Advice on Personal Investment Portfolio

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dcarste
Posts: 144
Joined: Mon Apr 27, 2015 4:55 pm

Advice on Personal Investment Portfolio

Post by dcarste »

Hi All,

I need some advice on my personal investing portfolio, specifically what should I do with 100k sitting in a savings account in Ally making .5%. I will give a breakdown of my total worth and how it is invested currently.

I use Vanguard index fund 3 fund portfolio with Total Index Funds.
Goal: 50-60% Stocks, 40 to 50% Bonds.
Emergency Fund: 25K
Moderate Risk Tolerance

Current: 430K total net worth.
Age: 42
Income is Low so tax bracket and tax considerations aren't a big deal for me

IRA: 125K with 45% US stocks, 15% Ttl Intl Stocks, 40% US Bond Indx
ROTH IRA: 125K with 45% US stocks, 15% Ttl Intl Stocks, 40% US Bond Indx
Taxable: 81K in Vanguard Balanced Fund. 60% US stocks, 40% US Bond Indx
Ally Online Savings Account: 100K earning .5%.

Total Stocks as Percentage of Total Net Worth Including Emergency Fund: 48.5% Socks, 28% US Bond Index, 24% Ally Online Savings

I usually exclude the Emergency Fund of 25K when I calculate my Investable Assets and therefore use my intended allocation on 430K net worth less the 25K emergency fund.

So 405K in investable assets? Or would you use total net worth including the emergency fund to use your desired percentage asset allocation.

I am pretty confused and not sure what to do with the 100K sitting in the Ally Savings Account. Previously this was invested in CDs with them so it didn't bother me, it was yielding close to the total us bond market index fund. But those days are gone and CD's pay same as regular savings account.

What would you do with the 100K sitting at Ally? Would you wait it out and hope interest rates go up in a couple years, and invest them in CD's again?

Would you put some of it in corporate bond index funds at Vanguard?

Would you invest it in the Vanguard Balanced Index Fund - so the online savings goes 60% stocks and 40% Us Bond Index (earns 1.3% vs .5% in Ally)

I am comfortable in having 50 to 60% in Stocks, and 40 to 50% in Bonds - the bond portion is what I'm not sure what to do with. Lean a bit more towards corporates (short and intermediate terms indx), take the 100K in online savings and just throw it in the US Bond index fund? I wish CD's payed more as that was my previous plan - my Bond/Stable portion of my assets split between CDs in Ally and US Bond index at Vanguard. WIth the prospects of low rates, especially for longer at US Banks in online savings accounts - what to do.

Should I do nothing and not go out on the risk curve seeking a bit more yield than my online savings account?

I appreciate all of your insights, and look forward to reading any advice.
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ruralavalon
Posts: 21099
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Advice on Personal Investment Portfolio

Post by ruralavalon »

dcarste wrote: Thu Apr 29, 2021 12:00 pm Hi All,

I need some advice on my personal investing portfolio, specifically what should I do with 100k sitting in a savings account in Ally making .5%. I will give a breakdown of my total worth and how it is invested currently.

I use Vanguard index fund 3 fund portfolio with Total Index Funds.
Goal: 50-60% Stocks, 40 to 50% Bonds.
In my opinion at age 42 an asset allocation of either either 60/40 or 50/50 is within the range of what is reasonable.

dcarste wrote: Thu Apr 29, 2021 12:00 pmEmergency Fund: 25K
Moderate Risk Tolerance

Current: 430K total net worth.
Age: 42
Income is Low so tax bracket and tax considerations aren't a big deal for me
What is your tax bracket, both federal and state? What is your tax filing status?

We are currently in the 12% tax bracket, and still pay attention to tax issues.

dcarste wrote: Thu Apr 29, 2021 12:00 pmIRA: 125K with 45% US stocks, 15% Ttl Intl Stocks, 40% US Bond Indx
ROTH IRA: 125K with 45% US stocks, 15% Ttl Intl Stocks, 40% US Bond Indx
Taxable: 81K in Vanguard Balanced Fund. 60% US stocks, 40% US Bond Indx
Ally Online Savings Account: 100K earning .5%.
How much do you contribute annually to each account?

Do you currently have W2 income to make you eligible to contribute to an IRA?

Are the IRAs and taxable brokerage account all at Vanguard?

dcarste wrote: Thu Apr 29, 2021 12:00 pmTotal Stocks as Percentage of Total Net Worth Including Emergency Fund: 48.5% Socks, 28% US Bond Index, 24% Ally Online Savings

I usually exclude the Emergency Fund of 25K when I calculate my Investable Assets and therefore use my intended allocation on 430K net worth less the 25K emergency fund.

So 405K in investable assets? Or would you use total net worth including the emergency fund to use your desired percentage asset allocation.
Net worth and investable assets are different things. I would not count the emergency fund as part of the investment portfolio.

I am retired, we have no emergency fund or cash allocation.


dcarste wrote: Thu Apr 29, 2021 12:00 pmI am pretty confused and not sure what to do with the 100K sitting in the Ally Savings Account. Previously this was invested in CDs with them so it didn't bother me, it was yielding close to the total us bond market index fund. But those days are gone and CD's pay same as regular savings account.

What would you do with the 100K sitting at Ally? Would you wait it out and hope interest rates go up in a couple years, and invest them in CD's again?
You should consider using $10k annually, $20k annually if married, to buy I savings bonds, the current interest rate is 1.68%.


dcarste wrote: Thu Apr 29, 2021 12:00 pmWould you put some of it in corporate bond index funds at Vanguard?

Would you invest it in the Vanguard Balanced Index Fund - so the online savings goes 60% stocks and 40% Us Bond Index (earns 1.3% vs .5% in Ally)

I am comfortable in having 50 to 60% in Stocks, and 40 to 50% in Bonds - the bond portion is what I'm not sure what to do with. Lean a bit more towards corporates (short and intermediate terms indx), take the 100K in online savings and just throw it in the US Bond index fund? I wish CD's payed more as that was my previous plan - my Bond/Stable portion of my assets split between CDs in Ally and US Bond index at Vanguard. WIth the prospects of low rates, especially for longer at US Banks in online savings accounts - what to do.

Should I do nothing and not go out on the risk curve seeking a bit more yield than my online savings account?

I appreciate all of your insights, and look forward to reading any advice.
I do not suggest using Vanguard Balanced Index Fund Admiral Shares (VBIAX) in a taxable account, it's fine in tax-advantaged accounts in my opinion.

Our asset allocation is 50/50. We use Vanguard Intermediate-term Bond Index Fund (VBILX) in my rollover IRA. The fund is about 1/2 government bonds, 1/2 corporate bonds, with no mortgage backed securities (MBS).

If you add some of this money to the taxable brokerage account then I suggest very tax-efficient stock index funds such as Vanguard Total Stock Market Index Fund (VTSAX) and Vanguard Total International Stock Index Fund (VTIAX).

You can coordinate investments among all accounts treating all accounts together as a single unified portfolio, instead of trying to have an asset allocation of 60/40 in each account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
rhubarbpie
Posts: 3
Joined: Mon May 03, 2021 9:18 am

Re: Advice on Personal Investment Portfolio

Post by rhubarbpie »

From what I've read, most Bogleheads exclude their emergency fund from their asset allocation. You could include it, though, and have a 'cash equivalent' percentage. That's what I'm doing right now, because like you I have a lot of money in a taxable bank account. In my case it's the equity from selling a house after a divorce, but for non-financial reasons I am not looking to buy another house right now. I'm not quite ready to consider it retirement money and buy total stock index funds or such, but I don't want it to sit for several years earning zilch either.

It's tough right now with interest rates so low - HYSAs and CDs and money markets are all basically paying nothing. I've learned about I bonds here and plan to buy the max each year, but it's only $10k (or a bit more if you do the tax refund or trust thing).
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