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Explorer ○○

Really Could Use Advice on VTWAX/VBTLX Combo

As I posted in an earlier thread that only FatCat responded to, I have a 30 year son who is starting up his own company and will be rolling over his 401K to Vanguard.

He won't have time to do more than glance once a year at his portfolio.

Given that, is the best advice for someone that is that young and a novice at investing a simple VTWAX/VBTLX total world stock/total U.S. bond index at an 80/20 allocation?

Or, would the traditional Boglehead Three Fund Portfolio of VTSAX (total U.S.), VTIAX (total international), VBTLX (U.S. bond) make better sense at a 60/20/20 allocation?

Since all of my own funds are for the retirement stage (VWENX, VWIAX etc.), I am not sure how to best advise on the Indexes (despite a lot of research and portfolio backtesting, scanning of the Bogleheads site).

Can you please educate me and share what you would do? (Vanguard only please).

Thanks!

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6 Replies
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Explorer ○○○

Re: Really Could Use Advice on VTWAX/VBTLX Combo

Since your son won't pay much attention for the next 20 years, why not either Vanguard Balanced Index Fund, or Vanguard Target Date 2050 or so.  That way it will auto rebalance.  Given International's underperformance forever, you might not want to go with VTWAX.  

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Explorer ○

Re: Really Could Use Advice on VTWAX/VBTLX Combo

For a 30-yer old investor, I don't think bonds should occupy 20% of the portfolio, especially at this low-interest period for the next few years.  You could use this Vanguard website (https://investor.vanguard.com/mutual-funds/list#/mutual-funds/asset-class/month-end-returns) to see all MFs/ETFs, their returns and %bond with age in the target-date funds. Vanguard is keen on global diversification, so its target-date funds have relatively high international equity (e.g. 36% in 2050 fund, or 40% in VTWAX).  Yes, international could out-perform in the future, but hadn't been consistently so in long duration compared to the US market. I personally only have 20% in international. For person that doesn't have time or interest in tracking the portfolio, I would go with VFIAX for domestic and VTIAX for international. I believe technology will be the key for future global growth, so depending on his current 401K value and potential future investment, growth funds such as VGT or VUG and VWILX could also be considered.

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Participant ○○○

Re: Really Could Use Advice on VTWAX/VBTLX Combo

I agree with the Target Date Retirement Fund suggestion, they were developed for people just like your son.

If not that, I prefer the Total World Index over the Total Stock, Total International  combo. It's simpler. The ETF, VT, has a slightly lower expense ratio than the mutual fund.

 

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Participant ○○○

Re: Really Could Use Advice on VTWAX/VBTLX Combo

Here is a table comparison from 2010-2020 of:

port 1 = VT - 80% / VBTLX -20%
port 2 = VTSAX (total Stock mkt) -80% / VBTLX - 20%

port 3 = VBIAX - 100% (Balanced Index of 60% stock/40% bond)

VFIAX (S&P 500 benchmark) - 100% stock

Portfolio performance statistics

                                    Initial Balance   Final.  CAGR      Stdev    Best Year Worst Year Max. Drawdown

Portfolio 1$10,000$21,7287.61%11.63%23.20%-7.81%-17.06%0.640.960.96
Portfolio 2$10,000$30,86511.24%11.28%26.39%-4.14%-16.35%0.951.511.00
Portfolio 3$10,000$26,4759.64%8.45%21.79%-2.86%-12.34%1.071.750.99
Vanguard 500 Index Investor$10,000$35,97612.86%13.73%32.18%-4.52%-19.63%
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Frequent Contributor

Re: Really Could Use Advice on VTWAX/VBTLX Combo

Invest 100% in VTI

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Explorer ○○

Re: Really Could Use Advice on VTWAX/VBTLX Combo

Thanks all!

Any other thoughts out there?

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