Need a Review

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Topic Author
Elvisd
Posts: 8
Joined: Sat Sep 18, 2021 9:00 am

Need a Review

Post by Elvisd »

Go ahead and throw fruit. I'm sure it looks a mess:

Age 52. Only started making enough to substantially save a decade ago. Make 60K/yr. My wife is a bit older, and just works a couple of days a week as a nurse. She comes from a poor family. Her retirement isn't much- probably 65K at this point. Partially paid on a house, debts are only monthly things. Looking for some land to gradually move to, maybe keep the the urban house as a rental- I'm from the country originally, and ready to get back.

I first fill up the Roth each yr with 7K. Right now it's worth 65K. Current breakdown:

Fund/Index Current Value
VTI Vanguard Total Stock Market Index Fund ETF Shares 36.1K
PARMX Parnassus Mid Cap Fund 14.1K
VWIGX Vanguard International Growth Fund Investor Shares 8.3K
Cash 7.5 K

The "overflow" of money that I have available to invest goes into a retirement fund (I'm a school teacher), currently at $100/month. I started this a few years back. My plan is to increase the contribution as my salary increases, though I'll be topping out in the next few years, and COL increases I doubt will be huge:

VITFX Vanguard Instl Trgt Retire 2035 Instl 6.1 K

I received a small inheritance 6 years back and put $55K of it into a Vanguard account. It has done very well, but my rationale is that I should be loading what I have to invest each month into my tax-advantaged accounts, so nothing has been added to it. This is one of the things I'm soliciting advice on- is this the way to go? Here's how it stands currently at 104K:


Vanguard S&P Mid-Cap 400 Growth ETF 18.2K
Vanguard S&P Mid-Cap 400 Value ETF 10.5K
Vanguard Dividend Growth Fund 43.9K
Vanguard Health Care ETF 8.9 K
Vanguard International Growth Fund Investor Shares 22.9K


Put togher, these accounts come together to make up the he basic allocation that I've roughly followed was to weight my asset classes thusly:
Large Blend VTI Roth/VITFX 401K 24%
Dividend Growth VDIGX 25%
midcap value IVOV 6%
midcap growth IVOG 11%
midcap blend PARMX 8%
international growth VWIGX roth/vgd split 18%
health care VHT 6%
Investable cash 5%

In my state retirement, I have about 90K. Also, 12K worth of metals (real, not certificates). 25K in the bank.

As you can guess, my weighting partially derives from years back when I checked out Dan Wiener's model portfolios. No need for Wiener commentary, I've read my share. I was never orthodox about it, but it was helpful for getting started.

I'm trying to maintain some discipline in my allocation plan. These have been my weights for several years. I've done some small modifications, but not a whole lot of change. I rebalance twice a year. I'm not ready for the "just put everything into Total Market" move, but some simplification I'm open to doing.

Some considerations I'm looking at:
    To what extent, if at all, simplify the midcaps?
      I added International Growth to my Roth a year ago to stick to my weighting, but also to my rationale that I should be putting more money into a tax-advantaged account than a heavily-taxed brokerage. Good idea or no?
        Is there a good thread on an order-of-allocation by account?
          One of the residues from Wiener is the VHT. I'm not hooked on keeping it. It's up 17% from six years ago, so "Okay" performance, I guess.
            I've got a family member who is very good with investing, and is a "Bonds are a waste of time" hawk, and this has influenced my own allocations. Stay the course, at least at this point in life?

            Probably too many questions, but I promise to be very attentive to any feedback. I really appreciate this forum and the level of seriousness that it has.
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            retiredjg
            Posts: 54082
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            Re: Need a Review

            Post by retiredjg »

            Elvisd, welcome to the forum. :happy

            It would be much easier to help you with information in the format we use to help people with their portfolio questions. It is a bit of work, but people do learn quite a bit by doing it. Many of the things we need to know are in included in your post.

            See the format in the link at the bottom of this message. The closer you follow the format, the easier it is to help you (and the better the help you will get).

            Let us know if you need any help.
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            retired@50
            Posts: 12828
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            Location: Living in the U.S.A.

            Re: Need a Review

            Post by retired@50 »

            Welcome to the forum. :happy
            A few thoughts come to mind after reading your post.

            1. The PARMX Mid Cap fund has a pretty high expense ratio (0.98%) so you might want to consider replacing it with a less expensive mid cap index fund. The performance of the fund has been decent, but the question is, will it remain decent for the rest of your life as an investor.

            2. The 55K inheritance account, I presume is in a taxable account. . . ?
            If this is true, then it's not as tax-efficient as it could be. Have you noticed on your IRS form 1040 that some of your funds are making capital gains distributions in addition to dividends? Some people seek to avoid this additional income because they don't really need it in any given year.
            For a deeper dive on the topic, see these two links from the Boglehead wiki.
            https://www.bogleheads.org/wiki/Tax-eff ... _placement
            https://www.bogleheads.org/wiki/Capital ... stribution

            3. One way to help de-emphasize all the sector funds and small market slices is to start re-directing all dividends, capital gains distributions, and new money into "Total Market" funds, assuming that's your long-term game plan. If not, you can stick with all the slices and sectors.

            Regards,
            If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
            Topic Author
            Elvisd
            Posts: 8
            Joined: Sat Sep 18, 2021 9:00 am

            Re: Need a Review

            Post by Elvisd »

            Thanks, Retiredjg. I'll get to studying that post format asap. Retired@50, the 55K is Vanguard. Each fund/ETF in both the Roth and the Vanguard are set to reinvest to itself. So you're saying I might consider setting the reinvests of the sectors in the VTI or other total markets?
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            ruralavalon
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            Location: Illinois

            Re: Need a Review

            Post by ruralavalon »

            Welcome to the forum :) .

            It looks like you are already doing many things right. Offhand I don't see any big mistakes.

            It would help a lot if you recasted your original post to use the Asking Portfolio Questions format as suggested by retiredjg.

            Please just modify your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.


            Elvisd wrote: Sat Sep 18, 2021 10:00 amI'm trying to maintain some discipline in my allocation plan. These have been my weights for several years. I've done some small modifications, but not a whole lot of change. I rebalance twice a year. I'm not ready for the "just put everything into Total Market" move, but some simplification I'm open to doing.

            Some considerations I'm looking at:
            To what extent, if at all, simplify the midcaps?
            I added International Growth to my Roth a year ago to stick to my weighting, but also to my rationale that I should be putting more money into a tax-advantaged account than a heavily-taxed brokerage. Good idea or no?
            Is there a good thread on an order-of-allocation by account?
            I like the idea of dropping the mid-cap fund to simplify.

            I prefer Vanguard Total International Stock Index Fund (VTIAX ) over Vanguard International Growth Fund.

            Yes, it is a good idea to prioritize contributions to tax-advantaged accounts ahead of contributions to a taxable brokerage account.

            If good funds with low expense ratios are offered in your employer's plan, then its probably a good idea to prioritize maximum annual employee contributions to the employer plan ahead of contributions to any other accounts.

            Using a work-based plan has the added benefit (in addition to tax advantages) of automatic deductions from payroll, making it easier to maintain savings discipline.

            For the best general discussion of order of investing by account please see the wiki article, Prioritizing Investments.

            What type of account (taxable brokerage account, or traditional IRA, or Roth IRA) is the "small inheritance 6 years back and put $55K of it into a Vanguard account"?

            What type of account (401k, or 403b, or 457b) is your "retirement fund (I'm a school teacher)"?

            Will either or both of you be eligible for both a significant pension and Social Security benefits?
            Last edited by ruralavalon on Sat Sep 18, 2021 11:36 am, edited 5 times in total.
            "Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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            retired@50
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            Re: Need a Review

            Post by retired@50 »

            Elvisd wrote: Sat Sep 18, 2021 11:08 am . . . Retired@50, the 55K is Vanguard. Each fund/ETF in both the Roth and the Vanguard are set to reinvest to itself. So you're saying I might consider setting the reinvests of the sectors in the VTI or other total markets? <- Yes, you might consider it.
            << the 55K is Vanguard >>
            What I'm really asking is, what is the tax status of the inherited money?
            Was the inheritance inside an 1.) IRA, 2.) a Roth IRA, 3.) or is it in a regular taxable brokerage account? These are the 3 basic choices.

            The second part of my remark was that ** IF ** you seek to simplify your accounts over time, ** THEN ** you could consider using total market funds. This would initially add to your total number of funds, but you could sell off the sector and market slice funds over time and put the proceeds into the total market approach. It's not required, it's optional.

            Some people like to "slice and dice" the total market, and put money into their favorite sectors or cap weights, but maintaining this kind of a portfolio gets more challenging as you age. Do you want to be trading ETFs into your 80s or 90s when your portfolio needs to be re-balanced?

            Others prefer to keep things simple by using the basic Boglehead 3-Fund portfolio approach. You have to decide if this is of interest to you. . .
            https://www.bogleheads.org/wiki/Three-fund_portfolio

            Regards,
            If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
            Topic Author
            Elvisd
            Posts: 8
            Joined: Sat Sep 18, 2021 9:00 am

            Re: Need a Review

            Post by Elvisd »

            What I'm really asking is, what is the tax status of the inherited money? The Vanguard is a taxable account. I opened it after the receipt of the inheritance.


            I prefer Vanguard Total International Stock Index Fund (VTIAX ) over Vanguard International Growth Fund.
            Lower expense ratio, I presume?

            The PARMX Mid Cap fund has a pretty high expense ratio (0.98%) so you might want to consider replacing it with a less expensive mid cap index fund. I understand. The "ethical" appeal was one of the reasons I went for it, though that isn't reflect in my total portfolio of course. Any suggestions on a replaxement index? I probably just need to at least simplfy all my mids into some sort of a total, I would think.




            So, here is my post recast in what I hope is the correct format! Thanks once again.

            Emergency funds: 23K

            Debt: 80 K left on mortgage

            Tax Filing Status: single

            Tax Rate: 22% federal

            State of Residence: TN

            Age:52

            Desired Asset allocation: 90% stocks 10% bonds (or even less on bonds)

            investment portfolio total 180K


            Current retirement assets



            Taxable Vanguard

            Vanguard S&P Mid-Cap 400 Growth ETF 10%
            Vanguard S&P Mid-Cap 400 Value ETF 5.8%
            Vanguard Dividend Growth Fund 24.3%
            Vanguard Health Care ETF 5.0%
            Vanguard International Growth Fund Investor Shares 12.7%



            401k

            VITFX Vanguard Instl Trgt Retire 2035 Instl 3%


            Roth IRA at TD Ameritrade
            VTI Vanguard Total Stock Market Index Fund ETF Shares 20%
            PARMX Parnassus Mid Cap Fund 7.8%
            VWIGX Vanguard International Growth Fund Investor Shares 4.6
            User avatar
            retired@50
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            Re: Need a Review

            Post by retired@50 »

            Elvisd wrote: Sat Sep 18, 2021 12:21 pm What I'm really asking is, what is the tax status of the inherited money? The Vanguard is a taxable account. I opened it after the receipt of the inheritance.
            <- Since this money is in a taxable account, my earlier remarks are accurate, since I assumed this was the case.


            The PARMX Mid Cap fund has a pretty high expense ratio (0.98%) so you might want to consider replacing it with a less expensive mid cap index fund. I understand. The "ethical" appeal was one of the reasons I went for it, though that isn't reflect in my total portfolio of course. Any suggestions on a replaxement index? I probably just need to at least simplfy all my mids into some sort of a total, I would think.
            <- You could probably use VIMAX as a less expensive Mid Cap Index fund if you are looking for a direct replacement of this fund. Otherwise, if you adopt the "Total Market" 3-fund approach (mentioned earlier) the money would wind up in a total stock market fund.

            See my responses above, in blue.

            Regards,
            If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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            retiredjg
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            Re: Need a Review

            Post by retiredjg »

            Elvisd wrote: Sat Sep 18, 2021 12:21 pm
            So, here is my post recast in what I hope is the correct format! Thanks once again.

            Emergency funds: 23K

            Debt: 80 K left on mortgage

            Tax Filing Status: single

            Tax Rate: 22% federal

            State of Residence: TN

            Age:52

            Desired Asset allocation: 90% stocks 10% bonds (or even less on bonds)
            This is quite aggressive for your age. There are a lot of people who feel like your relative - that having bonds is not worthwhile while they are paying so little. But bonds perform another function - stabilization and preservation of your portfolio - something that stocks cannot do.

            What's going to happen to your 90/10 portfolio in the next downturn? It could dwindle down to half its current value and take years to get "back". You are too old to risk that. And if you happen to lose your income at the same time, finding another job after 50 can be quite the challenge.

            I suggest that you hold at least 25% bonds, probably 30% bonds instead of your current plan. Yes, your portfolio will grow a little slower, but more of it will hang around during the bad times.



            You don't mention how much you are saving each year but you need to maximize that as much as you comfortably can. Your future comfort depends more on your savings rate than on your investment selections.
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            ruralavalon
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            Re: Need a Review

            Post by ruralavalon »

            Elvisd wrote: Sat Sep 18, 2021 12:21 pm What I'm really asking is, what is the tax status of the inherited money? The Vanguard is a taxable account. I opened it after the receipt of the inheritance.
            Did you inherit the funds you are currently using in the taxable brokerage account account? Or did you inherit cash or other property and use that to buy those funds?

            It makes a difference in your tax liability if you decide to change anything in the taxable brokerage account.

            Elvisd wrote: Sat Sep 18, 2021 12:21 pm
            I prefer Vanguard Total International Stock Index Fund (VTIAX ) over Vanguard International Growth Fund.
            Lower expense ratio, I presume?
            Three reasons (1) for broader diversification, (2) lower expense ratio, and also (3) an index fund gives better tax efficiency in a taxable brokerage account.

            Elvisd wrote: Sat Sep 18, 2021 12:21 pmThe PARMX Mid Cap fund has a pretty high expense ratio (0.98%) so you might want to consider replacing it with a less expensive mid cap index fund. I understand. The "ethical" appeal was one of the reasons I went for it, though that isn't reflect in my total portfolio of course. Any suggestions on a replaxement index? I probably just need to at least simplfy all my mids into some sort of a total, I would think.
            I would simply use an all-inclusive total stock market index fund.

            If you really want ESG investing, then Vanguard offers several low expense funds to choose from. Vanguard, ESG Investing.



            Elvisd wrote: Sat Sep 18, 2021 12:21 pmSo, here is my post recast in what I hope is the correct format! Thanks once again.

            Emergency funds: 23K

            Debt: 80 K left on mortgage

            Tax Filing Status: single

            Tax Rate: 22% federal

            State of Residence: TN

            Age:52

            Desired Asset allocation: 90% stocks 10% bonds (or even less on bonds)

            investment portfolio total 180K


            Current retirement assets



            Taxable Vanguard

            Vanguard S&P Mid-Cap 400 Growth ETF 10%
            Vanguard S&P Mid-Cap 400 Value ETF 5.8%
            Vanguard Dividend Growth Fund 24.3%
            Vanguard Health Care ETF 5.0%
            Vanguard International Growth Fund Investor Shares 12.7%



            401k

            VITFX Vanguard Instl Trgt Retire 2035 Instl 3%


            Roth IRA at TD Ameritrade
            VTI Vanguard Total Stock Market Index Fund ETF Shares 20%
            PARMX Parnassus Mid Cap Fund 7.8%
            VWIGX Vanguard International Growth Fund Investor Shares 4.6
            What funds are offered in your employer's 401k plan? Please give fund names, tickers and expense ratios.

            What is the interest rate on your mortgage? (Paying off higher interest debt can be a good "investment".)

            What is your desired mix of domestic/international stocks?

            About how much (in dollars) do you currently contribute annually to each account?

            About how much (in dollars) do you feel that you will be able to contribute annually to investing (total, all accounts)?

            Establishing a high rate of contributions is the most important investing decision you can make, forum discussion.

            When starting a little late ("Age 52. Only started making enough to substantially save a decade ago"), your contribution rate is very important.

            I didn't start significant contributions to investing until my late 30s, and it still worked out fine. So you have time to get a good plan going.
            "Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
            Topic Author
            Elvisd
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            Joined: Sat Sep 18, 2021 9:00 am

            Re: Need a Review

            Post by Elvisd »

            What is the interest rate on your mortgage? 3.75% $80K to go.

            Did you inherit the funds you are currently using in the taxable brokerage account account? Or did you inherit cash or other property and use that to buy those funds? I inherited cash and opened the account from there.


            What funds are offered in your employer's 401k plan? Please give fund names, tickers and expense ratios.

            It's quite a list:
            DFA International Value IInternational DFIVX 0.54
            Fidelity International DiscoveryInternational FIGRX 1.02
            Brown Capital Small Company InvSmall Cap BCSIX 1.24
            Franklin Small Cap Value R6Small Cap FRCSX 0.69
            Columbia Select Mid Cap Value AdvMid Cap CFDRX 0.93
            Janus Henderson Enterprise NMid Cap JDMNX 0.66
            Virtus NFJ Large-Cap Value InstLarge Cap ANVIX 0.74
            Fidelity Contrafund K6Large Cap FLCNX 0.45
            Fidelity OTC K6Large Cap FOKFX 0.50
            Vanguard Institutional Index Instl PlLarge Cap VIIIX 0.02
            Fidelity PuritanBalanced FPURX 0.50
            Tennessee Treasury Managed FundBalanced N/A
            Vanguard Total Bond Market Idx Instl PlsBond VBMPX 0.03
            Western Asset Core Plus Bond ISBond WAPSX 0.42
            Tennessee Stable Value FundFixed N/A
            TD Ameritrade SDB Sweep ProgramBrokerage N/A
            TD Ameritrade SDB SecuritiesBrokerage N/A
            TD Ameritrade SDB Sweep Program RothBrokerage N/A
            TD Ameritrade SDB Securities RothBrokerage N/A

            What is your desired mix of domestic/international stocks? I see a lot of 80/20 advice. Currently, I'm a bit below that currently at 18 with VWIGX.

            About how much (in dollars) do you currently contribute annually to each account? 7K to Roth, 1.2K to 401k.


            About how much (in dollars) do you feel that you will be able to contribute annually to investing (total, all accounts)?
            I can get it to 9K starting next year. One reason that I probably won't go much higher for now is that I'm looking for land. I expect that to cost around 40-80 K.

            I see how my current lack of bonds becomes more of an issue with age. Advice on going forward with increasing my allocation is certainly appreciated.


            So much great advice already!
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            ruralavalon
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            Re: Need a Review

            Post by ruralavalon »

            Your employer's plan offers excellent funds with very low expense ratios. You are fortunate.

            In my opinion the better funds to consider using include:
            1) Vanguard Institutional Index Institutional Plus (VIIIX) ER 0.02%; and
            2) Vanguard Total Bond Market Index Institutional Plus (VBMPX) ER 0.03%.

            I don't see a good international stock index fund to use in the employer plan.

            In the taxable brokerage account I would not switch out of the Vanguard International Growth Fund Investor Shares (VWIGX) ER 0.44% if any significant income tax liability would be created.


            Elvisd wrote: Sat Sep 18, 2021 4:35 pmAbout how much (in dollars) do you currently contribute annually to each account? 7K to Roth, 1.2K to 401k.


            About how much (in dollars) do you feel that you will be able to contribute annually to investing (total, all accounts)? I can get it to 9K starting next year. One reason that I probably won't go much higher for now is that I'm looking for land. I expect that to cost around 40-80 K.
            Try to reduce spending and increase contributions to tax-advantaged accounts as much as is practical for you.
            "Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
            Topic Author
            Elvisd
            Posts: 8
            Joined: Sat Sep 18, 2021 9:00 am

            Re: Need a Review

            Post by Elvisd »

            In my opinion the better funds to consider using include:
            1) Vanguard Institutional Index Institutional Plus (VIIIX) ER 0.02%; and
            2) Vanguard Total Bond Market Index Institutional Plus (VBMPX) ER 0.03%.

            Looks like I could use the 401k then to be the place for an increased bond allocation with VBMPX. Someone else recommended VBMPX, so I had looked at it some.

            In the taxable brokerage account I would not switch out of the Vanguard International Growth Fund Investor Shares (VWIGX) ER 0.44% if any significant income tax liability would be created.

            So the tax issues with holding foreign companies would make VWIGX a case of holding long and selling in one lump when sale does happen? I
            User avatar
            ruralavalon
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            Re: Need a Review

            Post by ruralavalon »

            Elvisd wrote: Sat Sep 18, 2021 5:25 pm In my opinion the better funds to consider using include:
            1) Vanguard Institutional Index Institutional Plus (VIIIX) ER 0.02%; and
            2) Vanguard Total Bond Market Index Institutional Plus (VBMPX) ER 0.03%.

            Looks like I could use the 401k then to be the place for an increased bond allocation with VBMPX. Someone else recommended VBMPX, so I had looked at it some.
            That's correct.


            Elvisd wrote: Sat Sep 18, 2021 5:25 pmIn the taxable brokerage account I would not switch out of the Vanguard International Growth Fund Investor Shares (VWIGX) ER 0.44% if any significant income tax liability would be created.

            So the tax issues with holding foreign companies would make VWIGX a case of holding long and selling in one lump when sale does happen? I
            If you sell that to replace with an international stock index fund, you incur a capital gains tax on the gains you have.

            Don't incur significant income liability if it is not necessary. I don't think it's necessary to get rid of Vanguard International Growth Fund Investor Shares (VWIGX). Let it grow.

            It's not a bad fund, just not what I would have picked. If you want more international stock you could keep VWIGX and add some Vanguard Total Stock Index Fund (VTIAX). You can also stop any automatic reinvestment of dividends in VWIGX and invest those dividends in VTIAX.

            Sell when you need the money for something, like after you retire. Your tax rate will likely be lower then.
            "Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
            Topic Author
            Elvisd
            Posts: 8
            Joined: Sat Sep 18, 2021 9:00 am

            Re: Need a Review

            Post by Elvisd »

            Great. Thanks for the clarification. I've decided to move funds over in the 401k to VBMPX to get a real allocation for bonds-indeed I'm probably at the age where that should kick in.

            I don't foresee selling VWIGX until retirement time, and plan to continue keeping the Vanguard Brokerage pretty much as is other than some rebalancing over time- new money goes into the tax advantaged accounts.

            Some great clarification on this thread!
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