I sent you a spreadsheet via email that might get you started in the right direction.

Thought you guys might have an answer for this one. I’m currently updating my IRA and 401K. I want the following distribution across the accounts:
US – 65%
– Large cap – 70%
– Mid cap – 20%
– Small cap – 10%

I’m splitting that between Doge & Cox and individual Vanguard large, mid, and small cap funds. I’ve played around on Excel trying to make the mix of funds match the 70/20/10 cap overall distribution, using Doge & Cox (86% – Large cap; 14% – mid cap) and Vanguard funds. Keep running into a wall. Can you recommend how to set it up? I would also consider the X-ray tool at Morningstar.com. Thanks for the help.

That’s fantastic. It sure will simplify things for you! Thanks for bringing it up.

I tend not to remember to mention in-service withdrawals because a) you have to be the right age and b) from my anecdotal experience, most plans don’t offer them.

Perhaps I should rectify that with a post on the topic.

And just for reference, every comment on the blog shows up as an email to me. So I’m pretty much always following every discussion just by default.

@Ken: “I like the Keep It Simple plan. You can make things way too complex with invesments.”

Easy for Ken to say, but the problem is: what is “simple”? Is simple a matter of reducing the number of funds, or tracking the portfolio, or the easiest way to rebalance? But then Mike is proposing a strategy that may require a bit more “effort,” and effort is the opposite to simple.

For example: if I want a 60/40 s/b split, I can easily achieve it within each provider’s offerings. If (as is happens) my 401(k) has FUSEX and FBIDX @ .1 and .38 respectively, I get an average ER of .21 if I allocate 60/40, or $21 for each $10K in the account. Sure, I can allocate the 401(k) 80/20 for an average ER of 1.52, a savings of about $6 per each $10K, but then I have to re-allocate the IRA to compensate based on the overall percentages I wind up within my total portfolio. That seems to me more complicated than just allocating 60/40 within each account.

Maybe part of the question should be (and this would apply both to any individual account as well as the total portfolio): what is the upper limit of an acceptable expense ratio for any fund as well as overall? Obviously the lower the better, but if I have an ER of .2 in 90% of my funds, how much is the 10% I have with a fund of .5 in my 401(k) really hurting me if it gives me an average ER of .23?

Sorry if I’m writing too much here. If I am, I’ll back off.

I have up to this point taken the strategy of “separate but equal” portfolios – 401k using Fidelity 60/40 stock/bond, with the stock fund @ an excellent .1 and the bond @ a decent .38, and tIRA using several funds from Vanguard in similar proportions. I could of course have all my US stock in Fido’s Total US Market and exchange out of VG’s Total Stock Market, but if I have only one fund in my 401(k) how do I rebalance it if the 401(k) grows too large for my targets? (I continue to contribute regularly to the 401(k) but not to the tIRA, as it’s not deductible, and I also feed the Roth.)

While I appreciate the simplicity argument too, VG’s Portfolio Watch (which is at least as useful as Morningstar’s, as the VG analysis gives you feedback on every aspect of your portfolio) makes tracking your investments a piece of cake. At worst, I have an extra fund or two, but as it’s all going to get rolled over into the tIRA come withdrawal time, is that such a big deal?

GoYanks: Admittedly, ongoing contributions do complicate things.

If an investor has good options for each asset class in their 401k, then sure, having the same allocation in each account could make sense.

If, however, it means having to use high-cost funds in your 401k, I think it can be worth the effort (especially for larger portfolios). Or perhaps a hybrid strategy something like this:

• Have ongoing contributions (in each account) use your overall/total portfolio allocation.
• When you rebalance (once per year, for instance) use the method above to minimize ongoing costs.

In the simple world it is a good strategy, but in real world I think there are a lot more complications. When you have disproportionate amount in each of the accounts (401k, Rollover IRA, Roth IRA, regular IRA for spouse, taxable account) AND disproportionate ongoing contribution limits, it can become really complicated. To keep it simple, wouldn’t it be better to have the same allocation for each of your portfolios? I understand the tax implications, but you can potentially reduce that by using muni bonds in your taxable portfolio.

Ever use Morningstar’s Free XRAY product to determine those gaps:

http://www.myjourneytomillions.com/articles/using-morningstars-free-instant-x-ray-tool-to-evaluate-your-portfolio/