HELP: 5-10yr Portfolio with $1mil target

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Topic Author
MKFort12
Posts: 3
Joined: Sat Apr 10, 2021 1:36 am

HELP: 5-10yr Portfolio with $1mil target

Post by MKFort12 »

Hi! I have a portfolio that I would like to grow primarily with the goal of improving my quality of life and net worth. I have no plans to buy a house, have a very stable paycheck and a pension waiting for me. I'd like this portfolio to be worth $1mil in 5-10yrs and am willing to invest a sizeable portion of my income to do so. Any suggestions welcome - pretty new at this!

Emergency funds: Yes, 3months.

Debt: Zero debt.

Tax Filing Status: Married, filing jointly w/4 x Dependents

Tax Rate: 12% Federal, 9.3% State

State of Residence: California

Age: 37

Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: doesn't matter

TOTAL PORTFOLIO SIZE IS $140K

Current retirement assets

Taxable
In addition to portfolio, in addition to emergency funds, I have $10K in cash for investments.

25% Vanguard Total Index ETF (VTI) (0.03%)
10% Vanguard 500 Index Fund ETF (VOO) (0.03%)
6% Invesco KBW Premium ETF (KBWY) (0.35%)
6% Global X Superdividend ETF (SDIV) (0.59%)
5% Vanguard Total Bond Market (BND) (0.035%)
5% Raytheon Technologies (RTX)
5% Proshares Ultrapro 3x Leveraged S&P 500 ETF (UPRO) (0.93%)
5% ISHARES Silver Trust (SLV) (0.5%)
3% Vanguard Momentum Fund ETF (VFMO) (0.13%)

His Roth IRA
15% USAA Cornerstone Aggressive Fund (1.1%)

Her Roth IRA
15% USAA Cornerstone Aggressive Fund (1.1%)

Contributions

New annual Contributions
I conbtribute annually, $48,000 into the taxable portfolio, and the maximum ($6000) into each IRA.

Questions:
1. My goal is to rapidly grow my portfolio with a 5yr horizon of $500K and a 10yr horizon of $1mil. I contribute ~50% of my income. I am a government worker with a very stable paychesk and no concerns about retirement (I will receive a pension). This portfolio exists mainly to improve my own quality of life. I have no plans to purchase a house.

2. Looking to rebalance my portfolio for high growth in the 5-10 year range. I am willing to accept risk in order to do so. Can anyone provide me any recommendations?

3. I had originally purchased the high-dividend funds (KBWY, SDIV) to supplement my income, but given that I am contributing so much of it to investment, is it worth it to keep them?
Nate7out
Posts: 410
Joined: Wed Jan 16, 2008 1:06 pm

Re: HELP: 5-10yr Portfolio with $1mil target

Post by Nate7out »

MKFort12 wrote: Sat Apr 10, 2021 2:46 am Hi! I have a portfolio that I would like to grow primarily with the goal of improving my quality of life and net worth. I have no plans to buy a house, have a very stable paycheck and a pension waiting for me. I'd like this portfolio to be worth $1mil in 5-10yrs and am willing to invest a sizeable portion of my income to do so. Any suggestions welcome - pretty new at this!

Emergency funds: Yes, 3months.

Debt: Zero debt.

Tax Filing Status: Married, filing jointly w/4 x Dependents

Tax Rate: 12% Federal, 9.3% State

State of Residence: California

Age: 37

Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: doesn't matter

TOTAL PORTFOLIO SIZE IS $140K

Current retirement assets

Taxable
In addition to portfolio, in addition to emergency funds, I have $10K in cash for investments.

25% Vanguard Total Index ETF (VTI) (0.03%)
10% Vanguard 500 Index Fund ETF (VOO) (0.03%)
6% Invesco KBW Premium ETF (KBWY) (0.35%)
6% Global X Superdividend ETF (SDIV) (0.59%)
5% Vanguard Total Bond Market (BND) (0.035%)
5% Raytheon Technologies (RTX)
5% Proshares Ultrapro 3x Leveraged S&P 500 ETF (UPRO) (0.93%)
5% ISHARES Silver Trust (SLV) (0.5%)
3% Vanguard Momentum Fund ETF (VFMO) (0.13%)

His Roth IRA
15% USAA Cornerstone Aggressive Fund (1.1%)

Her Roth IRA
15% USAA Cornerstone Aggressive Fund (1.1%)

Contributions

New annual Contributions
I conbtribute annually, $48,000 into the taxable portfolio, and the maximum ($6000) into each IRA.

Questions:
1. My goal is to rapidly grow my portfolio with a 5yr horizon of $500K and a 10yr horizon of $1mil. I contribute ~50% of my income. I am a government worker with a very stable paychesk and no concerns about retirement (I will receive a pension). This portfolio exists mainly to improve my own quality of life. I have no plans to purchase a house.

2. Looking to rebalance my portfolio for high growth in the 5-10 year range. I am willing to accept risk in order to do so. Can anyone provide me any recommendations?

3. I had originally purchased the high-dividend funds (KBWY, SDIV) to supplement my income, but given that I am contributing so much of it to investment, is it worth it to keep them?
You are off to a good start and in a good financial position. I don't quite understand your goal. It sounds like you are not as concerned about retirement savings because you have a pension, and you want your quality of life to increase in the short term. To that I would say, just spend more now (I rarely advise this). Only save 30% of your income and spend the rest - immediate boost to quality of life! Also, you don't need to pay taxes on dividends to supplement your income, you have enough income.

If your goal is portfolio growth, then maximizing tax advantaged accounts will help get you there. It looks like you are not using a 403b or 457, those are worthwhile to look into.

For taxable investments, don't use the dividend funds if you want to focus on portfolio growth. They force you to pay more taxes, forgoing some % of contributions which are instead directed to pay taxes. You save $60k per year, so getting to $500k in 5 years and $1MM in 10 only requires very modest returns. You don't need to take risk above typical boglehead recommendations. I would focus on VTI/VXUS in taxable and VT in Roth.
radR investing
Posts: 42
Joined: Fri Jan 29, 2021 3:08 pm

Re: HELP: 5-10yr Portfolio with $1mil target

Post by radR investing »

https://www.nerdwallet.com/banking/calc ... calculator

Running this calculator, starting with $140,000 and adding $54,000 annually for 10 years shows a return needed of 6% annually - very doable using the standard Boglehead asset allocation, although I would be 100% stocks and zero percent bonds.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: HELP: 5-10yr Portfolio with $1mil target

Post by dbr »

You can use a planner such as FireCalc with pre-retirment settings. That means setting an initial portfolio value (140k), no spending, a time period of 10 years, going to the the "not retired" page and setting retirement date 10 or more years out, setting rate of contriubiton (50k, for example), going to the portfolio page and setting 90% stocks asset allocation, and then running the model. You will see the range of possible outcomes you could get. From that decide if the results are likely to be acceptable. You can change the asset allocation and the rate of saving.

I ran the model as above and find that at ten years your result could range from a low of about half a million dollars to a high of about two and a half million dollars in nominal dollars. At five years you range from about a quarter million to a million. The average of those distributions is .6 million and 1.3 million. On the "investigate" tab you can elect to get the results in a spreadsheet.

I think you are wasting time and energy trying to engineer complicated investment selections when you would be better served to just put all your investment in the total stock market, maybe with some international. I am not sure I would even put anything in fixed income given your objectives. You will have to decide for yourself if accumulating that money in tax deferred holdings means the same thing as wealth after tax. To actually extract wealth from tax deferred accounts someone is going to have to pay some taxes most likely. Note results in FireCalc are before taxes and before investment expenses so you need to get your money out of those high ER funds and into low ER funds such as Vanguard total market.

If you want to increase your odds of getting more wealth, then the first step is to save more.
Topic Author
MKFort12
Posts: 3
Joined: Sat Apr 10, 2021 1:36 am

Re: HELP: 5-10yr Portfolio with $1mil target

Post by MKFort12 »

Thank you everyone for your help! My thought process regarding SDIV and KBWY are, that they cratered after the pandemic hit and are quickly climbing back. Looked like a good time to jump in.
User avatar
WoodSpinner
Posts: 3505
Joined: Mon Feb 27, 2017 12:15 pm

Re: HELP: 5-10yr Portfolio with $1mil target

Post by WoodSpinner »

MKFort12 wrote: Sat Apr 10, 2021 2:46 am Hi! I have a portfolio that I would like to grow primarily with the goal of improving my quality of life and net worth. I have no plans to buy a house, have a very stable paycheck and a pension waiting for me. I'd like this portfolio to be worth $1mil in 5-10yrs and am willing to invest a sizeable portion of my income to do so. Any suggestions welcome - pretty new at this!

Emergency funds: Yes, 3months.

Debt: Zero debt.

Tax Filing Status: Married, filing jointly w/4 x Dependents

Tax Rate: 12% Federal, 9.3% State

State of Residence: California

Age: 37

Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: doesn't matter

TOTAL PORTFOLIO SIZE IS $140K

Current retirement assets

Taxable
In addition to portfolio, in addition to emergency funds, I have $10K in cash for investments.

25% Vanguard Total Index ETF (VTI) (0.03%)
10% Vanguard 500 Index Fund ETF (VOO) (0.03%)
6% Invesco KBW Premium ETF (KBWY) (0.35%)
6% Global X Superdividend ETF (SDIV) (0.59%)
5% Vanguard Total Bond Market (BND) (0.035%)
5% Raytheon Technologies (RTX)
5% Proshares Ultrapro 3x Leveraged S&P 500 ETF (UPRO) (0.93%)
5% ISHARES Silver Trust (SLV) (0.5%)
3% Vanguard Momentum Fund ETF (VFMO) (0.13%)

His Roth IRA
15% USAA Cornerstone Aggressive Fund (1.1%)

Her Roth IRA
15% USAA Cornerstone Aggressive Fund (1.1%)

Contributions

New annual Contributions
I conbtribute annually, $48,000 into the taxable portfolio, and the maximum ($6000) into each IRA.

Questions:
1. My goal is to rapidly grow my portfolio with a 5yr horizon of $500K and a 10yr horizon of $1mil. I contribute ~50% of my income. I am a government worker with a very stable paychesk and no concerns about retirement (I will receive a pension). This portfolio exists mainly to improve my own quality of life. I have no plans to purchase a house.

2. Looking to rebalance my portfolio for high growth in the 5-10 year range. I am willing to accept risk in order to do so. Can anyone provide me any recommendations?

3. I had originally purchased the high-dividend funds (KBWY, SDIV) to supplement my income, but given that I am contributing so much of it to investment, is it worth it to keep them?
OP,

A couple of questions......

Why are you accumulating so much in Taxable versus Roth or Tax-Deffered?

Why do you own any investments with high expense ratios? 1.1% is astronomically large.

What happens if your assets don’t grow as expected? Just wondering how risky you really want to be?

Thanks

WoodSpinner
WoodSpinner
Topic Author
MKFort12
Posts: 3
Joined: Sat Apr 10, 2021 1:36 am

Re: HELP: 5-10yr Portfolio with $1mil target

Post by MKFort12 »

WoodSpinner wrote: Sat Apr 10, 2021 8:49 am OP,

A couple of questions......

Why are you accumulating so much in Taxable versus Roth or Tax-Deffered?

Why do you own any investments with high expense ratios? 1.1% is astronomically large.

What happens if your assets don’t grow as expected? Just wondering how risky you really want to be?

Thanks

WoodSpinner
Hi! Thanks for taking the time to look it all over. Answers below:

1. I'm not sure where else to go with regard to a non-taxable account. The two Roth IRA's are legacy items that I've kept open, but hardly contributed to until recently. Do you have any suggestions for what direction to go with non-taxable? I'm only 37 and would like access to my money prior to being in my 60's, which is what scared me away from most retirement accounts.

2. The USAA Cornerstone fund is another legacy fund (1.1%). It has performed extremely well (doubled one year, for example) that I hesitate to move out of it. Do you have a suggestion?

3. I am willing to accept risk if it results in faster growth. I gave UPRO a shot for just that reason. If you have any suggestions for that, they would be appreciated. Thanks!
User avatar
WoodSpinner
Posts: 3505
Joined: Mon Feb 27, 2017 12:15 pm

Re: HELP: 5-10yr Portfolio with $1mil target

Post by WoodSpinner »

MKFort12 wrote: Sat Apr 10, 2021 8:30 pm
WoodSpinner wrote: Sat Apr 10, 2021 8:49 am OP,

A couple of questions......

Why are you accumulating so much in Taxable versus Roth or Tax-Deffered?

Why do you own any investments with high expense ratios? 1.1% is astronomically large.

What happens if your assets don’t grow as expected? Just wondering how risky you really want to be?

Thanks

WoodSpinner
Hi! Thanks for taking the time to look it all over. Answers below:

1. I'm not sure where else to go with regard to a non-taxable account. The two Roth IRA's are legacy items that I've kept open, but hardly contributed to until recently. Do you have any suggestions for what direction to go with non-taxable? I'm only 37 and would like access to my money prior to being in my 60's, which is what scared me away from most retirement accounts.

Do you have access to a 401k? Or similar type account? If not, given your tax bracket I would be adding the max to the Roth accounts.


2. The USAA Cornerstone fund is another legacy fund (1.1%). It has performed extremely well (doubled one year, for example) that I hesitate to move out of it. Do you have a suggestion?

Take a look at the Bogleheads Wiki, Getting Started. We tend to focus on low-cost index funds and look to harvest market returns. Personally, you might consider a Total Stock Market fund like VTI/VTSAX.

3. I am willing to accept risk if it results in faster growth. I gave UPRO a shot for just that reason. If you have any suggestions for that, they would be appreciated.

Lets talk more after you check out the Wiki. Think about what happens if you loose more rather than getting the growth? How did you do when the market lost 50%?

Thanks!

WoodSpinner
WoodSpinner
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