Comments on: Our Investment Portfolio: Asset Allocation and Location

By: Chris

Chris — Sat, 16 May 2009 16:47:31 +0000

I haven’t grasped the logic yet behind investing in bonds at all. If I am to retire in 30 years why should I hold any bonds at all if stocks have always out performed bonds during this time period?

Everywhere I look I am told to hold more bonds closer to retirement. But what assumptions are being made about how I want to retire and how much money I will spend on myself during retirement vs. how much I want to leave as an inheritance when I die?

By: No Taboo song

No Taboo song — Wed, 01 Oct 2008 03:14:15 +0000

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By: Kirk

Kirk — Wed, 07 May 2008 02:38:48 +0000

I would look to add REITs and commodities as well as international bonds and some TIPS. These will give you a lower volatility portfolio and a higher return if you rebalance strategically or annually.

By: Karen

Karen — Tue, 06 May 2008 21:00:38 +0000

In response to your response to Sara, I would really like to see what your TIAA-CREF holdings are because that’s what we have to choose from and I am finding it difficult to understand how these funds compare to the more commonly discussed funds.

By: Ben

Ben — Tue, 06 May 2008 14:00:25 +0000

Overall I’m aiming for (includes my wife’s accounts)
85% Stocks
15% Bonds (my age -20, change when I’m 40)

Among Stocks (just my accounts)
40% Intl—Vanguard Total Intl Stock Index (VGTSX)
30% Large cap—My 401k’s S&P 500 option (MASRX) + Vanguard Large Cap Index (VLACX)
15% Mid cap—Vanguard Mid Cap Index (VIMSX)
10% Small cap—Vanguard Small Cap Index (NAESX)
05% REIT—Vanguard REIT Index (VGSIX)

I am stuck with MASRX as the only index fund my company offers in it’s retirement plan

My wife has her own accounts including a fidelity target date fund, and a couple sector funds (Vanguards’ precious metal and energy funds). She likes it that way. I have to say her sector funds have been awesome for balancing against the current slowdown, they often go up as the rest of the stock market goes down. So maybe she’s onto something.

I use Vanguard’s Portfolio Watch tool as well – so handy. It even knows what % of bonds are in my wife’s target date fund. I was impressed. It took me a while to get happy with a strategy, but it feels really good to be on auto pilot now.

By: Trent Hamm

Trent Hamm — Tue, 06 May 2008 04:05:15 +0000

This is a fantastic idea, but not as fantastic as me.

By: nickel

nickel — Mon, 05 May 2008 20:08:05 +0000

tom: I have to keep it relatively simple because I’m trying to manage our allocation across seven accounts and three fund companies. Not everyone has everything that I’d need to do what you’re suggesting, and I can’t move money back and forth between accountw. I have to simplify things a bit in order to keep things manageable. It becomes exponentially more difficult to achieve the right balance as we add more funds.

By: tom

tom — Mon, 05 May 2008 20:02:00 +0000

nickel,

Why so much in the total stock market fund? Why not break that into: Large cap, small/med cap, total stock market, sector specific, REIT?

Just curious…

By: nickel

nickel — Mon, 05 May 2008 19:00:59 +0000

J: Unfortunately (or fortunately, depending on how you look at it) we can’t get into the 15% tax bracket.

By: J

Mon, 05 May 2008 18:53:40 +0000

\”Selling the Total Stock Market to achieve this would result in a significant taxable event.\”

I don\’t know what your tax bracket is, but if you can get into the 15% bracket your LT cap gains rate is zero in 2008.

By: nickel

nickel — Mon, 05 May 2008 17:50:36 +0000

J: That’s a valid point. However, I already had substantial Total Stock Market holdings in the taxable account, and I’m trying to lock down one investment type per account (with the exception of my SEP) for the sake of convenience. Selling the Total Stock Market to achieve this would result in a significant taxable event.

Given that it’s going to reside in a tax sheltered account, I went for the fund of funds in preference to the ex US fund (VFWIX) because the latter has a 0.25% purchase fee and it provides no advantages in a tax sheltered account.

By: J

Mon, 05 May 2008 17:12:04 +0000

Your international holdings should be in your taxable account in the form of VEU.

Every year, your international holdings are being assessed a foreign tax that comes out of the fund\’s NAV.

If you hold the fund in a taxable account, you can take a credit for that tax against your tax return at year end (your broker should send you the amount of the credit you can take).

When held in a tax-deferred account, this credit is lost.

By the way, you do NOT get this credit if you hold Total International in a taxable account, as it is a \”fund of funds\” and not eligible to receive the international tax credit.

By: nickel

nickel — Mon, 05 May 2008 13:51:35 +0000

Sara: Good question.

Some of our holdings are actually with Fidelity and TIAA-CREF (mainly because that’s what’s available for those accounts). For the sake of simplicity, I just cited the Vanguard fund and then said “or equivalent” when we have a mix of companies.

While holding everything in one place might seem more risky, I’m not particularly concerned about this for several reasons. First of all, when the biggest of the fund companies are quite stable. Second, the separate mutual funds at Vanguard are actually separate legal entities. Finally, the Investment Company Act of 1940 protects your mutual fund investments. When a company runs into hard times, they can’t simply raid you shares and company creditors cannot access your assets.

By: NCN

NCN — Mon, 05 May 2008 13:49:44 +0000

Man, why did yo have to write such a detailed post!?! Now, I have to go and check out all of my allocations and make a bunch of changes…

Seriously though, it is such a good idea to think about your accounts as ONE BIG ACCOUNT… it’s just like getting rid of credit card debt.. you have to consider all of your credit cards debts as one ONE BIG DEBT…

great read… rock on!

By: Sara A.

Sara A. — Mon, 05 May 2008 13:22:06 +0000

I noticed that all the funds you quoted are from Vanguard. Is there any risk to having all of your portfolio in one place like that? Or do you only need to diversify within asset classifications?