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Asset Allocation for Beginner

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  • Asset Allocation for Beginner

    I am 33 yr old attending physician with salary of $260k and wife is in residency with $60k salary. We recently started saving money into our retirement accounts. I have questions regarding the appropriateness of my allocations as a beginner.

    My 403b, 457: 3.5k invested 100% in VITFX (Vanguard Instl Trgt Retire 2035 Instl).

    My 401a: 11.5k invested 100% in VITFX (Vanguard Instl Trgt Retire 2035 Instl).

    Wife's 403b: 1.5k invested 100% in VITFX (Vanguard Instl Trgt Retire 2035 Instl).

    Wife's Roth: 5.5k invested 100% in VTTHX (Vanguard Target Retirement 2035 Fund Investor Shares)

    My Roth: 5.5k invested 100% in VFINX (Vanguard 500 Index Fund Investor Shares)- is this appropriate for roth account.

    Taxable account: none opened yet.

    HSA: about to open soon.


    VITFX have:-

    • Vanguard Total Stock Market Idx I: 47.6%

    • Vanguard Total Intl Stock Index Inv: 31.2%

    • Vanguard Total Bond Market II Idx Inv: 14.8%

    • Vanguard Total Intl Bd Idx Admiralâ: 6.5%


    VTTHX have similar profile as above:-

    • Vanguard Total Stock Market Index Fund Investor Shares: 47%

    • Vanguard Total International Stock Index Fund Investor Shares: 31.3%

    • Vanguard Total Bond Market II Index Fund Investor Shares: 15.3%

    • Vanguard Total International Bond Index Fund Investor Shares: 6.4%


    We don't have better options in our 403b, 457 and 401a account.

    Is this above approach risky in any way. I feel like I am putting all eggs in one basket. Which sector should I focus on to diversity my portfolio in future. Thanks.

  • #2
    You don’t really have your eggs in one basket; you own essentially every stock in the world and have an 80/20 stock/bond ratio.

    I am at a similar stage as you but have nothing in bonds. You (we) have very little to begin with in your portfolio, there’s really no need to be conservative at this point. A 50% drop tomorrow should cost you the same amount you invest 1-2 months.

    I’d wait until you have a big enough portfolio that you’d be uncomfortable seeing wild fluctuations before having anything more in bonds. Would also probably wait for a year that we’re not guaranteed to see interest rates on the rise


    edit: also, how much are you saving?  This matters more than any asset allocation


    • #3
      Vanguard created these funds for beginners, so in general, target date allocations are fine. Are you planning to retire in 2035?  If not, why did you choose that target retirement year?  Again, Vanguard is trying to make this as easy as possible for beginners, so just choose your actual expected retirement year.


      • #4
        I think the only mistake you made was your rIRA!


        • #5


          • I like your idea of including bonds as portfolio increases.

          • We have 90k in saving account at American Express (with 1.45%)- this is combination of our emergency fun and saving for our future house downpayment.

          • We are planning to save 20% of annual salary from this year onward.



          • My retirement year is 2045.

          • I initially had 2045 vanguard plan but I changed this to 2035 plan to have increase the bond ratio in portfolio. Now I am realizing that 2045 is better plan compared to 2035.

          • Vanguard Instl Trgt Retire 2045 Instl: Stocks (91%) and Bonds (10%)

          • Vanguard Instl Trgt Retire 2035 Instl: Stocks (79%) and Bonds (21%)


          @Peds: please do elaborate on this mistake. I am about to open taxable investing account at Vanguard. Is VFINX (Vanguard 500 Index Fund Investor Shares) better suited for taxable account.


          Thanks again for useful suggestions.


          • #6
            I don't know (but willing to guess) as to what Peds meant:

            My guess one of two things:

            a. issue with VFINX in not being in the same target date funds as your other retirement assets.  The level of simplicity across your portfolio is great, though being more aggressive with equities is certainly appropriate with a rIRA.

            b. issue with the fund selection.  Your selection, though being all equity is a certainly a large cap focused.  I would tend towards a total US stock market index like (Vanguard Total Stock Market- VTSMX/VTSAX/VTI).  You can do either the ETF (VTI) or the VTSMX until such time as you are able to add funds and get to an admiral class (VTSAX).


            • #7
              Thanks @ajm184. After reviewing each suggestion, I am planning to update my portfolio with following changes:-

              My 403(b)VIRSX (Vanguard target retirement 2040) = 52% U.S Stock (VITSX) + 34.3% International Stocks (VGTSX) + 9.6% U.S Bonds (VTBIX) + 4% International Bonds (VTABX).

              Wife's 403(b): same as mine 403b above- VIRSX (Vanguard target retirement 2040).

              My 457(b): 100% to VITPX (U.S. Large-Cap Stocks:- Total Stock Market Index Fund).

              My 401a: 100% to VSMAX (U.S Small/Mid-Cap Stocks Index fund).

              My Roth: 100% to VTSMX (Total US Stock Market).

              Wife's Roth: 100% to VTSMX (Total US Stock Market).

              Planning to open Taxable account at Vanguard with following two accounts:- 70% to VFINX (500 Index Fund Investor Shares) and 30% to VDVIX (Developed International Market).


              Hopefully once I have more money in these accounts- will consider adding REIT and more bonds options.