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  • Asset Allocation Help

    Greetings to the WCI community! I am reaching out for opinions on portfolio asset allocation. There are a lot of different portfolios out there and as I take a year-end inventory, I'd appreciate any advice/comments. I am 30 years old and currently a resident without any school loan debt (HPSP scholar) and have 130K invested with additional 30k in cash. As I have continued to invest throughout medschool/residency, I have added to wife's ROTH IRA, in addition to individual work-sponsored accounts. Our current retirement asset allocation breakdown is as follows:






















































































































    Roth IRA Portfolio
    % Allocation
    Large Cap VHDYX 5
    POGRX 14
    Small Cap VISVX 3
    Foreign Large Cap DODFX 17
    Healthcare VGHCX 3
    REIT VNQ 2
    TOTAL 44
    Roth IRA Portfolio (wife)
    Mid Cap VASVX 22
    403b (wife)
    Large Cap TRBCX (G) 20
    Roth TSP
    Large Cap C fund 6
    Mid/Small Cap S fund 6
    Bonds F fund 2
    TOTAL 14

    Our total portfolio as a whole gives the following Asset Allocations:



































    Large Cap Growth 37
    Large Cap Value 8
    Mid Cap 28
    Small Cap 3
    International 17
    REIT 2
    Healthcare 3
    Bonds 2

    In the upcoming year, I do not intend on changing 403b/TSP contributions, however, I plan on rebalancing through ROTH accounts, namely increasing international exposure in my ROTH and adding VFIAX to my wife's IRA given our total mid cap overweight.

     

    Questions:

    1. What would remain a reasonable US/foreign and LC/MC/SC asset ratios

    2. I recognize we are nearly 100% stocks, fine with that given our risk acceptance and age

  • #2
    Its very personal, but I think that your allocation is not unreasonable.

    In my equity portfolio, I overweight small and value and am about 2/3 US and 1/3 international.

    I am not a huge fan of overweighting healthcare with a sector fund, especially such a tiny position, especially when your livelihood is in health care, but I would not stone you for it. (I might just add that to the minuscule REIT position.)

    Comment


    • #3
      The longer I invest the more I think simpler is better.  Consider just a simple mix of total bonds plus total stocks and possibly 30-40% foreign stocks.  2 or 3 funds can do this fine.  Or consider Target Retirement funds.  Then there is only one.

      Comment


      • #4
        Agree with simplicity, in the end the differences will likely shake themselves out unless you're actually exposing yourself to some real market beta or risk. If not doing that, you will greatly benefit from the ease of simplicity. A total market fund, a bond fund if you want that, and an ex US if you want that.

        Nothing wrong with tilts, but after having a large, mid, and small mix, how is that different than a total market? There is usually quite a bit of overlap in these funds as some of the definitions overlap. If you have a strong view on one of the factors, go ahead and overweight it. If not, maybe simplify.

        Comment


        • #5
          From time to time I even consider going to the 1 fund portfolio, Vanguard Total World Stock Index Fund.  Sure, the allocations aren't perfect (not too far off either), but having a 1 fund portfolio is pretty appealing.


           

          Comment


          • #6
            Congrats on being a resident without debt. That is awesome, and as someone who recently finished fellowship, I'm jealous. That is way more important than your current asset allocation.

            Your asset allocation is fine, but like the others said, I'd simplify it if possible. I don't see a reason to have a 2% or 3% position. It also looks like a good portion of your portfolio is in actively managed funds with expense ratios in the ballpark of 0.7%. Most people here will tell you to use index funds with much lower expense ratios, if they are available to you. For example, most of my funds have ERs of less than 0.1%.

            Last thing. If I were you, I'd invest some of that $30K in cash. Especially if your wife works. Emergency funds are important, but it's pretty hard to get fired as a resident.

            Whatever you decide, don't lose sleep over any of these decisions. You are in a great position.

            Comment


            • #7




              The longer I invest the more I think simpler is better.  Consider just a simple mix of total bonds plus total stocks and possibly 30-40% foreign stocks.  2 or 3 funds can do this fine.  Or consider Target Retirement funds.  Then there is only one.
              Click to expand...


              It is hard to argue with this, but even harder (for me) to simplify!

              Comment


              • #8
                Simple is good.  Realign now while you are in a relatively low tax bracket.  Of course I say that my portfolio has many more positions than yours.  I hold on to things to avoid taxes.

                Comment


                • #9
                  Being 30 with no debt is outstanding as you are way ahead of the game. The main thing I would caution you on your allocation is don't underestimate the importance of diversification from an all equity position. I know you are young, but even a small amount (10-20% bonds for instance) will make the next bear market tolerable. As many smarter men/women than me will attest you never really know your risk tolerance until you see your portfolio drop big in a bear market.

                  Comment


                  • #10
                    Thank you to everyone who has responded, I appreciate the input. I think moving forward, I will simplify holdings by selling VNQ/VGHCX and putting this amount in DODFX. I'll continue to DCA between SC and LG value in Roth and then decrease my MC by selling some VASVX for SP500 core holding. I'd imagine moving forward, the sp500 will become  my "core holding" but in the meantime I like what the active funds have done and hope they may prove worthwhile in the next market correction.

                    Comment


                    • #11
                      Simple is better.  Less temptation to tinker.  Boring is good.  However, your 17% international;  is that emerging or international?  Either way, it is low.

                      Comment


                      • #12




                        Thank you to everyone who has responded, I appreciate the input. I think moving forward, I will simplify holdings by selling VNQ/VGHCX and putting this amount in DODFX. I’ll continue to DCA between SC and LG value in Roth and then decrease my MC by selling some VASVX for SP500 core holding. I’d imagine moving forward, the sp500 will become  my “core holding” but in the meantime I like what the active funds have done and hope they may prove worthwhile in the next market correction.
                        Click to expand...


                        All these assets are correlated highly, and during corrections correlations tend toward one anyway, they wont really provide much but maybe a 'relative' difference, all will still be down.

                        Only bonds and products that are long volatility will be expected to be non correlated.

                        As far as diversifying, 10-20% isnt much help either. Im not sure theres much you can do outside of a dangerously bond heavy portfolio for age to really feel slightly better during a drop. I think its going to suck no matter what. This is just a trade off for a different kind of risk that is more sinister in the long run.

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