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Old 04-17-2017, 12:38 PM
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Default Rate/Balance My Taxable Porfolio

So it has been almost a year since I started taxable investing. Please take a look to see if my portfolio is balanced or too risky for my age. Currently I don't think it's very well balanced since I have significant exposure to crowd funding investments which is too new to tell.

Everything you see here are in my taxable account

ETFs
1. Vanguard Financial ETF: 12k
2. Vanguard Mid Cap Growth: 10k
3. Vanguard S&P Small Cap: 6.2k
4. Vanguard Total Stock Market: 16k

Muni Bonds
1. Vanguard High Yield Tax Exempt Fund: 8k

Individual Stocks: 29k

Preferred Stocks: 7.5k

Crowd Funding
1. Lending Club: 7.5k
2. Peer Street: 72k

Risk Tolerance is High, tax bracket: 33%
34yo.

Please let me know if there are alarming red flags to reduce unnecessary risk. I am new to investing myself. Spent the last 10 years letting the 401k do its own thing.
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Old 04-17-2017, 01:18 PM
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Risk is an incredibly personal decision and comfort level can be different for everyone, I think the most important thing is to stay the course once you have a plan, I have been investing in a taxable account for 5 years and recently increased my muni bond holding so my asset allocation looks like this at 36 (105 minus age in stock):

38% VTSAX Total US Stock
31% VTIAX Total International Stock
31% VWIUX Intermediate Term Tax Exempt Muni

I prefer having Total US Stock vs different large/mid/small funds for simplicity.

I like having International Stock weighting to its market percentage. If the Vanguard Total World fund was as cheap as its components I would have it instead.

I also prefer the intermediate term fund over the high yield because the principal shouldn't go down as much when interest rates rise.

I was previously at 120 minus age in stock.

Last edited by AJ444; 04-17-2017 at 01:48 PM.
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Old 04-20-2017, 05:59 AM
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It would be hard to say if this is out of line for your asset allocation for 3 reasons:

1. I assume this is only part of your overall asset allocation. Maybe you have a large cash position or maybe 100% stocks in your retirement fund?

2. What is your desired asset allocation?

3. We don't know what this money is to be used for/what is the time horizon? Is it your EF? If it is your EF (and your only source of emergency funds), then I would say--Yes, too risky. Is it for retirement? Maybe not--see 1. and 2. above.
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Old 04-20-2017, 06:16 AM
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Quote:
Originally Posted by Like2Plan View Post
It would be hard to say if this is out of line for your asset allocation for 3 reasons:

1. I assume this is only part of your overall asset allocation. Maybe you have a large cash position or maybe 100% stocks in your retirement fund?

2. What is your desired asset allocation?

3. We don't know what this money is to be used for/what is the time horizon? Is it your EF? If it is your EF (and your only source of emergency funds), then I would say--Yes, too risky. Is it for retirement? Maybe not--see 1. and 2. above.
I agree with all of this. There's no context in which to evaluate what you've posted. We need more info.

If you looked at my wife's Roth, you would think she was nuts as it is 100% bonds. However, it's only a small portion of our overall portfolio. You need to look at the big picture to know if this piece of your portfolio makes sense.
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Old 04-20-2017, 07:44 AM
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Given your ability to save, you would probably be fine going 60:40. Reason being that you don't need to expose yourself to as much risk since you save 100k+ each year (if my memory is right).
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Old 04-20-2017, 08:40 AM
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Quote:
Originally Posted by AJ444 View Post
I prefer having Total US Stock vs different large/mid/small funds for simplicity.
It is simpler, and there's another very good reason to prefer it. Suppose a small cap stock grows in size and becomes a mid cap stock. A total market fund does not need to sell that stock; a small cap index fund does. Why not avoid taxable events if you can?
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Old 04-20-2017, 09:47 AM
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It also depends on what your individual stocks are, because they are probably in the ETF's, too. On the surface, it would appear that your ETFs are diversified, but Morningstar lists the top 5 sectors as pretty much the same (industrials, healthcare, technology, and financials, particularly), so you might have a lot of overlap and higher risk than anticipated.
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Old 04-20-2017, 11:11 PM
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As far as context goes.

The investment from my first post is everything I have that is liquid (13% of nw).

My 401k and my wife's IRA (17% of nw) are mostly just index funds at 100% stock allocation. Most of my other net worth which accounts for 70% of it is in my paid off house. Context wise, my net worth is heavily weighted in real estate (especially when you add peerstreet into the mix).

My goal is to have an investment rate of about 15-20k/month. My goal retirement age is 44yo (10 years from now).
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Old 04-21-2017, 02:30 AM
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I think it's reasonable, but you are very high in the bonds/p2p category. That's close to 100k. When the economy weakens, many of the p2p loans may take a hit. I'd argue for no more than 10% of your portfolio in p2p, and even that is high. 5% is a more reasonable figure. Other than that, looks fine, as long as you don't need the money within the next 10 years or so.

my portfolio is probably somewhat similar, excluding the preferred stock, individual stock, p2p lending (i divested out). I do have world bond, world stock, and reit mutual funds, which is something you could also consider. The muni bond fund is a nice diversification move in a taxable fund as well. If your state financial position looks good, you might consider a fund that invests heavier in your state bonds. That way that interest portion is state tax free as well.

edit: actually the reit is in tax advantaged account. probably not the best idea to place a high yielding fund in a taxable account.

Last edited by ~bs; 04-21-2017 at 02:46 AM.
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Old 04-21-2017, 05:08 AM
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Originally Posted by Singuy View Post
As far as context goes.

The investment from my first post is everything I have that is liquid (13% of nw).

My 401k and my wife's IRA (17% of nw) are mostly just index funds at 100% stock allocation. Most of my other net worth which accounts for 70% of it is in my paid off house. Context wise, my net worth is heavily weighted in real estate (especially when you add peerstreet into the mix).

My goal is to have an investment rate of about 15-20k/month. My goal retirement age is 44yo (10 years from now).
2 more Questions:
1. Will you sell your house when you retire in 10 years from now?
2. Is your EF in equities?

If the answer to #1. is No, I'm not sure it should be considered in the same category as a retirement investment. Yes, there are ways to tap into the home equity--but, maybe not something to rely on an income stream at age 44 (I'm thinking reverse mortgage). I haven't tried this, but I have heard that home equity lines of credit are more difficult to get when you are not employed. So, you may have a lot of your net worth tied up in real estate, but it might not be so easy to tap into in a case where there is a market correction (like in2008). You wouldn't necessarily want to tap into your stocks. So, what do you have that is rock solid on which you could rely on in such a case?
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Old 04-21-2017, 05:21 AM
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If one owns a house outright, it should be viewed more as an expense stream that doesn't exist because you own the property moreso than a retirement asset that you will draw on in my opinion. unless you plan to do a reverse mortgage or something.

owning a house will likely help you in retirement because if an expense stream doesn't exist, then it reduces the amount of income you will need in retirement. You'll be paying for maintenance and taxes versus if you rent, you'll pay full market rent for the rest of your life.
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Old 04-21-2017, 07:08 AM
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Quote:
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owning a house will likely help you in retirement because if an expense stream doesn't exist, then it reduces the amount of income you will need in retirement. You'll be paying for maintenance and taxes versus if you rent, you'll pay full market rent for the rest of your life.
My mom is 86. Ten years ago, she sold her house and moved into a senior apartment building. Her rent and utilities are far less than what it was costing her to have the house even though it was paid off decades earlier. She saves a few hundred dollars per month renting vs. owning.
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Old 04-21-2017, 07:18 AM
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Originally Posted by disneysteve View Post
My mom is 86. Ten years ago, she sold her house and moved into a senior apartment building. Her rent and utilities are far less than what it was costing her to have the house even though it was paid off decades earlier. She saves a few hundred dollars per month renting vs. owning.
good anecdotal, always an exception I suppose, and all situations different There's no way that would be true in my area. Here's an example of senior housing in my area, income limits. I believe the monthly rate is non section 8/low income. At these rates, there's no way it's cheaper to rent in my area than own especially since our property tax rates are pretty low. Prop taxes on a property that rents for $1400 or so is probably like $60-70/month



---------------
Anyways, in your case, she benefits by being able to use the money from the sale to cover her rental expense and generate some interest/dividends in an investment account.

Last edited by ~bs; 04-21-2017 at 07:31 AM.
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Old 04-21-2017, 09:24 AM
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To add a little more information

I will not be selling the house at retirement (will most likely get passed down or sell and split the money among the children). I am also not looking forward to any withdraws of principle at retirement as well. I am still expecting a passive income at retirement of close to 200k/year (I'll drop down to part time, wife's business should sustain itself). If you include the passive income plus investment returns 10 years from now, I'll still probably be making the same vs today with the both of us working full time.

My plan is to earn our current salary today at retirement..and then continue to invest like today and then pass it down. I don't see ourselves every touching the principle.

Thanks to all your suggestions. I'll be looking into some of the funds suggested and make some tweeks. Any other pointers are welcome.
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