A Closer Look at Our Investment Portfolio

A Closer Look at Our Investment Portfolio

This post will take a closer look at our investment portfolio. The purpose is not to influence your decision on investment options or to suggest you should follow our approach. The intention is to share a strategy that we’re comfortable with and works for us.

Background

When we started investing, our understanding of the stock market was non-existent. We 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 minimize your chances of screwing up. These 3 myths (except for the risk of losing money in the stock market), led to fear that kept us 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 we 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%.

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.

2009 2010-2012
AF Europac Growth R5 AF Europac Growth R5
FID 500 Index Inv Company Stock
FID Ext Mkt Idx Inv FID Freedom 2045
FID Freedom 2045
FID Tot Mkt Idx Inv
PIM Total Rt Inst

2013 2014
AF Europac Growth R6 AF Europac Growth R6
AF Grth Fund Amer R6 Company Stock
Company Stock FID 500 Index Inv Inst
FID ContraFund K FiD Ext Mkt Idx Pr
FID Freedom K 2030 VANG Tot Bd Mkt Adm
FiD Growth CO K VANG Tot Intl Stk Ad
PIM Total RT Inst VANF Val Index Inst

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?

We let them manage my 401(k) and soon after we 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.

We realized the only thing we could control was investing expenses. There was simply no need to put a foot on the brake while the other one was hitting the gas. Looking back we paid FE a total of $2,088.71.

Today we manage all our accounts and try to keep fees as low as humanly possible.

Without further ado, let’s get to it.

Pre-Tax/Roth/After-Tax 401(k)

The difference between pre-tax, Roth and after-tax 401(k) is beyond the scope of this post. I will probably write an article targeting how we manage these three options. For now, let’s stay focused on our asset allocation.

Below our current investments including fees.

Current Employer

On a weighted average, our fees are sitting at 0.024%.

Symbol Description Portfolio % Fees %
BITSX Total US Stock Market Index Fund 69.45 0.03
NA Company Stock 25.89 NA
BDOIX Total International Stock Market Index Fund 2.86 0.08
BMOIX US Bond Index Fund 1.80 0.04

Previous Employer

On a weighted average, our fees are sitting at 0.028%.

Symbol Description Portfolio % Fees %
FSKAX FID Total US Stock Market Index Fund 60.38 0.015
VTSNX Vanguard Total International Stock Market Index Fund 27.64 0.08
VBTIX Vanguard US Bond Index Fund 11.99 0.035

Roth IRAs

We opened two Traditional IRAs at Vanguard. Initially, we chose target-date retirement funds but the following year, transitioned to VTSAX. Currently, the expense ratio sits at 0.04%

Health Savings Account (HSA)

This type of account when used properly, can provide the benefits of both a Traditional IRA and a Roth IRA. You can contribute pre-tax dollars as 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 we contribute up the annual limit and just like our Roth IRAs, we keep things simple using Fidelity’s FSTVX. This fund is equivalent to Vanguard’s VTSAX but has even a lower expense ratio of 0.015%.

529 – College Fund 

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 moved to Colorado in 2015. Even though we invest in a Vanguard total stock index fund the fees are not the lowest (0.36%).

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.

We’re 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.

Taxable

We invested with Betterment for ~ 4 years. After some time we decided to move our portfolio to Vanguard.

If you’re wondering about the number of ETFs please know these were sitting at Betterment. One of their offerings is tax-loss harvesting. As a result, there’s some redundancy that we need to manage.

Eventually, we’ll simplify this portfolio; however, we need to make sure we minimize triggering taxable events especially those related to short-term capital gains.

The current weighted expense ratio is a little high at 0.06%.

Symbol Description Portfolio % Fees %
VEA VANGUARD FTSE DEVELOPED MKTS ETF 0.36 0.05
VWO VANGUARD FTSE EMERGING MARKETS ETF 5.49 0.10
VBR VANGUARD SMALL CAP VALUE ETF 9.38 0.07
VTI VANGUARD TOTAL STOCK MARKET ETF 18.83 0.03
IWN ISHARES RUSSELL 2000 VALUE ETF 1.01 0.24
IWS ISHARES RUSSELL MID CAP VALUE ETF 1.80 0.24
IVE ISHARES S&P 500 VALUE ETF 3.14 0.18
SCHF SCHWAB INTL EQUITY ETF 37.63 0.06
SCHB SCHWAB US BROAD MARKET ETF 22.37 0.03

Final Thoughts

  • Better late than never … It took us a while to get our shit together and start taking the bull by the horns.
  • Watch for those fees! … This is the only thing we can control,
  • We are passive investors; however, you can’t forget about your investments and hope that everything will be fine.
  • Just because this portfolio works for us, 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.
  • We invest in individual stocks, and real estate; however, they are relatively small amounts compared to our investment portfolio.

Until next time … JJ

4 thoughts on “A Closer Look at Our Investment Portfolio

  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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