Building a Taxable Portfolio Properly
I'm currently maxing my 401(k) and a Roth IRA. I have emergency savings, savings for a house down payment, and savings for vehicle maintenance. I'm looking for advice on how to properly build a taxable portfolio of Vanguard ETFs to supplement my retirement savings.
I've read that total market ETFs are the most tax efficient investment for a taxable portfolio, so I plan to buy 1 share each of VTI and VXUS every two weeks. I chose these ETFS because the Boglehead's wiki's Lazy Portfolio page recommended them, but also because I do not have the required cash to invest in fractional shares of their equivalent mutual funds.
I am 30 years old. When I begin shifting my allocation to include more fixed income products, I will include them in my 401(k) and IRA accounts. Please assume that I will re-balance all of my investments as I build my taxable portfolio (i.e., I will buy fewer equity mutual funds in my tax-protected accounts as I accrue more equity ETFs in my taxable account until I reach the desired allocation across all portfolios).
Please critique this strategy for building a taxable portfolio (e.g., unanticipated tax implications, making purchases too often, etc).
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Not a bad strategy. However:
Target a % allocation instead of buying 1 share of each. Most efficient frontier portfolios (portfolio with highest expected return per unit of risk) and long term strategic allocations with the highest sharp ratio are ~60-70% U.S. domestic, 20-30% Int'l Developed, and 5-10% Emerging Markets (ticker VWO)
Vanguard index ETFs are exactly what you want to use
Personally I would do 70% VTI, 20% VEA (not VXUS), and 10% VWO. At times, due to its excessive risk, i would go to 0% in Emerging Markets, which you wouldn't be able to do with VXUS.
If you REALLY want tax efficiency you can buy stocks that don't pay a dividend, usually growth stocks like FB, GOOGL, and others. This way you will never have to pay any dividend tax - all your tax will be paid when you retire at a theoretically lower tax rate (<--- really a grey tax area here).
*Also, check out Robin Hood. They offer commission free stock trading.
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