TL;DR Please help me choose the exact funds for my planned portfolio below?
I came up with a portfolio that I like on portfoliocharts.com and I'd like some advice before I settle on it, as well as some advice on how to actually implement it. Any takers?
Background: I'm 40 and work as an engineer at a well-known public tech firm in Seattle (no income tax state). My wife is 45. I have three younger children (all under 10).
Income: I make around 450K to 520K in total yearly comp. Roughly 175K per year of that is in tech-company RSUs. While the RSUs are unvested, a large drop in the share price of large tech companies would impact my income quite a bit and so I would like to have a lower exposure to tech stocks than normal in my portfolio.
Assets: 220K equity in 800K home. 20K bitcoin (I should sell this soon). 50K emergency fund in high-yield savings account. 50K in an old-employer 401K. 50K in current 401K (I'm new here). 25K between two Roth IRAs. 25K taxable brokerage (vanguard). 80K in my checking account (planning on putting it into the portfolio once it's set up). No debt except the house - 580K owed at 3.5%, no PMI.
I also have roughly 2.5 million in illiquid "unicorn" common stock. (early engineer at a multi-billion dollar startup that is profitable). This is my other big concern - I'm in the process of trying to liquidate some of this, but it's only possible if I take a big haircut. I could probably get 1.5 million in cash for it today but it's worth at least 2.5 million (I know this because I already sold a million dollars worth of it in the past, but that required a liquidity event.). Again, this is massive exposure to the US Tech sector already and I don't know if I want too much more exposure until I can diversify.
Assets are low because I've had a lot of student debt and a half million dollar tax bill from income plus the sale of the stock. I've only recently got the new job as well, which doubled my total comp.
Accounts: I have a 401K that I max out. My wife and I both have Roth IRAs that we do a maxed-out backdoor Roth with. I also have access to a mega backdoor Roth via my 401k provider that I max out as well. The company provides roughly 10K in matching pre-tax 401K funds.
I also max out a health FSA account each year (and use it each year) and I have three 529 plans - one for each child, each with only a few thousand in them.
PLANNED PORTFOLIO:
I'd eventually like the following portfolio:
- 45% USA equities
- 10% Europe (including UK and Swiss) equities.
- 10% Japan equities.
- 5% Euro-zone Long-term bonds
- 10% Japan Long-term bonds
- 15% REIT
- 5% gold
I built this on portfoliocharts.com and it has a similar rate of return to a 100% equity portfolio (7.8% versus 8%) but with a MUCH lower standard deviation and risk of a losing year.
I fully understand that this is not the conventional "all in VTSAX" that so many seem to be a fan of. I chose this portfolio for the following reasons:
I needed a large amount of equities in order to last forty years or so (planning on retiring at 55 and would like to avoid running out of money before I die).
I want "real" diversification - not just in the equity base but in terms of currency risk (thus the Euro and Japan equities and bonds, and gold), interest rate risk etc.
Gold, I know, doesn't return much, but it had a correlation coefficient of almost zero with US equities and is a decent hedge against sky-is-falling moments that are sure to happen over the next fifty five years.
The REIT thing is surprising - it's 67% correlated with US equities but adding it seemed to really help get the returns close to 100% VTSAX while significantly reducing risk.
The choice of Japan and Euro-zone over a total stock market (excluding US) is just based on the historical data. I completely agree that I may be overfitting here and could go for a simpler set up if I cannot find appropriate funds.
FUND SELECTION
This is where I am struggling. I have a Fidelity 401K that I could move my old Vanguard 401K to which would make things simpler. There is also the possibility to get more complete control over the 401K with BrokerageLink, which allows direct investing. There is also probably the option for the mega backdoor to go to my Roth IRA account. Right now the post-tax "mega backdoor: goes to a Fidelity Roth 401K automatically through the year. Our Roth IRAs and brokerage account are already with Vanguard. Our E-fund is with Marcus.
*What I would like is to find the exact funds that I should be investing in. *
I don't know if I can get all the funds I want inside my tax-advantaged accounts. In addition, I don't know if I should keep my 401K, Roth and taxable accounts all with exactly the same amounts of everything or if I should put the gold (28% tax!) and things like bonds and REITs that have annoying tax issues inside tax-advantaged accounts or not. Right now I'm paying 37% marginal tax rate so 15% or 20% long term gains is a big savings.
Tax considerations and fund expense ratios are both a big deal and definitely matter to final fund selection.
Finally, in terms of a rebalancing strategy: I'd planned on mostly rebalancing with new contributions rather than regularly buying and selling things, but I'll do that if there is a swing of more than 5% in absolute terms for each bucket. Should I rebalance in my tax-advantaged accounts first, or does it not really matter?
Help?
No comments:
Post a Comment