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Optimal investments for taxable account

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  • Optimal investments for taxable account

    I am starting a taxable account and planning to manage it myself. I have a financial advisor whom I trust who manages our tax-deferred retirement accounts, but I want to start taking back our investments over the next 5 years. As a resident, I managed all our investments and did our taxes, but stuff got out of hand when we started in two different private practices and invested in multiple real estate properties, so I called in some help with a CPA and a financial advisor about 3 years ago.  I had a taxable account a few years ago but gifted it to our DAF since they were all old investments with huge gains. I currently manage our HSA and my kids 529 accounts myself. Starting a taxable account seems like a bigger undertaking with multiple potential pitfalls.

    I want to get the groups recommendations about what is the best thing to put in a taxable account. I want it to be low maintenance without a lot of rebalancing-yearly? I am tolerant of aggressive investments so was planning on 100% stocks, likely growth as I want to avoid dividends. We are in the highest tax bracket, both surgeons, (fairly) youngish, and currently put over $150K/year in tax-deferred accounts plus invest a similar amount yearly in real estate.  I know enough to avoid loaded, actively managed funds.

    Do I buy US total stocks vs international vs load up on Berkshire Hathaway and call it good? Appreciate recommendations for a simple allocation.

  • #2
    Total us. Total intl. Munis.
    That's it.

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    • #3
      What's your goal asset allocation? There's nothing special about investing in a taxable account. You could probably spend a week of reading and be ready to take back your tax-deferred accounts now instead of in 5 years.

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      • #4
        Don’t take them back over five years, five weeks or five months would be more appropriate. Listen to short answer Peds, he usually knows what he’s talking about.

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        • #5
          My taxable account is my easiest account to manage:

          Vanguard

          20% muni bonds

          80% total stock market

          Whenever I add new money I get my calculator out and just figure out how much I need to add to each to keep 80/20

          super easy, will take you less than 5 minutes each time you add money

           

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          • #6
            Some combo of Total Stock, Total International (if you want International), and muni bonds (I do intermediate term tax exempt since my state doesn’t have its own muni bond fund). I have terrible, high fee international options in my tax deferred accounts so am stuck getting them in taxable and/or Roth.

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            • #7
              if you want 100% stock and no rebalancing then go with VTWAX.

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              • #8
                I agree. Total stock and total international. When you add bonds do it in your tax deferred.

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                • #9
                  Ultimately though, as your taxable account increases, won't you be required to put bonds in there to keep it balanced?

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                  • #10
                    “You could probably spend a week of reading and be ready to take back your tax-deferred accounts now instead of in 5 years.”
                    “Total us. Total intl.” Total Bonds.
                    That’s it.” for tax-deferred .

                    Just figure out a % for each and thank Peds and Cord for freeing you from advisor fees. Start with 50/30/20 and add or subtract if you wish to shrink a week to 5 minutes.

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                    • #11




                      I agree. Total stock and total international. When you add bonds do it in your tax deferred.
                      Click to expand...


                      But if you're already in retirement and just looking to get a better return than a HYSA, muni bonds is reasonable as part of your AA in a taxable account? or is there a better option (at Vanguard in this case)?

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                      • #12
                        Depends on your timeframe. Financial goals. And risk tolerance.

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                        • #13
                          I appreciate all the feedback and opinions. I looked into VTWAX on Bogelheads--wow, what a strong reaction that one raises amongst the literate investor masses. Very interesting idea for a one fund portfolio, or add some bonds for a 2-fund arrangement. We are young and our risk tolerance is very high so I do not mind an aggressive portfolio with 90 or 100% stocks for now.

                          In regards to the tax-deferred accounts, I will plan to manage it in time. There are other things that our advisor does that are very important to us including charitable giving advice, hosting Journeys of Generosity, and community involvement in other non-profits. I am happy to pay reasonable advisor fees to help support him and his family for the big picture of what he does in our community. I know I could be ostracized on this website for not just making it a math problem, but money is really just a tool, not an end goal.

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                          • #14




                            I am happy to pay reasonable advisor fees to help support him and his family for the big picture of what he does in our community. I know I could be ostracized on this website for not just making it a math problem, but money is really just a tool, not an end goal.
                            Click to expand...


                            well dont forget you dont get a pass on basic math.

                            depending on the AUM fee, you will do exponentially greater charitable giving by not using your advisor.

                             

                            so whats the cost?

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                            • #15


                              I am happy to pay reasonable advisor fees to help support him and his family for the big picture of what he does in our community.
                              Click to expand...


                              You hire someone for their value they add not to give them a job.  If you want to be generous give to charity, tip a higher percentage, or Pay for the person behind you at the drive thru.

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