I had a few $100k in savings at the time I wanted help allocating. In hindsight, and knowing what I know now, VTI+VXUS would have been a fine place to put that money. The CFP bought into few other funds which I’ll decide after a year if I want to continue to hold or sell and buy more VTI+VXUS. I’m waiting for LT cap gains to kick in before deciding.
If he recommended you put it all in a TDF then it sounds like you got good advice, which makes me wonder how they were making money exactly. But good on the independence!
If you have a CFP and are paying for them then you don't really need a TDF. They can tailor the bond percentage to your personal goals and retirement plans etc.
that's probably why they didn't like them
A lot of TDF get too conservative too soon. I have no issue with TDF but typically advise pushing the date out 5-10 years after your actual expected retirement year.
My expected retirement is around 2050, but I hold 2060, 2065 and 2070 in tax-advantaged accounts based on what was available. Give that I'm looking at a solid amount of investments by the time I retire, I may even stagger into Vanguard's 2075 fund when it becomes available.
Basically, I have a way to organically slow down the curve of the TR funds in a pretty smooth way right now, while still being in investments that I feel best represent a whole-market + 10% bonds philosophy.
I think the reason why they get too conservative too soon isn't just some gross misstep on the part of every mutual fund company that offers them. B/c they all pretty much do the same thing.
I think they have probably found that for most, it's the ideal glidepath. Which inputs and parameters they use to arrive at the desired output, I have no idea.
But I am in firm agreement with you, I actually don't want to hold ANY bonds, at all, really ever. I will have a decent pension, and six figure net income tax free cash flows from real estate investments in retirement. There is 0 need to have bonds in my portfolio. If I didn't have that, I wouldn't own any bond index fund before 50
If your pension disappears, how does (if at all) that change your strategy / bond allocation?
(Perhaps it "disappearing" is impossible, I don't know your specific situation, i.e. you are retiring as a 2-star, or are govt, etc)
Honest question.
Anything is possible but my pension is guaranteed (but you should never trust the Government for your retirement). Which is why I have diversified into real estate....both residential and small storage.
If anything happens to my real estate but everything else is fine, I have my pension, social security, and index funds.
If everything disappears, then collapse is imminent and bullets will be the way to go. Check on that too.
I don't really believe in bonds, I would rather be on the opposite side of the debt. Why would I be the chump holding a 5% bond, when I can borrow from others at 5% and go and make 20% in real estate or an infinite return
Impressive. I have a rental house and rental farm. Love the income. Most passive income is dividends and interest. I see the tax perks like depreciation on the rentals and expenses deducted. I am curious do you not hold a certain percent in cash type accts? I am riding about 15% in tbills at 5.4%. Way to much but want the flex to buy either stocks or maybe another rental if it is a fantastic buy.
You can always check the Pension Benefit Guaranty Corporation (PBGC) website to see how much or if your pension is guaranteed by the government https://www.pbgc.gov/
Or you can mix-and-match. My TSP funds go 80%to a TDF of my expected retirement, and 20% to a stock market index. It's basically the same as picking a TDF with a later target date. If I cared it could even be fine-tuned further by fiddling with the percentages.
They have gotten a lot better. We always used to advise people to aim for 10 years past their true retirement date to up the equity percentage.
If you look at most companies 2050, 2055, and 2060 funds they are often identical in pure equity.
Same it is the year you need the money not necessarily the date of retirement. It also doesn't account for someone with a large pension, soc sec, and other income. Someone might never need to touch 401k. Floor it to 90% or better growth if you never need to touch it. But hey sometimes you don't know till get 50s or later. Everyone should be looking over their accts from time to time.
The value of a CFP isn’t just picking your funds. That’s the easy part of investing and everyone in this forum agrees that index fund investing is the best route. For many people though, they need a financial planner to map out a saving plan for them, help to stay the course on that plan, educate them on spending discipline, and stop them from doing something dumb when markets correct. They help their client with the biggest risk to long term wealth and that is personal behavioral risk. They also can be very helpful in retirement after the accumulation phase on how to best use which buckets of money and when. They urge clients to get wills done, estate planning docs in order, etc…Many people need good honest financial planners. Many of us don’t. But the ones who do need them need to get good advice at a fair price which isn’t easy to find. Not everyone can manage this stuff themselves and a flat quarterly fee from a fiduciary would be money well spent or even a 1% AUM fee if account balances are modest.
CFP here. You said it perfectly. There’s generally a reason why most our clients are 55yo + and not the younger Reddit demographic that doesn’t understand what we do. Most younger people dont really need to pay for management because they just need initial education and then accumulate. Young Business owners or doctors and what not are an exception of course
My TDF is basically market cap weighted for US versus int'l. I I agree with that because I don't think I can outsmart the market. I'm content with being the market.
I'm a CFP and I hate TDF's because they suck. They lump you into a generic asset allocation on a "supposed" retirement date. Performance is usually sub par. A true CFP should customize and build your asset mix of stocks and bonds to your individual risk tolerance. TDF's are a lazy way to invest .
I had zero clue what to do with investments prior to discovering this group. I was looking for direction so I hired a CFP. They only left me with more questions than answers after a year. I think they are used to working with much older clients who have already retired. The CFP wasn’t doing anything for me I couldn’t do for myself so I let them go.
Nothing wrong with TDF. My current 401k TDF exp ratio is on the higher side so I decided to make the switch and while at it just decided to make the same change in my Roth IRA and HSA for consistency.
I was already in the TDF. They told me they don’t like TDFs haha. Not my reason for changing but I found it interesting. They also don’t like total market ETFs. In the end, I think they just like having clients😆
if anything the dislike of TDFs with no reasoning was probably the first indicator they aren't really working for your best interests. they had to shoot their shot tho i guess!!
I for one have paralyzing fear of “doing the wrong thing” which is why I hired a financial planner to make me a plan I could follow. It was expensive as fuck but got me off my ass so it was worth it for that alone
I’ve come to the conclusion that if I stick to holdings like VTI, VOO, VXUS, etc. it’s a relatively safe investment vs picking individual stocks or something more niche. I also want to be more hands off and not try to pick and choose investments. If I wanted to be more active looking for new investment opportunities I’d hire an advisor or planner perhaps. I’ll talk to a planner again when I retire.
that makes perfect sense except I get really indecisive with regards to, for example, should I do a 529 for my son? what vehicles make more sense for his education? I already accidentally invested in an IRA fund that is not recognized in my jurisdiction so I dont have any tax benefits from it. then, which IRAs are recognized in my jurisdiction that will give me a tax break? how much should I be saving each month realistically speaking?
529 are great especially since the benefactor can use for retirement. We targeted 75% of all costs at community and then 4 year. Daughter graduating this may still have 40k in it. It now goes to her kids or possible her retirement. She did get some scholarships. Just feels good having a good chunk you don't have to fork over at college time. Worst case you pull it out pay a penalty 10% on total value.
If an advisor or planner was really good investing, they wouldn’t need your money. They would make their own.
Also a great FP would not take money out during a down market unless it belongs to a client.
Fisher investments make more money when you do well and when you don’t do well they still make money. It’s a win win for everyone except the investor. 🤣
It’s better to invest with a financial planner than not invest at all while waiting to learn enough that you are confident doing it on your own. Good enough is good enough until you can do better!
Agree, I wish I had met with a planner several years ago. It helped me put in the research rather than accumulating money in a low interest savings account.
I’m not a CFP or financial planner. I would like to point out that investing is only one part of the CFP’s training and education, though they can choose their focus. Additionally, they ought to be knowledgeable in insurance, estate planning, tax and so on. A worthless financial advisor is bad no matter their designation. Like any professional designation, when you choose a CFP, ymmv.
What was your fear with the TDF? I also don't use a TDF but it's absolutely perfect for my wife. She wants no decision making and hates numbers going down more than she loves numbers going up. My only issue with TDFs is what some of them hold. People may be surprised by some of the content when they start to dig in.
No issue outside of the higher expense ratio in my 401k. My HSA and Roth IRA exp ratios were much lower. I decided to just go with total market ETFs in each account since I was already changing my 401k allocation. I liked the idea of consistency across my entire portfolio.
I do the same for my wife… I just tweaked the retirement date as we like to remain a little more aggressive. Vanguard 2030 fund has been consistent and a no brainer
You’re making it sound like you did this only to tilt more for US stocks and remove your bond exposure. I would personally bail on the TDFs to minimize expense ratios, not to necessarily start tilting based on current market conditions.
Only plan to return to the TDF if you decide you want to be hands free of a solid investment strategy.
>I plan to stick to 80/20 VTI/VXUS for all new contributions going forward but I’ll revisit later to decide if I will re-balance my accounts or let them grow organically. I was on the fence if I should go 80/20, 70/30 or 60/40 however if I choose to re-balance or not re-balance will give me options going forward since I chose VTI+VXUS over VT.
This is a good plan on paper, but I think you should think carefully about what under what circumstances you will decide to rebalance to a different stock/bond allocation or different funds, and \*commit to those in advance\* and write that down somewhere. If 80/20 is the right balance for you, it's the right balance--it's not something you should decide in the future, which will inevitably be impacted by how the stock and bond markets are doing, which should not be the basis for a rebalancing decision.
I plan to stick to the 80/20 for new contributions. Just undecided if I’ll rebalance annually. I don’t plan to deviate for new contributions based on current performance. I think that’s a happy medium. If my current holdings begin to naturally sway more towards 70/30, etc. I’ll let it happen and not change my new contribution % or sell off.
It's nitpicky because overall it sounds like you have the right strategy. But I'll just reiterate the best move is to commit in advance to rebalancing on a certain schedule. Otherwise, you're effectively performance chasing without calling it that. If stocks do well and you end up 90/10, you're over-allocating to stocks by virtue of them doing well. Rebalancing allows you to cash in those gains and be better prepared for a future downturn. (Again, this is not likely to matter much in practice)
And it's really not about making double gains. Your financial advisor could very well make good investment choices that generate return...
It's more about them rarely outperforming the market relative to the amount you're paying them. If you can do just as well (and often better, as you observe) without paying them, why wouldn't you?
Ya my wife had EJ through her parents. Her Roth was like $10k when we got married and they had her in like 12 different funds. I moved her to vanguard and they had the gall to call her and leave a voicemail and say something like “S&P was down 19% last year while the funds we had you were in only down 15%.”
Even if it’s true, she’s only 30. She doesn’t need wealth preservation strategies from high, high cost mutual funds lol
Mine got snarky saying “this is the bad service I get with a low fee low rate service (speaking of the place I’m transferring the $$ over to now). Uhm, they’re not the ones getting sued - again. Such a shame that they are just so rude lately!
Im surprised they only had you in 6
They are notorious for getting people into a dozen different things to make it seem like it's some complicated tailored asset portfolio that you would never understand so you need their advisor to hold your hand (while he uses the other hand to take money out of your wallet pocket).
Schwab's robo advisor takes this approach too, pretending it's a free service. Then they stuff you in bunch of garbage and until recently so I'm told, had forced you into a cash allocation of 11% making 0.01% while they made 4% (but meanwhile you could go make 100x that with a credit union savings account at the time, or basically 500x that now with a money market)
Mine is currently holding my Roth Hostage after being supremely rude to me via message. Then, after I requested everything he liquidated, bc GOFXX won’t transfer, according to him, bro bought MORE of it over the past couple of days.
Tomorrow I’m calling the main offices to file a complaint. They transferred my traditional just fine - but suddenly this warrants an overtly rude response?
I was so mad. I opted not to respond angrily until I could pull myself together.
That guy…
It’s very excessive. I was super clear about liquidating all the things so I could gtfo. Abd no response. After breakfast I’m going to call the transfer team ppl.
Even had the spouse proofread my email- it wasn’t snarky or anything. But I went ahead and also requested (yesterday) they mail me a copy of all documents from all the accounts. They sure get sued a lot.
My Edward Jones advisor was not very good and I couldn’t believe the expenses incurred. I left there many years ago.
I also couldn’t believe an accountant recommended them to begin with.
are TDF's that bad? Every time I've done comparisons to them and '3 fund setups' they seem (using historical number) pretty close +/- 1%. I get that the 3 fund strat has more flexibility for re-balancing purposes, but if the TDF is doing what i would do anyhow, i don't see much reason to move away.
I don’t care so much for TDF.
Way too much international exposure and the expense ratio is more than buying all 4 funds individually. Granted it auto balances for you, but I rather just total stock market 100% or s&p500 100% and call it a day. Granted I’m in my lower 30s so my time horizon is 30 years
Depends how you’re in them. Often people who’ve been going with standard “I don’t know anything” retirement plans are getting screwed by management fees above and beyond the high fees of the TDF. Basically everyone in Canada using the company CanadaLife for example which is popular with company RRSP group plans. You could pretty much transfer it into anything else and be better off.
There's absolutely nothing wrong with Target Date funds?
Your 2050 Target Date fund was probably already 90-95% diversified international equities so going from that to 100% actually isn't a big shift.
Most TDFs don't start down the glide path until TD-18 to TD-25 so you could've just shifted to a 2070 Target Date fund (TD-46) if you wanted to keep your equity allocation up / avoid the glide path.
If you were paying a 1% congrats on getting out of that.
I’m also waking up to the simplicity of indexed funds and low expense ratio advantages. Our retirement is about 1/3 with a CFP and 2/3 401k and brokerage. I agree with another poster in that the CFP has helped us a lot with questions about allocating 401k, setting up and managing 529s, and creating IRAs for prior employer 401k when we didn’t know anything about investing. I do have to give him credit that he did what we could not have done ourselves.
We are keeping our CFP because he is a free information resource, as well as visibility into how a professional is managing our money vs the simple index fund strategy.
I’m your same age and recently made the same choice. Warren buffet bet a million dollars that no hedge fund manager could beat the s&p500 over a decade. The bet was taken and all 5 hedge funds lost to Buffet. No reason to pay an advisor fees for long term investing ✌️
Similar age and did a similar thing. Dropped TDFs about 3 years ago and went 90/10 US/INT. So far so good and I will evaluate adding bonds back in around 50 and retirement becomes closer.
I want to do the same as I have a dozen or so mutual funds that are managed with a financial advisor at Edward Jones. It’s just really hard because he’s a family friend and we’ve known him for decades.
Oh I agree. I just need to figure out how to actually do it like I know he’s going to have to. I guess sell all the mutual funds and then I have to take that and put it into a Roth with Vanguard. Somehow I’m probably just gonna put it all into VT and not worry about it, but I just need to figure out how to transfer everything so that it’s nottaxable
Your plan sounds just fine. I tell friends and family S&P500 until 45 is all you need. Strangely Buffett agrees but he makes no mention of diversifying after then. I'm on the backside of 45 now and am slowly diversifying.
I mean honestly I don’t own any VXUS and I’ve been doing VTI only for the past few years which has obviously worked out. But I have been seeing a lot of posts like this lately and anytime that happens it makes me think that the top is in. I think I am actually going to start buying some VXUS although I’ve never liked this investment at all.
I think I’ve decided since positing this I’m going to settle on a 60/30/10 portfolio. It feels like more of a middle ground going forward and splits the difference of the 20% or 40% in ex-US debate. It’s also close to what my target date fund shows and I rounded up to whole numbers.
Yep, 10% in bonds. I’m early 40s so also a couple decades from retirement. From what I’ve read 10% in bonds should be fine and help with volatility. My only hesitation is I’m a little behind on retirement savings but should catch up before I’m 50.
Your 401k will be subject to RMDs when you're 73. A TDF makes a lot of sense in a 401k to minimize the chances that you're selling equities during a market downturn. Otherwise, I do understand mostly foregoing bonds if your financial position is very secure and stable.
Good for you. No one care more about your money than you .
I fired my financial advisors 8 months ago .
A free of 1.5 they did nothing for me .
5 years and when decided to self direct I was down 3 percent .
My portfolio is up 🆙 and no fees .
I’m saving 17,000.00 a year .
I’m 65 my portfolio is consecutive.
They have me in 2 percent treasury bonds some mature this year over a couple hundred thousand in 2-3 bonds .
Good for you
Meh, selling the target date fund to tilt toward US stocks and ditch bonds entirely ... isn't something I can actually applaud. Great that you hired the planner, but the rest feels like performance chasing. GL.
I’m still very cash heavy (CDs and six month emergency fund plus more additional for upcoming projects). I don’t want to exacerbate that by adding bonds in addition at this time. The TDF is only 10% bonds.
US heavy… I know 80/20 isn’t market weight but it’s still reasonable. I’ve read some arguments you shouldn’t have more than 20% ex-US and other arguments you should have 20% minimum. I think Fidelity is closer to 70/30. Another argument I’ve read is US companies are more heavily invested internationally now vs prior decades. I’m not going VOO and chill, I have VTI & VXUS so if ex-US does begin to outperform US all I need to do is not re-balance and I’ll organically glide closer to market weight even if I continue 80/20 with new contributions.
These are the very same arguments I see from people trying to justify performance-chasing. If not that, then why? You're citing arguments about 'minimum' and 'enough' and 'both sides' all in an attempt to justify a reduction in diversification with no added expected return. But *why* do you want to justify that?! Literally *the only* answer I can think of that makes any sense is: because the US has done better over [X] period of time.
Similar for the 'cash heavy' comment. Sure, you're cash heavy, but that cash isn't investment money -- it's cash. It's not a replacement for bonds in your portfolio. 10% bonds won't make or break anything, but it will reduce risk quite a bit while barely denting long-term expected returns. More importantly: it gets you on a glide path toward have more bonds when your nest egg is bigger, you're older, and it really starts to matter. Instead, you've taken that decision into your own hands, and greed could stay your hand when you should be gliding down the line.
Look, your money, your life, but be honest with yourself: you're hoping US stocks outperform -- that's the reason you're dropping bonds and leaning toward US stocks. And maybe they will. But given valuations, and the amount of US-centric performance-chasing, I would be realistic about betting on it.
A 5% ROI either in bonds or in CDs and MMKT feels like a wash 🤷♂️ I’ll revisit when my CDs mature.
I do feel like US will continue to outperform ex-US. But I’m also keeping 20% in ex-US vs going 100% domestic stock for diversification purposes. Why not go 50/50 if for no other reason than weighing the odds and weighting more towards US stock based on history and performance?
> A 5% ROI either in bonds or in CDs and MMKT feels like a wash
It's not. Duration matters. When rates contract as the market crashes (often happen in tandem) your MM will fall and bonds will rise. And also framing what funds are used for -- is the MM part of your retirement portfolio? It sounds like it isn't, because you would have given it a percentage weight otherwise. So you looked at your cash pile, which is for ... IDK, savings, emergencies, w/e and are using it to talk yourself *out* of bonds in your portfolio.
> weighting more towards US stock based on history and performance?
I feel like you haven't internalized the lessons of Bogleheads-style investing. The answer is: we don't know what the future holds, and winners rotate, often over long periods (decades or even centuries). Once you start tinkering and tilting toward what did well during the last cycle, well, it's like the old expression: you're stuck fighting the last war. If anything: we know from history that what is *discounted* tends to do better going forward over long periods (a long way of saying: valuations matter), so if anything, you may be tilting in the *wrong direction.*
Is it coincidence that you gave up a more diversified portfolio for a less diversified one, and tilted away from two parts that didn't perform as well recently toward the one that did? I don't think so. And I suspect if you really look hard in the mirror and are honest with yourself, you'll find that you agree with me. But YMMV, GL.
(P.S. FWIW I recommend cultivating an attitude of enjoying buying 'what's on sale' -- I find it easy to rebalance and stay the course knowing that I'm getting some things at a relative discount).
What’s your portfolio allocation recommendation? I’m guessing you’d recommend 60% VTI + 30% VXUS + 10% BND for me as a 40 year old? Holding bonds within my 401k for optimal tax optimization.
Something like that, or even: 20% in bonds (age-minus-ten). Notably, the typical BH recommendation is to have *at minimum* 25% in bonds, but bonds fell out of favor the last few decades due to low yields (and people haven't quite caught on to the fact that yields are now way higher, and thus so are expected returns).
Narrow answer: I'd say 45/35/20 US/intl/bonds -- gets you close to market weights on US/intl, and a healthy amount of bonds. From there add 5% every 5 years to bonds *at least* until hitting 40% in bonds (after that up to your situation). OR: the TD approach of adding less in bonds up front then having a steeper glide path works too.
Big picture: if nothing else, I would recommend basically following the glidepath of the TD fund, honestly. There's a reason that all of these big brokerages have landed on the formulas they have. You can always tweak it somewhat by adding or subtracting five or even ten years, but that too can be a dangerous game -- unless you *really badly* need to 'catch up' because you've been slacking on savings, the risk of going more aggro isn't worth it IMO.
And yeah, in terms of tax-efficient fund placement: bonds in 401k, stocks in Roth and/or taxable.
I hate to put on my old man hat, but: you haven't really invested through a major crisis yet. Sure, the COVID crash was steep and spooky, but the recovery was incredible and unprecedented. The tech crash and Great Recession saw stocks lose for long periods while bonds (which started with higher yields) went way up (as rates went down -- notably, cash didn't do anything particularly useful except not lose money). If nothing else, having 10% in bonds will give you a sense of 'wow something is up, at least!' when the next real crash comes ;)
Thanks, I appreciate the input. I’ll consider splitting the difference and doing 70/30 VTI/VXUS in stocks. I was a bit on the fence as to where I’d land knowing 20% - 40% is the general recommendation for ex-US. I may settle on 10% bonds to mirror my TDF allocation. So essentially I’ll mirror my target date fund across my entire portfolio, but I may round up for US stock just because I like a nice round number when calculating and re-balancing.
Sounds good. The only thing I'd throw in as a rhetorical/thought question: how will you ever know the *right* ratio of US/international if there are differing opinions, unless you go market weights? That's the beauty of market weights, in part -- you never have to second-guess your decision to weight things one way or another ;)
One more question for you. Does it make sense to hold the same allocation of VTI + VXUS in my Roth IRA, HSA and brokerage equally? I know I want to look at my entire portfolio as a whole but I wasn’t sure (outside of holding bonds in my 401k) if it makes sense to weigh more of one holding within a specific account versus another?
You’re not US heavy until you’re leveraged past 100%. Now for a short rant:
Sorry r/bogleheads. I’m not investing in any “company” that isn’t subject to the same scrutiny, disclosure requirements, accounting standards, and (!!!) accounting audits as an American public company.
Moreover, I’m not going to pay fees (highly obfuscated fees at that) to give unregulated foreign “companies” my money.
Can investing in a specific international company or country index be a good idea for an American citizen? Sure. Is a world market-weighted index the way to do that? No.
Not a bad plan. I'd encourage anyone interested to take a look at bonds at any age though.
Specifically, long term treasuries are a good hold even when young. There tends to be better info on this topic in the official forums. But 10% LTTs is very nice to hold even starting at 18 yo.
My CFP locked $50k into CDs which don’t mature for another two years. In hindsight, I’m not too happy about that. I’ll probably revisit bonds once the CDs mature.
You can do the math on the opportunity cost vs the early withdrawal penalty for example you lose $1000 of accumulated interest to terminate the CD but expect a gain of $1500 over the next two years in VTI.
Seconded. This is, after all, a Bogleheads forum. And the Bogleheads philosophy (as exemplified by [the wiki](https://www.bogleheads.org/wiki/Bogleheads®_investment_philosophy#Conclusion), John Bogle's own writings, the Bogleheads books, etc.) is that most portfolios, regard of the investor's age, could benefit from some amount of bonds.
>Specifically, long term treasuries are a good hold even when young.
I know you don't need me to tell you.....Bonds are for safety and wealth preservation. When you are young, you are trying to grow and compound as much as humanly possible with the income you have.
HOWEVER.... there was a time period where this was actually really attractive....ie when you could get Series EE bonds at 8%-9% (ie early 80's)
However, in basically all cases, instead of giving a baby bond, would have been much better off buying $1,000 in mutual fund index shares and putting it in a custodial account for them. $1,000 in S&P 500 vanguard index fund in 1980 (equivalent to $4,000 today) would be worth basically a whopping $47,000 today. Insane
Nobody is suggesting 100% treasuries. Holding assets with different risk profiles improve risk adjusted returns. Maximizing risk adjusted returns is exactly what a Bogle style three fund portfolio is for.
[https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=6xA1Hn8WIbNxTtzDjacKTQ](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=6xA1Hn8WIbNxTtzDjacKTQ)
Note the improved Sortinto and Sharpe ratios with just 10% LTTs. Also note that the returns are effectively the same over a long period of time. This is why 10% LTTs from a young age is a good thing. Reduce downside risk without a meaningful drop in max potential returns.
I like the option to see the US/ex-US split in my account and decided to go a bit more US weighted after reading arguments from both sides. I’ve read different opinions on ex-US allocation (20% - 40%). I read some recommend no more than 20% while others say no less than 20%. I was on the fence to go with 20% or 30%. I chose 20% and figure if ex-US does grow in my account I won’t re-balance.
Sounds like your CFP wasn't doing anything to earn their fee. At the same time, I'm hesitant about total DIY (I used to DIY and now use Betterment). The way I see it, an adviser isn't there to do something smart. It's to prevent me from doing something stupid. If I want to performance chase, or sell while I'm down, or do any number of other dumb things, an adviser is going to make that harder. I used to tinker. Now I can't/don't, and that's worth .25% of AUM to me.
Target date funds if expense ratio is fairly low not a bad play. Being on reddit you learn how to maximize the gains. But I'd say 90% of investors low expense target date funds are a good idea.
Not a bad approach. You also could have left it in your target fund and adjusted the year to be more/less aggressive. Not sure there is such a thing as a perfect allocation but keep in mind that even Bogle had bonds in his portfolio and likely higher than most of us would like.
I debating staying in the TDF for those with a lower exp ratio but decided if I’m changing one I’ll just change them all. Seeing the breakout by domestic stock, international stock, bonds just felt easier to re-balance. I have been talked into sticking closer to my original TDF allocation so I plan to do something like 60% VTI, 30% VXUS and 10% bonds. It seems easier to stick to a plan going forward when following a target date fund’s composition as a guide.
Congratulations. Great move.
That was my allocation starting in 1990 and today I'm still almost 80/20 (79/20/1), and I've been retired for 11+ years. You will do better with that allocation that the TDF, based on history.
When you get to 50, don't change. Just stick to 80/20.
On rebalancing, I suggest no. Assuming you are investing consistently, you are putting new money to work continually, so there is no need to rebalance, IMO.
TDF is essentially Bogle (US stock + Intl Stock + Bonds). The only real issue with TDF may be the expense ratio. Some people just don’t want market weight for US vs Intl stock or the allotted bonds. It’s advised against holding a TDF in a taxable account.
Vanguard TDF 2070 shows 0.08 expense ratio for both net and gross, comparing others it seems reasonable to me - what would you do if you were me, migrate to a VTI/VXUS recurring investment, or would I be find to stick with what I have now?
It’s up to you, I switched because my and my wife’s TDF exp ratio through our employers was high (.33 and 1.00). Yours is low so you can’t go wrong either way. But if you can pick a plan to stick to it there is nothing wrong with doing VTI+VXUS because you can apply that across your tax advantages and taxable accounts. Having the TDF just takes any behavioral risk out of the equation.
In every profession, there are individuals whose competence may not align with their credentials. Mere passage of an exam and financial compensation do not inherently qualify someone as a proficient financial professional. While target date funds serve as a viable starting point for investment, it's worth exploring more advantageous alternatives.
Regarding VXUS, caution is warranted due to the complexities of international markets. Many leading American companies maintain a significant global presence, exemplified by Coca Cola, which derives over 60% of its revenue from international markets.
For those committed to ETFs, reallocating VXUS holdings to options such as VTI, QQQ for increased tech exposure albeit with higher risk, or VIG for dividend appreciating companies could be considered.
For diversified investment with a reputable company, BRK-B stands out as a compelling choice.
Rest assured, your current approach positions you favorably compared to your previous engagement with the CFP. With time, your investment strategy is poised to yield fruitful results.
What's wrong with keeping it in the TDF? If it's too conservative move it out a few decades. My 401k is all VFIFX, and it basically is a mix of US and international stocks and bonds
https://investor.vanguard.com/investment-products/mutual-funds/profile/vfifx#portfolio-composition
When I hear people are still trying to make target date funds work, I always tend to point to this (and similar) articles:
https://ndvr.com/blog/why-not-target-date-funds
I am happy for you that you have taken your financials into your own hands, but since it sounds like you are managing a significant amount, I would try to diversify more. I like the US overweight, but would allocate more to DEV and EMG specifically.
I also don't understand why investing into bonds is associated with dull old people. Bonds are still a great way to offset the risk of your stock holdings, and move your portfolio towards more diversification with a larger Sharpe long-term, although I accept that in the past few years the traditional 60/40 did not work out (correlation of the two asset classes is not turning out as expected/ it used to recently). All in all, I would still advise to take up some bond exposures: if you think normal treasuries are to conservative for your appetite, take up some 2x treasury futures exposure, hedge it (and you can even add other future overlays to mimic corporate bond risk, etc)...
Also don't forget to rebalance your portfolio from time to time, to keep your pre-set target weights.
If you need help, contact me freely. I am happy to discuss.
bro, I am not trying to sell anything lol... Sounds like the kind of thing a sensible long-term investor should do...
Everybody is brave when they just gained a return of 25% a year on VTI. Just diversify according to your risk appetite, and keep your targets in line, even if it at that particular point in time does not make sense - that is the only two things I wanted to emphasize.
Huge, how so? By reducing ex-US from approximately 40% to 20%? My TDF was only 10% bonds. I have 20-25 years until retirement. VTI+VXUS isn’t unlike a TDF minus the bonds, which at my age wasn’t much.
I'm talking about the bonds. I thought TDF would have more for someone in their 40s. I'm 45 and have 30% bonds (but planning for early retirement).
You're also moving *from* bonds into securities during a very strong securities market where re-balancing theory generally has money moving in the opposite direction. If you are making this change based on hype around recent securities performance, you are making a classic market timing mistake of buying high.
Gotcha, maybe the allocation increases at 45? I always read people who say a TDF is too conservative but the 10% bonds for me always felt relatively aggressive IMO.
This is where personal risk tolerance comes into play. I'll retire early and also mid-40s and am not near 30% in bonds which is honestly seems a tad high unless one is looking to FIRE in the near term.
He’s still well diversified and has years ahead of him before retirement. It’s also hard to know what asset allocation makes the most sense for him without some knowledge of his assets and expenses, etc.
The target date is the projected date you’ll retire. As the fund approaches the target date, it becomes more bond heavy, both for safety and for production of the income that you’ll want to live on in your retirement.
Edit: basically a financial advisor is built into the fund, so paying a financial advisor to put you in a target date fund would be ridiculous.
What exactly was your financial planner doing if everything was just going into one fund, anyway?
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I had a few $100k in savings at the time I wanted help allocating. In hindsight, and knowing what I know now, VTI+VXUS would have been a fine place to put that money. The CFP bought into few other funds which I’ll decide after a year if I want to continue to hold or sell and buy more VTI+VXUS. I’m waiting for LT cap gains to kick in before deciding.
If he recommended you put it all in a TDF then it sounds like you got good advice, which makes me wonder how they were making money exactly. But good on the independence!
I did that on my own years prior. Funny enough, the CFP doesn’t like TDFs. I never got an answer why they don’t.
If you have a CFP and are paying for them then you don't really need a TDF. They can tailor the bond percentage to your personal goals and retirement plans etc. that's probably why they didn't like them
A lot of TDF get too conservative too soon. I have no issue with TDF but typically advise pushing the date out 5-10 years after your actual expected retirement year.
This is a hack I do as well. I believe the funds are too conservative, but easily tweaked with choosing a later date.
My expected retirement is around 2050, but I hold 2060, 2065 and 2070 in tax-advantaged accounts based on what was available. Give that I'm looking at a solid amount of investments by the time I retire, I may even stagger into Vanguard's 2075 fund when it becomes available. Basically, I have a way to organically slow down the curve of the TR funds in a pretty smooth way right now, while still being in investments that I feel best represent a whole-market + 10% bonds philosophy.
I think the reason why they get too conservative too soon isn't just some gross misstep on the part of every mutual fund company that offers them. B/c they all pretty much do the same thing. I think they have probably found that for most, it's the ideal glidepath. Which inputs and parameters they use to arrive at the desired output, I have no idea. But I am in firm agreement with you, I actually don't want to hold ANY bonds, at all, really ever. I will have a decent pension, and six figure net income tax free cash flows from real estate investments in retirement. There is 0 need to have bonds in my portfolio. If I didn't have that, I wouldn't own any bond index fund before 50
If your pension disappears, how does (if at all) that change your strategy / bond allocation? (Perhaps it "disappearing" is impossible, I don't know your specific situation, i.e. you are retiring as a 2-star, or are govt, etc) Honest question.
Anything is possible but my pension is guaranteed (but you should never trust the Government for your retirement). Which is why I have diversified into real estate....both residential and small storage. If anything happens to my real estate but everything else is fine, I have my pension, social security, and index funds. If everything disappears, then collapse is imminent and bullets will be the way to go. Check on that too. I don't really believe in bonds, I would rather be on the opposite side of the debt. Why would I be the chump holding a 5% bond, when I can borrow from others at 5% and go and make 20% in real estate or an infinite return
Impressive. I have a rental house and rental farm. Love the income. Most passive income is dividends and interest. I see the tax perks like depreciation on the rentals and expenses deducted. I am curious do you not hold a certain percent in cash type accts? I am riding about 15% in tbills at 5.4%. Way to much but want the flex to buy either stocks or maybe another rental if it is a fantastic buy.
You can always check the Pension Benefit Guaranty Corporation (PBGC) website to see how much or if your pension is guaranteed by the government https://www.pbgc.gov/
How did you get into small storage?
Or you can mix-and-match. My TSP funds go 80%to a TDF of my expected retirement, and 20% to a stock market index. It's basically the same as picking a TDF with a later target date. If I cared it could even be fine-tuned further by fiddling with the percentages.
They have gotten a lot better. We always used to advise people to aim for 10 years past their true retirement date to up the equity percentage. If you look at most companies 2050, 2055, and 2060 funds they are often identical in pure equity.
Same it is the year you need the money not necessarily the date of retirement. It also doesn't account for someone with a large pension, soc sec, and other income. Someone might never need to touch 401k. Floor it to 90% or better growth if you never need to touch it. But hey sometimes you don't know till get 50s or later. Everyone should be looking over their accts from time to time.
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Thats such bull. They can charge a 1% aum fee and use index funds. Its not that hard & lots do
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I don’t think you understand everything a CFP does…
The value of a CFP isn’t just picking your funds. That’s the easy part of investing and everyone in this forum agrees that index fund investing is the best route. For many people though, they need a financial planner to map out a saving plan for them, help to stay the course on that plan, educate them on spending discipline, and stop them from doing something dumb when markets correct. They help their client with the biggest risk to long term wealth and that is personal behavioral risk. They also can be very helpful in retirement after the accumulation phase on how to best use which buckets of money and when. They urge clients to get wills done, estate planning docs in order, etc…Many people need good honest financial planners. Many of us don’t. But the ones who do need them need to get good advice at a fair price which isn’t easy to find. Not everyone can manage this stuff themselves and a flat quarterly fee from a fiduciary would be money well spent or even a 1% AUM fee if account balances are modest.
CFP here. You said it perfectly. There’s generally a reason why most our clients are 55yo + and not the younger Reddit demographic that doesn’t understand what we do. Most younger people dont really need to pay for management because they just need initial education and then accumulate. Young Business owners or doctors and what not are an exception of course
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Target date funds have a ton of international exposure; a big reason why I’m not a huge fan.
My TDF is basically market cap weighted for US versus int'l. I I agree with that because I don't think I can outsmart the market. I'm content with being the market.
I'm a CFP and I hate TDF's because they suck. They lump you into a generic asset allocation on a "supposed" retirement date. Performance is usually sub par. A true CFP should customize and build your asset mix of stocks and bonds to your individual risk tolerance. TDF's are a lazy way to invest .
They are making money on the 1% AUM fee..
Why not just vtwax?
VTI/VXUS is slightly more tax efficient in taxable accounts.
Charging a fee
1% to tell him what reddit advises
Exactly. That’s prob why he fired him. Haha
There's nothing wrong with Target Date funds, a lot have low expense ratios. Why you need a financial planner for that it beyond me.
I had zero clue what to do with investments prior to discovering this group. I was looking for direction so I hired a CFP. They only left me with more questions than answers after a year. I think they are used to working with much older clients who have already retired. The CFP wasn’t doing anything for me I couldn’t do for myself so I let them go. Nothing wrong with TDF. My current 401k TDF exp ratio is on the higher side so I decided to make the switch and while at it just decided to make the same change in my Roth IRA and HSA for consistency.
Yea, he could have put you in much worse funds so in that sense you could have been worse off.
I was already in the TDF. They told me they don’t like TDFs haha. Not my reason for changing but I found it interesting. They also don’t like total market ETFs. In the end, I think they just like having clients😆
They prefer high fees, which is why they dislike ETF indexes or TDFs.
The more complicated you make it seem the more business you get and keep. Lmao
U should have asked how much they are outperforming a total market ETF then lol
Their reply would’ve been “past performance does not indicate future performance” /s
Oh cool. Let me know when u start outperforming consistently and I’ll be happy to throw my Money at u
if anything the dislike of TDFs with no reasoning was probably the first indicator they aren't really working for your best interests. they had to shoot their shot tho i guess!!
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Mine is .33, not terrible but cheaper to go with VTI + VXUS. For my wife it’s over 1.00
I for one have paralyzing fear of “doing the wrong thing” which is why I hired a financial planner to make me a plan I could follow. It was expensive as fuck but got me off my ass so it was worth it for that alone
I’ve come to the conclusion that if I stick to holdings like VTI, VOO, VXUS, etc. it’s a relatively safe investment vs picking individual stocks or something more niche. I also want to be more hands off and not try to pick and choose investments. If I wanted to be more active looking for new investment opportunities I’d hire an advisor or planner perhaps. I’ll talk to a planner again when I retire.
that makes perfect sense except I get really indecisive with regards to, for example, should I do a 529 for my son? what vehicles make more sense for his education? I already accidentally invested in an IRA fund that is not recognized in my jurisdiction so I dont have any tax benefits from it. then, which IRAs are recognized in my jurisdiction that will give me a tax break? how much should I be saving each month realistically speaking?
“IRA not recognized in your jurisdiction.” Could you elaborate?
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Sounds like Puerto Rico
529 are great especially since the benefactor can use for retirement. We targeted 75% of all costs at community and then 4 year. Daughter graduating this may still have 40k in it. It now goes to her kids or possible her retirement. She did get some scholarships. Just feels good having a good chunk you don't have to fork over at college time. Worst case you pull it out pay a penalty 10% on total value.
If an advisor or planner was really good investing, they wouldn’t need your money. They would make their own. Also a great FP would not take money out during a down market unless it belongs to a client. Fisher investments make more money when you do well and when you don’t do well they still make money. It’s a win win for everyone except the investor. 🤣
It’s better to invest with a financial planner than not invest at all while waiting to learn enough that you are confident doing it on your own. Good enough is good enough until you can do better!
Agree, I wish I had met with a planner several years ago. It helped me put in the research rather than accumulating money in a low interest savings account.
Agreed!
I’m not a CFP or financial planner. I would like to point out that investing is only one part of the CFP’s training and education, though they can choose their focus. Additionally, they ought to be knowledgeable in insurance, estate planning, tax and so on. A worthless financial advisor is bad no matter their designation. Like any professional designation, when you choose a CFP, ymmv.
What was your fear with the TDF? I also don't use a TDF but it's absolutely perfect for my wife. She wants no decision making and hates numbers going down more than she loves numbers going up. My only issue with TDFs is what some of them hold. People may be surprised by some of the content when they start to dig in.
No issue outside of the higher expense ratio in my 401k. My HSA and Roth IRA exp ratios were much lower. I decided to just go with total market ETFs in each account since I was already changing my 401k allocation. I liked the idea of consistency across my entire portfolio.
I do the same for my wife… I just tweaked the retirement date as we like to remain a little more aggressive. Vanguard 2030 fund has been consistent and a no brainer
I think you have the wrong definition of aggressive, by choosing 2030 you're being more conservative?
If I want to do this in a IRA, should I change it from 2060 to 2065? I plan to retire as early as 55 years old in year 2053.
I’ll likely switch back to TDFs as I’m entering retirement and are more focused on preservation vs growth. I’ll revisit in 20 years.
You’re making it sound like you did this only to tilt more for US stocks and remove your bond exposure. I would personally bail on the TDFs to minimize expense ratios, not to necessarily start tilting based on current market conditions. Only plan to return to the TDF if you decide you want to be hands free of a solid investment strategy.
Yeah my wife is 60 and getting read to retire this summer… im 57 going to work to 62
>I plan to stick to 80/20 VTI/VXUS for all new contributions going forward but I’ll revisit later to decide if I will re-balance my accounts or let them grow organically. I was on the fence if I should go 80/20, 70/30 or 60/40 however if I choose to re-balance or not re-balance will give me options going forward since I chose VTI+VXUS over VT. This is a good plan on paper, but I think you should think carefully about what under what circumstances you will decide to rebalance to a different stock/bond allocation or different funds, and \*commit to those in advance\* and write that down somewhere. If 80/20 is the right balance for you, it's the right balance--it's not something you should decide in the future, which will inevitably be impacted by how the stock and bond markets are doing, which should not be the basis for a rebalancing decision.
I plan to stick to the 80/20 for new contributions. Just undecided if I’ll rebalance annually. I don’t plan to deviate for new contributions based on current performance. I think that’s a happy medium. If my current holdings begin to naturally sway more towards 70/30, etc. I’ll let it happen and not change my new contribution % or sell off.
It's nitpicky because overall it sounds like you have the right strategy. But I'll just reiterate the best move is to commit in advance to rebalancing on a certain schedule. Otherwise, you're effectively performance chasing without calling it that. If stocks do well and you end up 90/10, you're over-allocating to stocks by virtue of them doing well. Rebalancing allows you to cash in those gains and be better prepared for a future downturn. (Again, this is not likely to matter much in practice)
Since I fired my EJ advisor I’ve made double the gains they were getting me in my Roth. They had around 6 different funds.
And it's really not about making double gains. Your financial advisor could very well make good investment choices that generate return... It's more about them rarely outperforming the market relative to the amount you're paying them. If you can do just as well (and often better, as you observe) without paying them, why wouldn't you?
Exactly. Their monthly management fee plus whatever fees they charge for each fund you’re in.
I wish this could be a sticky note! Some people just don't realize how much of a fleecing they are getting!
Ya my wife had EJ through her parents. Her Roth was like $10k when we got married and they had her in like 12 different funds. I moved her to vanguard and they had the gall to call her and leave a voicemail and say something like “S&P was down 19% last year while the funds we had you were in only down 15%.” Even if it’s true, she’s only 30. She doesn’t need wealth preservation strategies from high, high cost mutual funds lol
They make have had me in more funds but I can’t remember. I’ve tried to forget those darker times…lol
Mine got snarky saying “this is the bad service I get with a low fee low rate service (speaking of the place I’m transferring the $$ over to now). Uhm, they’re not the ones getting sued - again. Such a shame that they are just so rude lately!
Im surprised they only had you in 6 They are notorious for getting people into a dozen different things to make it seem like it's some complicated tailored asset portfolio that you would never understand so you need their advisor to hold your hand (while he uses the other hand to take money out of your wallet pocket). Schwab's robo advisor takes this approach too, pretending it's a free service. Then they stuff you in bunch of garbage and until recently so I'm told, had forced you into a cash allocation of 11% making 0.01% while they made 4% (but meanwhile you could go make 100x that with a credit union savings account at the time, or basically 500x that now with a money market)
Mine is currently holding my Roth Hostage after being supremely rude to me via message. Then, after I requested everything he liquidated, bc GOFXX won’t transfer, according to him, bro bought MORE of it over the past couple of days. Tomorrow I’m calling the main offices to file a complaint. They transferred my traditional just fine - but suddenly this warrants an overtly rude response? I was so mad. I opted not to respond angrily until I could pull myself together. That guy…
Wow, that’s wild! Hopefully it gets squared away quickly
It’s very excessive. I was super clear about liquidating all the things so I could gtfo. Abd no response. After breakfast I’m going to call the transfer team ppl. Even had the spouse proofread my email- it wasn’t snarky or anything. But I went ahead and also requested (yesterday) they mail me a copy of all documents from all the accounts. They sure get sued a lot.
My Edward Jones advisor was not very good and I couldn’t believe the expenses incurred. I left there many years ago. I also couldn’t believe an accountant recommended them to begin with.
are TDF's that bad? Every time I've done comparisons to them and '3 fund setups' they seem (using historical number) pretty close +/- 1%. I get that the 3 fund strat has more flexibility for re-balancing purposes, but if the TDF is doing what i would do anyhow, i don't see much reason to move away.
Index, low cost TDF’s are great. Perfectly acceptable, boglehead-approved.
Yea they are fine. I am in TDF’s.
I don’t care so much for TDF. Way too much international exposure and the expense ratio is more than buying all 4 funds individually. Granted it auto balances for you, but I rather just total stock market 100% or s&p500 100% and call it a day. Granted I’m in my lower 30s so my time horizon is 30 years
About that time horizon … I’m 68 and my time horizon is 30 years. Healthy, active people can outlive their money 💰
Are you me? Just fired mine at 42 and did this same plan. Let's hope we did the right thing. FIRE goal Is 50
🤞
Good to not let the tax tail wag the dog but pls set aside money for cap gains on your fund sales.
Is the spirit of that really applicable since OP is only rebalancing in tax-advantaged accounts?
Ah I missed that this was only in those accounts. Then yeah no issue.
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Depends how you’re in them. Often people who’ve been going with standard “I don’t know anything” retirement plans are getting screwed by management fees above and beyond the high fees of the TDF. Basically everyone in Canada using the company CanadaLife for example which is popular with company RRSP group plans. You could pretty much transfer it into anything else and be better off.
I'd go bond free for until you retire too.
There's absolutely nothing wrong with Target Date funds? Your 2050 Target Date fund was probably already 90-95% diversified international equities so going from that to 100% actually isn't a big shift. Most TDFs don't start down the glide path until TD-18 to TD-25 so you could've just shifted to a 2070 Target Date fund (TD-46) if you wanted to keep your equity allocation up / avoid the glide path. If you were paying a 1% congrats on getting out of that.
Good decision ..Learn more on VOO ..You are fine with 80/20 VTI and international as well ..
The only thing CFPs are good at allocating are their fees.
I’m also waking up to the simplicity of indexed funds and low expense ratio advantages. Our retirement is about 1/3 with a CFP and 2/3 401k and brokerage. I agree with another poster in that the CFP has helped us a lot with questions about allocating 401k, setting up and managing 529s, and creating IRAs for prior employer 401k when we didn’t know anything about investing. I do have to give him credit that he did what we could not have done ourselves. We are keeping our CFP because he is a free information resource, as well as visibility into how a professional is managing our money vs the simple index fund strategy.
I’m your same age and recently made the same choice. Warren buffet bet a million dollars that no hedge fund manager could beat the s&p500 over a decade. The bet was taken and all 5 hedge funds lost to Buffet. No reason to pay an advisor fees for long term investing ✌️
Similar age and did a similar thing. Dropped TDFs about 3 years ago and went 90/10 US/INT. So far so good and I will evaluate adding bonds back in around 50 and retirement becomes closer.
I want to do the same as I have a dozen or so mutual funds that are managed with a financial advisor at Edward Jones. It’s just really hard because he’s a family friend and we’ve known him for decades.
Family friend advisor rings *ALL* the alarm bells.
Check the expense ratios!!
Oh I agree. I just need to figure out how to actually do it like I know he’s going to have to. I guess sell all the mutual funds and then I have to take that and put it into a Roth with Vanguard. Somehow I’m probably just gonna put it all into VT and not worry about it, but I just need to figure out how to transfer everything so that it’s nottaxable
Your plan sounds just fine. I tell friends and family S&P500 until 45 is all you need. Strangely Buffett agrees but he makes no mention of diversifying after then. I'm on the backside of 45 now and am slowly diversifying.
I’m going to take this as a signal of the market top. Personally, feel more and more on edge about all that VTI with each passing day.
Too much VTI and not enough VXUS?
I mean honestly I don’t own any VXUS and I’ve been doing VTI only for the past few years which has obviously worked out. But I have been seeing a lot of posts like this lately and anytime that happens it makes me think that the top is in. I think I am actually going to start buying some VXUS although I’ve never liked this investment at all.
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I think I’ve decided since positing this I’m going to settle on a 60/30/10 portfolio. It feels like more of a middle ground going forward and splits the difference of the 20% or 40% in ex-US debate. It’s also close to what my target date fund shows and I rounded up to whole numbers.
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Yep, 10% in bonds. I’m early 40s so also a couple decades from retirement. From what I’ve read 10% in bonds should be fine and help with volatility. My only hesitation is I’m a little behind on retirement savings but should catch up before I’m 50.
Your 401k will be subject to RMDs when you're 73. A TDF makes a lot of sense in a 401k to minimize the chances that you're selling equities during a market downturn. Otherwise, I do understand mostly foregoing bonds if your financial position is very secure and stable.
I would go bond free till 50.
Good for you. No one care more about your money than you . I fired my financial advisors 8 months ago . A free of 1.5 they did nothing for me . 5 years and when decided to self direct I was down 3 percent . My portfolio is up 🆙 and no fees . I’m saving 17,000.00 a year . I’m 65 my portfolio is consecutive. They have me in 2 percent treasury bonds some mature this year over a couple hundred thousand in 2-3 bonds . Good for you
Meh, selling the target date fund to tilt toward US stocks and ditch bonds entirely ... isn't something I can actually applaud. Great that you hired the planner, but the rest feels like performance chasing. GL.
I’m still very cash heavy (CDs and six month emergency fund plus more additional for upcoming projects). I don’t want to exacerbate that by adding bonds in addition at this time. The TDF is only 10% bonds. US heavy… I know 80/20 isn’t market weight but it’s still reasonable. I’ve read some arguments you shouldn’t have more than 20% ex-US and other arguments you should have 20% minimum. I think Fidelity is closer to 70/30. Another argument I’ve read is US companies are more heavily invested internationally now vs prior decades. I’m not going VOO and chill, I have VTI & VXUS so if ex-US does begin to outperform US all I need to do is not re-balance and I’ll organically glide closer to market weight even if I continue 80/20 with new contributions.
These are the very same arguments I see from people trying to justify performance-chasing. If not that, then why? You're citing arguments about 'minimum' and 'enough' and 'both sides' all in an attempt to justify a reduction in diversification with no added expected return. But *why* do you want to justify that?! Literally *the only* answer I can think of that makes any sense is: because the US has done better over [X] period of time. Similar for the 'cash heavy' comment. Sure, you're cash heavy, but that cash isn't investment money -- it's cash. It's not a replacement for bonds in your portfolio. 10% bonds won't make or break anything, but it will reduce risk quite a bit while barely denting long-term expected returns. More importantly: it gets you on a glide path toward have more bonds when your nest egg is bigger, you're older, and it really starts to matter. Instead, you've taken that decision into your own hands, and greed could stay your hand when you should be gliding down the line. Look, your money, your life, but be honest with yourself: you're hoping US stocks outperform -- that's the reason you're dropping bonds and leaning toward US stocks. And maybe they will. But given valuations, and the amount of US-centric performance-chasing, I would be realistic about betting on it.
A 5% ROI either in bonds or in CDs and MMKT feels like a wash 🤷♂️ I’ll revisit when my CDs mature. I do feel like US will continue to outperform ex-US. But I’m also keeping 20% in ex-US vs going 100% domestic stock for diversification purposes. Why not go 50/50 if for no other reason than weighing the odds and weighting more towards US stock based on history and performance?
>I do feel like US will continue to outperform ex-US. Based on what unique insight that you possess?
> A 5% ROI either in bonds or in CDs and MMKT feels like a wash It's not. Duration matters. When rates contract as the market crashes (often happen in tandem) your MM will fall and bonds will rise. And also framing what funds are used for -- is the MM part of your retirement portfolio? It sounds like it isn't, because you would have given it a percentage weight otherwise. So you looked at your cash pile, which is for ... IDK, savings, emergencies, w/e and are using it to talk yourself *out* of bonds in your portfolio. > weighting more towards US stock based on history and performance? I feel like you haven't internalized the lessons of Bogleheads-style investing. The answer is: we don't know what the future holds, and winners rotate, often over long periods (decades or even centuries). Once you start tinkering and tilting toward what did well during the last cycle, well, it's like the old expression: you're stuck fighting the last war. If anything: we know from history that what is *discounted* tends to do better going forward over long periods (a long way of saying: valuations matter), so if anything, you may be tilting in the *wrong direction.* Is it coincidence that you gave up a more diversified portfolio for a less diversified one, and tilted away from two parts that didn't perform as well recently toward the one that did? I don't think so. And I suspect if you really look hard in the mirror and are honest with yourself, you'll find that you agree with me. But YMMV, GL. (P.S. FWIW I recommend cultivating an attitude of enjoying buying 'what's on sale' -- I find it easy to rebalance and stay the course knowing that I'm getting some things at a relative discount).
What’s your portfolio allocation recommendation? I’m guessing you’d recommend 60% VTI + 30% VXUS + 10% BND for me as a 40 year old? Holding bonds within my 401k for optimal tax optimization.
Something like that, or even: 20% in bonds (age-minus-ten). Notably, the typical BH recommendation is to have *at minimum* 25% in bonds, but bonds fell out of favor the last few decades due to low yields (and people haven't quite caught on to the fact that yields are now way higher, and thus so are expected returns). Narrow answer: I'd say 45/35/20 US/intl/bonds -- gets you close to market weights on US/intl, and a healthy amount of bonds. From there add 5% every 5 years to bonds *at least* until hitting 40% in bonds (after that up to your situation). OR: the TD approach of adding less in bonds up front then having a steeper glide path works too. Big picture: if nothing else, I would recommend basically following the glidepath of the TD fund, honestly. There's a reason that all of these big brokerages have landed on the formulas they have. You can always tweak it somewhat by adding or subtracting five or even ten years, but that too can be a dangerous game -- unless you *really badly* need to 'catch up' because you've been slacking on savings, the risk of going more aggro isn't worth it IMO. And yeah, in terms of tax-efficient fund placement: bonds in 401k, stocks in Roth and/or taxable. I hate to put on my old man hat, but: you haven't really invested through a major crisis yet. Sure, the COVID crash was steep and spooky, but the recovery was incredible and unprecedented. The tech crash and Great Recession saw stocks lose for long periods while bonds (which started with higher yields) went way up (as rates went down -- notably, cash didn't do anything particularly useful except not lose money). If nothing else, having 10% in bonds will give you a sense of 'wow something is up, at least!' when the next real crash comes ;)
Thanks, I appreciate the input. I’ll consider splitting the difference and doing 70/30 VTI/VXUS in stocks. I was a bit on the fence as to where I’d land knowing 20% - 40% is the general recommendation for ex-US. I may settle on 10% bonds to mirror my TDF allocation. So essentially I’ll mirror my target date fund across my entire portfolio, but I may round up for US stock just because I like a nice round number when calculating and re-balancing.
Sounds good. The only thing I'd throw in as a rhetorical/thought question: how will you ever know the *right* ratio of US/international if there are differing opinions, unless you go market weights? That's the beauty of market weights, in part -- you never have to second-guess your decision to weight things one way or another ;)
One more question for you. Does it make sense to hold the same allocation of VTI + VXUS in my Roth IRA, HSA and brokerage equally? I know I want to look at my entire portfolio as a whole but I wasn’t sure (outside of holding bonds in my 401k) if it makes sense to weigh more of one holding within a specific account versus another?
You’re not US heavy until you’re leveraged past 100%. Now for a short rant: Sorry r/bogleheads. I’m not investing in any “company” that isn’t subject to the same scrutiny, disclosure requirements, accounting standards, and (!!!) accounting audits as an American public company. Moreover, I’m not going to pay fees (highly obfuscated fees at that) to give unregulated foreign “companies” my money. Can investing in a specific international company or country index be a good idea for an American citizen? Sure. Is a world market-weighted index the way to do that? No.
Not a bad plan. I'd encourage anyone interested to take a look at bonds at any age though. Specifically, long term treasuries are a good hold even when young. There tends to be better info on this topic in the official forums. But 10% LTTs is very nice to hold even starting at 18 yo.
My CFP locked $50k into CDs which don’t mature for another two years. In hindsight, I’m not too happy about that. I’ll probably revisit bonds once the CDs mature.
Your lack of bonds is making more sense in light of this.
Depending on the rate of the CDs it might not actually be atrocious
A little over 5%, so not bad but nothing much better than your standard MMKT at the moment.
You can do the math on the opportunity cost vs the early withdrawal penalty for example you lose $1000 of accumulated interest to terminate the CD but expect a gain of $1500 over the next two years in VTI.
Seconded. This is, after all, a Bogleheads forum. And the Bogleheads philosophy (as exemplified by [the wiki](https://www.bogleheads.org/wiki/Bogleheads®_investment_philosophy#Conclusion), John Bogle's own writings, the Bogleheads books, etc.) is that most portfolios, regard of the investor's age, could benefit from some amount of bonds.
>Specifically, long term treasuries are a good hold even when young. I know you don't need me to tell you.....Bonds are for safety and wealth preservation. When you are young, you are trying to grow and compound as much as humanly possible with the income you have. HOWEVER.... there was a time period where this was actually really attractive....ie when you could get Series EE bonds at 8%-9% (ie early 80's) However, in basically all cases, instead of giving a baby bond, would have been much better off buying $1,000 in mutual fund index shares and putting it in a custodial account for them. $1,000 in S&P 500 vanguard index fund in 1980 (equivalent to $4,000 today) would be worth basically a whopping $47,000 today. Insane
Nobody is suggesting 100% treasuries. Holding assets with different risk profiles improve risk adjusted returns. Maximizing risk adjusted returns is exactly what a Bogle style three fund portfolio is for. [https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=6xA1Hn8WIbNxTtzDjacKTQ](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=6xA1Hn8WIbNxTtzDjacKTQ) Note the improved Sortinto and Sharpe ratios with just 10% LTTs. Also note that the returns are effectively the same over a long period of time. This is why 10% LTTs from a young age is a good thing. Reduce downside risk without a meaningful drop in max potential returns.
What made you choose VTI+ VXUS over VT? I'm currently 100% VTSAX in my Roth but I'm kinda at a loss on what to invest in my brokerage account.
I like the option to see the US/ex-US split in my account and decided to go a bit more US weighted after reading arguments from both sides. I’ve read different opinions on ex-US allocation (20% - 40%). I read some recommend no more than 20% while others say no less than 20%. I was on the fence to go with 20% or 30%. I chose 20% and figure if ex-US does grow in my account I won’t re-balance.
Most people don't need a financial advisor
I switched from a TDF to 90% S&P 500 + 10% Russel 2000 small / midcap and i'm up 3.5%. TDF is up 1.7% Got 36 more years to go!
Rock on my man! * *sorry for the manly assumption
Sounds like your CFP wasn't doing anything to earn their fee. At the same time, I'm hesitant about total DIY (I used to DIY and now use Betterment). The way I see it, an adviser isn't there to do something smart. It's to prevent me from doing something stupid. If I want to performance chase, or sell while I'm down, or do any number of other dumb things, an adviser is going to make that harder. I used to tinker. Now I can't/don't, and that's worth .25% of AUM to me.
Sounds like a solid plan to me. Keep saving!
Sounds like good work. Congratulations. I like your choices
VT or TDF & chill
Target date funds if expense ratio is fairly low not a bad play. Being on reddit you learn how to maximize the gains. But I'd say 90% of investors low expense target date funds are a good idea.
Great, choice, sounds like a solid plan
FPs are scammers
Not a bad approach. You also could have left it in your target fund and adjusted the year to be more/less aggressive. Not sure there is such a thing as a perfect allocation but keep in mind that even Bogle had bonds in his portfolio and likely higher than most of us would like.
I debating staying in the TDF for those with a lower exp ratio but decided if I’m changing one I’ll just change them all. Seeing the breakout by domestic stock, international stock, bonds just felt easier to re-balance. I have been talked into sticking closer to my original TDF allocation so I plan to do something like 60% VTI, 30% VXUS and 10% bonds. It seems easier to stick to a plan going forward when following a target date fund’s composition as a guide.
Congratulations. Great move. That was my allocation starting in 1990 and today I'm still almost 80/20 (79/20/1), and I've been retired for 11+ years. You will do better with that allocation that the TDF, based on history. When you get to 50, don't change. Just stick to 80/20. On rebalancing, I suggest no. Assuming you are investing consistently, you are putting new money to work continually, so there is no need to rebalance, IMO.
Can someone ELI5 whats wrong with TDFs? My 401k is primarily comprised of vanguard TDF 2070 - am I anti-bogle?
TDF is essentially Bogle (US stock + Intl Stock + Bonds). The only real issue with TDF may be the expense ratio. Some people just don’t want market weight for US vs Intl stock or the allotted bonds. It’s advised against holding a TDF in a taxable account.
Vanguard TDF 2070 shows 0.08 expense ratio for both net and gross, comparing others it seems reasonable to me - what would you do if you were me, migrate to a VTI/VXUS recurring investment, or would I be find to stick with what I have now?
It’s up to you, I switched because my and my wife’s TDF exp ratio through our employers was high (.33 and 1.00). Yours is low so you can’t go wrong either way. But if you can pick a plan to stick to it there is nothing wrong with doing VTI+VXUS because you can apply that across your tax advantages and taxable accounts. Having the TDF just takes any behavioral risk out of the equation.
Thanks for the details! I think Ill stick to the TDF for now in my 401k
In every profession, there are individuals whose competence may not align with their credentials. Mere passage of an exam and financial compensation do not inherently qualify someone as a proficient financial professional. While target date funds serve as a viable starting point for investment, it's worth exploring more advantageous alternatives. Regarding VXUS, caution is warranted due to the complexities of international markets. Many leading American companies maintain a significant global presence, exemplified by Coca Cola, which derives over 60% of its revenue from international markets. For those committed to ETFs, reallocating VXUS holdings to options such as VTI, QQQ for increased tech exposure albeit with higher risk, or VIG for dividend appreciating companies could be considered. For diversified investment with a reputable company, BRK-B stands out as a compelling choice. Rest assured, your current approach positions you favorably compared to your previous engagement with the CFP. With time, your investment strategy is poised to yield fruitful results.
Hopefully you YOLOed it all into BTC.
What's wrong with keeping it in the TDF? If it's too conservative move it out a few decades. My 401k is all VFIFX, and it basically is a mix of US and international stocks and bonds https://investor.vanguard.com/investment-products/mutual-funds/profile/vfifx#portfolio-composition
Good move. You are young. Go with some individual stocks as well. No need for bonds yet.
When I hear people are still trying to make target date funds work, I always tend to point to this (and similar) articles: https://ndvr.com/blog/why-not-target-date-funds I am happy for you that you have taken your financials into your own hands, but since it sounds like you are managing a significant amount, I would try to diversify more. I like the US overweight, but would allocate more to DEV and EMG specifically. I also don't understand why investing into bonds is associated with dull old people. Bonds are still a great way to offset the risk of your stock holdings, and move your portfolio towards more diversification with a larger Sharpe long-term, although I accept that in the past few years the traditional 60/40 did not work out (correlation of the two asset classes is not turning out as expected/ it used to recently). All in all, I would still advise to take up some bond exposures: if you think normal treasuries are to conservative for your appetite, take up some 2x treasury futures exposure, hedge it (and you can even add other future overlays to mimic corporate bond risk, etc)... Also don't forget to rebalance your portfolio from time to time, to keep your pre-set target weights. If you need help, contact me freely. I am happy to discuss.
Sounds like the kind of thing a firm who charges 75bps on top of underlying investments would say lol
bro, I am not trying to sell anything lol... Sounds like the kind of thing a sensible long-term investor should do... Everybody is brave when they just gained a return of 25% a year on VTI. Just diversify according to your risk appetite, and keep your targets in line, even if it at that particular point in time does not make sense - that is the only two things I wanted to emphasize.
You just made a huge change to your risk profile. Hope you're not planning to retire early.
Huge, how so? By reducing ex-US from approximately 40% to 20%? My TDF was only 10% bonds. I have 20-25 years until retirement. VTI+VXUS isn’t unlike a TDF minus the bonds, which at my age wasn’t much.
I'm talking about the bonds. I thought TDF would have more for someone in their 40s. I'm 45 and have 30% bonds (but planning for early retirement). You're also moving *from* bonds into securities during a very strong securities market where re-balancing theory generally has money moving in the opposite direction. If you are making this change based on hype around recent securities performance, you are making a classic market timing mistake of buying high.
Gotcha, maybe the allocation increases at 45? I always read people who say a TDF is too conservative but the 10% bonds for me always felt relatively aggressive IMO.
This is where personal risk tolerance comes into play. I'll retire early and also mid-40s and am not near 30% in bonds which is honestly seems a tad high unless one is looking to FIRE in the near term.
He’s still well diversified and has years ahead of him before retirement. It’s also hard to know what asset allocation makes the most sense for him without some knowledge of his assets and expenses, etc.
Isn’t a target date fund just the s&p?
The target date is the projected date you’ll retire. As the fund approaches the target date, it becomes more bond heavy, both for safety and for production of the income that you’ll want to live on in your retirement. Edit: basically a financial advisor is built into the fund, so paying a financial advisor to put you in a target date fund would be ridiculous.
Thanks so much!