Personal Investments • Portfolio Review - Taxable account questions

All investment account through fidelity = 168k

Roth - 67k
FSKAX - 80%
FTIHX - 20%

TIRA - 24k
FSKAX
FTIHX
FXNAX

401k - 76k
FSKAX
FTIHX
FXNAX

So it's not clear how much you have allocated to bonds, in the two tax-deferred accounts, so I've assumed $0. Also, 67 Roth + 24 TIRA + 76 T401k = 167 so in rounding down, you've left out $1K which is likely invested "somewhere."

I've been roughly aiming for 70% US/20% INT/10%Bonds, but do need to rebalance some with the new year.

This is your Current layout, which is obviously wrong since I assumed $0 in bonds just to make a point (you need to tell us how each account is allocated). You also seem to be using a Mirrored Setup, which seems intuitively easy to manage, but actually creates clutter. In the Proposed layout, I've simplified your holdings count from 8 down to 5 by not using a mirrored approach and looking at all accounts as a unified portfolio. This also meets an AA of 90/10 with 20% of stocks in int'l. As noted below under #2 if you're using the $200K cash in Taxable, that's a home purchase portfolio that will have a different time-frame and asset allocation from this retirement portfolio, per #2 below.



A template spreadsheet (not your data) to help with asset allocation assessment and rebalance planning is linked below. Make a copy in your local GoogleSheets space to edit (or download to your local machine if you have Excel).
Asset Allocation Sheet
AA Current and Proposed

1. I have kept bonds out of the Roth that is the correct move?

Yes, both Taxable and Roth Tax-Free accounts should be 100% stocks (no bonds) if possible, which would adhere to Tax-Efficient Fund Placement.

2. I'm looking to find a place to put my cash, I had thought I should save for a house, but prices of homes at this point don't seem appealing. I do not have children and am not married. I also pay just a total of about $750/mo in rent/electric/water/internet/insurance/etc. I'm happy with living where I do right now, my fear has been if I do finally put this cash somewhere and that changes then I don't have a large savings to pursue a house, but on the flip side leaving the cash just sit there in a CD or High interest checking I realize isn't smart either. So I guess I’m going to start putting this cash savings into a taxable account.

You can track this $200K separate from your retirement portfolio, if it will be invested to eventually pay for a house well before you retire. How you invest it depends on when you think you'd want to buy a house. Some very generic guidance on investment asset classes by time-frame...
<5 years: Cash: (MMF, HYSA, CDs, T-Bills)
5-10 years: Cash/Bonds or Bonds/Stock (exact % depends on risk tolerance)
>10 years: Stock/Bonds (exact % depends on risk tolerance)

So if you want to buy in <5y, it should stay in cash, but maybe in a MMF or T-Bills, not a bank savings account or anything significantly below the 3m T-Bill yield of 4.29%. If you're sure you will not be buying anything for at least 5 years you could look at a something between 50% short-term Treasuries + 50% cash (0/50/50) to 60% stock + 40% intermediate-term "total" bonds (60/40/0), take the take the Vanguard Investor Questionnaire, then tailor the asset allocation (AA) that was recommended by the quiz based on your knowledge of your personal risk tolerance. Be sure to specify a goal to spend the money in N years (so it doesn't think you're using your life-expectancy).

3. I have also stayed with the above index funds but see so much conflicting information on going with FSKAK or FXIAX, or some of the VT/VTI or even just going with all ETFs. In the tax advantaged accounts does this matter as much?

In my opinion, there's no significant difference, so it comes down to personal prefernce. The biggest difference among "total" stock market index funds/ETFs will be the cost (expense ratio) and how closely the fund/ETF tracks the underlying index (significant tracking error isn't usually a problem for Vanguard, Fidelity, Schwab, BlackRock, etc.). Mutual funds trade in dollars so I find that easier. Some think ETFs would be more tax-efficient in a Taxable account than funds (not true for Vanguard ETFs which are just a different share-class of the mutual fund, but may be true with ETFs from other fund companies). ETFs can only be traded during market open, which I find acceptable for "fun money" individual stock picks, but I'd rather not be constrained for my "money that counts." Some discussion on mutual funds vs ETFs is given below, that may help you decide one way or the other (again not much difference).

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MFs vs ETFs
Wiki topic on ETFs vs MFs

If you're dealing with a brokerage that allows fractional share transactions of ETFs, there's not a lot of difference. The biggest thing to me is that a mutual fund (MF) order can be placed at any time of day or night and will execute at close of business at the same NAV for everyone that placed orders. MFs are traded in dollars so every penny you wanted invested is deployed (nothing left sitting in the settlement fund). If your brokerage allows ETF transactions in dollars (rather than shares), there's no significant difference at all.

ETFs have a tiny, but non-zero, bid/ask spread. They should only be traded during Market Open (9a to 4p EDT). You should probably avoid trading during times of high price volatility (typically first and last hour of market open) since the price can change since you last calculated the number of shares you need for the approximate dollar purchase/sale you want to make and price changes between lookup and execution can make you buy more (or less) than you wanted. Buying shares, instead of dollars, likely means some residual is not deployed and ends up sitting in the settlement fund. None of these ETF traits are show-stoppers, and I deal with them all the time for individual stocks (fun money), but I don't see any need to deal with it for my MF investments (an ETF is just a packaged MF that trades like a stock). ETFs certainly are portable whereas MFs may or may not be transferrable to a different brokerage "in kind," which is a valuable attribute to some, but I'm not leaving Vanguard so a non-factor to me.

It's also my understanding that ETFs in a Taxable account are more tax-efficient if the underlying fund has any churn due to trading (rather than churn due to changes in the underlying index). Since the ETF is directly trading on an exchange between buyers and sellers, the ETF manager can be hands off, but a mutual fund manager has to match buy and sell orders to try and minimize capital gains distributions for those that did not sell any shares (I always get a capital gains distribution for my taxable mutual fund even if I sold nothing that year). This might be a pretty small efficiency as I've heard it said that VTSAX is pretty tax-efficient (but likely not as efficient as VTI).

4. If I were to open up a taxable account and start putting some of my cash savings in that, is it better to switch to ETF or stay with the same funds i'm already using? I've read I don't want to keep bonds in a taxable, but does the total US vs international index matter?

You do not want the same ticker symbols or even "substantially identical" funds in Taxable as what you have in tax-advantaged, or you may run into Wash Sales. Those aren't illegal but they're a nuisance when filing your taxes if you sold shares from Taxable at a loss and would like to claim that loss-credit on your tax return.

Subsequently, you can pick a similar fund, but not the same. Often we recommend S&P-500 in all the tax-advantaged accounts that will hold "US Stock" and Total Stock Market (TSM) in Taxable... there's no wash-sale pair with that setup.

Would switching it up and going with FXIAX in the taxable be better, or just stick with FSKAK?

In theory, you can use S&P-500 (FXIAX) in Taxable and then use TSM (FSKAX) in all tax-advantaged accounts; the opposite also works and is what we typically recommend given that many folks do not have access to a Total US Stock Index in their 401k plans, but do have access to S&P-500. You might have such access to TSM now, but you might not in the future (change in employers or current employer changes 401k admin) so planning for the future and putting S&P-500 in tax-advantaged and TSM in Taxable is probably still the recommendation.

Statistics: Posted by bonesly — Tue Jan 21, 2025 7:44 pm — Replies 4 — Views 342

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