Portfolio Allocation

[LivingAlmostLarge]

Do you know your portfolio allocation? I interestingly decide to play with it last night.

Cash 5.65% - mostly to pay taxes - not counting my ibonds or cash in capital one savings
Individual Stocks 30%
ETFS 65%

ETF - Composition 65% - i'm thinking of dumping my small caps, mid caps, internationals and going to VTI 50% and QQQ 25% VGT 25%. But i have a lot of gains so I may have to just keep adding to positions like i've been doing instead of selling and rebalancing. I don't rebalance I add usually. So I have a lot of capital gains on everything. I don't have any losers to sell. hard to when you've held like buffet said forever.

VOO 18%
VOT 5%
VB 5%
VEU 11%
VTI 32%
AMLP 1%
FBTC 1%
QQQ 18%


Stocks - 30% messy - some positions like googl 2006 ,appl 2007, meta 2016, amzn 2016, 2020 tesla, brkb 2020, pltr 2022, nvda 2022 so the gains are hefty and my positions I don't know how to get out of so I leave it alone to grow. I have 1500% returns on google and apple. and 500% on pltr and nvda and the positions are all 6 figure gains. 1st world problems I do realize.

Apple 6%
Amzn 5%
BRKB 4%
Goog 13%
NBIS 9% - this year
NVDA 8%
PLTR 16%
TSLA 10%
Meta 4%
MSFT 4%
-21% -lots of little positions in other stocks like 1% or less
FIG, CRWD, BURE, AMD, IONQ, LB, Team, QUBT, SHOP - AMD went nuts

I've been thinking about to racheting down the number of ETFs and the number of stocks. But a lot is in taxable with big gains. I don't usually sell anything so it gets harder to unwind. A lot I bought in 2020 during the covid dip and haven't sold. There are a couple of things i bought later like pltr and nvda and nbis which also went crazy.

We are also about 50% taxable and 25% Roth and 25% Pre-tax. When I add money I typically add to positions I want to increase. i don't rebalance in the traditional sense. It means things are sitting a long time. I have VB and VOT from 2005 when I started investing and VTI and VOO and QQQ and VEU as well. I did the efficient frontier/intelligent investor allocation of 10% to small, mid, international caps and split my large to QQQ and VTI/VOO. I would have money and redirect it into these funds based on which was doing good and which was doing bad. I never sold and rebalanced ever year. so for 20 years I've added to my positions only.

AMLP and FBTC are new positions. I had money and would push new contributions into them. I don't think this is for everyone this style of rebalancing and I'm not sure it's the most efficient. but it lets me sleep at night know I don't ever sell when the market is going down. Instead I keep buying and reinvesting. But the small/mid/international have been a REAL drag on my portfolio. If I had only invested in VOO and QQQ i would have 3x what I have now probably.

My thought had been to wait until FIRE and then harvest some gains in our taxable, but now i'm looking at our pre-tax and needing to do conversion. And then wondering if I need to harvest some of these crazy winners sooner. Thoughts?

[srblanco7]

Do you know your portfolio allocation? I interestingly decide to play with it last night.


My thought had been to wait until FIRE and then harvest some gains in our taxable, but now i'm looking at our pre-tax and needing to do conversion. And then wondering if I need to harvest some of these crazy winners sooner. Thoughts?

To answer your first question - yes our AA is 70% equities / 23% bonds & 7% cash (or cash equivalents like t bills). Our asset location is 51% brokerage (taxable) / 43% tax deferred / 6% roth. Our equities are owned via mutual funds - no individual stock holdings. We always avoided holding individual stocks because up until about 5 years ago a fairly significant portion of our net worth (approximately 25%) was tied up in a single private company stock and we didn't want additional concentrated risk (this was resolved in January of 2019 when the shareholders of the private company elected to merge with a larger firm).

I think many here are buy and hold investors and likely have substantive cap gains in their taxable accounts - similar to what you describe. As for when and how to address portfolio simplification and perhaps also moving toward a different asset allocation and/or asset location - I think you have to have a target for what your trying to achieve and then create a road map to get there - factoring in time, taxes, risk tolerance and risk capacity, etc. There's generally not a perfect plan for addressing portfolio changes - so accept that "good enough" is fine.

[kork13]

I don't monitor or manage our overall AA super closely ... But at least in general terms:

How it's invested:
- Stocks: 51%
- Bonds: 5%
- 529/UTMAs: 6% (I manage them separately, but these are 100% stocks)
- Cash: 2%
- Real Estate/RELP: 36%

Where it's invested:
- Taxable: 50%
- Roth: 41%
- Tax deferred: 9%

I think what's most telling about our plans based on these numbers are 2 points, understanding that our intention is for me to retire in 3-7 years with a pension (combined with my wife's existing/smaller pension) that will easily cover all of our baseline expenses (~$100k total).

First, because our pensions will likely be at least mostly taxable (DW's pension is effectively tax free, ~25% of total), not to mention our taxable investment returns .... most of our sub-15% tax brackets will be taken up by that income. So I have very intentionally heavy-weighed Roth, completely stopped traditional contributions 15+ years ago, and maxed out our retirement vehicles since 2007. The Roth money will hopefully allow us to manage/minimize taxes in retirement.

Second, our goal is to be FIRE'd/work-optional once I retire from the military (as early as age 42). It's entirely possible or likely that one or both of us will still work, but we're stacking money in taxable accounts to provide stopgap funds for any spending beyond our pensions without needing to tap retirement funds via 72t or otherwise.

[LivingAlmostLarge]

To answer your first question - yes our AA is 70% equities / 23% bonds & 7% cash (or cash equivalents like t bills). Our asset location is 51% brokerage (taxable) / 43% tax deferred / 6% roth. Our equities are owned via mutual funds - no individual stock holdings. We always avoided holding individual stocks because up until about 5 years ago a fairly significant portion of our net worth (approximately 25%) was tied up in a single private company stock and we didn't want additional concentrated risk (this was resolved in January of 2019 when the shareholders of the private company elected to merge with a larger firm).

I think many here are buy and hold investors and likely have substantive cap gains in their taxable accounts - similar to what you describe. As for when and how to address portfolio simplification and perhaps also moving toward a different asset allocation and/or asset location - I think you have to have a target for what your trying to achieve and then create a road map to get there - factoring in time, taxes, risk tolerance and risk capacity, etc. There's generally not a perfect plan for addressing portfolio changes - so accept that "good enough" is fine.

Unfortunately I think i'm going to have to suck it up and hold positions for awhile longer. I think i'm going to just push new assets into the ETFS I want to hold and slowly pare back gains as we go alone. We were very fortunate in our Roth IRA gains and it made our retirement accounts surprisingly balanced though we stacked cash way faster in the 401k yet they are nearly the same. The taxable is what it is.

[Atretes1]

Broken up between the 3 different accounts. I might think about liquidating my brokerage and start paying off my rental properties. My cash position is only about 1% of my portfolio now. I put most of my cash in the brokerage.

457

76.27% Vanguard 500 INdex admiral
16.39% Vanguard Total Intl Index Admiral
7.37% Vanguard Small Cap Index ADM

ROTH IRA

0.08% VTIAX Total Int.
92% VTSAX Total Stock

Taxable Brokerage

100% VTI Total stock ETF

[srblanco7]

Unfortunately I think i'm going to have to suck it up and hold positions for awhile longer. I think i'm going to just push new assets into the ETFS I want to hold and slowly pare back gains as we go alone. We were very fortunate in our Roth IRA gains and it made our retirement accounts surprisingly balanced though we stacked cash way faster in the 401k yet they are nearly the same. The taxable is what it is.

LAL - was listening to a podcast this morning that touched on your problem statement. Podcast is “The Long Term Investor” and the episode is from Oct 8. Deals with using 351 Exchanges to move appreciated stock shares into an ETF and receiving ETF shares in return. Some level of complication as it relates to process, and I think you’d have to work with an advisor to accomplish. Was an interesting introduction to the topic.

[LivingAlmostLarge]

LAL - was listening to a podcast this morning that touched on your problem statement. Podcast is “The Long Term Investor” and the episode is from Oct 8. Deals with using 351 Exchanges to move appreciated stock shares into an ETF and receiving ETF shares in return. Some level of complication as it relates to process, and I think you’d have to work with an advisor to accomplish. Was an interesting introduction to the topic.

Thanks and i heard and read about 351 but i don't know if i want to pay to have help or make a mistake.

Atretes i'm not sure harvesting gains is the way to go to pay off rentals versus just redirecting money.

[LivingAlmostLarge]

Also my gains are over 100% for some and for a few like 500% or more in taxable if not 10x so 1000%. Unwinding while working is not easy.

[Like2Plan]

I just re-balanced so we are 55% stocks and 45% bonds--mostly in tax advantaged accounts.

In your situation, I would immediately change the desired allocation in your tax advantaged accounts because there will be no tax consequences.
In taxable:
1. Turn off dividend reinvestment for stocks you are hoping to change.
2. (Any new dividends you receive go into your new desired allocation)
3. Sell losers.
4. Using specID sell some of the winners to the extent that it would be offset by the losers.
(If you have been doing dividend reinvestment and making new purchases, you may have some lots that don't have a lot of gains).
5. Put all new income into your desired allocation.
6. Resist the urge to buy more individual stocks Write out your Investment Policy Statement and Ind stick to it. https://www.whitecoatinvestor.com/ho...nal-statement/

7. In your tax advantaged accounts- to the extent possible, bonds in pretax and stocks in Roth

[LivingAlmostLarge]

LOL I need an investment policy statement.

Okay I just created a spreadsheet summary I'm at 5% cash, 66% ETFs, and 29% individual stocks. I hadn't had a chance to really look at my portfolio until now.

tax deferred 25.89%
Tax free 32.17%
taxable 41.94%

I think this can work out for us to FIRE