Portfolio advice : $3.2M

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Topic Author
asadr
Posts: 10
Joined: Wed May 11, 2022 4:06 pm

Portfolio advice : $3.2M

Post by asadr »

Hi all,

Looking for some advice on my portfolio/ asset allocation. I'm a firm believer in holding for long and ignoring the market choppiness, but the recent down turn has me a bit concerned. YTD I'm down ~21% across all my investments. I'm continuing to DCA in my 401K and DCP while also looking at any opportunities to buy VOO/VTI for the long term. Also doing TLH wherever I can. I know I have a large allocation in MSFT that I've been trying to wind down (yeah I missed the top which sucks) and convert to VOO/VTI in the longer run but anything else I should be doing differently? Not a fan of playing options, tried once, lost, and learnt a lesson.

Me: 37
Wife: 33
1 kid (5yr old)
No major liabilities
No house (yet) - looking to buy when things cool off a bit
Medical expenses - ~600 per year

Total Assets (was much higher start of the year :(): ~ 3.2M @ ~ 58/4/38 (stocks/bonds/cash)
Expenses/Yr: ~100K
Income (combined): ~ 420k (both of us are in software development - outside of ~100K yearly expenses and taxes, the rest go into investments as DCA)

Me:
90K - VTI - Taxable
25K - VOO - Taxable
12K - BND - Taxable
800K - MSFT - Taxable

230K - Vanguard S&P 500 - 401K
110K - Fidelity Growth Fund (FDGRX) - 401K
75K - Vanguard Growth (VUG) - 401K
55K - Artisan Mid Cap (ARTMX) - 401K
50K - Vanguard Total Bond (VBTLX) - 401K

80K - Vanguard S&P 500 - Deferred Comp (Fidelity)
20K - Vanguard Total Bond (VBTLX) - Deferred Comp (Fidelity)

26K - Vanguard S&P 500 - HSA
24K - Cash - HSA

20K - I-Bonds

8K - VOO - Kiddo's 529

800k - Cash (recent windfall and asset allocation readjustment at end of 2021 - spread across various accounts earning ~0.6%)

Wife:
200K - MSFT - Taxable

24K - Vanguard S&P 500 - 401K
2K - Vanguard Total Bond (VBTLX) - 401K

20K - I-Bonds

520K - Cash (Ally Bank @ 0.6%)
Topic Author
asadr
Posts: 10
Joined: Wed May 11, 2022 4:06 pm

Re: Portfolio advice : $3.2M

Post by asadr »

[adjusted some details since the numbers were slightly off]
mega317
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Re: Portfolio advice : $3.2M

Post by mega317 »

What are your questions?

IMO way too much cash, what are you doing there? I'd put ALL OF IT in bonds. Given your statement about the recent downturn I would not increase stock allocation.

What is the tax situation on microsoft? Are you sitting on huge gains? I would be willing to pay a pretty big tax penalty to get out of that.

If your expenses including taxes are truly 100k then you are financially independent. I hope you love your jobs or have something else to occupy you for the next 50 years.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
Topic Author
asadr
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Joined: Wed May 11, 2022 4:06 pm

Re: Portfolio advice : $3.2M

Post by asadr »

Thanks for the quick reply and advice. Primarily looking for advice on any changes in my overall setup. Was going to make a dumb move of selling all my stock and switching to cash and then DCAing back in but that solidifies my losses instead of just paper-loss right now.

On the cash side, yeah, pretty heavy. Was holding ~300k for house down payment but pushed the plan out by about a year or two. Been slowly putting money in bonds to get to a 60/40 AA long term. But mainly doing DCA as opposed to putting it all in right now given that bonds are also taking a beating and interest rates are going up in the short term. Any benefits in going all in on bonds right now vs DCA?

Tax situation on MSFT: bought half of it when it was $42 so holding on to a pretty big tax penalty. But some of my recent buys were at higher prices so I could do TLH there and offset partially. The problem is that I get stock awards vesting every month, which if I read correctly, would result in a wash sale and not TLH, right?

My yearly expenses are 96k + 4k buffer (includes rent). It will increase once I buy a house (hopefully! :)). It does not include Federal + Medicare + SS taxes. The total income I listed is post-tax since that is our primary source of income (W-2). Love my job - stressful but would not trade it for anything else. I think we have another 8-10 years between the two of us to continue working. Get to work with a lot of smart people on a daily basis!
HomeStretch
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Re: Portfolio advice : $3.2M

Post by HomeStretch »

Consider opening and contributing to Roth IRAs for you and spouse to get the 5-year clock on initial Roth IRAs started. You can each contribute $6k for 2022 via a Backdoor Roth. The Roth accounts will grow tax free.

Do your/spouse’s 401k plans offer a mega backdoor Roth?

If you continue to DCA the cash into bonds, consider buying some treasuries whose maturity schedule matches your DCA schedule. The yield (state-tax exempt) will likely be higher than Ally’s 0.6%.
MattB
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Re: Portfolio advice : $3.2M

Post by MattB »

asadr wrote: Wed May 11, 2022 10:39 pm Any benefits in going all in on bonds right now vs DCA?
About 2.5% interest on whatever money you invest, presuming you're currently holding it in a savings account or similar.

If it were me I'd calculate roughly how much of your cash you want to put into bonds, and then dollar cost average it into an appropriate duration bond fund over the next 12 to 18 months. Doing so automates the process and limits the risk that you'll regret having gone all in before interest rates continued to rise.

There is nothing special my 12 to 18 month suggestion. You might be better served by choosing to DCA over the next 6 to 12 months, or over the next 18 to 24. I just suggested a middle ground that seems reasonable.
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jjunk
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Location: Seattle

Re: Portfolio advice : $3.2M

Post by jjunk »

Quick note on your MSFT stock if you're also doing ESPP. The timing of award vests and ESPP purchases make a very narrow window for not having wash sales. Depending on how much of a loss is disallowed, it might not matter (I get hit with a few hundred per year because of the timing). However given the amount you're holding, capturing any losses might be tougher.

As for bonds, I'd just lump sum into them now and forget about it. The markets are down across the board so there really is no safe haven. I moved out of bond funds and am doing 3yr and less Treasuries and CDs. Same yield with no downside to the principal.

Best of luck.
Topic Author
asadr
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Joined: Wed May 11, 2022 4:06 pm

Re: Portfolio advice : $3.2M

Post by asadr »

HomeStretch wrote: Wed May 11, 2022 10:59 pm Consider opening and contributing to Roth IRAs for you and spouse to get the 5-year clock on initial Roth IRAs started. You can each contribute $6k for 2022 via a Backdoor Roth. The Roth accounts will grow tax free.

Do your/spouse’s 401k plans offer a mega backdoor Roth?

If you continue to DCA the cash into bonds, consider buying some treasuries whose maturity schedule matches your DCA schedule. The yield (state-tax exempt) will likely be higher than Ally’s 0.6%.
Yes, our 401k plans offer mega backdoor Roth in-plan conversion and we max out all every year. Also max out the HSA contributions, FSA and any other tax-saving vehicles (at least ones that I'm aware of :)).
Last edited by asadr on Wed May 11, 2022 11:13 pm, edited 1 time in total.
Topic Author
asadr
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Joined: Wed May 11, 2022 4:06 pm

Re: Portfolio advice : $3.2M

Post by asadr »

jjunk wrote: Wed May 11, 2022 11:06 pm Quick note on your MSFT stock if you're also doing ESPP. The timing of award vests and ESPP purchases make a very narrow window for not having wash sales. Depending on how much of a loss is disallowed, it might not matter (I get hit with a few hundred per year because of the timing). However given the amount you're holding, capturing any losses might be tougher.

As for bonds, I'd just lump sum into them now and forget about it. The markets are down across the board so there really is no safe haven. I moved out of bond funds and am doing 3yr and less Treasuries and CDs. Same yield with no downside to the principal.

Best of luck.
Yep, doing both which is one of the main reasons I haven't been able to sell out of MSFT as the tax hit will be huge. Any group guidance on reducing this in the longer run? Thinking about selling covered calls to get some up side and cover the taxes but been burnt badly in the past playing options.

Interesting approach with the <= 3yrs Treasuries and CDs. I'll look into that.
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jjunk
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Location: Seattle

Re: Portfolio advice : $3.2M

Post by jjunk »

The trick with covered calls is being absolutely sure you want to sell at the price you sell the calls at. Given you've kept your stock awards for a while (given some of the $42 shares), you obviously like MSFT enough to hold onto it. I've never kept my awards (or ESPP for that matter). I sell immediately and throw it into the indexes I own. During the lost decade, that was great but the stock has done really well since Satya took over so your strategy has come out ahead for now. I would still just take the tax hit and diversify if it were me. Being so concentrated in one stock, especially one you also own in your index holdings, is setting up for failure IMO but I prefer the diversification over additional risk/return.

Besides, if you don't plan on leaving MSFT anytime soon, you'll continue to accumulate shares via any awards and SSAs you pick up so you can always hold onto some as you continue in your career. Either way, its a good problem to have :sharebeer.
SnowBog
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Re: Portfolio advice : $3.2M

Post by SnowBog »

asadr wrote: Wed May 11, 2022 11:10 pm
HomeStretch wrote: Wed May 11, 2022 10:59 pm Consider opening and contributing to Roth IRAs for you and spouse to get the 5-year clock on initial Roth IRAs started. You can each contribute $6k for 2022 via a Backdoor Roth. The Roth accounts will grow tax free.

Do your/spouse’s 401k plans offer a mega backdoor Roth?

If you continue to DCA the cash into bonds, consider buying some treasuries whose maturity schedule matches your DCA schedule. The yield (state-tax exempt) will likely be higher than Ally’s 0.6%.
Yes, our 401k plans offer mega backdoor Roth in-plan conversion and we max out all every year. Also max out the HSA contributions, FSA and any other tax-saving vehicles (at least ones that I'm aware of :)).
For clarity - you can do the Mega Backdoor Roth via your 401k (which it sounds like you both are doing) and a "normal" Backdoor Roth. https://www.bogleheads.org/wiki/Backdoor_Roth

In the near term - this just means $6k each ($12k combined) going into Roth vs. Taxable (since they both are "after-tax" dollars). But the extra Roth should save you in the long run.
Last edited by SnowBog on Thu May 12, 2022 12:36 am, edited 1 time in total.
SnowBog
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Re: Portfolio advice : $3.2M

Post by SnowBog »

asadr wrote: Wed May 11, 2022 11:12 pm
jjunk wrote: Wed May 11, 2022 11:06 pm Quick note on your MSFT stock if you're also doing ESPP. The timing of award vests and ESPP purchases make a very narrow window for not having wash sales. Depending on how much of a loss is disallowed, it might not matter (I get hit with a few hundred per year because of the timing). However given the amount you're holding, capturing any losses might be tougher.
...
Best of luck.
Yep, doing both which is one of the main reasons I haven't been able to sell out of MSFT as the tax hit will be huge. Any group guidance on reducing this in the longer run? Thinking about selling covered calls to get some up side and cover the taxes but been burnt badly in the past playing options.
...
I was (I guess still am) in a similar situation - holding way more "employer" stock than I should have been...

First, the easy stuff, if you haven't yet - quit making the "problem" worse...
  • Turn off dividend reinvesting on MSFT
  • Sell all RSU's going forward immediately sell on vest (given the issue with TLH - a limit order at the vest price may be reasonable)
  • If you aren't, you should max out ESPP* (sounds like you can), but again immediately sell after purchase (again - limit order may be reasonable)
* Most tech firms let you buy at a discounted price, which makes for a nearly risk-free return on ESPP (assuming no minimal required holding period).

Now the hard part - you need to define "how much is too much" of MSFT... To put this into context - I think it's clear you have "too much:"
  • MSFT is 31.35% of your portfolio before you include the % that's part of VOO, VTI, etc.
  • MSFT (1 stock) is 58.3% of equities before you include the % that's part of VOO, VTI, etc.
  • Or stated differently, you have $1M in MSFT (1 stock) and only $0.7M in all other equities (VTI, VOO, etc.)
For context - when I realized "my problem" - my employer stock was also > 50% of all of my equities. That was my "wake up" call - that caused me to act...

You need to establish your own "target" - how much do you feel comfortable holding going forward... The "general recommendation" is to hold no more than 5 - 10% in your employer stock.

From there - you need to determine "how long" you are comfortable being out-of-alignment with that target %... For some - they'd probably sell enough immediately to get to their target range - and pay any/all taxes to do so...

I couldn't bring myself to do that... Instead, here's what I did (and am continuing to do):
  • I decided that I wanted to get to <= 15% within 5 years - see rationale below.**
  • As noted above, I "stopped contributing" to the problem by selling off all new RSU, ESPP, etc.
  • That year - and every year following until I reach my target:
    • Contributed MSFT shares to UTMA setup for kid(s) - which were sold and reinvested in a "total stock market" fund (pay attention to "kiddie tax" limits)
    • Sell up-to the top of the 15% LTCG limit of MSFT (for $420k MFJ - looks like that would be around $123k of gains for 2022 https://engaging-data.com/tax-brackets/ ... &cg=123100). Note - you'll also get hit by NIIT - and maybe state taxes... Edited to add: After posting this - I realized that you later mentioned for $420k of income was "post-tax"... You'd want to use "taxable income" to figure out your 15% LTCG cap - which is less than what I initially posted above...
    • Re-invest those funds into "total stock market" (or as needed to reach/maintain my AA)
Plus, if you are saving roughly $300k "new money" each year - that's going to help "shrink" the amount of MSFT (as a % of portfolio) - just by nature of growing the portfolio. Of course - MSFT could grow faster than the markets in general... But actively selling (above) MSFT combined with large contributions in non-MSFT investments will bring your % down.

After a few years of doing this, I'm < 20% and projected to hit my 15% goal within about 5 years of starting.

** My rationale on 15% in 5 years was based on things such as:
  • While keeping such a concentrated position long-term is unacceptable - I felt the risk of taking a few years to get out of the situation acceptable...
  • Our tax system penalizes large moves/incomes... Better to spread out the tax impact over many years (staying in 15% LTCG) vs. higher in fewer years...
  • At the time, we were considering "early retirement" about 10 years later - and I wanted to ensure our concentrated position was "managed" in advance to minimize our long-term risks...
  • But that also meant we potentially have a few years of 0% LTCG - hence why I opted for 15% vs. 10%... For us - the "risk" of the extra 5% was less than the potential "reward" of even higher tax savings... (Based on the assumption that if the 15% ended up failing completely - while it may impact an "early" retirement - it would not impact "retirement" as a whole for us...)
  • When I modeled out portfolio growth via new investments and selling off annual chunks of our employer shares (staying in 15% LTCG) - it looked like 5 years was a realistic timeframe - which fit my criteria above - so I ran with it...
Last edited by SnowBog on Thu May 12, 2022 2:21 am, edited 1 time in total.
SnowBog
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Re: Portfolio advice : $3.2M

Post by SnowBog »

These are a little more nit-picky... But food for thought...
asadr wrote: Wed May 11, 2022 5:06 pm 12K - BND - Taxable
I'm not a fan of BND in taxable - especially at your income brackets...

https://www.bogleheads.org/wiki/Tax_eff ... _placement would recommend moving your bonds into your tax-deferred.

Given your AA (mine is similar at 60/40), you may not be able to hold "enough" bonds in tax-deferred (and/or don't want to "starve" all growth in tax-deferred), so you might end-up needing to hold bonds in taxable.

I Bonds (which you already purchase) and EE Bonds (if they fit your needs - see my "EE Bond Manifesto" viewtopic.php?t=358793) can be great options - as they essentially "extend" your tax-deferred space.

Treasuries (especially if you have state taxes) and/or municipal bonds might be of interest as well.

asadr wrote: Wed May 11, 2022 5:06 pm 230K - Vanguard S&P 500 - 401K
110K - Fidelity Growth Fund (FDGRX) - 401K
75K - Vanguard Growth (VUG) - 401K
55K - Artisan Mid Cap (ARTMX) - 401K
Unless you have a specific reason for holding all of these... I'd be tempted to move them all into your S&P 500 fund. Alternatively, see if you have access to Fidelity's "BrokerageLink" account - and then you could put these into something like FZROX and/or FKSAX (total stock market) funds.
asadr wrote: Wed May 11, 2022 5:06 pm 24K - Cash - HSA
At your income - not a fan of any HSA in cash... You should be able to cash flow any medical expenses. So you are better off getting HSA 100% invested - and let growth do its thing!
SnowBog
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Re: Portfolio advice : $3.2M

Post by SnowBog »

Lastly - your cash... Way too much! It's like 42% of your portfolio - losing to inflation every month!
asadr wrote: Wed May 11, 2022 5:06 pm [your] 800k - Cash (recent windfall and asset allocation readjustment at end of 2021 - spread across various accounts earning ~0.6%)
[wife] 520K - Cash (Ally Bank @ 0.6%)
That said - I don't know if you have identified your target asset allocation! I thought you had - but upon re-reading it - I think it simply lists your "current" allocation:
asadr wrote: Wed May 11, 2022 5:06 pm Total Assets (was much higher start of the year :(): ~ 3.2M @ ~ 58/4/38 (stocks/bonds/cash)
The responses may differ depending on your target AA...

I'm definitely making an assumption here - but below is written assuming you want to stay to a roughly 60/40 AA - as you have now - with mainly shifting from cash to bonds...

After AA - you need to figure out "short-term" needs vs. "long-term" investments... As you are seeing with bonds right now - even those so-called "safe" investments can lose money over the near-term.

In particular, you mentioned:
asadr wrote: Wed May 11, 2022 10:39 pm Was holding ~300k for house down payment but pushed the plan out by about a year or two.
How much of that $300k (or maybe more/less now) do you really need and in how many years?

For example, with your income vs. expenses - in theory you could invest 100% of it - and within 1 year - you could replace the entire amount when you are ready to buy your home... But you also run the risk of one of you needing to stay home with child, thus reducing income (and maybe increasing expenses) - and taking years to re-save the $300k...

For the money you need to access in the "short-term", personally I'd stick with options that protect your principle - such as savings, CD's, Treasury Bills, Savings Bonds (although limited by the $10k/person/year limit), etc.

One notable option - if you can get a referral and/or they open back up to new deposits - would be HMBradely.com - where you can get 3% on up-to $100k per account (in theory you could have 3 accounts - 2 individual and 1 joint - giving you $300k @ 3%). There are some hopes to jump through - namely $1500/month direct deposit (per account) + "save" (don't remove) at least 20% of deposits each quarter + minimum (IIRC $100) monthly spend on credit card. But 3% is way better - especially on up to $100k per account - than I've found elsewhere...

While these may lose to inflation - ideally over the "short-term" - the impact isn't too large... But we live in "interesting" times - with inflation going crazy... I'd have to think about the trade-offs - but TIPS might be an option - especially if you can purchase the # of years needed (so you can avoid the "noise" of value changes in the interim years).

Let's assume you want to set aside the original $300k for "short-term" needs - and for simplicity - we'll "remove" it from the portfolio. That leaves you with roughly $2.9M - and an [assumed] target AA of roughly 60/40. Meaning you need around $1.16M of "fixed income" (between bonds and cash) for "long-term" needs.

For your "long-term" needs - there the options are both "easier" and "harder"... On the "easy" side - we invest because we believe in 20+ years - the markets will have risen, and stated differently, if we don't invest - our money will be eroded over-time due to inflation.

On the "hard" side - in our current markets where stocks and bonds seem to fall nearly every month - it's hard to get out of our own minds... We get caught in "if I just wait - I'll get more shares at a lower price"... The problem is - no one is good at timing the market... And historically "lump sum" investing beats DCA - as the markets are generally more likely to rise than not...

Currently, your AA appears to be roughly 54/46 (I'm ignoring the 529) - and per my assumption above - I'm assuming your target is 60/40...

That said, if I were in your situation - what I'd likely be doing:
  • Set aside $300k - as noted above - for "short-term" needs (or whatever amount you think is appropriate... Below is based on $300k...)
  • [as mentioned in a previous post] Sell potentially $100k of "gains" in MSFT (or up to your expected 15% LTCG limit) - reinvest in something like VTI & set aside $15k of your "cash" (15%) to pay quarter taxes (lowers current "fixed income" by $15k)
  • [as mentioned in a previous post] Invest your $24k from your HSA into the S&P 500 offered in your HSA (lowers current "fixed income" by $24k)
  • [as mentioned in a previous post] Invest $6k each from your "cash" into his/her "Backdoor Roths" - 100% into a total stock market fund (lowers current "fixed income" by $12k)
  • I'd exchange roughly $315K of your/spouses 401k + deferred comp to Bonds (getting your 401k to roughly 40/60 AA - you could do more/less as you feel appropriate). But this gets the bulk of your bonds into your tax-deferred space... And this is clearly a "long-term" investment... Note - since your 401k is likely co-mingled with Roth + pre-tax, I'd call out the following... Roth should remain 100% stocks - no bonds. Personally, I'd want at least 25% or so of pre-tax to remain in stocks - allowing for growth and tax-free "rebalancing" between stocks/bonds. That may adjust this $ up or down... Which impacts the rest below...
  • Use $315k of your "cash" to buy stocks in taxable - ideally VTI. This essentially is just "moving fixed income" into your tax-deferred accounts - where it's more tax-efficient, while also buying stocks "cheap" in taxable (or creating more TLH opportunities if they keep falling).
  • Use another $300k of your "cash" to buy stocks (VTI) in taxable - which if I did the math right - should get you to roughly 60/40 AA
  • In 401k - set your contribution % - along with future taxable investments (like I Bonds) - to maintain AA going forward)
Doing so leaves you roughly $390k in cash (+ $300k for short-term/house).

Keep however much you need to "sleep well at night" (SWAN) in cash (for us - it's about $100k - or about 1 year expenses) - with the bulk ideally in a high-yield account.

Assuming you plan to continue to buy I Bonds - you could consider "front-loading" 1+ years of I Bonds at the current high rates by purchasing $10k "gifts" for each other - to be delivered in future years. If EE Bonds (see previously linked "EE Bond Manifesto" make sense for you - that could be another $10k/each (and/or front-load those as well). You can buy as much as you want this way - but you'll "lock up" those funds for > 1 year - as you can only "buy" or "receive" a $10k bond each year (so $100k of I Bonds - done as 5 x $10k gifts for each spouse - would take 5 years to "deliver"/"receive").

The rest - should get invested bonds/treasuries/etc. Personally, I'd probably just "lump sum" into something like VTEB or FBMIX (muni bond funds) - and then TLH if the losses continue to accrue. But maybe a DCA of 1/6 a month would be emotionally easier - such that you get the money invested by end-of-year - and maybe get a few extra shares along the way...
Last edited by SnowBog on Thu May 12, 2022 2:31 am, edited 4 times in total.
DIYtrixie
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Re: Portfolio advice : $3.2M

Post by DIYtrixie »

asadr wrote: Wed May 11, 2022 11:10 pm Yes, our 401k plans offer mega backdoor Roth in-plan conversion and we max out all every year. Also max out the HSA contributions, FSA and any other tax-saving vehicles (at least ones that I'm aware of :)).
Which of your investments is Roth? That’s not indicated in your OP.
SnowBog
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Re: Portfolio advice : $3.2M

Post by SnowBog »

Sorry - missed this before... I'd use caution buying VOO - or any fund that you also have in your tax-advantaged accounts.

As a general rule, I avoid using the same fund - and any other "substantially identical" fund - which is largely considered to be a fund that tracks the same index (such as the S&P 500) in taxable as I have in a tax-advantaged account. These can create "wash sales." Some would argue certain accounts like 401k aren't subjected to this requirement (as few people can control their 401k options). But I err on the side of caution and just avoid that completely...

Most of my accounts are at Fidelity - and as such - where possible I use funds like FZROX for my "total stock market" in all tax-advantaged accounts. FZROX is a 0% fee fund, with a proprietary index (meaning no other fund should be "substantially identical") - while having similar results to say VTI, and one I'd never hold in a taxable account - which in my mind makes it perfect for my tax-advantaged accounts - letting me use basically "everything else" in my taxable account without concern for accidental wash sales...
asadr wrote: Wed May 11, 2022 5:06 pm 25K - VOO - Taxable
...
230K - Vanguard S&P 500 - 401K
...
80K - Vanguard S&P 500 - Deferred Comp (Fidelity)
...
26K - Vanguard S&P 500 - HSA
...
8K - VOO - Kiddo's 529
...
24K - Vanguard S&P 500 - 401K
SnowBog
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Re: Portfolio advice : $3.2M

Post by SnowBog »

DIYtrixie wrote: Thu May 12, 2022 2:12 am
asadr wrote: Wed May 11, 2022 11:10 pm Yes, our 401k plans offer mega backdoor Roth in-plan conversion and we max out all every year. Also max out the HSA contributions, FSA and any other tax-saving vehicles (at least ones that I'm aware of :)).
Which of your investments is Roth? That’s not indicated in your OP.
Based on their response - I assume its co-mingled in their 401k...
HomeStretch
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Re: Portfolio advice : $3.2M

Post by HomeStretch »

asadr wrote: Wed May 11, 2022 11:10 pm
HomeStretch wrote: Wed May 11, 2022 10:59 pm Consider opening and contributing to Roth IRAs for you and spouse to get the 5-year clock on initial Roth IRAs started. You can each contribute $6k for 2022 via a Backdoor Roth. The Roth accounts will grow tax free.

Do your/spouse’s 401k plans offer a mega backdoor Roth?

If you continue to DCA the cash into bonds, consider buying some treasuries whose maturity schedule matches your DCA schedule. The yield (state-tax exempt) will likely be higher than Ally’s 0.6%.
Yes, our 401k plans offer mega backdoor Roth in-plan conversion and we max out all every year. Also max out the HSA contributions, FSA and any other tax-saving vehicles (at least ones that I'm aware of :)).
A backdoor Roth is still available to you and spouse. BH wiki page about backdoor Roth:
https://www.bogleheads.org/wiki/Backdoor_Roth
Topic Author
asadr
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Re: Portfolio advice : $3.2M

Post by asadr »

SnowBog wrote: Thu May 12, 2022 2:15 am Sorry - missed this before... I'd use caution buying VOO - or any fund that you also have in your tax-advantaged accounts.

As a general rule, I avoid using the same fund - and any other "substantially identical" fund - which is largely considered to be a fund that tracks the same index (such as the S&P 500) in taxable as I have in a tax-advantaged account. These can create "wash sales." Some would argue certain accounts like 401k aren't subjected to this requirement (as few people can control their 401k options). But I err on the side of caution and just avoid that completely...

Most of my accounts are at Fidelity - and as such - where possible I use funds like FZROX for my "total stock market" in all tax-advantaged accounts. FZROX is a 0% fee fund, with a proprietary index (meaning no other fund should be "substantially identical") - while having similar results to say VTI, and one I'd never hold in a taxable account - which in my mind makes it perfect for my tax-advantaged accounts - letting me use basically "everything else" in my taxable account without concern for accidental wash sales...
asadr wrote: Wed May 11, 2022 5:06 pm 25K - VOO - Taxable
...
230K - Vanguard S&P 500 - 401K
...
80K - Vanguard S&P 500 - Deferred Comp (Fidelity)
...
26K - Vanguard S&P 500 - HSA
...
8K - VOO - Kiddo's 529
...
24K - Vanguard S&P 500 - 401K
Sorry for the late reply - came down with COVID. SnowBog and others - thank you for all the great advice - this board is a blessing in disguise! Going to incorporate this into my plans and adjust accordingly. Almost went paper hands and sold my investments yesterday but common sense and calm nerves prevailed. I'm going to adjust my long term AA to 70/30 to take on a bit more risk. I think going 80/20 or 90/10 might be a bit overkill given that I've been able to accumulate $3.2M, so part of the goal is to protect my nest even though I'm far from retirement :)
Jack FFR1846
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Re: Portfolio advice : $3.2M

Post by Jack FFR1846 »

At 0.79%, I almost fell out of my chair for FDGRX in your 401k. I guess I'd ask: Is that the cheapest ER fund in your 401k? I know from having crappy 401k's with nothing cheaper than 0.41% that sometimes you just have to use it to pour money in. My current Fidelity 401k has a ton of garbage at those high ERs and exactly one cheap fund at 0.015%. S&P 500 fund, which is fine with me.
Bogle: Smart Beta is stupid
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asadr
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Re: Portfolio advice : $3.2M

Post by asadr »

Jack FFR1846 wrote: Fri May 13, 2022 2:52 pm At 0.79%, I almost fell out of my chair for FDGRX in your 401k. I guess I'd ask: Is that the cheapest ER fund in your 401k? I know from having crappy 401k's with nothing cheaper than 0.41% that sometimes you just have to use it to pour money in. My current Fidelity 401k has a ton of garbage at those high ERs and exactly one cheap fund at 0.015%. S&P 500 fund, which is fine with me.
I do have other much cheaper ones including S&P 500. FDGRX in my 401k is cheaper at 0.43% expense but still ridiculously high. All my recent contributions have been to S&P 500 fund. Slowly getting out of the FDGRX one (and others like Artisan Mid Cap), it was great and returns were much higher than S&P 500 over the past 2 years so I fell for that trap and bought that. Going forward, from a stocks side I'm moving everything to S&P 500 or FZROX to keep things simple and let them run.
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4nursebee
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Re: Portfolio advice : $3.2M

Post by 4nursebee »

What are your goals?
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asadr
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Re: Portfolio advice : $3.2M

Post by asadr »

Tough questions
4nursebee wrote: Fri May 13, 2022 3:22 pm What are your goals?
Yikes, been so busy saving and didn't put too much thought into long term goals. Tough question :)
  • Both of us retire at 48-50 with limited debt (housing being the only one).
  • Have enough to cover current yearly expenses without any major drawdowns.
  • Cover college tuition for kiddo in full.
  • Leave ~1.2-1.5M for them (with certain hard goals to achieve before this unlocks).
End goal is to get close to or above $5.0M by then (higher the better).
SnowBog
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Re: Portfolio advice : $3.2M

Post by SnowBog »

asadr wrote: Fri May 13, 2022 2:55 pm
Jack FFR1846 wrote: Fri May 13, 2022 2:52 pm At 0.79%, I almost fell out of my chair for FDGRX in your 401k. I guess I'd ask: Is that the cheapest ER fund in your 401k? I know from having crappy 401k's with nothing cheaper than 0.41% that sometimes you just have to use it to pour money in. My current Fidelity 401k has a ton of garbage at those high ERs and exactly one cheap fund at 0.015%. S&P 500 fund, which is fine with me.
I do have other much cheaper ones including S&P 500. FDGRX in my 401k is cheaper at 0.43% expense but still ridiculously high. All my recent contributions have been to S&P 500 fund. Slowly getting out of the FDGRX one (and others like Artisan Mid Cap), it was great and returns were much higher than S&P 500 over the past 2 years so I fell for that trap and bought that. Going forward, from a stocks side I'm moving everything to S&P 500 or FZROX to keep things simple and let them run.
In case you aren't aware - you can go into your 401k and "rebalance" any time you want - with (usually) no cost and definitely no tax impact.

Assuming you've changed your "contributions" - its similar - but you just direct to rebalance all of your current holdings the same.

On that - one note of caution - ideally you'd keep any Roth (aka your Mega Backdoor Roth accounts) in 100% stocks. Hopefully your brokerage/plan let's you direct what should be done with Roth vs. pre-tax...
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asadr
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Re: Portfolio advice : $3.2M

Post by asadr »

SnowBog wrote: Fri May 13, 2022 5:08 pm
asadr wrote: Fri May 13, 2022 2:55 pm
Jack FFR1846 wrote: Fri May 13, 2022 2:52 pm At 0.79%, I almost fell out of my chair for FDGRX in your 401k. I guess I'd ask: Is that the cheapest ER fund in your 401k? I know from having crappy 401k's with nothing cheaper than 0.41% that sometimes you just have to use it to pour money in. My current Fidelity 401k has a ton of garbage at those high ERs and exactly one cheap fund at 0.015%. S&P 500 fund, which is fine with me.
I do have other much cheaper ones including S&P 500. FDGRX in my 401k is cheaper at 0.43% expense but still ridiculously high. All my recent contributions have been to S&P 500 fund. Slowly getting out of the FDGRX one (and others like Artisan Mid Cap), it was great and returns were much higher than S&P 500 over the past 2 years so I fell for that trap and bought that. Going forward, from a stocks side I'm moving everything to S&P 500 or FZROX to keep things simple and let them run.
In case you aren't aware - you can go into your 401k and "rebalance" any time you want - with (usually) no cost and definitely no tax impact.

Assuming you've changed your "contributions" - its similar - but you just direct to rebalance all of your current holdings the same.

On that - one note of caution - ideally you'd keep any Roth (aka your Mega Backdoor Roth accounts) in 100% stocks. Hopefully your brokerage/plan let's you direct what should be done with Roth vs. pre-tax...
They do, and that is exactly what I'm doing now!
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4nursebee
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Re: Portfolio advice : $3.2M

Post by 4nursebee »

asadr wrote: Fri May 13, 2022 3:42 pm Tough questions
4nursebee wrote: Fri May 13, 2022 3:22 pm What are your goals?
Yikes, been so busy saving and didn't put too much thought into long term goals. Tough question :)
  • Both of us retire at 48-50 with limited debt (housing being the only one).
  • Have enough to cover current yearly expenses without any major drawdowns.
  • Cover college tuition for kiddo in full.
  • Leave ~1.2-1.5M for them (with certain hard goals to achieve before this unlocks).
End goal is to get close to or above $5.0M by then (higher the better).
I'm a simple person. With that portfolio, I'd put it in total market or SP500 based stock fund and forget about it. Ditch the low yields. 3.2M over your time frame should reach your goals without much work. (Rule of 72 kind of thinking).
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nedsaid
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Re: Portfolio advice : $3.2M

Post by nedsaid »

asadr wrote: Wed May 11, 2022 5:06 pm YTD I'm down ~21% across all my investments.
Not shocking that you are down 21% for the year as your portfolio was heavily tilted towards Growth. Doubtless you enjoyed the ride up but are now suffering from the inevitable correction in Growth stocks. Value has fared better in this market environment. Yet for younger investors, Growth is a good strategy as you are invested in the High Tech companies which have excellent earnings potential in the future. It is a more volatile strategy but probably will pay off over time.

I would not have 30% of my portfolio in one stock, even Microsoft. I am a Microsoft shareholder by the way but I trimmed back my holdings when it was really hot.
A fool and his money are good for business.
hudson
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Re: Portfolio advice : $3.2M

Post by hudson »

asadr,

Have you read any of the Boglehead books?
I would use the concepts in the books to make my plan.
I'd use the forum to fine tune my plan.
Maybe these books?
viewtopic.php?p=5372762#p5372762
m@ver1ck
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Re: Portfolio advice : $3.2M

Post by m@ver1ck »

asadr wrote: Fri May 13, 2022 3:42 pm Tough questions
4nursebee wrote: Fri May 13, 2022 3:22 pm What are your goals?
Yikes, been so busy saving and didn't put too much thought into long term goals. Tough question :)
  • Both of us retire at 48-50 with limited debt (housing being the only one).
  • Have enough to cover current yearly expenses without any major drawdowns.
  • Cover college tuition for kiddo in full.
  • Leave ~1.2-1.5M for them (with certain hard goals to achieve before this unlocks).
End goal is to get close to or above $5.0M by then (higher the better).
Your problems are going to be non-money ones. What are you going to do after MSFT?
Have you started work, aligning yourself on that?
Otherwise, you either won’t retire - or will be in for a shock after that.
Additionally, you’ve got so much untapped potential - sad to see it wasted just cause your financial goals have been met / you still have so much to give!
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