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Asset allocation advise

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  • Asset allocation advise

    Hi all,

    I will soon begin as an attending and am working over the summer on designing my first retirement investment portfolio.   I am hoping to get some advice on selection of funds and asset allocation.  I plan to max out 403b, 457b (non-govt), and HSA through my employer (Mass Mutual manages funds) and do a backdoor Roth IRA.


    Vanguard options available through new employer (there are additional non-Vanguard options, but ER too high)

    0.06% Vanguard Intermediate Term Bond Index Fund (VBIMX)

    0.10% Vanguard Inflation-Protected Secs Fund (VAIPX)

    0.17% Vanguard Equity-Income Fund (VEIRX)

    0.04% Vanguard Institutional Index Fund (VINIX)

    0.07% Vanguard small cap index fund (VSCIX)

    0.12% Vanguard Total International Stock Index Fund (VTIAX)

    0.10% Vanguard Institutional Target Retirement/Lifestyle funds (2025-2060)


    1. Given those options, is this a reasonable asset allocation for a more aggressive portfolio?  Any suggestions for change?  I'm not sure about the large vs. small caps.

    60% domestic stocks (40% Large caps VINIX, 20% small caps VSCIX)

    20% International stocks (VTIAX)

    5% bonds (VBIMX)

    5% TIPS (VAIPX)

    10% REIT (will use Roth IRA)

    2. These are not the funds I would have chosen had I free reign of all the Vanguard funds.  Would I be better off using one of their Target funds instead?


    Many thanks!

  • #2
    That seems reasonable.  I would probably skip bonds and tips, but that's up to you.  Just because it's offered doesn't mean you have to allocate anything to it.


    • #3
      Out of curiosity, why don't mid-cap stocks seem to appear on anyone's asset allocation?


      • #4

        Out of curiosity, why don’t mid-cap stocks seem to appear on anyone’s asset allocation?
        Click to expand...

        so both VINIX and VSCIX have mid caps. it seems like there is no specific fund the OP listed which could be the 2nd reason.


        OP: why TIPS? if you cant elaborate then get rid of them. i personally would aim for 10% bonds but to each their own, 5% doesnt seem worth it otherwise.

        also using the institutional TDF is an easy option still with REIT in rIRA.


        • #5
          Given the parameters you've stated, here is my advice for what it's worth:

          a.  Given your estimated age (late 20's), I would be much more aggressive relative to the asset allocation you have proposed.  I didn't even think about bonds in my tax deferred retirement plan until my mid to late 30's.  Your future earning power is your 'bond'.

          b.  Proposed allocation: 40 - 45% in VINIX, 5 -10% in VSCIX, and 45 - 50% in VTIAX.  The range is based on your preference (or lack thereof) to the overall split between domestic (50 - 55%) and international equity (45 - 50%).

          Good Luck.


          • #6
            Thanks all!


            Peds: I included TIPS in an attempt for diversification.  But after reviewing the comments and stewing a bit more, I'm leaning towards eliminating the bonds all together at this point, and adding them in down the road.


            • #7
              definitely you have time on your side.  bonds can wait!

              but if comes down to risk tolerance, and ability to stick with the plan.  only you can know these things.  and ultimately my experience is most people don't know these things until they face them.  even if they think they do.  or at least their circumstances change and they are not as sure as they once were.