simple asset allocation question

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Topic Author
JM13004
Posts: 30
Joined: Thu Jul 21, 2011 9:15 pm

simple asset allocation question

Post by JM13004 »

Hello all,
I love this site and the info this community provides. I think I have a new hobby.
I'm trying to put a game plan together for my AA. I'm trying (thru Roth IRA and 457) to accomplish a 60/40 portfolio. 40% will be in a bond index fund. It's the 60% that I'm a little unsure of. After reading a couple of Berntein's books, I'm trying to diversify as best I can yet keep it fairly simple for rebalancing. Bernstein and Swedroe(BTW great article today in Money Watch) do a great job pointing out how diversification lowers your SD but increases annualized yield. My question is: one of the index funds in my 457 tracks the Willshire 5000. Can I utilize this fund to capture my : small cap, mid cap, and large cap stocks. If so, I'll probably place 70-80% equities in this fund and the remaining 20-30% in broad international index fund. Basically, I'll be using 3 funds total.....keeping it simple. I realize I could probably diversify more and lower SD and gain AR but that will come in the future....I think this is good start for me.

Thanks,
JM
DSInvestor
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Joined: Sat Oct 04, 2008 11:42 am

Post by DSInvestor »

I like your simple 3 fund portfolio. Wilshire 5000 is a Total US stock market index and would include large, mid and small cap stocks.
http://web.wilshire.com/Indexes/Broad/

Which international index funds are included in your plans? Some international index funds are developed markets and do not include emerging markets. Vanguard's Total International Stock Market fund (VGTSX) includes emerging markets and small cap. If your employer plan doesn't offer a broad international index fund, you may be able to get one in your Roth IRA.

Your asset allocation 60/40 where international is 20-30% of stocks is very close to Vanguard's Target Retirement 2020 or 2015 funds. If Vanguard Target Retirement funds are available in your 457 and IRA, that may be an even simpler way to get your AA. Target Retirement funds are a great choice for investors who invest only in tax advantaged accounts.

Here's a link to the Portfolio and Management page of Vanguard Target 2020 fund VTWNX er=0.17%:
https://personal.vanguard.com/us/funds/ ... st=tab%3A2
Topic Author
JM13004
Posts: 30
Joined: Thu Jul 21, 2011 9:15 pm

Post by JM13004 »

I don't have any Vanguard Funds in my 457....I could use those in my IRA however. I'm opening 2 accounts within the next few days (5k my wife and 5K for me). Should I open them at Vanguard or just continue with Schwab account and purchase Vanguard Funds through there...... not sure.

The international funds in my 457 are :
VT Vantagepoint International Fund
VT Vantagepoint Overseas Equity Index Fund, Class II
VT Fidelity Diversified International Fund
VT Harbor International Fund, Class Administrative
They are through ICMA-RC
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archbish99
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Joined: Fri Jun 10, 2011 6:02 pm

Post by archbish99 »

For the IRA, it's really up to you.... If you want to invest as traditional mutual funds, go with Vanguard itself -- no one else will have Vanguard's funds cheaper than Vanguard. If you want to use ETFs instead (pro: lower ER without meeting the threshold for Admiral shares; cons: must buy in whole-share increments, usually a brokerage commission), you can go anywhere that has a brokerage account.

Personally, I'd just go with Vanguard and switch to Admiral shares when you've met the minimum. I buy ETFs because I'm stuck at Fidelity for my employer's 401k, and the commission is $8 for ETFs trades and $75 for mutual fund trades. :x
Topic Author
JM13004
Posts: 30
Joined: Thu Jul 21, 2011 9:15 pm

Post by JM13004 »

Just called Vanguard...they're sending me a packet in the mail. I'll transfer my Schwab IRA to Vanguard to simplify and ultimately reduce costs. Looks like I'll have to wait till next year until I get the Admiral shares. Thanks a bunch.
pkcrafter
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Post by pkcrafter »

If you want more feedback you'll have to post the funds available in your 457 including expense ratios. If there are too many, just post the lower cost ones. And do not rush into making changes until you have developed a complete strategy.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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