Portfolio review, first time post!

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gohawks206
Posts: 25
Joined: Thu May 19, 2022 1:39 pm
Location: PNW

Portfolio review, first time post!

Post by gohawks206 »

Hello! First post, long time reader.

A few points of context before I get started:
  • I have found target-date to be useful and keep me from behavioral errors, i.e. market timing, and focusing on keeping high contributions.
  • To that end, I recently liquidated everything but a couple shares of MSFT out of my Roth IRA and moved it to Target Date.
  • Everything in our tax-deferred funds (with the exception of a couple MSFT shares I hold for sentimental reasons) is generally now in 2055 funds.
  • Recently married and purchased a home about a year ago. Sold a lot of RSUs, etc, but am happy with our lifestyle.
  • Got burned by recent tech downturn, learned the lesson to sell ESPP and RSUs as soon as I can and pump the cash into our M1 account.
  • Have a desire to simplify my accounts. It feels almost impossible to TLH without a wash sale right now so I just avoid it and keep pumping money into the accounts. Not the worst thing, but I know it's pointless to have such tiny amounts of money spread all over the place. I'm a BIG sucker for the "deposit $50 and we'll give you $50" type deals, though... opened my schwab and fidelity accts because it was too good to resist, but would like to pare back...
  • Not only is TLH impossible but as I'm reviewing, it makes it hard to understand allocation across accounts.
  • We currently max pre-tax 401k with matches (to best of our ability, my plan makes it a best effort attempt), max backdoor roth IRA, max HSA, and I've been looking into mega backdoor roth plan offered at my work, though currently throw money in taxable accts. Talk about children, 529s may be in our future.
Okay! Here we go:

Income:
we both have pretty variable comp in tech - ranges between $350k - $500k combined depending on commissions, stock performance/vesting, bonuses, etc.

Emergency funds: About a year of expenses. Like a cushion for tax time, house repairs, peace of mind. Roughly $85k.

Debt: $732k 3.375% mortgage

Tax Filing Status: Married Filing Jointly

Tax Rate: 24% Federal (I think?) -- honestly feel like I need a CPA, our income is variable due to stock compensation, commission checks, bonuses, etc. It doesn't feel as simple as choosing the right withholding and I don't want it to bite us in the a$$.

State of Residence: WA

Age: 32 and 33

Desired Asset allocation: 95% stocks / 5% bonds
Desired International allocation: 35% of stocks

Total portfolio roughly $350k

Current retirement assets

Taxable
---------------
(mostly) M1 Finance:
  • 5.3% VTI
  • 2.24% VXUS
  • 2.08% assorted ETFs (won't waste your time :)
Then I have also 2 Wealthfront accounts, a Fidelity account, a Schwab account, a SoFi account, a BlockFi account, CashApp and some other holdings in M1 that make up only 2.08% of my investable assets. And these 2.08% are the ones that I spend time tinkering with and wasting time on.

Seems clear as I'm typing this up that this sub-$10k sum should just be liquidated and put into VTI/VXUS.

His 401k
  • 18.93% VFFVX vanguard target 2055 (expense ratio 0.08%)
Company match - yes, up to $208 something per paycheck, up to $5000 per year

His Roth IRA
  • 16.62% VFFVX vanguard target 2055 (expense ratio 0.08%)
  • 0.70% MSFT (ticker symbol) (expense ratio)
His HSA ($2k has to be held in cash, this is the investable part):
  • 3.03% Schwab Target 2060 Index Fund (SWYNX) 0.08%
company contributes $700/yr

Her 401k:
  • 44.5% T. Rowe Price Retirement 2055 Trust Class F (ticker symbol) (expense ratio 0.37%!!)
need to look into her match, 2fa makes working with our accounts difficult at times :)

Very tempted to see if there is a self-directed brokerage option here to buy VFFVX instead. There is a $50 per year fee for the account but no commissions. That's less than 1/10th the current yearly cost of the expense ratio.

There is also VIIIX (Vanguard Institutional Index Fund Institutional Plus) at 0.02% which is a very cheap SP500 option.

Her HSA ($2k has to be held in cash, this is the investable part):
3.17% Schwab Target 2055 Index Fund (SWYJX) 0.08%

Her Roth IRA
3.43% VFFVX vanguard target 2055 (expense ratio 0.08%)


I also have about $25k of company stock that drops by the day and will have a decent chunk vesting next month, as well as my ESPP purchase. Plan on selling it all when I'm able to put into M1 for VTI/VXUS split.
_______________________________________________________________


Contributions

New annual Contributions
  • $20,500 his 401k (plus $5k company match, $25.5k total, looking into Mega Backdoor option)
  • $20,500 her 401k (also specify any employer matching contributions)
  • $6k each for his/her backdoor Roth IRA
  • $3.5k each for his/her HSA
  • Taxable varies greatly, when we bought our house last year it was very low, this year we've already put $27.5k in, shooting for $50k. Would say that $25k per year would be roughly "normal" if I had to guess, we just stick extra in when we have it in checking.
FUND CHOICES
  • His retirement accts --- happy with selections, feel they're best available.
  • Her retirement accts --- want to change 401k, pay $50/yr to self direct and invest in VFFVX. With the $50/yr fee and 0.08% expense ratio, we'd save ~$450 a year in her account on fees right away. Other option is VIIIX which is a very cheap SP500 fund that I would not need to pay to self direct.
  • Taxable -- I realize I have way too many accounts but am unsure if the cost of transfer, etc, is worth it, or if I should just bite the bullet, liquidate everything, and move all the cash to one brokerage to simplify.

Questions:
  1. I generally like my M1 account and have most taxable funds there. Feels like it makes sense to close the Wealthfronts, Schwabs, Fidelity, SoFi, CashApp, etc, etc, that I've used for "fun" and just shovel everything in there at a 70/30 VTI/VXUS split.... especially seeing what a dismally small percentage of assets most of these holdings represent.
  2. Feel like we need to make a change w/ her 401k between the options I presented.
  3. I like just throwing extra cash as it's available into my M1 account. It's easy and I don't really have to think about it at all. It also preserves my liquidity more than the mega backdoor roth, where money is taken out of my paycheck and I don't have the flexibility to decide when to shovel some extra into long-term holdings.... I'm tempted to sign up and commit 1-2% of income as a starting point, as I know it's beneficial... that way I can continue to contribute to taxable if and when I see fit without making any large adjustments right away, while easing my way into enjoying the tax-deferral.

Overall, I've tried to stay true to the Boglehead principles of diversification and low-costs, and have tried to focus primarily on our contribution level and making sure we save as much as is realistic for us as a couple. I clearly have an issue with tinkering with things (and account sign-up bonuses) and think that settling for Target Date funds allows me to remember that it's "good enough" and there's nothing to change or rebalance.

For taxable, I'd like to follow a similar approach and get down to 2-3 core funds (VTI/VXUS/possibly AVUV) to make my life easier and enable TLH in the future. It's hard to know right know which accounts are holding what, I have wealthfront changing ETFs, dividends coming in, etc...

Anyways, this is a massive post but I just wanted to share as much information as I could for all of you fine folks who care to read this.

Thanks very much! :sharebeer :sharebeer
If a man knows not to which port he sails, no wind is favorable.
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BL
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Re: Portfolio review, first time post!

Post by BL »

I won't give any advice except to say that while writing all of this out, you seem to have figured out what the best choices are. Now to implement your convictions..
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retiredjg
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Re: Portfolio review, first time post!

Post by retiredjg »

I too think you have it figured out.

If not, I think it is your sucker-dum for "free stuff" that is primarily getting you into trouble. Almost all the time, "free stuff" is not really free. They want something from you and if patient enough, they will get it.

Even if "they" don't get anything, you can clearly see that "free stuff" is burdensome at the very least.

Figure out where you want your taxable account and start moving everything over there. Once you get rid of all the minutia that is taking up your time and brain, consider if there is anything else about your portfolio that needs to be improved.
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Watty
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Re: Portfolio review, first time post!

Post by Watty »

As you invest more in a taxable account you should consider using a three fund portfolio for tax effeciency.

https://www.bogleheads.org/wiki/Three-fund_portfolio

https://www.bogleheads.org/wiki/Tax-eff ... _placement

I have not read it yet but one of the founders of these boards even wrote a book on three fund portfolios.

https://www.amazon.com/Bogleheads-Guide ... 415&sr=8-2
gohawks206 wrote: Thu May 19, 2022 3:22 pm I generally like my M1 account and have most taxable funds there. Feels like it makes sense to close the Wealthfronts, Schwabs, Fidelity, SoFi, CashApp, etc, etc, that I've used for "fun" and just shovel everything in there at a 70/30 VTI/VXUS split.... especially seeing what a dismally small percentage of assets most of these holdings represent.
I am not familiar with M1 but I agree that they should be consolidated somewhere.

You may want to set any mutual funds in the taxable accounts to not automatically reinvest dividends or capital gains distributions. That will help you make all the gains long term and also help avoid wash sales.

In addition to simplifying your investments having that many accounts is a security risk. Even if the amounts in those account may be small there is a risk that someone could hack an account and then use a linked account, like your checking account, to transfer more money into it. Be sure to disable those links at some point when you are closing the account.

One thing to watch out for is that many accounts will have an account closing or transfer fee of maybe $75 to $150 dollars. It has been a long time since I have looked at that but you might be able to work around that by selling everything in an account then taking all the money out except for $1.

When you close an account be sure to print out or get PDFs of any documents that you might need since you may not be able to sign back into that account in the future.
gohawks206 wrote: Thu May 19, 2022 3:22 pm Tax Rate: 24% Federal (I think?) -- honestly feel like I need a CPA, our income is variable due to stock compensation, commission checks, bonuses, etc. It doesn't feel as simple as choosing the right withholding and I don't want it to bite us in the a$$.
With your income and stock compensation having your taxes professionally done makes a lot of sense. After you have seen how they do it for a year or two then you can decide if you want to try doing it yourself if you understand just what they are doing.
gohawks206 wrote: Thu May 19, 2022 3:22 pm we both have pretty variable comp in tech - ranges between $350k - $500k
.....
Total portfolio roughly $350k
.....
$20,500 his 401k (plus $5k company match, $25.5k total, looking into Mega Backdoor option)
$20,500 her 401k (also specify any employer matching contributions)
$6k each for his/her backdoor Roth IRA
$3.5k each for his/her HSA
That is roughly $60K

You did not say how much you are saving in your taxable account each year or how much home equity you have but your net worth is not very high relative to your income and ages.

It would be good to take a hard look at your budget to figure out if you are spending too much and if you should really ramp up your savings for the next ten years or so.

I am a retired software developer and the tech field can be rough when you get to be in your 40s and 50s so it would be good to have a plan in place to be financially secure and to be able to pay off the house(even if you don't) by the time you are in your 50s since the types of jobs that you can get them may pay a lot less. The last ten years or so have been phenomenal for some tech salaries but that may not last forever especially if you are not one of the superstars that is in the top 5% of your field.
tashnewbie
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Re: Portfolio review, first time post!

Post by tashnewbie »

gohawks206 wrote: Thu May 19, 2022 3:22 pm Questions:
  1. I generally like my M1 account and have most taxable funds there. Feels like it makes sense to close the Wealthfronts, Schwabs, Fidelity, SoFi, CashApp, etc, etc, that I've used for "fun" and just shovel everything in there at a 70/30 VTI/VXUS split.... especially seeing what a dismally small percentage of assets most of these holdings represent.
I'd probably lean towards selling the assortment of ETFs that comprise 2.08% of your portfolio. Do any of those positions have losses? I assume some would if you've purchased them within the past year or so. If so, now would be a good time to sell them. You'd have to look at the net unrealized gains (after offsetting the losses) to estimate the tax cost.

I don't know why you think TLH would be impossible with your current portfolio. You have TDFs in all of the accounts other than the taxable ones. Seems it'd be very easy to TLH VTI and VXUS.
[*] Feel like we need to make a change w/ her 401k between the options I presented.
Looks like her plan probably has good low-cost index funds, if the cheap S&P 500 fund is any indication. I would use those instead of paying to use the brokerage link, unless you really really want to use a TDF.
[*] I like just throwing extra cash as it's available into my M1 account. It's easy and I don't really have to think about it at all. It also preserves my liquidity more than the mega backdoor roth, where money is taken out of my paycheck and I don't have the flexibility to decide when to shovel some extra into long-term holdings.... I'm tempted to sign up and commit 1-2% of income as a starting point, as I know it's beneficial... that way I can continue to contribute to taxable if and when I see fit without making any large adjustments right away, while easing my way into enjoying the tax-deferral.[/list]
I'd do some MBDR. You could split any extra money you want to invest between MBDR and taxable.
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retired@50
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Re: Portfolio review, first time post!

Post by retired@50 »

gohawks206 wrote: Thu May 19, 2022 3:22 pm I'm a BIG sucker for the "deposit $50 and we'll give you $50" type deals, though...
I'll give you a reason to knock off the new accounts...

Every time you get something "free" from a financial institution you surrender your name, address, SSN, email, etc. This is only making you more likely to be the victim of a data hack or leak of some kind.

Then comes the post-hack apology letter... Whoops, we exposed your SSN to our "affiliate" who doesn't take data security nearly as seriously as we thought...etc.

If you close all the extraneous accounts, maybe in a few years' time your SSN will work its way out of their systems and backups or archives.

Have you heard any of the horror stories some folks have gone through after getting their identity stolen. It's not pretty.

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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ruralavalon
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Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Portfolio review, first time post!

Post by ruralavalon »

Welcome to the forum :) .

Congratulations on your recent marriage. It seems to me that you are on the right track toward simplifying your investments.

gohawks206 wrote: Thu May 19, 2022 3:22 pmTaxable
---------------
(mostly) M1 Finance:
5.3% VTI
2.24% VXUS
2.08% assorted ETFs (won't waste your time :)
Then I have also 2 Wealthfront accounts, a Fidelity account, a Schwab account, a SoFi account, a BlockFi account, CashApp and some other holdings in M1 that make up only 2.08% of my investable assets. And these 2.08% are the ones that I spend time tinkering with and wasting time on.

Seems clear as I'm typing this up that this sub-$10k sum should just be liquidated and put into VTI/VXUS.
I agree that consolidating the taxable accounts is wise. You could consider a low cost fund firm like Vanguard, Fidelity or Schwab. The ETFs can be transferred "in kind", with no income tax liability from the transfer.

gohawks206 wrote: Thu May 19, 2022 3:22 pmHer 401k:
44.5% T. Rowe Price Retirement 2055 Trust Class F (ticker symbol) (expense ratio 0.37%!!)
T. Rowe Price target date funds are very good even with their higher expense ratio. Morningstar (3/18/2021), "The Best Target-Date Funds for 2021 and Beyond", link. If you want to simplify then stay with that target date fund. I would not bother with the brokerage window (and the $50 fee) just to switch target date funds.

gohawks206 wrote: Thu May 19, 2022 3:22 pm 3. I like just throwing extra cash as it's available into my M1 account. It's easy and I don't really have to think about it at all. It also preserves my liquidity more than the mega backdoor roth, where money is taken out of my paycheck and I don't have the flexibility to decide when to shovel some extra into long-term holdings.... I'm tempted to sign up and commit 1-2% of income as a starting point, as I know it's beneficial... that way I can continue to contribute to taxable if and when I see fit without making any large adjustments right away, while easing my way into enjoying the tax-deferral.
Why delay enjoying the tax benefits?

If the mega backdoor Roth is available in your 401k then I suggest doing that as a priority over using a taxable brokerage account.

Wiki article Prioritizing investments.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
gohawks206
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Joined: Thu May 19, 2022 1:39 pm
Location: PNW

Re: Portfolio review, first time post!

Post by gohawks206 »

ruralavalon wrote: Fri May 20, 2022 10:00 am Welcome to the forum :) .

Congratulations on your recent marriage. It seems to me that you are on the right track toward simplifying your investments.

I agree that consolidating the taxable accounts is wise. You could consider a low cost fund firm like Vanguard, Fidelity or Schwab. The ETFs can be transferred "in kind", with no income tax liability from the transfer.

If you want to simplify then stay with that target date fund. I would not bother with the brokerage window (and the $50 fee) just to switch target date funds.

Why delay enjoying the tax benefits?

If the mega backdoor Roth is available in your 401k then I suggest doing that as a priority over using a taxable brokerage account.

Wiki article Prioritizing investments.

Thanks everyone for the replies and for the well wishes on our marriage.

This all makes sense... some of the accounts are so minuscule that dealing with transfer fees (or the hassle of trying to get reimbursed for them) makes me think that I should just sell everything and then transfer the cash into my taxable M1 pie (60% VTI, 30% VXUS, 10% AVUV) so I'm down to one taxable account. The recent downturn and fact that I would not be paying much in gains (if any) makes that easier to swallow.

I also agree hassling with her 401k is likely not worth it... when she changes jobs we'll just address that then.

And to your point, I signed up for the automated in-plan conversion and made my first contribution with my last paycheck. Slick and painless, if I regularly had "extra" money for taxable, doesn't seem to hurt to throw a few percent of income here and increase as we feel comfortable with our budgets. Will prioritize these contributions over taxable moving forward. I also never tinker with my 401k - it feels like for that reason alone, behaviorally, a safer place for me to make my long term investments anyways. :oops: :D
If a man knows not to which port he sails, no wind is favorable.
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