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MY WRITTEN ASSET allocation calls for 80% of my portfolio to be in stocks, with the balance in bonds. That might seem aggressive for someone in their 60s, but I’ve long been comfortable taking stock market risk and, indeed, I boosted my allocation above 90% amid 2022’s stock market swoon. I continued with a 90%-plus stock allocation after my 2024 cancer diagnosis. After all, while my time horizon became very short, that of my heirs remained considerably longer.
The bulk of my bond portfolio is split between a short-term government bond fund and a short-term inflation-indexed bond fund. I view bonds not as a source of income, but as a place to go for cash if the stock market is suffering one of its periodic downturns. My general approach: Play it safe with bonds and take risk with my stocks.
How is my stock portfolio invested? I have everything in index funds, with that money divided roughly equally between U.S. and foreign stocks. My various Roth accounts, which I’ll bequeath to my kids, are all invested in the same fund—a total world stock index fund.
What about my traditional IRA? In that account, the U.S. stock portion is split between a total stock market index fund, which gives me broad market exposure, and index funds that focus on large-company and small-company value stocks. Meanwhile, for my core foreign exposure, I own an international total market index fund, with smaller stakes in international value stocks, international small-company stocks and emerging markets.
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Hello Jonathan,
I want to thank you for being so generous with your knowledge and experience in investing. This week an article came out in Morningstar about where not to place international stock in your portfolio. I am using an international stock index fund (SWISX) and had placed it into a tax deferred IRA and also into a Roth. But now I am worried reading all of this information about taxes from Morningstar and elsewhere.
From what I can see from your portfolio above, you have placed international stock funds (Total World Fund) into a Roth and an IRA? Since I was not invested in any international stock, I felt that I needed to make some long term investment changes you my allocations. Can you give me the low down on placing international stock index funds into these IRA and Roth accounts. I will never be in a high tax bracket. Even so I am trying to be tax efficient as possible.
Thanks so much!
Emily
By placing an International fund in a tax-deferred account, you can’t take advantage of the foreign tax credit. But in the greater scheme of things, missing out on the foreign tax credit isn’t a huge deal, so I wouldn’t be too concerned about it.
In the case of Vanguard World Stock, there’s no foreign tax credit available to shareholders right now, because the fund currently has less than half its portfolio in foreign stocks.