More than just vtsax?

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jaykrew6311
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More than just vtsax?

Post by jaykrew6311 »

I read the simple path to wealth and decided to allocate 100% of my investing to vtsax, or the equivalent (my hsa I could only get Schwab total, and my children's 529s the Arizona total). I only started back in March, so it's not like I have made a horrible mistake I know, but I'm just wondering as I read a bit more if I'm doing things the right way before I get too deeply far along/closer to retirement. Should I also be mixing in international? Something else? Just wondering.
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RickBoglehead
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Re: More than just vtsax?

Post by RickBoglehead »

You're fine for now.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
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anon_investor
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Re: More than just vtsax?

Post by anon_investor »

RickBoglehead wrote: Mon Jul 19, 2021 8:09 am You're fine for now.
+1
Soon2BXProgrammer
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Re: More than just vtsax?

Post by Soon2BXProgrammer »

jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am Should I also be mixing in international? Something else? Just wondering.
if you have $10k invested, then VTSAX only isn't a big deal.
If you have $1M invested, then VTSAX probably doesn't make sense.

Everyone will argue about where along that path you should consider International investments and where Bonds should be added.
Chartered Financial Consultant (ChFC®) -- However I am not your advisor.
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Watty
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Re: More than just vtsax?

Post by Watty »

There is a getting started wiki if you have not seen it yet.

https://www.bogleheads.org/wiki/Getting_started

and the Boglehead books that are also very readable even without a background in investing.

https://www.amazon.com/s?k=Bogleheads&t ... ads.org-20

jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am I read the simple path to wealth and decided to allocate 100% of my investing to vtsax, or the equivalent (my hsa I could only get Schwab total, and my children's 529s the Arizona total).
What to invest in and what asset allocation to use depends on when the money will be needed, these are just wild guesses but it looks like you have these three time frames so they should be thought of as being three different portfolios and invested appropriately for each goal.

1) Retirement money, 30(?) years
2) Kids college 529 money, 5 to 10(?) years
3) HSA money <1(?) year.

Each of these would use an asset allocation that has a lower percentage of stocks because the money will be needed sooner.

How to invest the retirement money also depends on if the money is in a retirement account or a taxable account. A low cost target date fund like a 2060 fund would be a reasonable choice since it would automatically select and buy a mixture of stocks, bonds, US, and international. They work best in retirement accounts because they are not very tax efficient in taxable accounts.

There is a wiki on asset allocation.

https://www.bogleheads.org/wiki/Asset_allocation
tashnewbie
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Re: More than just vtsax?

Post by tashnewbie »

You may want to read more on the BH wiki.

These are a good place to start: https://www.bogleheads.org/wiki/Getting_started

https://www.bogleheads.org/wiki/Boglehe ... philosophy

https://www.bogleheads.org/wiki/Three-fund_portfolio


If you want more tailored advice, I suggest posting a portfolio review in the Personal Investment forum in the suggested format here: viewtopic.php?f=1&t=6212
Visitor76
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Re: More than just vtsax?

Post by Visitor76 »

Soon2BXProgrammer wrote: Mon Jul 19, 2021 8:34 am
jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am Should I also be mixing in international? Something else? Just wondering.
if you have $10k invested, then VTSAX only isn't a big deal.
If you have $1M invested, then VTSAX probably doesn't make sense.

Everyone will argue about where along that path you should consider International investments and where Bonds should be added.
Why do you say keeping $1M or more in VTSAX is a bad idea? It is well diversified with a low expense ratio and is tax efficient.
Wealth is not about having a lot of money; it's about having a lot of options.
02nz
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Re: More than just vtsax?

Post by 02nz »

Visitor76 wrote: Mon Jul 19, 2021 9:52 am
Soon2BXProgrammer wrote: Mon Jul 19, 2021 8:34 am
jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am Should I also be mixing in international? Something else? Just wondering.
if you have $10k invested, then VTSAX only isn't a big deal.
If you have $1M invested, then VTSAX probably doesn't make sense.

Everyone will argue about where along that path you should consider International investments and where Bonds should be added.
Why do you say keeping $1M or more in VTSAX is a bad idea? It is well diversified with a low expense ratio and is tax efficient.
... and concentrated in one country. Diversifying that with at least 20% international makes sense.
Visitor76
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Re: More than just vtsax?

Post by Visitor76 »

02nz wrote: Mon Jul 19, 2021 10:00 am
Visitor76 wrote: Mon Jul 19, 2021 9:52 am
Soon2BXProgrammer wrote: Mon Jul 19, 2021 8:34 am
jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am Should I also be mixing in international? Something else? Just wondering.
if you have $10k invested, then VTSAX only isn't a big deal.
If you have $1M invested, then VTSAX probably doesn't make sense.

Everyone will argue about where along that path you should consider International investments and where Bonds should be added.
Why do you say keeping $1M or more in VTSAX is a bad idea? It is well diversified with a low expense ratio and is tax efficient.
... and concentrated in one country. Diversifying that with at least 20% international makes sense.
I'm not too confident in International's ability to outperform the US over the long term. When there's a bear market in the US, International catches a cold and follows suit.
Wealth is not about having a lot of money; it's about having a lot of options.
02nz
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Re: More than just vtsax?

Post by 02nz »

Visitor76 wrote: Mon Jul 19, 2021 10:44 am
02nz wrote: Mon Jul 19, 2021 10:00 am
Visitor76 wrote: Mon Jul 19, 2021 9:52 am
Soon2BXProgrammer wrote: Mon Jul 19, 2021 8:34 am
jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am Should I also be mixing in international? Something else? Just wondering.
if you have $10k invested, then VTSAX only isn't a big deal.
If you have $1M invested, then VTSAX probably doesn't make sense.

Everyone will argue about where along that path you should consider International investments and where Bonds should be added.
Why do you say keeping $1M or more in VTSAX is a bad idea? It is well diversified with a low expense ratio and is tax efficient.
... and concentrated in one country. Diversifying that with at least 20% international makes sense.
I'm not too confident in International's ability to outperform the US over the long term. When there's a bear market in the US, International catches a cold and follows suit.
We don't need another U.S. vs international thread, so I'm not going to turn this into that. Suffice it to say that diversification is not the same as looking for outperformance.
Soon2BXProgrammer
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Re: More than just vtsax?

Post by Soon2BXProgrammer »

Visitor76 wrote: Mon Jul 19, 2021 9:52 am
Soon2BXProgrammer wrote: Mon Jul 19, 2021 8:34 am
jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am Should I also be mixing in international? Something else? Just wondering.
if you have $10k invested, then VTSAX only isn't a big deal.
If you have $1M invested, then VTSAX probably doesn't make sense.

Everyone will argue about where along that path you should consider International investments and where Bonds should be added.
Why do you say keeping $1M or more in VTSAX is a bad idea? It is well diversified with a low expense ratio and is tax efficient.
02nz wrote: Mon Jul 19, 2021 10:00 am ... and concentrated in one country. Diversifying that with at least 20% international makes sense.

To re-inforce and add to 02nz statement which I agree with.

VTSAX is a great fund. It is a US only equity fund. I personally have $1M+ in it. However, at this level of wealth, one should take the same principles that make VTSAX great, and apply it to the world. People can argue how much international, 20% is sort of the absolute low.. (20% of 10k is 2k, so it doesn't make a lot of sense at that level of wealth to worry about it..).. On the upper bounds... roughly the "market weight" can make sense which is about 45% of equities.

I personally hold US equities and International equities at market weights...

Then comes bonds/cash/money market/CDs/etc/etc at some level of wealth, one should consider the balance between equities and lower risk investments. (especially when one's human capital (future earnings from work) starts to decline)
Chartered Financial Consultant (ChFC®) -- However I am not your advisor.
mikeyzito22
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Re: More than just vtsax?

Post by mikeyzito22 »

Soon2BXProgrammer wrote: Mon Jul 19, 2021 10:53 am
Visitor76 wrote: Mon Jul 19, 2021 9:52 am
Soon2BXProgrammer wrote: Mon Jul 19, 2021 8:34 am
jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am Should I also be mixing in international? Something else? Just wondering.
if you have $10k invested, then VTSAX only isn't a big deal.
If you have $1M invested, then VTSAX probably doesn't make sense.

Everyone will argue about where along that path you should consider International investments and where Bonds should be added.
Why do you say keeping $1M or more in VTSAX is a bad idea? It is well diversified with a low expense ratio and is tax efficient.
02nz wrote: Mon Jul 19, 2021 10:00 am ... and concentrated in one country. Diversifying that with at least 20% international makes sense.

To re-inforce and add to 02nz statement which I agree with.

VTSAX is a great fund. It is a US only equity fund. I personally have $1M+ in it. However, at this level of wealth, one should take the same principles that make VTSAX great, and apply it to the world. People can argue how much international, 20% is sort of the absolute low.. (20% of 10k is 2k, so it doesn't make a lot of sense at that level of wealth to worry about it..).. On the upper bounds... roughly the "market weight" can make sense which is about 45% of equities.

I personally hold US equities and International equities at market weights...

Then comes bonds/cash/money market/CDs/etc/etc at some level of wealth, one should consider the balance between equities and lower risk investments. (especially when one's human capital (future earnings from work) starts to decline)
I keep wondering what is that level of wealth? Is it a fixed sum? Something along the lines of "Okay, now I have 100K, time to add some bonds." Or "Okay I'm 50, time to add some bonds." I look at the target date funds for my age but it seems to me that 10%-11% bonds doesn't really move the needle.
snshew12
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Re: More than just vtsax?

Post by snshew12 »

I follow "The Simple Path to Wealth" with 100% in VTSAX and I have never slept better at night.

I read it once a year as a refresher.

For me the simplicity the approach offers is what I needed in my financial life.
Go strong. Go long.
Soon2BXProgrammer
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Re: More than just vtsax?

Post by Soon2BXProgrammer »

mikeyzito22 wrote: Mon Jul 19, 2021 12:12 pm
Soon2BXProgrammer wrote: Mon Jul 19, 2021 10:53 am Then comes bonds/cash/money market/CDs/etc/etc at some level of wealth, one should consider the balance between equities and lower risk investments. (especially when one's human capital (future earnings from work) starts to decline)
I keep wondering what is that level of wealth? Is it a fixed sum? Something along the lines of "Okay, now I have 100K, time to add some bonds." Or "Okay I'm 50, time to add some bonds." I look at the target date funds for my age but it seems to me that 10%-11% bonds doesn't really move the needle.
1) When you think about your human capital.. is it bond like? or is it stock like? Simple example, if you are tenured university professor, your human capital might be large AND it would be very bond like. This would mean one could potentially have less bonds for longer..... If you are a low paid receptionist that works for a stock broker, your human capital is very stock like (because if stocks do bad, you could lose your job) AND small... which would mean you should have more bonds and sooner.

1.5) if your married, is your human capital and your spouses in the same sector? then more bonds... if your married and you could live on one salary? then less bonds

2) rest of the balance sheet.. Do you have a year's spending as an emergency fund? then... you probably don't need as many bonds in your portfolio as early as others who don't have a sizable emergency fund. or are you already vested in a pension that is still growing? probably need less bonds and not as soon.

3) time to first planned withdrawal. There is research that shows one should reduce risk (more bonds) when they are in the retirement red zone which is plus or minus 10 years around your first withdrawal.. for reference: https://www.kitces.com/blog/managing-po ... -red-zone/

4) There is not an absolute number and its is also a function of risk tolerance & capacity of the person.. target date funds have to start bonds somewhere, and so they start at 10ish percent, and then start increasing, different funds have a different slope for that change.


Sorry i can't give you an exact number, but hopefully this gives you something to think about.
Chartered Financial Consultant (ChFC®) -- However I am not your advisor.
Visitor76
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Re: More than just vtsax?

Post by Visitor76 »

Soon2BXProgrammer wrote: Mon Jul 19, 2021 10:53 am
Visitor76 wrote: Mon Jul 19, 2021 9:52 am
Soon2BXProgrammer wrote: Mon Jul 19, 2021 8:34 am
jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am Should I also be mixing in international? Something else? Just wondering.
if you have $10k invested, then VTSAX only isn't a big deal.
If you have $1M invested, then VTSAX probably doesn't make sense.

Everyone will argue about where along that path you should consider International investments and where Bonds should be added.
Why do you say keeping $1M or more in VTSAX is a bad idea? It is well diversified with a low expense ratio and is tax efficient.
02nz wrote: Mon Jul 19, 2021 10:00 am ... and concentrated in one country. Diversifying that with at least 20% international makes sense.

To re-inforce and add to 02nz statement which I agree with.

VTSAX is a great fund. It is a US only equity fund. I personally have $1M+ in it. However, at this level of wealth, one should take the same principles that make VTSAX great, and apply it to the world. People can argue how much international, 20% is sort of the absolute low.. (20% of 10k is 2k, so it doesn't make a lot of sense at that level of wealth to worry about it..).. On the upper bounds... roughly the "market weight" can make sense which is about 45% of equities.

I personally hold US equities and International equities at market weights...

Then comes bonds/cash/money market/CDs/etc/etc at some level of wealth, one should consider the balance between equities and lower risk investments. (especially when one's human capital (future earnings from work) starts to decline)
If you're looking for a good total market fund on the global scale, then VTWIX is a decent choice. It's International weight is a little high (45%), but it is my single investment choice for our HSA.
Wealth is not about having a lot of money; it's about having a lot of options.
02nz
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Re: More than just vtsax?

Post by 02nz »

Visitor76 wrote: Mon Jul 19, 2021 1:08 pm
Soon2BXProgrammer wrote: Mon Jul 19, 2021 10:53 am
Visitor76 wrote: Mon Jul 19, 2021 9:52 am
Soon2BXProgrammer wrote: Mon Jul 19, 2021 8:34 am
jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am Should I also be mixing in international? Something else? Just wondering.
if you have $10k invested, then VTSAX only isn't a big deal.
If you have $1M invested, then VTSAX probably doesn't make sense.

Everyone will argue about where along that path you should consider International investments and where Bonds should be added.
Why do you say keeping $1M or more in VTSAX is a bad idea? It is well diversified with a low expense ratio and is tax efficient.
02nz wrote: Mon Jul 19, 2021 10:00 am ... and concentrated in one country. Diversifying that with at least 20% international makes sense.

To re-inforce and add to 02nz statement which I agree with.

VTSAX is a great fund. It is a US only equity fund. I personally have $1M+ in it. However, at this level of wealth, one should take the same principles that make VTSAX great, and apply it to the world. People can argue how much international, 20% is sort of the absolute low.. (20% of 10k is 2k, so it doesn't make a lot of sense at that level of wealth to worry about it..).. On the upper bounds... roughly the "market weight" can make sense which is about 45% of equities.

I personally hold US equities and International equities at market weights...

Then comes bonds/cash/money market/CDs/etc/etc at some level of wealth, one should consider the balance between equities and lower risk investments. (especially when one's human capital (future earnings from work) starts to decline)
If you're looking for a good total market fund on the global scale, then VTWIX is a decent choice. It's International weight is a little high (45%), but it is my single investment choice for our HSA.
VTWAX or VT.
mikeyzito22
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Re: More than just vtsax?

Post by mikeyzito22 »

Soon2BXProgrammer wrote: Mon Jul 19, 2021 12:24 pm
mikeyzito22 wrote: Mon Jul 19, 2021 12:12 pm
Soon2BXProgrammer wrote: Mon Jul 19, 2021 10:53 am Then comes bonds/cash/money market/CDs/etc/etc at some level of wealth, one should consider the balance between equities and lower risk investments. (especially when one's human capital (future earnings from work) starts to decline)
I keep wondering what is that level of wealth? Is it a fixed sum? Something along the lines of "Okay, now I have 100K, time to add some bonds." Or "Okay I'm 50, time to add some bonds." I look at the target date funds for my age but it seems to me that 10%-11% bonds doesn't really move the needle.
1) When you think about your human capital.. is it bond like? or is it stock like? Simple example, if you are tenured university professor, your human capital might be large AND it would be very bond like. This would mean one could potentially have less bonds for longer..... If you are a low paid receptionist that works for a stock broker, your human capital is very stock like (because if stocks do bad, you could lose your job) AND small... which would mean you should have more bonds and sooner.

1.5) if your married, is your human capital and your spouses in the same sector? then more bonds... if your married and you could live on one salary? then less bonds

2) rest of the balance sheet.. Do you have a year's spending as an emergency fund? then... you probably don't need as many bonds in your portfolio as early as others who don't have a sizable emergency fund. or are you already vested in a pension that is still growing? probably need less bonds and not as soon.

3) time to first planned withdrawal. There is research that shows one should reduce risk (more bonds) when they are in the retirement red zone which is plus or minus 10 years around your first withdrawal.. for reference: https://www.kitces.com/blog/managing-po ... -red-zone/

4) There is not an absolute number and its is also a function of risk tolerance & capacity of the person.. target date funds have to start bonds somewhere, and so they start at 10ish percent, and then start increasing, different funds have a different slope for that change.


Sorry i can't give you an exact number, but hopefully this gives you something to think about.
Thank you! This makes sense. I have some reading to do.
Soon2BXProgrammer
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Re: More than just vtsax?

Post by Soon2BXProgrammer »

Visitor76 wrote: Mon Jul 19, 2021 1:08 pm
If you're looking for a good total market fund on the global scale, then VTWIX is a decent choice. It's International weight is a little high (45%), but it is my single investment choice for our HSA.
02nz wrote: Mon Jul 19, 2021 1:09 pm VTWAX or VT.

Holding a combined fund can make sense in pretax or Roth, but it doens't make sense in taxable, due to the loss of the Foreign Tax Credit while using VTWAX or VT... This is because a fund must have over 50% international income to be eligible per the US Code.
Chartered Financial Consultant (ChFC®) -- However I am not your advisor.
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FIREchief
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Re: More than just vtsax?

Post by FIREchief »

jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am I'm just wondering as I read a bit more if I'm doing things the right way before I get too deeply far along/closer to retirement. Should I also be mixing in international? Something else? Just wondering.
There is no "right" way, but there are many wrong ways. Your's is not a "wrong" way. If I were 30 years old right now, I would just put everything in VTSAX or equivalent and check back in 25 years.

When I was 30, it was everything in S&P 500. Worked for me! 8-)

See my signature.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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retired@50
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Re: More than just vtsax?

Post by retired@50 »

mikeyzito22 wrote: Mon Jul 19, 2021 1:39 pm
Soon2BXProgrammer wrote: Mon Jul 19, 2021 12:24 pm
mikeyzito22 wrote: Mon Jul 19, 2021 12:12 pm
Soon2BXProgrammer wrote: Mon Jul 19, 2021 10:53 am Then comes bonds/cash/money market/CDs/etc/etc at some level of wealth, one should consider the balance between equities and lower risk investments. (especially when one's human capital (future earnings from work) starts to decline)
I keep wondering what is that level of wealth? Is it a fixed sum? Something along the lines of "Okay, now I have 100K, time to add some bonds." Or "Okay I'm 50, time to add some bonds." I look at the target date funds for my age but it seems to me that 10%-11% bonds doesn't really move the needle.
1) When you think about your human capital.. is it bond like? or is it stock like? Simple example, if you are tenured university professor, your human capital might be large AND it would be very bond like. This would mean one could potentially have less bonds for longer..... If you are a low paid receptionist that works for a stock broker, your human capital is very stock like (because if stocks do bad, you could lose your job) AND small... which would mean you should have more bonds and sooner.

1.5) if your married, is your human capital and your spouses in the same sector? then more bonds... if your married and you could live on one salary? then less bonds

2) rest of the balance sheet.. Do you have a year's spending as an emergency fund? then... you probably don't need as many bonds in your portfolio as early as others who don't have a sizable emergency fund. or are you already vested in a pension that is still growing? probably need less bonds and not as soon.

3) time to first planned withdrawal. There is research that shows one should reduce risk (more bonds) when they are in the retirement red zone which is plus or minus 10 years around your first withdrawal.. for reference: https://www.kitces.com/blog/managing-po ... -red-zone/

4) There is not an absolute number and its is also a function of risk tolerance & capacity of the person.. target date funds have to start bonds somewhere, and so they start at 10ish percent, and then start increasing, different funds have a different slope for that change.


Sorry i can't give you an exact number, but hopefully this gives you something to think about.
Thank you! This makes sense. I have some reading to do.
The idea presented in point number 1 above is from the book "Are You A Stock Or A Bond" by Moshe Milevsky published in 2008, with an updated and revised edition in 2012.

See link: https://www.goodreads.com/book/show/462 ... -or-a-bond

Happy reading.

Regards,
This is one person's opinion. Nothing more.
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ruralavalon
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Re: More than just vtsax?

Post by ruralavalon »

jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am I read the simple path to wealth and decided to allocate 100% of my investing to vtsax, or the equivalent (my hsa I could only get Schwab total, and my children's 529s the Arizona total). I only started back in March, so it's not like I have made a horrible mistake I know, but I'm just wondering as I read a bit more if I'm doing things the right way before I get too deeply far along/closer to retirement. Should I also be mixing in international? Something else? Just wondering.
It depends. 100% stocks is not a typical asset allocation among Bogleheads responding to a survey. Age versus stocks, graph.

How much do you currently have in investments? What is your age? About how long until expected retirement? Do you have an emergency fund, if so how much? Do you have any debt, if so how much? Do you have any dependents? How stable is your job, your employer and the industry you work in? How would you describe your tolerance for risk? Did you have substantial investments at the start of past market crashes, if so what did you do during past crashes?

I suggest about 20% in bonds or other fixed income investments (like CDs, savings accounts, Stable Value Fund, money market fund). This is expected to substantially reduce portfolio volatility (risk), with only a relatively modest decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see:
1) Wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk";
2) Wiki article, "Asset allocation";
3) Morningstar (8/20/2019), "The Best Diversifiers for Your Equity Portfolio";
4) Morningstar (4/8/2020), "What's the Best Diversifier for Stocks?"
5) White Coat Investor (9/23/2016), "In Defense of Bonds"; and
6) Ben Carlson (8/2/2020), "Why Would Anyone Own Bonds Right Now?"

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities", available as an archived pdf. Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). The diversification benefit has varied over time. (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box, upper right, this page).

That works out to about 20% bonds, 20% international stocks, and 60% domestic stocks. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Capster1
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Re: More than just vtsax?

Post by Capster1 »

I ran 100% VTSAX from 2004 until 2018. It worked great.
However, I think it depends on your age, how much of your net worth is in the market, life situations, and more.

As I got past age 40, I started diversifying. I'm so glad I have bond funds in my account now. There is no way I'd run 100% VTSAX again. I look back at it and I feel I like I got extremely lucky. Going all in on one asset class is not taking much into account.

On the other hand, if you are young and your greater earning potential is ahead of you, it is less of an issue.
ruud
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Re: More than just vtsax?

Post by ruud »

Soon2BXProgrammer wrote: Mon Jul 19, 2021 2:09 pm Holding a combined fund can make sense in pretax or Roth, but it doens't make sense in taxable, due to the loss of the Foreign Tax Credit while using VTWAX or VT... This is because a fund must have over 50% international income to be eligible per the US Code.
You lose out on about a $100 tax credit for every $100,000 invested. Not entirely nothing, but "doesn't make sense" is a bit strong in my opinion.
.
mikeyzito22
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Re: More than just vtsax?

Post by mikeyzito22 »

retired@50 wrote: Mon Jul 19, 2021 2:17 pm
mikeyzito22 wrote: Mon Jul 19, 2021 1:39 pm
Soon2BXProgrammer wrote: Mon Jul 19, 2021 12:24 pm
mikeyzito22 wrote: Mon Jul 19, 2021 12:12 pm
Soon2BXProgrammer wrote: Mon Jul 19, 2021 10:53 am Then comes bonds/cash/money market/CDs/etc/etc at some level of wealth, one should consider the balance between equities and lower risk investments. (especially when one's human capital (future earnings from work) starts to decline)
I keep wondering what is that level of wealth? Is it a fixed sum? Something along the lines of "Okay, now I have 100K, time to add some bonds." Or "Okay I'm 50, time to add some bonds." I look at the target date funds for my age but it seems to me that 10%-11% bonds doesn't really move the needle.
1) When you think about your human capital.. is it bond like? or is it stock like? Simple example, if you are tenured university professor, your human capital might be large AND it would be very bond like. This would mean one could potentially have less bonds for longer..... If you are a low paid receptionist that works for a stock broker, your human capital is very stock like (because if stocks do bad, you could lose your job) AND small... which would mean you should have more bonds and sooner.

1.5) if your married, is your human capital and your spouses in the same sector? then more bonds... if your married and you could live on one salary? then less bonds

2) rest of the balance sheet.. Do you have a year's spending as an emergency fund? then... you probably don't need as many bonds in your portfolio as early as others who don't have a sizable emergency fund. or are you already vested in a pension that is still growing? probably need less bonds and not as soon.

3) time to first planned withdrawal. There is research that shows one should reduce risk (more bonds) when they are in the retirement red zone which is plus or minus 10 years around your first withdrawal.. for reference: https://www.kitces.com/blog/managing-po ... -red-zone/

4) There is not an absolute number and its is also a function of risk tolerance & capacity of the person.. target date funds have to start bonds somewhere, and so they start at 10ish percent, and then start increasing, different funds have a different slope for that change.


Sorry i can't give you an exact number, but hopefully this gives you something to think about.
Thank you! This makes sense. I have some reading to do.
The idea presented in point number 1 above is from the book "Are You A Stock Or A Bond" by Moshe Milevsky published in 2008, with an updated and revised edition in 2012.

See link: https://www.goodreads.com/book/show/462 ... -or-a-bond

Happy reading.

Regards,
Thank you! I suppose I am lucky that I have pension. I will take a look nonetheless.
TheDDC
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Re: More than just vtsax?

Post by TheDDC »

Capster1 wrote: Mon Jul 19, 2021 6:26 pm I ran 100% VTSAX from 2004 until 2018. It worked great.
However, I think it depends on your age, how much of your net worth is in the market, life situations, and more.

As I got past age 40, I started diversifying. I'm so glad I have bond funds in my account now. There is no way I'd run 100% VTSAX again. I look back at it and I feel I like I got extremely lucky. Going all in on one asset class is not taking much into account.

On the other hand, if you are young and your greater earning potential is ahead of you, it is less of an issue.
Maybe not 100% VTSAX, but certainly 100% equities (VIGAX or VTIAX) is the way to fly. Doesn’t matter if it’s $10,000 or $10M net worth.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks, minimize amount given to medical-industrial complex
Soon2BXProgrammer
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Re: More than just vtsax?

Post by Soon2BXProgrammer »

ruud wrote: Mon Jul 19, 2021 6:45 pm
Soon2BXProgrammer wrote: Mon Jul 19, 2021 2:09 pm Holding a combined fund can make sense in pretax or Roth, but it doens't make sense in taxable, due to the loss of the Foreign Tax Credit while using VTWAX or VT... This is because a fund must have over 50% international income to be eligible per the US Code.
You lose out on about a $100 tax credit for every $100,000 invested. Not entirely nothing, but "doesn't make sense" is a bit strong in my opinion.
the other thing holding both allows is some tax loss harvesting opportunities that don't exist with just VT...

also it allow gifting of the winners.. I have been giving away VTSAX and replacing it with new contributions.

There are multiple reasons to hold it in two parts that add up significantly.
Chartered Financial Consultant (ChFC®) -- However I am not your advisor.
NYCaviator
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Location: NYC

Re: More than just vtsax?

Post by NYCaviator »

Nothing wrong with just VTSAX, but as posters said above, some international exposure may be a good idea. There are PLENTY of threads on that, with people arguing for an against, but ultimately it is up to you.

Whenever I see US equities' return over the last decade and start to dismiss intl. equities, I always have to remind myself of what you read constantly on here, which is that past performance is no guarantee of future performance.
ruud
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Re: More than just vtsax?

Post by ruud »

Soon2BXProgrammer wrote: Mon Jul 19, 2021 11:15 pm
ruud wrote: Mon Jul 19, 2021 6:45 pm
Soon2BXProgrammer wrote: Mon Jul 19, 2021 2:09 pm Holding a combined fund can make sense in pretax or Roth, but it doens't make sense in taxable, due to the loss of the Foreign Tax Credit while using VTWAX or VT... This is because a fund must have over 50% international income to be eligible per the US Code.
You lose out on about a $100 tax credit for every $100,000 invested. Not entirely nothing, but "doesn't make sense" is a bit strong in my opinion.
the other thing holding both allows is some tax loss harvesting opportunities that don't exist with just VT...

also it allow gifting of the winners.. I have been giving away VTSAX and replacing it with new contributions.

There are multiple reasons to hold it in two parts that add up significantly.
These are all good points, and I agree (we have VTI+VEA+VWO in our taxable account). But VT or VTWAX in taxable is not horrible, either. There are worse choices :)
.
Soon2BXProgrammer
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Joined: Mon Nov 24, 2014 11:30 pm

Re: More than just vtsax?

Post by Soon2BXProgrammer »

ruud wrote: Tue Jul 20, 2021 10:17 am
Soon2BXProgrammer wrote: Mon Jul 19, 2021 11:15 pm
ruud wrote: Mon Jul 19, 2021 6:45 pm
Soon2BXProgrammer wrote: Mon Jul 19, 2021 2:09 pm Holding a combined fund can make sense in pretax or Roth, but it doens't make sense in taxable, due to the loss of the Foreign Tax Credit while using VTWAX or VT... This is because a fund must have over 50% international income to be eligible per the US Code.
You lose out on about a $100 tax credit for every $100,000 invested. Not entirely nothing, but "doesn't make sense" is a bit strong in my opinion.
the other thing holding both allows is some tax loss harvesting opportunities that don't exist with just VT...

also it allow gifting of the winners.. I have been giving away VTSAX and replacing it with new contributions.

There are multiple reasons to hold it in two parts that add up significantly.
These are all good points, and I agree (we have VTI+VEA+VWO in our taxable account). But VT or VTWAX in taxable is not horrible, either. There are worse choices :)
agreed. there are infinite worse choices then VT in taxable.
Chartered Financial Consultant (ChFC®) -- However I am not your advisor.
anaparafunds
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Re: More than just vtsax?

Post by anaparafunds »

Watty wrote: Mon Jul 19, 2021 8:36 am There is a getting started wiki if you have not seen it yet.

https://www.bogleheads.org/wiki/Getting_started

and the Boglehead books that are also very readable even without a background in investing.

https://www.amazon.com/s?k=Bogleheads&t ... ads.org-20

jaykrew6311 wrote: Mon Jul 19, 2021 7:51 am I read the simple path to wealth and decided to allocate 100% of my investing to vtsax, or the equivalent (my hsa I could only get Schwab total, and my children's 529s the Arizona total).
What to invest in and what asset allocation to use depends on when the money will be needed, these are just wild guesses but it looks like you have these three time frames so they should be thought of as being three different portfolios and invested appropriately for each goal.

1) Retirement money, 30(?) years
2) Kids college 529 money, 5 to 10(?) years
3) HSA money <1(?) year.

Each of these would use an asset allocation that has a lower percentage of stocks because the money will be needed sooner.

How to invest the retirement money also depends on if the money is in a retirement account or a taxable account. A low cost target date fund like a 2060 fund would be a reasonable choice since it would automatically select and buy a mixture of stocks, bonds, US, and international. They work best in retirement accounts because they are not very tax efficient in taxable accounts.

There is a wiki on asset allocation.

https://www.bogleheads.org/wiki/Asset_allocation
I didn't think of this. I might do this.

3 portfolios, all separate time goals and in effect, can hedge against many circumstances.
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