Assett Allocationfor 90/10 portfolio

[Jrouss]

Any thoughts on the following portfolio of a 90/10 Stock/bond split using Vanguard Funds.  I just recently rolled over my IRA to Vanguard as I was put in a front loaded, high fee (1.72%) mainstay funds:

5%  - VICSX - Corporate Bond Fund

5%  - VBTLX - Total Bond Fund

50% - VTSAX - Total Stock Market

2.5% - VHDYH - Large Value

10% - VSIAX - Small Cap Value

15% - VTIAX - Total International

5%  - VEMAX - Emerging Markets

7.5% - VGSLX - REIT

 

[VagabondMD]

I like it except for the 2.5% Large Value. It is not really giving you much diversification benefit over the total stock market fund. I would rather see you add the 2.5% to small value or emerging markets.

[AZdoc68]

Vagabond MD wrote:

I like it except for the 2.5% Large Value. It is not really giving you much diversification benefit over the total stock market fund. I would rather see you add the 2.5% to small value or emerging markets.

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I agree.  I don't see much point in a small LV component here.  US Total Stock Market index is basically a large cap "blend" or "core" fund because of the capitalization weightings.

The only other quibble I'd make is that your allocation is very aggressive at 90/10.  Nothing necessarily wrong with that as long as you're tolerant enough to ride out bear markets without panic selling.

[Gas_Doc]

Agreed that the large value allocation isn't getting you much. I think there is something to keeping things simple, so as others have said, I'd get rid of that 2.5% and move it elsewhere. Also realize that VTIAX is 20% emerging markets, so if simplicity is of interest to you, just roll your 5% VEMAX into VTIAX. Finally, since bonds are such a small part of your portfolio, I wouldn't worry about diversifying within the bond market (and FYI, VICSX & VBTLX have a correlation of 0.94) until it becomes a bigger part of your plan. I also have a 90/10 allocation, and I stick with the just total bond market fund.

That consolidation would leave you with 5 asset categories rather than 8, well on your way to the Three Fund Portfolio

[VagabondMD]

Gas_Doc wrote:

I wouldn’t worry about diversifying within the bond market (and FYI, VICSX & VBTLX have a correlation of 0.94) until it becomes a bigger part of your plan. I also have a 90/10 allocation, and I stick with the just total bond market fund.

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Yeah, I agree with that two. If I split it, I might split between the Total Bond Market Index and a Short-term Treasury Index (to lower the interest rate sensitivity and the credit risk), but the total bond index is adequate as a singular bond fund.

[retinadoc]

I think it looks fine, but overly complex. Why worry about rebalancing all of that?

This is what I would do in your situation:

50% VTSAX

20% VTIAX

10% VBILX (50:50 intermediate government:corporates)

~10% SCV

~10% REIT

 

Of course you could also just roll the SCV and REITs into the equity portion and call it a day

[PhysicianOnFIRE]

retinadoc wrote:

This is what I would do in your situation:

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Pretty closely resembles my portfolio. 60 / 20 / 10 / 10 with a small & value tilt. I have some mid-caps in there, but I'll probably transition out of them when I separate from my employer (a.k.a. retire early).

[WallStreetPhysician]

Jrouss wrote:

Any thoughts on the following portfolio of a 90/10 Stock/bond split using Vanguard Funds.  I just recently rolled over my IRA to Vanguard as I was put in a front loaded, high fee (1.72%) mainstay funds:

5%  – VICSX – Corporate Bond Fund

5%  – VBTLX – Total Bond Fund

50% – VTSAX – Total Stock Market

2.5% – VHDYH – Large Value

10% – VSIAX – Small Cap Value

15% – VTIAX – Total International

5%  – VEMAX – Emerging Markets

7.5% – VGSLX – REIT

 

Click to expand...

Strong work on getting out of the high-fee funds. Your asset allocation certainly works, but I generally prefer simpler portfolios. As others have mentioned, a 2.5% allocation in any fund (as you have done in Large Value) won't change your portfolio much. VTIAX already has emerging markets, so unless you want a tilt to emerging markets (as you have done with small cap and value stocks), you could combine the VTIAX and VEMAX. I would also combine the total bond and corporate bond fund, but that's just me. Feel free to take any or all of our suggestions; the portfolio you have is fine if you're ok with managing 8 index funds.

[Jrouss]

Thank you to everyone for looking at this.  I personally have only used managed advisory service mutual funds in retirement accounts and am now getting out of them all and into low fee funds, and would rather manage them myself.  Looking into these managed funds more closely and the fees I've been getting charged, as well as the front load fees, I would rather not pay someone that much money to deal with them and get average returns.  I think I would rather take the extra 1-2% growth for myself than give it to mainstay.