American Funds Eupac R5
Welcome to the forum!
How about something like this?
Taxable
12.9% VFWIX/VEU FTSE All-World ex-US
My Traditional IRA (Plan to rollover to a roth in 2010)
1.5% VGTSX Total International
1.5% VIPSX Inflation Protected Securities
Spouse's Traditional IRA (Plan to rollover to a roth in 2010)
2.7% VGSIX REIT Index
My 401k
56.2% Vanguard TR 2050 VFIFX .21
Spouse 401(k)
22.5% Vanguard SP 500 index VFINX .18
2.7% Fidelity US bond index FBIDX .32
This adds up to:
65.7% domestic stocks
24.5% international stocks
8.3% nominal bonds
1.5% inflation protected securities
New contributions ($30,700)
Taxable
$? VFWIX/VEU FTSE All-World ex-US
My Traditional IRA
$3,500 VGTSX Total International
$1,500 VIPSX Inflation Protected Securities
Spouse's Traditional IRA
$5,000 VGSIX REIT Index
My 401(k)
$15,500 Vanguard TR 2050 VFIFX .21
Spouse's 401(k)
$5,200 Vanguard SP 500 index VFINX .18
I put VFWIX/VEU FTSE All-World ex-US in your taxable account for the following reasons:
- You can get foreign tax credit.
- You are more likely to be able to do tax loss harvesting because an international fund has larger ups and downs.
- Most employer sponsored plans do not have low-cost international funds, so it's important to have an international fund on your own.
I normally don't mix a Target Retirement fund with other funds, but I had to in this case. The cheapest funds in "My 401(k)" happen to be a Target Retirement fund. Other funds are at least twice as expensive. I selected a Target Retirement 2050 because its allocation won't change in the near future. It would be difficult to keep up with a moving target.
You might notice that the new contribution suggestion contributes a lot of money to REIT. That is to build a REIT position from scratch. I would shoot for something like:
54% domestic stocks
9% REIT Index
27% international stocks
5% nominal bonds
5% inflation protected securities
If you have a taxable money to contribute, I recommend keeping buying VFWIX/VEU FTSE All-World ex-US. If you are buying more than your desired international allocation, you can reduce Total International in your Traditional IRA thereby increasing foreign tax credit. Once you empty VGTSX Total International in your Traditional IRA, and your ongoing contribtion to a taxable account exceeds your desired international allocation, you can buy VFWIX/VEU FTSE All-World ex-US and VTSMX/VTI Total Stock Market at an appropriate rate.
You might find it strange that I recommend VFWIX/VEU FTSE All-World ex-US in a taxable account and VGTSX in a tax-advantaged account. For a comparison between the two funds, see the FAQ at the bottom of International Stocks.
REIT Index is notoriously tax inefficient for the following two reasons:
- dividends are not qualified dividends
- the yield is much higher than non-REIT stocks
I would recommend selling it. If you are still within one year redemption-fee period, that's a tough situation. At the very least, take dividends and capital gain distributions in cash. You might want to sell it as soon as all (or the vast majority of) short-term capital gains disappear by becoming either losses or long-term capital gains. It's possible that you can save money by selling REIT even if you are hit with short-term capital gains because you probably lose 1.4% or so of the fund balance in the federal income tax alone.
I would recommend selling VIGRX is you have losses. Otherwise, turn off reinvestment of dividends and capital gains and take them in cash. Invest in VFWIX/VEU FTSE All-World ex-US along with new money.
If you are wondering whether your asset allocation is too aggressive, you might want to visit:
- Investor Questionnaire
- Investment Planning
Welcome to the forum!
How about something like this?
Taxable
12.9% VFWIX/VEU FTSE All-World ex-US
My Traditional IRA (Plan to rollover to a roth in 2010)
1.5% VGTSX Total International
1.5% VIPSX Inflation Protected Securities
Spouse's Traditional IRA (Plan to rollover to a roth in 2010)
2.7% VGSIX REIT Index
My 401k
56.2% Vanguard TR 2050 VFIFX .21
Spouse 401(k)
22.5% Vanguard SP 500 index VFINX .18
2.7% Fidelity US bond index FBIDX .32
This adds up to:
65.7% domestic stocks
24.5% international stocks
8.3% nominal bonds
1.5% inflation protected securities
New contributions ($30,700)
Taxable
$? VFWIX/VEU FTSE All-World ex-US
My Traditional IRA
$3,500 VGTSX Total International
$1,500 VIPSX Inflation Protected Securities
Spouse's Traditional IRA
$5,000 VGSIX REIT Index
My 401(k)
$15,500 Vanguard TR 2050 VFIFX .21
Spouse's 401(k)
$5,200 Vanguard SP 500 index VFINX .18
I put VFWIX/VEU FTSE All-World ex-US in your taxable account for the following reasons:
- You can get foreign tax credit.
- You are more likely to be able to do tax loss harvesting because an international fund has larger ups and downs.
- Most employer sponsored plans do not have low-cost international funds, so it's important to have an international fund on your own.
I normally don't mix a Target Retirement fund with other funds, but I had to in this case. The cheapest funds in "My 401(k)" happen to be a Target Retirement fund. Other funds are at least twice as expensive. I selected a Target Retirement 2050 because its allocation won't change in the near future. It would be difficult to keep up with a moving target.
You might notice that the new contribution suggestion contributes a lot of money to REIT. That is to build a REIT position from scratch. I would shoot for something like:
54% domestic stocks
9% REIT Index
27% international stocks
5% nominal bonds
5% inflation protected securities
If you have a taxable money to contribute, I recommend keeping buying VFWIX/VEU FTSE All-World ex-US. If you are buying more than your desired international allocation, you can reduce Total International in your Traditional IRA thereby increasing foreign tax credit. Once you empty VGTSX Total International in your Traditional IRA, and your ongoing contribtion to a taxable account exceeds your desired international allocation, you can buy VFWIX/VEU FTSE All-World ex-US and VTSMX/VTI Total Stock Market at an appropriate rate.
You might find it strange that I recommend VFWIX/VEU FTSE All-World ex-US in a taxable account and VGTSX in a tax-advantaged account. For a comparison between the two funds, see the FAQ at the bottom of International Stocks.
REIT Index is notoriously tax inefficient for the following two reasons:
- dividends are not qualified dividends
- the yield is much higher than non-REIT stocks
I would recommend selling it. If you are still within one year redemption-fee period, that's a tough situation. At the very least, take dividends and capital gain distributions in cash. You might want to sell it as soon as all (or the vast majority of) short-term capital gains disappear by becoming either losses or long-term capital gains. It's possible that you can save money by selling REIT even if you are hit with short-term capital gains because you probably lose 1.4% or so of the fund balance in the federal income tax alone.
I would recommend selling VIGRX is you have losses. Otherwise, turn off reinvestment of dividends and capital gains and take them in cash. Invest in VFWIX/VEU FTSE All-World ex-US along with new money.
If you are wondering whether your asset allocation is too aggressive, you might want to visit:
- Investor Questionnaire
- Investment Planning
- Hartford Mutual Funds Homepage
- Defense Funds
- Efunds Online
- Tax Free Income Funds
- Lord Abbett Mutual Funds
