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Advice on how to organize brokerage account with multiple goals?

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  • Advice on how to organize brokerage account with multiple goals?

    Currently with my bank I have 7-8 different savings accounts which have monthly contributions (long term savings for future home down payment, savings for future cars, etc...) I would like to move these longer term savings to my Vanguard Brokerage account. Don't plan on using the money for 3-5 years and will keep adding monthly.

    I have really enjoyed having the multiple savings accounts with specific goals and am slightly at a loss of how to do something similar with a brokerage account. Do people open up multiple brokerage accounts in a similar way? How will I know what money is designated/budgeted for what in 3-5 years with continual contributions? I am very comfortable with excel but that would be a difficult and taxing spreadsheet to figure out.

    Thanks for the help

  • #2
    You are using various accounts to substitute for a true financial plan. Once you have your plan in place, you can consolidate accounts. The course Fire Your Financial Advisor will get you started on the basics. The book The One Page Financial Plan by Carl Richards is another excellent resource for a more robust look at planning from the perspective of a planner.

    After that, if you still want help implementing, post questions here or talk to one of the recommended financial advisors on this site.
    Financial planning, investment management and CPA services for medical professionals | 270-247-6087

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    • #3
      Nope. Just invest in 1 big pot of money.
      You need an asset allocation.

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      • #4
        Stick it all together and use addition and subtraction to figure it out.

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        • #5
          Is this like electronic envelopes?

          You could certainly open a separate brokerage account for each of your arbitrarily divided goals. Then you'd have to decide if each of those accounts will have the exact same asset allocation or how you're going to balance things across each account. Not sure why you'd complicate things that way instead of just remembering you want to save 60k for a downpayment on a house and 30k for a car and investing your money according to your AA, but if that's your thing...

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          • #6
            Be careful what you do with money that you plan to spend in 3-5 years. Invest in equities over a short time horizon and you could find yourself with only 50 or 60 cents left of every dollar invested

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            • #7
              The technique is relatively simple:

              Desired investment allocation + desired shorter term needs = adjusted AA

              The safe shorter term savings need cash equivalents (savings) the stock/bonds are your investments. Rebalance investments only. The cash will disappear when you spend it.

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              • #8
                When you’re in the saving/accumulation phase, I prefer mental “buckets” like you do as well. No right or wrong answer and what is easier for one person may seem tedious for someone else. I agree with @jfoxcpacfp that you do want an overall plan / be intentional about how those different buckets fit into your plan.

                Here is how I like to mentally “bucket”:

                • “Retirement Bucket”

                  1. This would include all your accounts earmarked for retirement (401k/403b, IRA, 457b, additional brokerage account, etc.) and this grouping would have the same investment allocation based on the longer time horizon of retirement. Take advantage of asset placement (higher long-term expected returns in Roths, less tax efficient funds in IRAs, most tax efficient funds in brokerage account).



                • Short term goals (0-3 years)

                  1. Have a high yield savings account (or several) that is earmarked for expenses like buying a new car, vacations, down payment, etc.



                • “Short/medium term goals” (3-10 years)

                  1. Like @Jacoavlu mentions, when you invest over shorter time horizons, you need to be aware that your investments could be down when you go to take the money out. That’s why the closer you get to needing the money, the riskier it is to be invested in stocks/bonds. This is where it comes down to your preference/comfort level with taking more risk to earn a higher return versus the flip side of your investments being temporarily down when you need them. As your investment time horizon expands, 5+ years out, the odds go up that you’ll be better off investing in stocks/bonds versus leaving in a high yield savings account.

                  2. When there are several short/medium term goals without an exact time horizon for them, it is often easier to have one account earmarked for these with an investment allocation of stocks/bonds you are comfortable with over that 3-10 year time frame.



                • College funding

                  1. I like having a separate college savings bucket/investment allocation. Many of the 529 plans out there have “age-based” investment allocations too if you didn’t want to think about customizing the allocation.



                • Emergency Fund – 3 to 6 months in a high yield savings account


                This changes though once you get closer to retirement at which point I prefer a single asset allocation for the most part.
                Financial Planning for Physicians | [email protected]

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