KevinW wrote: ↑Wed Jul 18, 2018 3:15 pm
There are two schools of thought, either "one big PP spread among all accounts" or "one separate 4x25 in each account."
When I started out I did "one big PP" but later changed to "separate 4x25". Both approaches work fine and have their merits, so I think this is really a personal preference thing.
Benefits of "one big PP":
- when you have a mix of taxable and tax-advantaged accounts, you can optimize the sheltering benefit by putting less tax-efficient assets in the sheltered accounts
- or, you can put the assets with the best growth prospects (stocks) in Roth accounts to maximize the size of your Roth
- likely involves fewer individual holdings, so fewer transactions to deal with or pay fees on
- you can work around inflexible accounts, such as 401k's with no gold vehicle
- this is what Harry Browne suggested
Benefits of "separate 4x25":
- conceptually simpler
- rebalancing can be done on an account-by-account basis, so does not involve any portfolio-wide optimization, which is easier for you, and more straightforward if someone else had to do it on your behalf
- asset-positioning decisions do not involve predicting the future (which is impossible per PP philosophy), or influence from government programs
- moreover, minimizes regret in the event that your asset-positioning scheme backfires (e.g. stocks underperform in your holding period, leaving your Roth smaller than it could've been)
- no "seismic shift" rebalancing events when one asset gets too big/small to fit in one of your accounts so you need to move everything else around at once
- likewise no "seismic shift" when you rollover accounts or change employers
Personally I was persuaded by the "minimize-regret" argument to separate out the accounts. But I think this can really go either way.