Advice on IRA distribution

[subzero123]

We just finished the process of transferring 14k into a Roth IRA, and our advisor is recommending this allocation. I am more inclined to just do a simple vanguard three fund portfolio. We are looking long term here. Just want a US/international index, and a bond in the 40/30/30 range. Any recommendations? Should I find a new advisor?

 

Vanguard 500 Index (VFIAX) – 40%
First Eagle Overseas (SGOIX) – 35%
T Rowe Price Small Cap Value (PRSVX) – 15
DoubleLine Low Duration Bond (DLSNX) – 10%

[DMFA]

Except VFIAX, those are actively managed funds, which most of this community (financial DIYers, Bogleheads, etc) tend to eschew since most active funds don't reliably beat their indices.

You don't know when the managers' formulae won't beat it, and you're still stuck paying at least 10x as much in some cases whether they earn or not. Returns are reported net, after fees, so if a fund with a 1.05% ER has to out-earn a fund with a 0.05% ER by a full percent to give you the same return. If you hold active funds in a taxable, they create capital gains by in-fund turnover, on which you're taxed as well.

That being said, you'll find a lot of push against anything other than the passive index funds here. SGOIX's managers didn't keep up with their index this past year, ending up 4% below it, good for 70th %ile in its class by Morningstar...and its investors still paid them $87 for every $10,000. Over 10 years, though, it's top 3%, in hindsight being worth it, since it earned when the index sagged. On the other hand is VTIAX, Vanguard's passive int'l index fund, which has high fidelity to the index and only costs 1/8 of SGOIX. Over a long-enough time frame, it tends to even out.

Going forward, you don't know how well the active funds' managers are going to capture the upside while avoiding the downside. Might as well save the fees and just stick with buying and holding.

VTSAX, VTIAX, VBTLX (or investor share equivalents).

[subzero123]

Excellent post and much appreciated! Any recs on ratios?

[subzero123]

What do you guys think about this distribution/funds?

Vanguard Total Stock Market Index (VTSAX) – 62%

Fidelity International Index (FSIVX) – 28%

Vanguard Total Bond Market Index (VBTLX) – 10%

[jfoxcpacfp]

subzero123 wrote:

What do you guys think about this distribution/funds?

Vanguard Total Stock Market Index (VTSAX) – 62%

Fidelity International Index (FSIVX) – 28%

Vanguard Total Bond Market Index (VBTLX) – 10%

Click to expand...

Assuming you're at the typical age for residents, ask yourself, "Why would I need to allocate anything to bonds?" Maybe put that 10% in a REIT fund. Otherwise, I think you're good.

[subzero123]

Im 2 months away from being a surgical specialty attending in an academic program (in PGY6 fellowship now), and my wife is a private practice pediatrician. Can you please explain what you mean? Thanks for the help

[subzero123]

PS this is money that we transferred from my wifes 403b from her practice. I do not have a retirement account yet since I'm still in training.

[DMFA]

Might consider the total int'l FTIPX instead of the Spartan, slightly more mid-cap and has 1/6 emerging as opposed to none. Dealer's choice. Not a big deal either way.

Also might just do zero-bond; with that small of a portfolio, you won't get much advantage from bonds.

Mind use of the term "distribution;" that refers to withdrawing from IRAs. I first thought you were wondering what you do with cash you'd just pulled out of one. What you're talking about is asset allocation.

...and how are you getting institutional and premium/admiral class shares with that little buy-in? Do you already have money in the account?

[jfoxcpacfp]

subzero123 wrote:

Im 2 months away from being a surgical specialty attending in an academic program (in PGY6 fellowship now), and my wife is a private practice pediatrician. Can you please explain what you mean? Thanks for the help

Click to expand...

Recommend you read these 2 articles:

Bonds: What are they good for? Part 1

Bonds: What are they good for? Part 2

ps - just b/c you're in training is no reason to not save for retirement. This is a great time in your life to contribute to a Roth IRA.