A Closer Look at my Investment Portfolio

A closer look at my Investment Portfolio

This post will take a closer look at my investment portfolio in an effort to provide more context around my investment style. The purpose is not to influence your decision on investment options or to suggest you should follow my approach, instead, my intention is to share a strategy that I’m comfortable with and that has worked for me so far.

Background

When I started investing, my understanding of the stock market was non-existent. I heard terrible things about losing your money, the need for high $$ to get started and how you were better off hiring a financial advisor to increase your chances of not screwing up. These 3 myths (except for the risk of losing money in the stock market), led to fear that kept me away from investing.

When I finished graduate studies, I got a job offer with a company that offered a 401(k) plan. Despite my lack of knowledge and/or interest, I knew enough about a 401(k) plan and how I needed to take advantage of the match (essentially free money). As a result, I set my contribution to 10% which was actually above the company match of 6%.

At this point, you’re probably wondering what I chose in terms of investments … well, hold yourself cause the ride ain’t pretty!

Since I couldn’t remember what I did in 2009, I downloaded my account history at Fidelity only to be shocked (I shouldn’t be) by my findings. The table below shows my investments from 2009-2014.

Roth 401(k) Investments Chronological Order

At the end of 2013, my employer announced a partnership with Financial Engines (FE). Fees for the first year were covered by my employer; however, point forward they were estimated at 53 basis points of assets under management (AUM). Not bad right? … Hell NO!!!

I let them manage my 401(k) and while doing so I started to see the adjustments they were making along the way. It wasn’t until I came across the FIRE community that I realized I wanted to learn more about how all this stuff worked. The more I learned, the more I realized this was no rocket science.

I didn’t discontinue their services right away; however, I eventually did … Yeah baby, No more FEES!!!

I realized the only thing I could control was looking after fees so no need for me to be putting my foot on the break while the other is trying to accelerate. Looking back I paid FE a total of $2,088.71 ouch!

The rest is history … I now manage most of my accounts and try to keep fees as low as humanly possible. Let’s get to it, below is a closer look at my investments portfolio.

Roth 401(k):

I’m gonna try to keep things simple without bothering on explaining the differences between a Traditional or Roth 401(k). Below you’ll see what my investments look like including the fees of my portfolio:

Roth 401(k)

Roth IRAs:

I opened two Traditional IRAs at Vanguard, one for my wife and the other one for myself, but then used the backdoor Roth IRA to get around income limitations. Once the accounts were opened we chose the target date retirement fund 2055 (VFFVX) which had a 90/10 stock/bond split. This wasn’t too bad; however, the fee was 16 basis points.

The following year, we each made our $5,500 contribution which was key to being able to transition our funds to VTSAX … Vanguard’s Total Stock Market Index Fund which requires a $10,000 minimum investment but has an ultra low fee at 4 basis points.

Roth IRA

Health Savings Account (HSA):

By far my favorite investment vehicle of all times. This type of account when used properly, can provide the benefits of both a Traditional IRA and a Roth IRA because you can contribute pre-tax dollars like you would in a Traditional but enjoy tax-free growth and tax-free distributions you get with a Roth. If you want to learn more about this type of account check this post by the Mad Fientist … definitely one of his best!

My employer is awesome and contributes $1,500/per year. As you may imagine I maximize my annual contribution ($6,750) and just like my Roth IRAs, I keep things simple using Fidelity’s FSTVX which is Vanguard’s VTSAX equivalent. We are currently expecting a baby boy so I keep cash on hand to cover ongoing medical expenses.

HSA

College Fund – 529

In case you’re clueless about this type of account then this post should provide some guidance. We live in Colorado and we love it; however, it comes at a price … a 4.63% state income tax of our federal taxable income to be more specific.

One way to lower our state income tax is by contributing to a state sponsored 529 plan. We’ve been taking advantage of this deduction since we move to Colorado in 2015. Even though we invest in a Vanguard fund the fees are not the lowest.

529

The benefit of being able to deduct contributions from state income tax is definitely a plus for us.  In addition, you get tax-free growth and tax-free withdrawals as long as you use the money for qualified education expenses. I’m aware this limitation scares some people away from a 529; however, as long as we remain Colorado residents we will continue to invest in this plan.

Betterment – Taxable

I’ve been using Betterment since 2015 and have been happy with their services. If you haven’t heard about them feel free to check this review. They are one of many robo-advisors that use modern portfolio theory to create custom portfolios built with low-cost index ETFs from Vanguard. Their fees are pretty competitive at 25 basis points of AUM, especially when compared to the 100 basis points charged by financial advisors (on average).

They have a pretty neat platform that allows creating different goals with each having different asset allocation. You can also connect external accounts and model retirement scenarios based on contribution assumptions. I created three goals: 1) Build Wealth, 2) Education Fund and 3) Emergency Fund.

If you’re wondering why I created an Education Fund (given I also have 529) … well, the answer is easy, Betterment was first and the 529 came later. I will; however, say that I have not contributed to this goal in my Betterment account after opening my 529 account.

 Build Wealth

Build Wealth Portfolio

Education Fund

Education Fund

Emergency Fund

Emergency Fund Portfolio

Final Thoughts

  • Better late than never … It took me a while to get my shit together and start taking the bull by the horns.
  • Watch for those fees! … This is the only thing we can control, for the rest you might as well get a crystal ball.
  • I consider myself a passive investor; however, you can’t forget about your investments and hope that everything will be fine.
  • Just because this portfolio works for me, it doesn’t mean it will work for you. Think about your financial plan and adjust accordingly.
  • If you haven’t considered investing in an HSA (assuming you’re eligible) I strongly recommend evaluating enrolling in this awesome account.
  • Betterment makes it really easy and I like it … It’s pretty much set it and forget it; however, they charge a fee which I’m Ok with for now.
  • I invest in individual stocks, peer to peer lending and real estate; however, they are relatively small amounts compared to my investment portfolio.

4 comments

  1. Great job on taking full advantage of all of the saving/retirement options that are available to you! I also waited longer than I should have to get everything in together, but like you said, better late than never. The HSA is a powerful thing, quickly becoming one of my favorites.

    1. Ross, thanks for stopping by. Yeah, better late than never. We can complain all day long about what we should have done but it doesn’t change a thing. As long as we learn from history and decide to take action TODAY then things should hopefully be fine.

  2. Awesome, thank you for sharing the details of your investments! I had no idea how terrible fees could be until we looked at Mr. Adventure Rich’s 403(b). Luckily, he was in some of the better funds offered, but they were giving options with over 1.2% in some cases… crazy! Needless to say, now that Mr. AR is no longer with that employer, we rolled the 403(b) into a Vanguard IRA.

    We are the similar in that we consider ourselves “passive investors” (via 401(k), IRA, HSA), but we still keep an eye on our allocations and deliberately guide our money into funds with low expense ratios.

    1. Good job rolling his 403(b) to a Vanguard IRA and for keeping an eye on Fees! … I agree with you, being a passive investor does not mean being complacent or disconnected from your portfolio. To me, it means having awareness to make sure you’re on track to reach your financial goals. Thanks for stopping by!

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