Emergency funds: yes
Debt: no
Tax Filing Status: married usually filing separately, but when appropriate filing jointly.
Tax Rate: 35% federal, 11% state
State of Residence: Hawaii
Age: 50
Desired Asset allocation: Roughly 50/50
Current retirement assets
Taxable
This is what I'm planning to build, basically a blend between a simple Bogleheads one and Ray Dalio All-Seasons:
45.00% Vanguard Total Stock Market ETF (VTI) (0.03%)
30.00% Vanguard Long-Term Treasury Admiral (VUSUX) (0.10%)
15.00% Vanguard Interm-Term Treasury Adm (VFIUX) (0.10%)
5.00% Vanguard Utilities ETF (VPU) (0.10%)
5.00% Gold (IAU) (0.25%)
Questions:
1. Does this seem like a sane allocation? Anything I'm missing?
Appendix
This shows the portfolio on Portfolio Visualizer compared to All-Seasons and a Boggleheads.
https://www.portfoliovisualizer.com/bac ... ion17_3=35
Sanity check on portfolio
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Sanity check on portfolio
Last edited by leafmuncher on Mon Apr 19, 2021 10:45 pm, edited 1 time in total.
Re: Sanity check on portfolio
Hi leafmuncher,
You’ll probably will get a better response if you follow the format here viewtopic.php?t=6212. Just update your original post.
You’ll probably will get a better response if you follow the format here viewtopic.php?t=6212. Just update your original post.
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Re: Sanity check on portfolio
Some comments,
1. Many Bogelheads will diverge from pure indexing by a small degree, say 5 to 10%, to focus on a particular sector. So 10% in utilities and gold should be fine.
2. 30% in long-term treasuries is interesting. I see more people, if they choose to differ from the Total Bond, going the other direction into short-term bonds or CDs.
3. No international equities? There’s no consensus on what the appropriate equity exposure is for a US based investor and I’ve seen recommendations of 0 to 20% (The Warren Buffet and John Bogel school), 40% (Vanguard’s recommendation), and up to 50% (approximate world capitalization).
1. Many Bogelheads will diverge from pure indexing by a small degree, say 5 to 10%, to focus on a particular sector. So 10% in utilities and gold should be fine.
2. 30% in long-term treasuries is interesting. I see more people, if they choose to differ from the Total Bond, going the other direction into short-term bonds or CDs.
3. No international equities? There’s no consensus on what the appropriate equity exposure is for a US based investor and I’ve seen recommendations of 0 to 20% (The Warren Buffet and John Bogel school), 40% (Vanguard’s recommendation), and up to 50% (approximate world capitalization).
Re: Sanity check on portfolio
1. Most likely no harm done (but see below)leafmuncher wrote: ↑Mon Apr 19, 2021 8:02 pm
1. Does this seem like a sane allocation? Anything I'm missing?
2. What you are missing is that it doesn't seem you have any idea why you are choosing that portfolio except that it is one in a list with some other portfolios that all have roughly similar behavior as far as you can tell for the time being. (For the given standard deviations of annual return those 14 year CAGR results are all the same within a statistical margin of uncertainty.)
3. Gold and utilities are probably irrelevant at those allocations or maybe at any allocation. These days it seems to be conventional to hold a significant allocation to international stocks. One might ask for the reason not to in your selection.
4. Given that all your assets are in taxable holdings you might consider the tax cost of your bonds and that a utilities holding would not be tax efficient. At your tax bracket munis might be indicated. Do you really have no tax deferred/tax exempt assets? Also if some of your tax planning is MFJ it would seem your investment planning should consider how your wife is invested.
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Re: Sanity check on portfolio
Thanks so much for the feedback!
Munis vs Utilities is interesting, do you mean perhaps something like Vanguard Tax-Exempt Bond ETF?
I guess from everything I've read about, US equities generally have outperformed international ones, and international ones tend to be fairly well correlated as well with US. Perhaps that's a naive view.furwut wrote: ↑Tue Apr 20, 2021 6:46 am No international equities? There’s no consensus on what the appropriate equity exposure is for a US based investor and I’ve seen recommendations of 0 to 20% (The Warren Buffet and John Bogel school), 40% (Vanguard’s recommendation), and up to 50% (approximate world capitalization).
Absolutely agreed that CAGR is very similar; I like the fact that volatility and drawdowns are lower (beyond statistical margins). That's why the portfolio is attractive.dbr wrote: ↑Tue Apr 20, 2021 9:07 am 2. What you are missing is that it doesn't seem you have any idea why you are choosing that portfolio except that it is one in a list with some other portfolios that all have roughly similar behavior as far as you can tell for the time being. (For the given standard deviations of annual return those 14 year CAGR results are all the same within a statistical margin of uncertainty.)
Per above, I haven't been convinced that performance/correlation make it worthwhile. Happy to be convinced otherwise.
We have tax deferred assets, but the % is small compared to this taxable chunk so didn't feel like it was particularly relevant.dbr wrote: ↑Tue Apr 20, 2021 9:07 am 4. Given that all your assets are in taxable holdings you might consider the tax cost of your bonds and that a utilities holding would not be tax efficient. At your tax bracket munis might be indicated. Do you really have no tax deferred/tax exempt assets? Also if some of your tax planning is MFJ it would seem your investment planning should consider how your wife is invested.
Munis vs Utilities is interesting, do you mean perhaps something like Vanguard Tax-Exempt Bond ETF?
Re: Sanity check on portfolio
leafmuncher wrote: ↑Tue Apr 20, 2021 2:40 pmAbsolutely agreed that CAGR is very similar; I like the fact that volatility and drawdowns are lower (beyond statistical margins). That's why the portfolio is attractive.dbr wrote: ↑Tue Apr 20, 2021 9:07 am 2. What you are missing is that it doesn't seem you have any idea why you are choosing that portfolio except that it is one in a list with some other portfolios that all have roughly similar behavior as far as you can tell for the time being. (For the given standard deviations of annual return those 14 year CAGR results are all the same within a statistical margin of uncertainty.)
I don't know about the statistical confidence on standard deviations and drawdowns, but that is fine if it so.
Per above, I haven't been convinced that performance/correlation make it worthwhile. Happy to be convinced otherwise.
Right, I personally am not so sure international is that important. The Forum consensus is that the fraction of stocks in international should be between 0% and 50% or maybe a little more.
We have tax deferred assets, but the % is small compared to this taxable chunk so didn't feel like it was particularly relevant.dbr wrote: ↑Tue Apr 20, 2021 9:07 am 4. Given that all your assets are in taxable holdings you might consider the tax cost of your bonds and that a utilities holding would not be tax efficient. At your tax bracket munis might be indicated. Do you really have no tax deferred/tax exempt assets? Also if some of your tax planning is MFJ it would seem your investment planning should consider how your wife is invested.
Munis vs Utilities is interesting, do you mean perhaps something like Vanguard Tax-Exempt Bond ETF?
At your tax rates I would think you would look at both a national tax exempt bond and even state specific bond funds, though the latter may be too expensive. Also, all Treasuries are exempt from state income tax.
Re: Sanity check on portfolio
If this is what you were planning for the total portfolio, I doubt you would get much pushback. However, the bonds and probably the utility ETF (I didn't check) are not tax efficient. In the 35% tax bracket, they are probably not great choices for your taxable account.leafmuncher wrote: ↑Mon Apr 19, 2021 8:02 pm 1. Does this seem like a sane allocation? Anything I'm missing?
Link to Asking Portfolio Questions
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Re: Sanity check on portfolio
So e.g. replacing some % of the long-term treasury with something like Vanguard High-Yield Tax-Exempt Fund Admiral Shares (VWALX)?