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Optimal investments for taxable account

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  • Avatar sjudkins 
    Participant
    Status: Physician
    Posts: 4
    Joined: 03/07/2016

    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.

    SEJ

    #246305 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4636
    Joined: 01/08/2016

    Total us. Total intl. Munis.
    That’s it.

    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 3007
    Joined: 01/03/2017

    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.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #246312 Reply
    Liked by AZPT
    wonka31 wonka31 
    Participant
    Status: Physician
    Posts: 712
    Joined: 03/24/2018

    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.

    #246313 Reply
    Liked by RocDoc
    Avatar BurnedoutDoc 
    Participant
    Status: Physician
    Posts: 40
    Joined: 11/21/2016

    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

     

    #247814 Reply
    Avatar MaxPower 
    Participant
    Status: Physician
    Posts: 370
    Joined: 02/22/2016

    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.

    #247821 Reply
    triad triad 
    Participant
    Status: Dentist, Small Business Owner
    Posts: 278
    Joined: 04/29/2016
    Earnest refinancing bonus

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

    #247822 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 2113
    Joined: 02/11/2019

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

    “Never let your sense of morals prevent you from doing what is right.”

    #247881 Reply
    ACN ACN 
    Moderator
    Status: Physician
    Posts: 666
    Joined: 01/08/2016

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

    If you're ever having a bad day, just remember in 1976 Ronald Wayne sold his 10% stake in Apple for $2,300.

    #247898 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3286
    Joined: 09/18/2018

    “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.

    #247900 Reply
    Yowza Yowza 
    Participant
    Status: Physician
    Posts: 39
    Joined: 08/25/2019

    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)?

    #248023 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
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    Joined: 02/11/2019

    Depends on your timeframe. Financial goals. And risk tolerance.

    “Never let your sense of morals prevent you from doing what is right.”

    #248025 Reply
    Avatar sjudkins 
    Participant
    Status: Physician
    Posts: 4
    Joined: 03/07/2016

    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.

    SEJ

    #248112 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4636
    Joined: 01/08/2016

    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?

    #248142 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 2113
    Joined: 02/11/2019
    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.

    “Never let your sense of morals prevent you from doing what is right.”

    #248190 Reply
    Liked by Tim

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