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chang
Valued Contributor

20-year B&H portfolio for a T-IRA pension rollover

Will be rolling a pension payout into a T-IRA. 56 y.o. with an existing T-IRA, Roth, 401k and 4 taxable accounts, so I think I can treat this rollover as a 20-year “set it and forget it” portfolio.

If this were 2009 I would consider going aggressive, but obviously we’re in a loooong bull market.

I’m thinking (all funds are Vanguard funds):

• 25% Wellesley (VWIAX)

• 25% Global Wellesley (VGYAX)

• 25% Global Wellington (VGWAX)

• 15% Selected Value (VASVX) - midcap value

• 10% High Yield Bond (VWEAX)

The VASVX is a bit of a play on MCV which has lagged growth for a long time. (I also have a SCV fund in my 401k.)

I specifically left out Wellington because (1) it’s semi closed now and VG only allows $25k per year; (2) I’m making up for it by adding MCV exposure (VASVX).

I realize it is unfair to ask for feedback without putting this into context of my existing portfolio / asset allocation, of which this IRA will make up about 5%. For example, if this IRA were a stand-alone portfolio, I would surely include emerging markets exposure. But I have that under control elsewhere. So let me just say, to keep things simple, that I want this IRA to be simple, low cost, and relatively “safe”. And one that doesn’t require a lot of tinkering with.

Make sense?

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19 Replies
retiredat48
Participant ○○○

Re: 20-year B&H portfolio for a T-IRA pension rollover


@chang wrote:

Will be rolling a pension payout into a T-IRA. 56 y.o. with an existing T-IRA, Roth, 401k and 4 taxable accounts, so I think I can treat this rollover as a 20-year “set it and forget it” portfolio.

 


...

So let me just say, to keep things simple, that I want this IRA to be simple, low cost, and relatively “safe”. And one that doesn’t require a lot of tinkering with.

Make sense?


No, it doesn't make sense to me!!

--You are one of the more experienced posters/investors on these forums.  Why would you want to have holdings that can be forgotten for twenty years?  Seems like lesser returns for a lack of following tradeoff.

--One must learn to accept that along with money comes RESPONSIBILITY... that is, responsibility to see that it is invested wisely.  Set and forget is not an option for this type of responsibility.  Even those investors using an advisor have a responsibility to know rudimentary investing to know whether or not they are being ripped-off.

--I also consider that such monies targeted for "long term" (two decades) should be aggressively invested with an "owning businesses" theme...aka stock mutual funds.  You are proposing far to much in plain vanilla bond holdings.

--Get over it...other than high yield, the bond market is dead---worldwide.  Even US Treasuries, with a 30 year maturity at 2% yield, is dead money.  Will double every 36 years, with dividends reinvested.  Do you seriously consider that inflation will not have increased prices of doubling, perhaps every fifteen years??  

Done preaching :-)

R48

 

 

yogibearbull
Valued Contributor

Re: 20-year B&H portfolio for a T-IRA pension rollover

@chang , with your new situation, consider core-and-explore.

Many of your recent posts include conservative/moderate-allocation funds, core-bond funds, multisector bond funds [also consider core-plus/multi-lite] and these can be part of your core/long-term portfolio.

Then you also like to invest in energy, value, small-caps, EMs, Asia, HY bonds, and those can be part of your explore/short-term portfolio. Use some consistent trading strategy for these [opportunistic, value-averaging, momentum/trend]. 

YBB
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chang
Valued Contributor

Re: 20-year B&H portfolio for a T-IRA pension rollover

If I combine yogi’s and R48’s posts, I would end up investing the money exactly as my current portfolio looks. (Except that would be difficult in a single-brokerage IRA.)

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BigTom
Follower ○○○

Re: 20-year B&H portfolio for a T-IRA pension rollover

Why do you have so many balanced funds?
Worst off, is you have them all from the same active management team.
So much overlap in all those funds. 

It appears you are looking for active management at a low cost so here is my suggestion on simplification

33.3% VEIRX - Vanguard Equity & Income Admiral (Wellington managed)

33.3% VZICX - Vanguard International Core Stock Admiral (Wellington managed)

33.3% VCOBX - Vanguard Core Bond Admiral 

Simple, diversified and DONE!

 

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DJANG0
Explorer ○○

Re: 20-year B&H portfolio for a T-IRA pension rollover

Chang, you're a tinkerer. I am too.

I thought I had it figured out as a retiree. Minimum volatility with a slice of aggressive growth, and in my case, +2 in CAGR and -2 SD compared to Total World Index. Perfect! Then a few weeks ago, I noticed how sensitive my portfolio was to changes in interest rates, so maybe it's not a set and forget portfolio after all, so now I tinker. If I really thought I could change, I'd be a Boglehead and just use index funds.

 

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chang
Valued Contributor

Re: 20-year B&H portfolio for a T-IRA pension rollover

My comments in blue:


@retiredat48 wrote:


No, it doesn't make sense to me!!

--You are one of the more experienced posters/investors on these forums.  Why would you want to have holdings that can be forgotten for twenty years?  Seems like lesser returns for a lack of following tradeoff.

--One must learn to accept that along with money comes RESPONSIBILITY... that is, responsibility to see that it is invested wisely.  Set and forget is not an option for this type of responsibility.  Even those investors using an advisor have a responsibility to know rudimentary investing to know whether or not they are being ripped-off.

I know I'm a watcher and a tinkerer, and probably couldn't "set it and forget it" for 20 years even if I wanted to. But given that I do plenty of tinkering with the rest of my portfolio, I thought I would make an attempt to construct a relatively static, low maintenance IRA here. That's one of the reasons for the balanced funds - to let them do the rebalancing for me.

--I also consider that such monies targeted for "long term" (two decades) should be aggressively invested with an "owning businesses" theme...aka stock mutual funds.  You are proposing far to much in plain vanilla bond holdings.

I hear you, but . . . be fair, it's not easy to invest "aggressively" in stocks right now, in the 10th year of a bull market and with new highs being made every day.

--Get over it...other than high yield, the bond market is dead---worldwide.  Even US Treasuries, with a 30 year maturity at 2% yield, is dead money.  Will double every 36 years, with dividends reinvested.  Do you seriously consider that inflation will not have increased prices of doubling, perhaps every fifteen years??  

I agree that Treasury yields look pathetic.


 

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chang
Valued Contributor

Re: 20-year B&H portfolio for a T-IRA pension rollover


@BigTom wrote:

Why do you have so many balanced funds?
Worst off, is you have them all from the same active management team.
So much overlap in all those funds. 

It appears you are looking for active management at a low cost so here is my suggestion on simplification

33.3% VEIRX - Vanguard Equity & Income Admiral (Wellington managed)

33.3% VZICX - Vanguard International Core Stock Admiral (Wellington managed)

33.3% VCOBX - Vanguard Core Bond Admiral 

Simple, diversified and DONE!


You're right about overlap. I really don't need Global Wellesley if I have Wellesley and Global Wellington.

The advantage of the balanced funds is that they rebalance without my having to do anything.

How about this simpler version (a little more stock as a nod to R48):

• 35% Wellesley (VWIAX)

• 35% Global Wellington (VGWAX)

• 20% Selected Value (VASVX) - midcap value

• 10% High Yield Bond (VWEAX)

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SJ60
Explorer ○

Re: 20-year B&H portfolio for a T-IRA pension rollover

Wellington is not closed, at least for Flagship customers. Just this week I sold 200K worth of another mutual fund and bought 200K of Wellington (a new position in this particular account, not merely adding to an existing position) in my Vanguard IRA. 

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chang
Valued Contributor

Re: 20-year B&H portfolio for a T-IRA pension rollover

OT question to R48: I bought an Intermediate-term bond fund with half treasuries early in the year, VBILX. Quite a decent chunk of it. I realize the yield is pathetic relative to the interest rate risk. But I benefited from an increase in NAV. Based on your comments, am I right in assuming you would advise me to take my profit and run? I also bought PIGIX and have an NAV profit there as well.
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retiredat48
Participant ○○○

Re: 20-year B&H portfolio for a T-IRA pension rollover


@chang wrote:

My comments in blue:


@retiredat48 wrote:


 

 

 

 

 

--I also consider that such monies targeted for "long term" (two decades) should be aggressively invested with an "owning businesses" theme...aka stock mutual funds.  You are proposing far to much in plain vanilla bond holdings.

I hear you, but . . . be fair, it's not easy to invest "aggressively" in stocks right now, in the 10th year of a bull market and with new highs being made every day.

 


 


I don't consider this viewpoint is correct.

Here's the problem with waiting for a bear market, just because the market hit new highs:

I lived through the following.  The Market was flat for 16 years, approx 1966 to 1981, Dow 1000 to Dow 1000.

Then the market went to new highs and people were stating they were afraid to invest at market new high points.  Dilemma is, the market is mostly making new high points, if you study long term charts.

Continuing...turns out, the market, after breaking through the 1000 barrier, went to Dow 2000.  Wow, sell, sell, sell was the war-cry of many.  However, the Dow doubled again to 4000...then again to 8000../.finally topping at 14,400.  If you did not invest during that first doubling to new highs, you missed a great bull market uptrend run.  One faces huge opportunity costs by not participating.

I suggest...forget we may have a bear market.  During the next 20 years, they will certainly happen.  Doesn't matter.  Further forget your fear that as soon as you buy, the bear market starts.  Doesn't matter, as in about 2 years you will likely have recovered and marching upward.  Reinvest all dividends, to buy more shares at low points.  You use that 20+ year timeline to your advantage.  Stay the course.

R48

 

 

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chang
Valued Contributor

Re: 20-year B&H portfolio for a T-IRA pension rollover

Updated to remove VWEAX and make the IRA more aggressive - which I can balance by maintaining or lowering equity in my taxable accounts.

• 30% Wellesley (VWIAX)

• 50% Global Wellington (VGWAX)

• 20% Selected Value (VASVX) - midcap value

Should be about 60% equity ... more than enough!

My reasoning for using balanced funds (W & W) was explained earlier.

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FatKat
Participant ○○○

Re: 20-year B&H portfolio for a T-IRA pension rollover


@retiredat48 wrote:

 


 


I don't consider this viewpoint is correct.

Here's the problem with waiting for a bear market, just because the market hit new highs:

I lived through the following.  The Market was flat for 16 years, approx 1966 to 1981, Dow 1000 to Dow 1000.

Then the market went to new highs and people were stating they were afraid to invest at market new high points.  Dilemma is, the market is mostly making new high points, if you study long term charts.

Continuing...turns out, the market, after breaking through the 1000 barrier, went to Dow 2000.  Wow, sell, sell, sell was the war-cry of many.  However, the Dow doubled again to 4000...then again to 8000../.finally topping at 14,400.  If you did not invest during that first doubling to new highs, you missed a great bull market uptrend run.  One faces huge opportunity costs by not participating.

I suggest...forget we may have a bear market.  During the next 20 years, they will certainly happen.  Doesn't matter.  Further forget your fear that as soon as you buy, the bear market starts.  Doesn't matter, as in about 2 years you will likely have recovered and marching upward.  Reinvest all dividends, to buy more shares at low points.  You use that 20+ year timeline to your advantage.  Stay the course.

R48

 

 


This is generally good advice. I do think when one is 'going into extra innings' in life, and the beneficiaries are not committed investors, then it might be a good idea to change the course.

Have gone from being slightly over 75% in equities to reinvesting in mostly bond funds, along with VWENX, VDIGX and VMNVX.

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Anitya
Explorer ○○

Re: 20-year B&H portfolio for a T-IRA pension rollover

Hi Chang, Have you considered any investment products offered by insurance companies?  Not sure what is on offer these days but sometime ago they were offering a minimum return with the upside of a percentage of SPY growth. A

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chang
Valued Contributor

Re: 20-year B&H portfolio for a T-IRA pension rollover


@Anitya wrote:

Hi Chang, Have you considered any investment products offered by insurance companies?  Not sure what is on offer these days but sometime ago they were offering a minimum return with the upside of a percentage of SPY growth. A


Hell no.

FD1001
Valued Contributor

Re: 20-year B&H portfolio for a T-IRA pension rollover


@chang wrote:

@Anitya wrote:

Hi Chang, Have you considered any investment products offered by insurance companies?  Not sure what is on offer these days but sometime ago they were offering a minimum return with the upside of a percentage of SPY growth. A


Hell no.


+1

Gary1952
Contributor ○○○

Re: 20-year B&H portfolio for a T-IRA pension rollover

I see too much international. The only 20 year set and forget would be something like VTI (total stock market) for me. If this is really only 5% of your total then 100% in total stock market. 

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FD1001
Valued Contributor

Re: 20-year B&H portfolio for a T-IRA pension rollover

20% VMNVX(playing global low volatility)

20% PDIIX (Diversification for global "riskier" higher income bond)

60% VGWAX global Wellington(value stocks + IG bonds) 

If you don't like the low volatility idea then 80% VGWAX and 20% PDIIX. 

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chang
Valued Contributor

Re: 20-year B&H portfolio for a T-IRA pension rollover


@Gary1952 wrote:

I see too much international. The only 20 year set and forget would be something like VTI (total stock market) for me. If this is really only 5% of your total then 100% in total stock market. 


Gary: I don't like most index funds, especially cap weighted indexes. I do have/use a few passive/indexed funds in more narrow applications. For example, I've owned SCHD for a while (LCV), and DFSVX in my 401k (SCV), and last year I bought VBILX in the bond space. I don't deny that the S&P500 has killed most active funds for a decade, and I certainly don't dispute the advantage of low costs. I am a value investor at heart and it's impossible for a value investor to warm to a cap weighted index fund. There are other reasons I don't like them very much, especially at this juncture, but that's a discussion for another thread.

Sure I am making a bet on international. Valuations there are better than in the US. Does that mean international will outperform over the next 1-2 decades? I'm not guaranteeing saying suggesting that, but simply overweighting international on the premise that I don't think it will underperform the US for the next two decades.

Anyway, my suggested portfolio is only 24% (of equity) foreign - actually underweight for me!

• 30% Wellesley (VWIAX)

• 50% Global Wellington (VGWAX)

• 20% Selected Value (VASVX) - midcap value

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