Announcement

Collapse
No announcement yet.

Asset allocation across accounts

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Asset allocation across accounts

    Everyone talks about asset allocation and diversification within you retirement portfolio. That includes holding different index funds. If someone has multiple accounts (eg i401k, rIRA, etc) does that mean they should diversify each account and have the same mix in each account or do they have certain funds in certain accounts and the rest in other accounts? Are there certain funds that are better suited for a specific type of account?
    TIA

  • #2
    I think it is best to think of your total portfolio. The asset allocation is across the total of accounts. Certain types of assets are better suited for different types of accounts.. This is called asset location strategies. In general Muni bonds go in taxable. Other bonds are good in tax deferred. Stocks go in Roth and taxable. Reits to Roth. High dividend paying stocks to Roth or tax deferred. Lots of opinions on this.

    Comment


    • #3
      Plus it's a lot easier to think of your entire portfolio instead of trying to mimic your AA in every single account.

      Comment


      • #4
        The more accounts, the more holdings in each account, the more difficult it is to have a total portfolio approach. I have various groupings with asset allocation target that I maintain for each grouping. It is not perfect, but it is a lot easier than wrangling everything into a single spreadsheet or aggregator.

        Comment


        • #5
          I disregard the advice to treat all accounts as one.
          Each account should have it's own AA depending upon intended duration, tax-efficiency, and potential to rebalance. It is of no use to have negatively correlated assets if one can not, in practice, rebalance them across accounts.
          examples:
          529 for children not yet born: 100% spy 500
          403b for use in 2024: 70% bonds + 30% stocks
          Taxable account for harvesting dividends only: 90% stocks +10% munis
          IRA to start draw in 2030: TGT2030.
          Roth IRA for legacy inheritance: 100% stock index

          I strive to keep the AAs simple within each account.

          Comment


          • #6
            I do a hybrid system, where all my retirement accounts are one big portfolio, and my taxable accounts are other separate portfolios.

            Especially if u have different goals for each one: retirement is generally full on growth in your youth, 100% stocks or close to it.
            Taxable may be combination of growth, wealth preservation, income, monthly withdrawals, etc.

            I have an indexed taxable with ETFs and some mega-caps along with muni bonds.
            Another taxable with cash as collateral for options plays.
            Another for YOLO plays
            etc.

            Comment


            • #7
              Originally posted by jz- View Post
              I disregard the advice to treat all accounts as one.
              Each account should have it's own AA depending upon intended duration, tax-efficiency, and potential to rebalance. It is of no use to have negatively correlated assets if one can not, in practice, rebalance them across accounts.
              examples:
              529 for children not yet born: 100% spy 500
              403b for use in 2024: 70% bonds + 30% stocks
              Taxable account for harvesting dividends only: 90% stocks +10% munis
              IRA to start draw in 2030: TGT2030.
              Roth IRA for legacy inheritance: 100% stock index

              I strive to keep the AAs simple within each account.
              Although I do think it is valuable to consider your overall AA across all asset locations, you make an important point here. Different accounts will be used for different purposes and at different times. My own version of this is that I am 60:40 stocks to bonds, but mostly bonds in the 457’s that I will spend first, Target Retirement 2025 in the deferred accounts (403b/401a) for age 72 and later, and mostly stock in Roth and taxable accounts. For whatever reason, I typically don’t include my directly owned real estate here.

              Comment

              Working...
              X