Change allocation or stay the course?

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Topic Author
mchampse
Posts: 186
Joined: Mon Feb 26, 2007 1:45 am

Change allocation or stay the course?

Post by mchampse » Fri Jun 14, 2019 1:32 pm

I've had a slice and dice portfolio for about 15 years or so and am thinking of changing things up. I read Bill Bernsteins book way back when and liked a lot of the suggestions (perhaps a little too much). I came with a portfolio of 10 funds of which I have 10% of my funds in each. They are:

Canadian Stock Index
Canadian Bond Index
Small Cap (VSMAX)
Small Cap Value (VSIAX)
S&P 500 (VFIAX)
Large Cap Value (VVIAX)
Emerging Markets (VEMAX)
REIT (VGSLX)
Total Bond (VBTLX)
International Index (VTIAX)

All of these funds are in retirement accounts. Approximately, 53% in traditional IRA, 22% in Canadian RRSP (acts similar to traditional IRA for federal, however as a California resident I have to pay 9.3% on the earnings as California doesn't recognize them) and 25% in Roth IRA. I rebalance once a year.

The Canadian funds are something of a relic of my Canadian retirement account. When I had put this portfolio together, the Canadian RRSP required that most of the investments be held in Canadian securities. That requirement has been abolished such that there are no restrictions on what that can be invested in. As such, I'm tempted to move that money into other securities. The Canadian index is composed of 1/3 financial services, 1/3 natural resources, so it's for all intents and purposes a sector fund.

I'm still comfortable with 80/20 stocks to bonds. At the moment, I effectively have 40% of my portfolio in foreign and am happy to reduce that or keep it the same.

I'm 45 years old, married filing jointly. Federal 24% bracket, State 9.3% living in California. Me and DW largely keep our investments separate.

megabad
Posts: 1768
Joined: Fri Jun 01, 2018 4:00 pm

Re: Change allocation or stay the course?

Post by megabad » Fri Jun 14, 2019 3:46 pm

mchampse wrote:
Fri Jun 14, 2019 1:32 pm
Change allocation or stay the course?
Are there tax implications to change allocations? If so, I would consider these before moving forward.

If not, I think I agree with reducing the Canada tilt unless you are confident you will return there (maybe even if you are). Canada is only ~3% of world equity. Also, this would help simplify your portfolio a little.

bloom2708
Posts: 6221
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Change allocation or stay the course?

Post by bloom2708 » Fri Jun 14, 2019 3:50 pm

If all in tax sheltered, I would suggest a more total market approach with a couple tilts that you seem to like.

10 funds with 10% each means you are way off the market percentages of pretty much everything.

Total US
Total International
Total US Bond
5% Small Cap Value (Optional)
5% REIT (Optional)

Done. 50% less funds. You don't list other options, so maybe the Canada funds have to stay.
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

Topic Author
mchampse
Posts: 186
Joined: Mon Feb 26, 2007 1:45 am

Re: Change allocation or stay the course?

Post by mchampse » Fri Jun 14, 2019 4:40 pm

megabad wrote:
Fri Jun 14, 2019 3:46 pm
mchampse wrote:
Fri Jun 14, 2019 1:32 pm
Change allocation or stay the course?
Are there tax implications to change allocations? If so, I would consider these before moving forward.

If not, I think I agree with reducing the Canada tilt unless you are confident you will return there (maybe even if you are). Canada is only ~3% of world equity. Also, this would help simplify your portfolio a little.
Very small tax implications, so I’m not worried about them. Not likely to return to Canada.
bloom2708 wrote:
Fri Jun 14, 2019 3:50 pm
If all in tax sheltered, I would suggest a more total market approach with a couple tilts that you seem to like.

10 funds with 10% each means you are way off the market percentages of pretty much everything.

Total US
Total International
Total US Bond
5% Small Cap Value (Optional)
5% REIT (Optional)

Done. 50% less funds. You don't list other options, so maybe the Canada funds have to stay.
Canadian funds can be changed to any ETF on the US or Canadian exchanges as well as Canada Mutual funds. There are some US and international index mutual funds available in Canada.

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