quote edited for brevity.
Last edited by calmaniac on Wed Apr 07, 2021 3:06 pm, edited 1 time in total.
63 yo,1y til go part-time. AA 70/30: 30% S&P, 16% value, 14% intl, 10% EM, 30% short/int govt bonds. My mil pension + DW's now ≈60% of expenses. Taking SS @age 70--> pension+SS ≈100% of expenses.
absolute zero
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Re: 18 Year Old Portfolio Final

Post by absolute zero »

calmaniac wrote: Wed Apr 07, 2021 6:46 am
retiredjg wrote: Tue Apr 06, 2021 3:02 pm
Suggest you look at Vanguard's Small Cap Value
Vanguard has 2 different SCV funds:
1. VBR (ETF, 0.07% ER), VSIAX (Admiral)
2. VIOV (ETF, 0.15% ER), VEMAX (Admiral)

These 2 funds are not equivalent. VIOV has a Price/Book of 1.53 and average company market cap of $1.8 B. VBR has a Price/Book of 1.80 and average market cap of $5.8 B. VIOV has more small cap weighting and is the better choice, despite higher fees.

Above quote edited for brevity.
Just here to point out that VEMAX is an emerging market fund. There is no mutual fund equivalent for VIOV; its ETF only.

Also, not to muddy the waters, but there’s a third SCV fund from Vanguard - VTWV. It pretty much never gets discussed though, because most of the factor investors on this forum don’t like funds that track a Russell index.
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