threetwoone wrote: Thu Oct 09, 2025 8:51 am
1. Should the cash reserves in the Ally account be reinvested in index funds according to my desired asset allocation? Given that the market is currently at an all-time high, this decision feels uncertain.
Reaching an all-time high is expected nearly every week for an exponentially growing asset. Perhaps your concern is that you feel stocks are over-priced (which is more about CAPE ratio than recent all-time high being broken). If the assets were previously invested in stocks (albeit a single company), then you should likely just lump-sum the entire amount back into stocks (a more broadly diversified index like Total US Stock or S&P-500).
If a pile of cash was due to an inheritance, then it was NOT previously invested in the stock market (from your perspective) and caution about lump-sum of a large cash pile into stocks is perhaps warranted with a mix of 50% lump-sum and 50% Dollar-Cost Averaging. Lump-sum beats DCA 67% of the time so on pure historical metrics, it’s still better to lump-sum, but it’s a personal risk-tolerance thing–if you’d Sleep Well At Night (SWAN) with 100% DCA (and no lump-sum portion), then that’s what you need to do for your SWAN factor. Again, this isn’t an inheritance given in cash… it’s vested shares that were recently in the stock market already, so just lump-sum it back in (you’re just reducing single-company risk, not buying in at “an all time high” which is media fright-noise anyway since media never talks about CAPE ratio relative to recent moving average or long-time mean-reversion line).
You stated your desired AA as 80/20, but didn’t say what percentage of stocks you wanted in int’l. What you have, assuming the exercised vested shares of AI sitting in cash were redeployed to US stocks, is about 94/5/1 with about 10.6% of stocks in int’l (which is <20% should boost this or cut to zero as <20% isn’t meaningful diversification from a US-only position). With the pile of Ally cash uninvested, your AA is 63/5/32 among stocks/bonds/cash.
Your Current layout has nominal bonds and cash in Taxable, which is not tax-friendly at the 24% Fed tax-bracket and 13.3% for CA (highlighted in purple). You have a Wash Sale concern with S&P-500 in Taxable and also in the HSA highlighted in red. You’re holding individual stocks (vested shares should be sold as soon as vested and re-invested in a broad index), which are highlighted in blue. It’s likely your 401k version of T Rowe Price’s 2045 Target Date Retirement fund is a Closed Investment Trust (CIT) that is less expensive than the retail version, but it’s probably still an ER > 0.30% and therefore highlighted in yellow with the ER in red. Note that I didn’t count the cash in savings/checking other than Ally as it seems like it’s for monthly expenses/liquidity, not for your retirement investment portfolio.
The Proposed layout consolidates the Taxable Schwab account to Fidelity, simplifies Taxable to just Fido Total Stock, Fido Total Int’l Stock, and Van Tax-Exempt bond ETF. This clears the wash sale with S&P-500 in both Taxable and the HSA, and replaces nominal bonds with Federally tax-exempt bonds, deploys the pile of cash at Ally into US & Int’l stocks. The TRP 2045 in the 401k is replaced with a low-cost US bond index, since a Trad Tax-Deferred account is the preferred location for bonds & cash per Tax-Efficient Fund Placement. This exactly meets your desired AA of 80/20 and has 20% of stocks in int’l (minimum suggested). It also simplifies from 11 holdings down to 5. “Simplicity is the master key to financial success.” — John C. Bogle
Note that there is a Tax Cost to Switch Funds for streamlining the Taxable account, so you have to weigh whether simplicity is worth that cost for the stocks. You probably can’t sell all the vested shares this year, but maybe you want to sell up to the top of the 15% LTCG bracket. You absolutely should replace nominal bonds with tax-exempt bonds, because that’s not just paying a cost for simplicity, it’s to reduce your annual tax-bill. I would not mix friendships with business (support your friend with allocations from your outright gift budget line, not “an investment” in your your retirement in a single company), so I’d sell the $100K stake in that individual company and re-invest in Fido Total US Stock, but as with all of these proposals, tailor to what you makes sense to you.
A template spreadsheet (not your data) to help with asset allocation assessment and rebalance planning is linked below. Make a copy in your local GoogleSheets space to edit (or download to your local machine if you have Excel). It should only take about 10-20 minutes once a year to update your balances and plan a shuffle among funds if any deltas are off by more than ±5% (or whatever your personal rebalance threshold is).
Asset Allocation Sheet
threetwoone wrote: Thu Oct 09, 2025 8:51 am
3. Would investing in gold or gold-based ETFs be a good strategy for portfolio diversification?
Precious metals are a speculative investment (along with short sales, options, futures, commodities) and aren’t part of the Boglehead Philosophy. I’m not going it’s a good or bad strategy for you (or any other specific poster), but Jack Bogle’s mantra was to “keep it simple” and that’s reflected in the linked Wiki topic on our philosophy.
threetwoone wrote: Thu Oct 09, 2025 8:51 am
4. For children’s investing, is gifting employer stock to them advisable? Could this provide tax benefits?
Gifting appreciated shares doesn’t give them a step-up in basis, but if their total income is kept low to avoid the Kiddie Tax, then their tax-rate should be lower than your tax-rate (in general, you have to look at how the IRS tries to close loop-holes on tax evasion to make sure a general read is actually going to work out in your specific situation). If it’s an unconditional gift, then cash is best unless they will pay less tax on sale of gifted/appreciated shares than you would (you’re probably still at 15% LTCG rate, but kids might be at 0% LTCG rate).
If you’re investing for college (a conditional gift) and you’re 100% sure they’ll attend 4 years, then I’d just put enough into a 529 such that, with expected earnings, it covers most of their “qualified” expenses. If there’s a reasonable chance they might not go to college in the US, then you might as well just invest the funds in your own Taxable account and ear-mark them for college funding in a spreadsheet to separate in an accounting fashion what’s for their college and what’s for your retirement and what’s for you cash-swap to avoid taxes on cash interest (see Holding Cash in a Tax-Deferred Account).
Many parents remember their own “wild years” from 18-25 and wait to give unconditional gifts until age 25, rather than at 18 (a child gains full control over a UGMA at age of majority in that state and most states that’s 18).
Another unconditional gift is to open a Roth IRA for them once they have summer jobs and you can contribute 100% of their wages (up to the $7K/yr annual contribution limit); they will gain control of these accounts at 18 like a UGMA, but can only draw the contributions, not the earnings. If they’ve been given financial literacy by you and/or your spouse then they will likely never touch the Roth accounts until they retire (thus a head-start on retirement savings for them).
threetwoone wrote: Thu Oct 09, 2025 8:51 am
5. Regarding mortgage payoff, would it be beneficial to pre-pay some principal since interest rates are trending down, or should I wait to refinance instead?
I’d probably pre-pay some principal since every day you wait for rates to drop you’re losing out on a guaranteed 6.459% rate of return on your debt reduction. Generally if your mortgage rate is greater than the 3m T-Bill Rate (3.95% as I post this), then it’s better to pre-pay now, if that’s fits within your budget constraints (see Prioritizing Investments).
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On Single-Company Risk…
All stocks and stock mutual funds/ETFs have the risk of companies being held having a significant decline or outright collapse. If that risk were hypothetically 1% for all companies (it’s not), then the risk of holding Stock XYZ becoming worthless is 1%. If we have a mutual fund/ETF tracking the S&P-500 and each company in that index has the same 1% independent risk of collapse, then the risk of holding that fund is 1%/500 = 0.002%, which is far, far less risky than 1.000%. If we had a fund like VTI/VTSAX holding 3,544 stocks, the risk is 1%/3,544 = 0.00028%. Both the S&P-500 and Total Stock Market (TSM) have negligible risk when compared to a single company stock (left chart). TSM is much lower risk than S&P-500 but they’re both effectively no risk of collapse (right chart). Despite the risk of all stocks not actually being equal the principle stands that a broadly diversified index is less risky than any individual stock holding.
The reasoning above is a large part of why we don’t’ recommend holding individual stocks (unless you’re holding at least 100 such stocks, which is complex!). If one holds employer stock (options or vested RSUs), there is a double-jeopardy because if it collapses: a) your stocks is worthless; and b) you probably lost your salary too.
