19 comments

  • TheGipper

    Love the post and your website PoF! I just bookmarked it and will surely return often.

    My AA is remarkably similar to yours, with some minor variation. Curious on how you settled on such a relatively large emerging market tilt on the international equity side of your portfolio. Good for you to stick with it over the last several years. Do you sometimes think that VEMAX is too heavily weighted towards China/Taiwan to be well diversified.

    I guess you’re not a subscriber to muni bonds in taxable over bonds in tax-deferred like I am. I guess when you only hold 10-15%), you’re overall REIT exposure is likely much higher than 10%, but I like that too.

    Most of my retirement savings is in tax-deferred 401k/PSP/DB plan. I was not as savvy or smart as you in 2010 and did not do any Roth conversions (for better or for worse). I now hope to play the Roth Conversion horesrace/ladder game from retirement date until age 70/SS/forced RMDs, if health, luck, and tax code co-operates! With any luck I can convert over several million at an effective tax rate at or below 20%. We shall see.

    • Thanks for the kind words, TheGipper!

      I’ve gone with a high EM allocation (10% overall) for the higher potential return. I’m not exactly risk averse. I have no idea if Chinese / Taiwanese stocks are weighted too heavily, but they have taken a beating lately. I’m a little over my target allocation because I tax loss harvested from Vanguard Developed Markets (0 EM) to FTSE All-World Ex-US, which has 14% EM.

      If I lived in a state that had a state specific Vanguard muni fund, I might have some in taxable. I’m not opposed to the idea of munis in taxable, and I’ve read WCI’s argument for bonds in taxable, but I’m not sure the math would work out in a higher interest rate environment. I can buy Vanguard Total Bond at an institutional expense ratio in my tax deferred, so there it goes.

      The Roth conversion ladder is a great way to fund an early retirement. I don’t think my mega Roth conversion was smart or savvy, but at least I did it when living in a lower tax state and before the additional ACA taxes took effect. I haven’t crunched the numbers, but it would make for an interesting post to analyze the repercussions of that decision. I’ll probably end up looking like a stupid dummy.

  • TheGipper

    Forgive the typo in the 2nd paragraph above, which should read:

    I guess you’re not a subscriber to muni bonds in taxable over bonds in tax-deferred. I guess when you only hold <10% in bonds, no big difference.

    I like you’re overall REIT exposure, but with all those Vanguard value funds (which are packed with REITs up to 15%), you're overall REIT exposure is higher than the target 10%, but I like that as well.

    • Typo forgiven. Thanks for the tip on the Value funds. I’ve read somewhere that TSM has about 4% REIT, but I hadn’t looked into the Value funds, which apparently have considerably more.

      I’ve considered reducing my REIT fund allocation and making a few investments via a real estate crowdfunding site. I would keep the real estate allocation to 10%. If I do this, I’ll be sure to write about the experience.

  • TheGipper

    I’ve been interested in looking into real estate crowdfunding as well but haven’t had the time. Would be interested in your thoughts if you do, particularly if it is a suitable candidate for a 1031 exchange with an existing investment rental condo.

  • I like your portfolio. If you have the right fortitude, then it’s good for the long haul. I have about 20% in bonds right now. That’s my ammunition for when the market drops further. We don’t have as much income to invest now so I need more reserves. I assume you still have good income so 10% bond is plenty.
    I also like 50x expense. That’s a lot of padding, but I’m sure you’ll sleep better. Good luck on your journey.

    • Thanks, Joe! Love your blog, by the way. I’m still in the accumulation phase, able to claim FI, but not at all ready to retire. So, yeah… a low bond allocation and target for excess funds make sense for me right now. I could probably make the 25x I’ve got now work for the long haul, but I’ll gladly work another 5 or 6 years for a good chance of doubling it. I’m pretty happy with life as it is, although I feel strongly that I will enjoy freedom when I do pull the trigger someday and call it a career.

  • jk

    can you post your excel spreadsheet file that you use in this post so that I can import my own information to figure out my allocation in each account. It looks awesome!

  • Good allocation! Bond yields are so low now. In the accumulation phase one should take lots of equity risk and use market corrections to scoop up more equities on the cheap.
    And in this day and age with low bond yields, it’s probably even wise for retirees to be (almost) all equities. I don’t see how you get close to 4% real return with a sizable bond allocation.

  • Wow, I can tell that you really did your homework. Our current asset allocation is pretty similar to yours (we don’t have it posted yet). We’re looking to build up our REITs to account for 10% of our portfolio. It’s going to take a while to build it up to that percentage since we’re putting it into our Roths and it’s only 5% now. Our bonds make up about 12% of the portfolio: 10% for U.S. Bonds and 2% for International Bonds. International stocks make up about 23% and the rest is in U.S stocks. We picked an asset allocation that works for us and are planning to stick to it. After we have 25 years worth of expenses in the portfolio we plan to continue investing any new money into physical real estate and diversify further.

  • JP

    Hi

    I would love to get your feedback on my portfolio and the location of the assets

    so far i have been using the fidelity freedom funds 2045 fund (FFKGX) (ER 0.64) in my 401k and 457 at fidelity.
    I also have roth IRA account for myself and my wife, plus a taxable account at Vanguard. I use the Vanguard personal advisory service for the vanguard accounts (they charge 0.3%). Unfortunately they dont help much with the non-vanguard accounts.

    I want to take the money out of the Fidelity freedom funds and use the low cost Vanguard funds in the 401k and 457

    Age: 40
    Desired Asset allocation: 75% stocks / 25% bonds
    Desired International allocation: 33% of total stocks

    I would like the following allocation

    REIT Vanguard REIT index fund 10%

    Remaining 65% of stocks are divided as follows

    US stocks 43% of total portfolio
    33% Vanguard total stock market index fund
    10% iShares S&P SmallCap 600 Value Idx (ETF)

    22% international stocks will be invested in Vanguard Total international stock market index fund

    For 25% Bonds I would like to divide it between an index bond fund and TIPS.

    12.5% Vanguard total Bond market index fund (available in 401k) or some other bond fund (I am open to suggestions)
    12.5% in TIPS

    Now regarding the location of the different funds in different accounts, here is what I am thinking

    REIT index fund goes in the ROTH IRAs

    Extra REIT amount which did not fit into ROTH IRA goes into 401K ( I can use fidelity brokerage link to access fidelity REIT index fund)

    401 K and 457 will also hold the following funds
    – iShares S&P SmallCap 600 Value Idx (ETF)
    – Vanguard total Bond market index fund (available in 401k)
    – TIPS (suggestions welcome for a fidelity fund)

    Taxable Account
    -Vanguard Total Stock Market index fund
    -Vanguard Total International stock market index Fund

    I would really appreciate any feedback . I am open to suggestions if you think there is a better way to locate these funds or if there any suggestions to improve the portfolio.

    Additional layer of complexity is added by the fact that my 401k/457 has vanguard s & p 500 index fund, vanguard extended market index fund and vanguard total bond market index fund but does not have any of the other vanguard funds mentioned above. However I can use any fidelity funds through brokerage link for no additional fees. Unfortunately for using vanguard funds through the brokerage link I will have to pay additional transaction fees which I would like to avoid

    Thanks a lot

  • I like how you avoid having any total stock market or total international outside of the taxable portion to allow for tax loss harvesting. Thanks for the tip!

    • You bet! I’ve found it’s the easiest way to avoid wash sales. Fortunately, it’s easy to swap out of funds in the tax advantaged accounts if you are currently set up in a way that you could have an issue.

      Cheers!
      -PoF

  • ken

    90% equities being retired at an early age is far too risky for my stomach lining

  • It’s interesting reading the various portfolios of bloggers! I’m shooting for something simpler…25% us stocks, 25% Reit, 25% corporate bonds, 25% gold
    http://Www.giveearnlive.com/create-your-own-bank

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