By only using four funds for investing and trying to keep each bucket (Taxable, Roth IRA, 401(k)) to have the minimum funds possible, my investing plan looks quite simple:
- I only have one index fund in my taxable account (for now). This means that it is quite easy to be past the $3,000 minimum Vanguard has and eventually, to hit the switch point for Admiral shares.
- I have only two index funds in my Roth IRA. My goal is for this bucket to be the only one that contains shares of Vanguard Extended Market Index Fund. (This is currently true.) It also currently contains the overflow allocation for International stocks, which helps if I need to re-balance the Extended Market Index amount.
- My 401(k) bucket contains all of my fixed income allocation. It has no minimums on funds and it has three of the four funds that my implementation calls for (International stocks, S&P 500 Index, and fixed income), which makes it really good to use for re-balancing.
In bucket 1, Taxable, I know that 100% of my contributions are going to International.
In bucket 2, Roth IRA, I know that my contributions are going to be split between two funds and I’ll figure out the exact split at the time that I make the contribution.
In bucket 3, 401(k), I know that I need to contribute all of my fixed income allocation for the year and most likely everything else will go to the S&P 500 Index since there is so much International everywhere else.
I definitely feel like by keeping it simple, I’m much less likely to try and tinker with my portfolio. I determine the allocation splits for the year by plugging some numbers into a spreadsheet, set it for the year, and then forget about it.