Help with Portfolio Allocation and Investing Excess Cash

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Topic Author
sonowwhat?
Posts: 43
Joined: Sat Jan 02, 2010 10:39 am

Help with Portfolio Allocation and Investing Excess Cash

Post by sonowwhat? »

Happy New Year everyone. It’s my 10 year anniversary as a Boglehead and I have never once regretted it!
So, in Laura’s format (our close to it) here you go:

Background

Employment Status: Retired since Dec 2007
Age: 56
Married w/ 3 Children: Ages 26, 23, 22
Home: (Paid for)
Income: Only source of income is from investments. In general, I have been living off of capital gains and rebalance by essentially selling equities to fund my lifestyle which keeps my allocations consistent.
Withdrawal Rate Needed as % of Investment Portfolio (Excluding Real Estate) in Today's dollars: Approx 2% to fund current standard of living
Investment Expertise: Novice but I do have a CPA license and MBA in taxation so some finance background
Max % of Equity I can handle without selling in panic markets = 37.5%
Emergency funds = Yes
Debt: No debt or mortgage
Tax Filing Status: Married filing Jointly w/ 1 remaining dependent child
Tax Rate:
Federal Taxes: Effective (Tax/AGI)- 15%; Marginal (Tax/Taxable Income)- 25%
State Taxes: Effective 4%; Marginal 6%

No preference on subcategory breakdowns

Current portfolio size = X,XXX,XXX (middle+ 7 Figures)

Investments other than Stocks and Bonds is zero. Personal residence is approx 10% of overall net worth and paid for.


Summary of Investments (Excludes personal residence):
Cash & Equivalents 6%
Equites 38%
Bonds 56%



Taxable

Bond Funds (50%)
21% VBTLX Vanguard Total Bond Market Index Fund Admiral
29% VFIDX Vanguard Intermediate-Term Investment-Grade F

Cash & Equivalents (6%)
6% Checking and Money Markets

Equity Funds (38%)
33% FSKAX Fidelity® Total Market Index Fund
3% FSPSX Fidelity® International Index Fund
2% Vanguard Total Stock Market Index Fund Admira

Equity Stocks (0%)


Options (0%)

HIS IRA

Bond Funds (5%)
5.0% VBTLX Vanguard Total Bond Market Index Fund Admiral

Equity Funds (0%)


HER IRA

Equity Funds (1%)
1% VBTLX Vanguard Total Bond Market Index Fund Admiral


100.00% Total Portfolio


Questions:

1) I just sold the one rental house I had and have a significant amount of cash. I don’t want to get back into being a landlord so should I allocated proportionally into stocks and bonds or diversify as before into real estate but passively like into a REIT?

- My youngest and I are considering going into business together. (Really I just want to get him a start in life then plan on bowing out as soon as I can). I am willing to go ½ million into a franchise or something. This probably won’t happen for another 9 to 12 months from now. Would the current investment decision of investing the cash change given the future franchise outlay.

2) In general given my portfolio holdings and situation as early retired, no debt etc. am investing as a savvy boglehead. How can I improve my portfolio.
Jablean
Posts: 755
Joined: Sat Jun 02, 2018 2:38 pm

Re: Help with Portfolio Allocation and Investing Excess Cash

Post by Jablean »

Congrats, that does look like a Boglehead portfolio!

Is the new cash part of the 6% you indicate? If so what percentage?
Topic Author
sonowwhat?
Posts: 43
Joined: Sat Jan 02, 2010 10:39 am

Re: Help with Portfolio Allocation and Investing Excess Cash

Post by sonowwhat? »

Thanks! And yes, the 6% is part of the new cash!
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Sandtrap
Posts: 13666
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Help with Portfolio Allocation and Investing Excess Cash

Post by Sandtrap »

Questions:

1) I just sold the one rental house I had and have a significant amount of cash. I don’t want to get back into being a landlord so should I allocated proportionally into stocks and bonds or diversify as before into real estate but passively like into a REIT?

- My youngest and I are considering going into business together. (Really I just want to get him a start in life then plan on bowing out as soon as I can). I am willing to go ½ million into a franchise or something. This probably won’t happen for another 9 to 12 months from now. Would the current investment decision of investing the cash change given the future franchise outlay.

2) In general given my portfolio holdings and situation as early retired, no debt etc. am investing as a savvy boglehead. How can I improve my portfolio.
Based on your data given:

1. Allocate proportionally into stocks and bonds (this seems to be your comfort zone), and/or (optional) 10% max of equities in REIT Index Funds. (depending on #2)

1b. Allocate $500k toward your family business venture, then do #1 with the balance, as long as you don't predict a need for additional funds beyond that.
(Suggest limit your liability and total outlay.)

2. Oustanding. At mid 7 figures, you've done well.

Good luck in your family business venture.
j :happy
Wiki Bogleheads Wiki: Everything You Need to Know
Jack FFR1846
Posts: 13867
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Help with Portfolio Allocation and Investing Excess Cash

Post by Jack FFR1846 »

I would agree with Sandtrap on investing as you currently are with your new money.

I'm not so keen on buying a franchise for your son. Instead, consider what franchise you think you would like to buy. Approach an owner of an existing franchise and talk about your desire to potentially buy into one for your son. Ask that the owner take on your son as a worker. Even if unpaid. Why? Because working at a franchise can be hard. Your son needs exposure to this. Learning the business from the inside, hands on is the only way he can know if it's for him. Running this same business is harder. Upsides here include that if your son really takes to it, the owner may promote him up to the point where he manages a store. At that point, he really understands more about running a franchise. While running a franchise from the outside might mean buying an existing Subway restaurant and "just" running it, there's a lot more to it. And it is MUCH harder work than just working at that restaurant. Even as a manager. If things fall apart, you haven't spent half a million dollars on nothing. He would simply leave.

I do not own a franchise but did my due diligence considering a Subway, a McDonalds and a Music-Go-Round (the latter being by far the easiest and cheapest to get in to).
Bogle: Smart Beta is stupid
Topic Author
sonowwhat?
Posts: 43
Joined: Sat Jan 02, 2010 10:39 am

Re: Help with Portfolio Allocation and Investing Excess Cash

Post by sonowwhat? »

That some really great advice Jack!!!!!
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