Keeping Investing Simple

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:

  1. 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.
  2. 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.
  3. 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.

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2 thoughts on “Keeping Investing Simple

  1. I’ve done something similar with my own investments.

    I have all my fixed income (TBM) and TSM in my ROTH, I have TISM, TSM and Extended Market in taxable, and I have my 401k in all S&P 500.

    If we had Vanguard target date funds in the 401k, I’d probably just put target date everywhere to make it even simpler as my portfolio isn’t that big and the difference between admiral shares and regular is just not that much for a 5 fig portfolio.

    With monitoring my investments, I use the below spreadsheet – this is not my portfolio btw – It uses real time data from google finances to put in real time pricing data. Of course…my S&P 500 index fund from the 401k has no ticker. :(

    https://docs.google.com/spreadsheet/ccc?key=0AjtcSBWlR9XIdHIwWE8zaW5jRDBUeFlYZUw2M2kya0E&hl=en#gid=17

    If you do File > Make a New Copy – it will copy to your private Google Docs account. I had to clean up a couple of the formulas, but it works great. So much easier than logging into my vanguard, fidelity and 401k accounts every month and then inputting into excel. :)

  2. I have great Target date funds in my 401(k) – they’re all the Vanguard ones. So I could do that in my 401(k) and my Roth IRA and then tilt to International to get my desired international stocks asset allocation with my taxable investments. Since I switched out of the Target Dates, I’m going to stay out for now instead of going and fidgeting with it some. I wish my 401(k) had TSM though!

    Wow, your spreadsheet looks pretty nifty – thanks! That’s a little more scientifically advanced than the tracking that I do right now. I essentially have a worksheet in which I input the transactions each month and then another one that pulls in ticker price for each fund at the time of looking at it. Then when I want to check how far off I am from my target allocations, I input the total value of each fund into a spreadsheet that tells me how far off each category is. I really only use that last spreadsheet for setting my 401(k) contributions for the year in January and when I get a raise or when I’m about to make a Taxable or Roth contribution.

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