Certainly during a time of rising interest rates, small caps have underperformed large caps. At least the past few years confirms what you are feeling for the tilt portion of your portfolio.Background
Over the past two years or so, I’ve given myself a crash course in investing after having little to no interest in finance for the first good chunk of my life. After consuming a ton of Boglehead literature and podcasts, I felt ready to marry my Small-Cap Value tilt of 30%. (I believe it was Rick Ferri that said if you are going to SCV tilt, be prepared to marry it.) I set everything up, wrote an Investor Policy Statement, created an elegant rebalancing spreadsheet, the portfolio has done fine…
And now here I am absolutely convinced that I want a divorce. I’m embracing simplicity once and for all, and I can’t see myself looking back. If a year or so of underperformance has me wavering this much, then it seems like SCV tilting is not for me.
My plan is to go VT in my tax-advantaged and 60/40 VTI/VXUS in my taxable. (I’m more than 20 years from retirement. I will potentially add fixed income later.) My portfolio is now roughly 50% in tax-advantaged, 50% in taxable.
My plan, in five steps:
1. In taxable:
Sell all my AVDV and AVUV holdings as soon as the holding period for each lot exceeds one year. I’m aware I will owe long-term capital gains taxes. Buy VTI/VXUS immediately.
2. In tax-advantaged (Roths, tIRA, 401k)
Sell everything that’s not already VT.
Buy VT.
In 401k where VT is not available, buy a close approximation (60/40 US/Ex-US).
3. Update Investor Policy Statement.
4. Rebalance taxable once a year.
5. Enjoy life.
Questions:
1. Is it sensible to use 60/40 VTI/VXUS as a proxy for VT? I’d like to be rules-based with annual rebalancing.
2. Is there anything else I should consider before making these moves?
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Original Source: https://www.youtube.com/watch?v=n30WNxVf4l0
CyclingDuo
Statistics: Posted by CyclingDuo — Sun Jun 16, 2024 10:12 pm — Replies 23 — Views 1616
