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Author: squarepegs Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75523  
Subject: Which combo of VG funds for retirement vehicles? Date: 12/2/2004 3:13 PM
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Hello Fools,

I have some fund-picking questions for y'all.

Our current allocations are as follows:

A) 35.9% individual stocks - About 25 companies from MF Hidden Gems, Income Investor, and Inside Value, with the higher-yielding companies in Roth accounts and the others in a no-commission taxable account. This allocation will receive about 55% of future contributions over the next several years, with most of this going into the Roth accounts.

B) 21.8% Vanguard 500 Index - in a Roth IRA. This allocation will receive no further contributions.

C) 19.9% Russell 3000 Index - in an extremely low-cost state retirement plan. This allocation will receive about 20% of future contributions.

D) 9.0% Vanguard 500 Index - in a SEP-IRA. This allocation will receive about 20% of future contributions.

E) 6.7% Vanguard 500 Index - in a 403(b). This allocation will receive no further contributions.

F) 6.6% Russell 2000 Index - in an extremely low-cost state retirement plan. This allocation will receive about 5% of future contributions.

My questions concern vehicles B, D, and E. Together, these three vehicles comprise 37.5% of our portfolio, but this will slowly decline, as only 20% of future contributions are headed to these vehicles.

Each of these three currently consists solely of the Vanguard 500 Index fund. I want that to change. Specifically, I would like to take on a small bond allocation and an international stock allocation. I also have a strong interest in REITs, but I am somewhat concerned about the valuation of the REIT index at this time. I'm sticking with Vanguard, regardless. My short-term target (say, the next 5-10 years) for my overall portfolio would be something like this:

Bonds ~10%
International stock ~10% (to include exposure to emerging markets)
REIT ~10%
US stock indexes ~25%
Individual stocks ~45%

These percentages are just ballpark numbers. I've considered just investing all three of these vehicles in the LifeStrategy Growth Fund (VASGX) to capture some bond and international stock exposure, and to relieve myself of concern over the fact that the SEP-IRA will be receiving contributions while the other two accounts will not. I'm curious what folks think about the fact that VASGX invests 25% of its assets in the Asset Allocation Fund. Is there a common opinion of that fund here? It's not an index fund, but I'm not sure I mind for such a small slice of my portfolio.

I could also go with the LifeStrategy Moderate Growth Fund. My beef with that fund is the small international stock investment (~10%). On the other hand, there is still the 25% Asset Allocation Fund investment, which may allow for international stock investments (does anybody know about that one?). And this one would give me about 10% in bonds overall, versus 3% from VASGX (sorry, thinking out loud now).

A possible concern with both of these funds is that the bond allocations are in the Total Bond Market Index. I've seen numerous posts recently that indicated a strong preference for the Intermediate Term Bond Index. This is just one of several concerns (along with the absence of an REIT position, for example) that makes me wonder if I should select separate funds for each of the Vanguard vehicles.

I'll stop there. I appreciate your having read this far, and I look forward to your input.

-squarepegs



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