3 Fund Lazy Portfolio ( Newbie Investor)

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chadamrein
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Joined: Mon Feb 22, 2021 9:09 pm

3 Fund Lazy Portfolio ( Newbie Investor)

Post by chadamrein »

Hello, So I'm a pretty newish investor and wanted to see if I could get some MOTIVATIONAL advice from you experienced investors. I just turned 35 and hope I'm not too late to the game, I'm a little worried and stressed abt it. I really would like to live the F.I.R.E life. I appreciate you guys/gals for your help! Thanks

1. Salary 70,000

2. No debt

3. 401k
Will be maxing out the $19,500/yearly
$20,000 as of today

4. Roth IRA
2020 6K
2021 6K

I'm currently in VTWAX/VBTLX
$9,000 VTWAX $3,000 VBTLX

Questions:

1. For my Vanguard Roth IRA would it be a better plan to do the 3 fund portfolio VTSAX/VBTLX/VTIAX or keep it as is? If so what percentage should I put in each one? Or should I just do a lifecycle fund?

2. I love the book "The Simple Path To Wealth" and thought abt even following his plan with 100% VTSAX.

Just kind of lost right now on what would be best for a set-and-forget portfolio.

The other question and this might be a dumb question, should I keep bonds in a Roth IRA?

Thank you
tashnewbie
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Re: 3 Fund Lazy Portfolio ( Newbie Investor)

Post by tashnewbie »

It's never too late to start!! You're doing great by maxing 401k and Roth IRA annually.

What are you invested in in the 401k?

I would just do VTWAX in your Roth IRA. Generally, the recommendation is to keep only stock/equities in the Roth IRA because qualified withdrawals are tax- and penalty-free. So bonds don't really belong in Roth IRA. See this wiki for more info about tax-efficient fund placement.

Think of all of your accounts as one portfolio. Once you decide on the asset allocation you want (percentage of stocks/bonds/cash), then you can reach that AA by placing funds tax-efficiently, generally with bonds in the tax-deferred account (e.g., 401k) and stocks everywhere.
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retired@50
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Re: 3 Fund Lazy Portfolio ( Newbie Investor)

Post by retired@50 »

chadamrein wrote: Mon May 03, 2021 4:05 pm
The other question and this might be a dumb question, should I keep bonds in a Roth IRA?

Thank you
No. Put bonds in your tax-deferred 401k plan. Typically, it's best to use all Roth space for stock index fund investments.

Regards,
This is one person's opinion. Nothing more.
Triple digit golfer
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Re: 3 Fund Lazy Portfolio ( Newbie Investor)

Post by Triple digit golfer »

First, decide on your asset allocation. I would advise as a default, using world market cap for the stock side, or 60% U.S. and 40% international will get you close enough. The latter is what Vanguard uses in all their target and lifecycle funds and about what most of the big companies use.

Decide how much you want in bonds. Some people want none. Others like a healthy dose. I use 20% at age 36 with a $1.1 million portfolio because I err on the conservative side, we're a single income household, my job is just average stability, and I have a family to support. I'd much rather work a couple extra years than risk a large downfall at the wrong time (i.e. market crashes 50% and I'm out of work). Also note that I don't have a separate emergency fund, so it would come from the portfolio. This is the amount that lets me sleep the best. I have moments where I want to dump them and other moments where I feel I should have more of my portfolio protected, so I feel this is about right for me.

So, let's say you choose 54% in U.S. stocks, 36% international stocks, and 10% bonds.

Put the 10% bonds in the 401k.

Put the U.S. equities and international equities wherever.

If you have access to a world stock fund, you can use that for the equities and not have to split them up.

If you don't, just use separate U.S. and international funds. If your 401k has an S&P 500 or Total U.S. Stock Market index fund, use that in the 401k and international in the Roth. You may end up with both stock funds in all the account types - that's okay too. They are both acceptable in any account type.

I would NOT recommend 100% VTSAX. In doing so, you're omitting almost half the world's equities and large multinational companies like Nestle, BP, Samsung, and Toyota. Not a good idea, in my opinion. Vanguard, Fidelity, Blackrock, and every other reputable company agrees.
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Re: 3 Fund Lazy Portfolio ( Newbie Investor)

Post by abuss368 »

chadamrein wrote: Mon May 03, 2021 4:05 pm
2. I love the book "The Simple Path To Wealth" and thought abt even following his plan with 100% VTSAX.
That is an excellent book isn’t it? I also have enjoyed JL Collins website where he expands on simplicity.

You can access that here:

https://jlcollinsnh.com/

I think Total Stock is an excellent choice and one that Jack Bogle has always said will serve most investors well.

No need to complicate. Add a bond fund and you have an excellent strategy.

It is most important to keep investing simple!
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: 3 Fund Lazy Portfolio ( Newbie Investor)

Post by abuss368 »

chadamrein wrote: Mon May 03, 2021 4:05 pm
1. For my Vanguard Roth IRA would it be a better plan to do the 3 fund portfolio VTSAX/VBTLX/VTIAX or keep it as is? If so what percentage should I put in each one? Or should I just do a lifecycle fund?
That is your call. Both the Two Fund Portfolio as recommended by Jack Bogle and Warren Buffett, and the Three Fund Portfolio will never be below average. It is most important to select the strategy you can stay with for the long term and sleep well at night.

Don’t forget! Jack Bogle already said by investing in Total Stock or the S&P 500 you have international exposure! Our companies derive almost 40% or more of revenue overseas. In fact, Mr. Bogle would say he is really not so sure what “international” needs. I would watch a few of his awesome interviews on YouTube. That is the best source.

Here is another excellent thread discussing the Jack Bogle and Warren Buffett Two Fund Portfolio:

viewtopic.php?f=10&t=188176

Tony
John C. Bogle: “Simplicity is the master key to financial success."
Topic Author
chadamrein
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Joined: Mon Feb 22, 2021 9:09 pm

Re: 3 Fund Lazy Portfolio ( Newbie Investor)

Post by chadamrein »

Thank you everyone for your help, I really appreciate it!
Triple digit golfer
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Re: 3 Fund Lazy Portfolio ( Newbie Investor)

Post by Triple digit golfer »

abuss368 wrote: Thu May 06, 2021 7:06 pm
chadamrein wrote: Mon May 03, 2021 4:05 pm
1. For my Vanguard Roth IRA would it be a better plan to do the 3 fund portfolio VTSAX/VBTLX/VTIAX or keep it as is? If so what percentage should I put in each one? Or should I just do a lifecycle fund?
That is your call. Both the Two Fund Portfolio as recommended by Jack Bogle and Warren Buffett, and the Three Fund Portfolio will never be below average. It is most important to select the strategy you can stay with for the long term and sleep well at night.

Don’t forget! Jack Bogle already said by investing in Total Stock or the S&P 500 you have international exposure! Our companies derive almost 40% or more of revenue overseas. In fact, Mr. Bogle would say he is really not so sure what “international” needs. I would watch a few of his awesome interviews on YouTube. That is the best source.

Here is another excellent thread discussing the Jack Bogle and Warren Buffett Two Fund Portfolio:

viewtopic.php?f=10&t=188176

Tony
And by investing in international companies you get U.S. exposure. It makes the most sense to own them all. Why own GM and Ford but not Toyota and Honda, Apple but not Samsung, Exxon but not Shell, and so on?
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Re: 3 Fund Lazy Portfolio ( Newbie Investor)

Post by abuss368 »

chadamrein wrote: Thu May 06, 2021 7:08 pm Thank you everyone for your help, I really appreciate it!
No problem! Remember with International stocks and bonds there is a whole different set of risks, which unfortunately have not paid off performance wise. An investor with international will have risks of currency, legal, taxation, and political risks.

Jack Bogle has an excellent chapter in his book: “Acres of Diamonds” that you should read. It is an eye opener!

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: 3 Fund Lazy Portfolio ( Newbie Investor)

Post by abuss368 »

retired@50 wrote: Mon May 03, 2021 4:39 pm
No. Put bonds in your tax-deferred 401k plan. Typically, it's best to use all Roth space for stock index fund investments.

Regards,
I would agree. With the low interest rates presently that makes sense. Having the stock gains compound over time in a Roth is prudent.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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CyclingDuo
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Re: 3 Fund Lazy Portfolio ( Newbie Investor)

Post by CyclingDuo »

chadamrein wrote: Mon May 03, 2021 4:05 pm Hello, So I'm a pretty newish investor and wanted to see if I could get some MOTIVATIONAL advice from you experienced investors. I just turned 35 and hope I'm not too late to the game, I'm a little worried and stressed abt it. I really would like to live the F.I.R.E life. I appreciate you guys/gals for your help! Thanks

1. Salary 70,000

2. No debt

3. 401k
Will be maxing out the $19,500/yearly
$20,000 as of today

4. Roth IRA
2020 6K
2021 6K

I'm currently in VTWAX/VBTLX
$9,000 VTWAX $3,000 VBTLX

Questions:

1. For my Vanguard Roth IRA would it be a better plan to do the 3 fund portfolio VTSAX/VBTLX/VTIAX or keep it as is? If so what percentage should I put in each one? Or should I just do a lifecycle fund?

2. I love the book "The Simple Path To Wealth" and thought abt even following his plan with 100% VTSAX.

Just kind of lost right now on what would be best for a set-and-forget portfolio.
Keep maxing out your 401k each and every year. Be glad that you started doing that! Kudos on contributing to your IRA as well.

Motivation?

Going with your Simple Path to Wealth reference, here is what being invested 100% S&P 500 has done for those who have maxed theirs out over the years...

Image

Your current rate of savings is $25,500 per year. Keep that up (as well as any increases to max contributions) over the next 20-30 years and you should be just fine. In terms of your comment I really would like to live the F.I.R.E life, you will need to reach at least 25-30X your annual expenses in savings - so keep plugging away and saving, but we would advocate that you also enjoy life's journey along the way.

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel
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