Planning the Joint Retirement Portfolio: Currently, It's A Mess
Posted on January 16, 2007 by Him and tagged investments, retirement
For those of you keeping track (and who isn't?), this is the second step of our Planning the Joint Portfolio series. Here's step 1 if you missed it.
A few weekends ago we went through the process of writing down all of our retirement investments down in one place. As our net worth statement says, we currently have our retirement funds spread across four accounts: my SIMPLE IRA, my Roth IRA, Her 401(k), and Her Roth IRA. The investment holdings in all of our accounts are as follows:
| Fund | Ticker | % of Portfolio |
|---|---|---|
| TOTAL | 100% | |
| Roth IRA (Vanguard) | ||
| Ameren | AEE | 1.42% |
| Boeing | BA | 0.76% |
| General Motors | GM | 1.06% |
| Northern Trust | NTRS | 1.56% |
| Prologis | PLD | 1.57% |
| Vanguard Prime Money Market Fund (Cash) | VMMXX | 1.05% |
| TOTAL PERCENTAGE OF PORTFOLIO ASSETS | 7.42% | |
| Roth IRA (Fidelity) | ||
| Advanced Micro Devices | AMD | 2.59% |
| CVS Corporation | CVS | 3.94% |
| General Electric | GE | 7.11% |
| Northern Trust | NTRS | 2.59% |
| Pfizer | PFE | 2.20% |
| Aston/TAMRO Small Cap N | ATASX | 7.52% |
| Fidelity Cash Reserves (Cash) | FDRXX | 1.54% |
| TOTAL PERCENTAGE OF PORTFOLIO ASSETS | 27.49% | |
| 401(k) | ||
| AllianceBernstein International Value Fund (A) | ABIAX | 16.74% |
| Dreyfus Premier S&P STARS Opportunity Fund (R) | DSORX | 9.84% |
| Fidelity Advisor Small Cap Fund (T) | FSCTX | 9.31% |
| Neuberger Berman Socially Responsive Fund (Investor) | NBSRX | 4.15% |
| TOTAL PERCENTAGE OF PORTFOLIO ASSETS | 40.04% | |
| SIMPLE IRA | ||
| John Handcock Lifestyle Growth Fund (C) | JCLGX | 21.19% |
| Cash Reserves (Cash) | - | 3.85% |
| TOTAL PERCENTAGE OF PORTFOLIO ASSETS | 25.05% | |
Running our total retirement investments into the Morningstar X-Ray tool yields this additional information about our overall portfolio:
You can see here that as for our total investment we are pretty much all in stocks, with the only exposure to bonds being primarily in JCLGX. In our stock holdings, we are weighted very heavily in large cap stocks. A lot of that is due to our individual stock exposure. All of those stocks were bought when we were in college and didn't know much about investing. While we knew little about Roth IRAs at the time, we did know that it was a relatively safe place to try and learn about investing.
After looking at the damage we realize that we have much to work on. The next post in this series will tackle how much risk we want to take on to get where we want to go.
Comments/Trackbacks
Trackback URL: http://www.makelovenotdebt.com/MT/mlnd-trackbacks.cgi/1061
The Wealthy Geek | Jan 17, 2007
Him,
I left out one caveat.
If you have significant capital gains on the stocks, you might consider spreading the trades out over 2 years to lower the tax hit each year.
In the end, getting your portfolio in decent shape is more important than worrying about the taxes you might pay in the short-term to schieve your goals.
Thanks for the suggestions. We'll be writing about our course of action in the next few posts in this series.
One question: since all of these funds are in tax deferred accounts, do we really have to worry about taxes from capital gains? I was under the impression that wouldn't be a factor in these accounts.
The Wealthy Geek | Jan 17, 2007
Hi Him,
I was so focused on the portfolio makeup that it didn't register that all four were retirement accounts. Sorry about that.
This makes matters much simpler. I look forward to reading about your moves in the coming weeks.
Please feel free to email questions you might have.
Cheers,
The Wealthy Geek
Him,
I come in peace! There is no doubt that your portfolio requires some adjustments; but I don't recommend making radical changes. First of all, individual stocks (namely small to mid-cap) can fuel a portfolio quite well in an environment that is fairly bullish. For example, the Fidelity Fund in your Roth IRA has a fine chance of outperforming the market in the next 12 months, expecially if GM maintains it current momentum.
You might consider an allocation of 30% to the food, transportaiton and financial sectors (e.g., MCD, CAL and NTRS) where demand should remain strong, going forward.
I agree that the Fidelity Fund should be tossed.
One valuable lesson learned is that you can make the money if you monitor your portfolio with regularity and search for good advice.
This isn't hard work, and you appear to be motivated. All the best!
Hawk
Hello again,
I too, lost track when I said "the Fidelity Fund might outperform..." I was referring to the Vanguard Fund in the Roth IRA with BA leading the charge. Please forgive me.
Hawk
J | Jan 21, 2007
I just found your blog; very funny.
I think the main problem with your account is overexposure to a few companies. It is diversified, but not sufficiently.
Vanguard and Fidelity are both good companies.
These index funds at Fidelity have a fee of .1%, about as low as it gets: FSIIX (foreign lg cap), (FSMKX) (domestic lg cap), FSEMX (domestic small and mid cap). A good allocation for a portfolio that is 100% equities might be 20% lg cap foreign, 5% emerging markets equity, 10 % REITs, 25% small and midcap domestic, 5% foreign small cap, and 35% domestic lg cap. Shave a little off of each category and buy a low fee bond fund if you want to trade some return for lower volatility (I'm not sure how old you are.)
RWR (REIT index ETF), SPY or IVV or VTI (lg cap domestic ETFs), EEM (emerging markets ETF), IWM (small cap ETF), and EFA (lg cap foreign ETF)--all of these have low fees, are highly liquid, are completely diversified, and are good proxies for index funds.
J
The Wealthy Geek | Jan 17, 2007
Hi Him,
Here are some recommendations to think about:
1. Sell all the stock in the Vanguard Roth IRA and replace with the Vanguard Small Cap Index Fund, INvestor Shares (NAESX)
2. Sell all the stock in the Fidelity Roth IRA and use 75% of the proceeds for the Fidelity Low-Priced Fund (FLPSX) and the remaining 25% for the existing Aston/Tamro Small Cap Fund (ATASX)
3. Replace the Alliance Bernstein Large Cap International with a small cap global fund of some kind. Preferably one with a reasonably low expense ratio.
The first two moves would move your large cap holdings from 66.88% (high for two people in their late 20s) to 42.08%. Your mid cap holdings would increase from 9.84% to 23.66% and the small cap from 16.83% to 27.81%.
Of course, if you moved the large cap international into a global small cap those numbers would change again.
In the long-term, small and mid cap stocks will outperform large caps by at least 50%.
I hope this helps. Cheers.
Reply to this comment