My New Target Allocations

My New Target Allocations

My New Target Allocations

Hello everyone! Welcome back to The Green Swan. Today’s post is a continuation of recent posts on my investment portfolio and strategy. In the first post on investments I explained why I Invest to Win, followed up with detail on My Investment Portfolio and the composition of my investments. In the third post, I explained why I invest a portion of my assets in My Actively Managed Funds and how they have performed historically (considering their higher annual management fees). And last week I explained in more detail My Small Business Investment opportunity I’ve chosen to pursue with my siblings. And as you may recall, the small business investment is actually what spurred the whole discussion on my investments since it will require liquidating a substantial amount of my taxable brokerage investments and a subsequent re-balancing of the rest of my portfolio.

So here we are today, time to re-balance the portfolio and decide my new target allocations!

Step 1: Establish Current Portfolio Composition

I did this initially in My Investment Portfolio, but that was a month ago so below is a quick recap with updated figures.

The primary focus of my portfolio is in three categories supported by Vanguard funds (VFINX to track the S&P 500, NAESX to track small cap stocks, and VGTSX as a broad international fund). With that as my primary focus, I have added a few actively managed funds in each of those categories to provide a balance, and the majority of my actively managed investments currently reside in my wife and my 401(k) plans due to limited investment options.

My New Target Allocations


My New Target Allocations

Step 2: Identify Target Allocations

As established in the My Actively Managed Funds post, I intend to sell PENNX and reallocate any such proceeds to my small cap index fund. I have also decided to reduce the overall amount of actively managed funds in my portfolio to approximately 35% since they tend to be more volatile as well as the potential to be weighed down by higher annual fees.

With the plan to eventually sell out of PENNX, I will have six actively managed funds remaining (not including investments in my H.S.A. which are pretty minimal and there are no good index fund options). To keep things balanced between the six, I will target 5-7% of my investments in each which will result in approximately 35% of my total portfolio in actively managed funds.

I am happy with my portfolio concentration by category and will continue to shoot for approximately 35% held in foreign stocks and the domestic stocks split relatively evenly between large and small cap. Note that I am not too concerned about mid cap exposure because generally large cap and small cap funds do still hold a small amount of mid cap due to companies naturally transcending these boundaries over time. So by holding large cap and small cap funds, I am still getting good exposure to mid cap and the complete spectrum of domestic stocks.

Step 3: Sell Taxable Brokerage Account Assets

I own seven mutual funds in my taxable brokerage account. There is a benefit to owning a lot of the same mutual funds in both IRA accounts and taxable brokerage accounts for one simple reason: flexibility. And that is key for both taking money out which is what I am in the process of doing, as well as for making new contributions. By owning many of the same funds, it can make it much easier to reallocate to ensure your broader investment portfolio is balanced. This is especially important for actively managed funds because they can become closed to new accounts, but if you already had an account established in both your IRA and taxable brokerage you could continue to contribute to either one as you please.

The seven funds are VFINX, NAESX, VGTSX, ARTKX, OAKLX, PRMSX, and PENNX. As noted above, I plan on selling PENNX completely. Unfortunately, I just invested $10K into PENNX a few months ago. And it has actually done very quickly since the investment, going up over 4% at the time of writing (over $400 in gains). It has not gone up enough to change my mind on the fund’s overall performance though J. But I will need to wait another 10 months or so to sell this and move it to NAESX to avoid having to pay normal income tax on the gains. By waiting a year from the original purchase, I will only have to pay the capital gains tax rate.

So for that reason, I want to continue to own each of the seven for now and do not plan on selling one in its entirety.

PRMSX is not a very significant piece of my overall portfolio (at 2.6%), so I plan on leaving this untouched in my taxable brokerage account. It just isn’t worth making a trade on this fund for such a small dollar amount.

Similarly, ARTKX is only 4.2% of my overall portfolio and I plan on leaving this untouched in order for it to move closer to its targeted allocation of 5-7%.

So leaving those three funds untouched means that I will be selling a combination of VFINX, NAESX, VGTSX, and OAKLX to come up with the amount needed.

Step 4: Rebalance Overall Portfolio

Naturally, by selling just the four funds mentioned above will through some of my targets out of whack. I will need to make a few trades in my IRA to correct this imbalance. Additionally, to move my other actively managed funds more in line with the 5-7% target weights, I will need to sell FCNTX in my wife’s 401(k) as well as my 401(k)’s international fund of funds. This can all be done in just a few trades, moving some FCNTX to a new S&P 500 index fund in her 401(k), moving my international fund of funds exposure to an international index fund that I already own, and re-balancing OAKLX after the sale in Step 3 by selling some VFINX in a combination of my wife and my IRA accounts.

Before and After Charts

My siblings and I will be closing on the small business on August 1, 2016. This means that I will need to make all the above changes in mid July to allow time to liquidate and send the wire. Below outlines my before and after charts:

Fund Type

My New Target Allocations


My New Target Allocations

Fund Chart

My New Target Allocations

I am also satisfied with the balance between index and active management by primary sector as outlined in the charts below. Having more exposure to active management in international is fine as that I believe is a sector that can really benefit by more research intensive active management. Having less exposure to active management in small cap is the result of getting rid of PENNX in favor of the NAESX index fund. I’m ok with this for the time being, but as discussed further below I will continue to evaluate actively managed small cap funds.

My New Target Allocations

Short-Term Goal #1: As previously detailed, a significant amount of my portfolio is held in my Employer’s stock. As discussed in My Investment Portfolio, I purchased this investment at an opportune time and it has performed very well since then. However it has lagged this year, as has the broader financial sector. My goal is sell out of this over time and reduce it to approximately 5% of my portfolio in the next year or two.

I’m primarily waiting on it to return to a bit higher share price since it has dropped so much this year. That may require me to hold it a bit longer than I’d like, but I think there is a lot of noise for the financial sector based on the uncertainty in the interest rate environment as well as the ongoing presidential election. Hopefully once some of this noise goes away the stock will perform better and allow me a more opportune exit point.

Short-Term Goal #2: My other short term goal is to find a new actively managed small cap fund (let me know if you have one you would recommend) to replace PENNX. I will then plan on selling some NAESX to keep my overall small cap exposure stable and to help re-balance from being heavily index weighted. However, it is not a huge priority to replace PENNX as NAESX is a good fund for small cap exposure.

Personal Capital: In additional to Excel, I use Personal Capital to manage and track my expenses as well as my investment accounts, allocations and performance. It is absolutely free to sign up and use and has some fantastic features when it comes to investment management. I highly recommend it to everyone. Note, if you sign up to Personal Capital by clicking the image below I may receive an affiliate fee. But rest assured that I would not recommend this tool so highly if I didn’t use it myself and love it. It adds so much convenience to managing personal finances. Plus it’s free!

Firstrade: I’d strongly recommend a place like Firstrade to open an IRA brokerage account. And if Vanguard index funds are your thing, you can still buy their funds through a Firstrade account (along with most other fund families). Your first 100 trades are free and transaction fees thereafter are under $7! If you are like me who doesn’t actively “trade”, you’ll only make a few transactions per year. Plus, Firstrade offers free access to research reports from Morningstar and others as well as additional education resources.

Thanks for taking a look!

The Green Swan

Work Harder, Work Smarter, Retire Earlier and Find Your Beach


Disclaimer: Please reference my Disclosures page. This post is for informational purposes only and is not to be construed as financial advice. If you need help with investing or financial decisions, please consult a financial professional.



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  1. Nice breakout of everything you are doing! I’m curious – why do you have such a small amount of active funds within the small cap category? Historically, small caps are the area that active management appears to have a slight edge over index funds because of their research into companies. I would think that would be an area where active may provide more benefit than in large cap.

      1. I’ve been surprisingly happy with MSCFX on the small cap front. It’s closed to new investors as of a couple months ago, and I thought it might start to go down because of that, but it seems to keep going up. We shall see. It’s the most expensive fund I own in regards to ER, but it has also been the most successful. Go figure.

  2. Thanks Mr. Swan – lot of great information.

    Never heard of First Trade, moving out of Etrade is on my list of things to do this year, I will add them to the list!

    35% international is a little high for my liking, tracking down funds with decent expense ratio/returns is tough

  3. Hey Green Swan,

    It’s always a good idea to get a good overview of how your investments are doing and considering if any rebalancing needs to happen. I completely understand your logic for doing so, and also why you have some of the active funds that you do. Nice update (both the post and new allocation) 🙂


  4. This is 100% the deep end of the pool (or maybe the ocean!) for me. But I really appreciate these details analyses. I do a lot of reading and feel like my understanding is growing, but it’s very helpful to see how people apply different investing strategies. Thank you!

    1. Glad you enjoyed! I don’t like going into a ton of detail on posts like this very often, but thought with a big change it was worthwhile to address. Thanks for stopping by!

  5. Hello! I’ve heard good things about Personal Capital and will have to check it out. Although I am a major Excel geek. 🙂 I also need to do a review of all of our investments, so this is a good tool and reminder. Sometimes I think we’re doing well just to have the major accounts open and on-going contributions scheduled. Also will have to check out Firstrade.

    1. Thanks for checking it out, Kelsey. I go into a bit more detail on the actively managed funds in another post (linked from the article above) if that interests you as well.

      I’m a big excel geek too, partially because I use it daily for my job. But Personal Capital has some great features you can’t get anywhere else.

      Thanks for the comment!

  6. Nice analysis, I’m due for my mid-year rebalancing as well! Similar to you, I like to do all of my number crunching for rebalancing purposes in Excel and then will use Personal Capital to check how things are going on a more frequent basis.

    Thanks for sharing!

  7. Great detail. I love these type of posts and I am so glad I am not the only one who writes such detailed posts. Good on you.

    Am I correct in noting that you have no exposure to REITs. Any particular reason? Just curious.

    1. Yes that’s correct, no REITs for me. I’ve never been totally comfortable with them, and that partly stems from never digging in to get to understand them fully. But my understanding is that RE is very cyclical and REITs tend to be highly levered, which is a bad combination. They have had great success since the recession in part because of the super low interest rates. As rates begin to rise, that could put REITs at risk.

      So as unfounded as it may be, my avoidance of REITs stem from a lack of compete understanding, concern for the sector based on the little I do know, and the fact that I’m completely satisfied with my current strategy and the ability to reach my goals through stock investing.

      Thanks for the great question Mr Pie!

        1. Thanks so much for sharing Mr Pie! I’ll give it a read and who knows, maybe I’ll be doing another portfolio reallocation to incorporate REITs.

          And I might as well add the Reformed Broker to the list, appreciate the recommendation.

          Great tips, advice and correspondence with the community like this is one of my favorite aspects of blogging!

  8. Great review on asset allocation. Based on your understanding of each element, it is no surprise you’ve managed to grow your portfolio so fast.

    I’ve taken a simpler approach of 100% VTI but as my wealth grows and my time opens up, I’m sure I’ll diversify a bit more.

    We also started using Personal Capital and it has been great. I was hesitant at first, but given its free, I signed up. I’m glad I did since it offers a lot of great insights.

  9. I hadn’t heard of Firstrade until reading your post, JW. At some point, I would love for someone in the community to create a massive post comparing all of the different platforms available today. 1, 2, 3, not it!

    Thanks for the insight into your approach on diversification and rebalancing. I still have lots of room to grow in learning about investing, so this post was enlightening.

  10. Why all the funds under 5%? Less is more. An allocation under 5% has little affect on the portfolio.

    More funds can actual equate to less diversity. An index and an active fund in the same cap can overweight you in areas.

    Lots of opinions and ways to go. Staying the course and not changing is the best strategy as long as your stock/bond mix is in a zone where you can sleep well at night.

    1. Thanks for the comment Matt. And you make a very good point, I hear ya on that. I actually try not to hold onto any fund that will hold less than 5% and in the past have sold a fund or two and consolidated my fund holdings with that objective. Unfortunately though, I am a victim of having multiple accounts.

      For instance, the allocations above include my H.S.A. and 529 plan (the light blue and green highlighted funds, respectively). By nature, those accounts will be small compared to the rest of the portfolio. Yet I don’t want the assets in each of those respective accounts to all be held in just one fund. So I’ve modeled them to be diversified in a similar fashion to the broader portfolio.

      Specifically with the 529 account, the three indexes mirror VFINX, VGTSX, and NAESX and should all track very closely, so although different funds, I view them the same.

      The only other funds less than 5% are PENNX which I am transitioning out of, PRMSX which I target around 5% or less as my foray into emerging markets, and VGTSX which is low now as a result of the liquidation for the small business investment but I would expect to grow back above 5% in time as I build back up my investments held in my taxable brokerage account.

      Thanks for the comment and agree on the 5% threshold. I’ve tried to minimize this while also balancing multiple accounts and maintaining diversification. I appreciate the feedback!

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