Gyroscopic Investing

I've been lurking in the forums for a while and am moving closer to a PP allocation, yet I'm unsure how to reallocate from where I am.

I came across this post http://gyroscopicinvesting.com/forum/ht ... 874#p32874 written by cabronjames and am curious how his recommendations could be tailored to my situation.

Age: 35
Location: Arizona

Wages: $68,000
457b: $82,000 ($41,000 VPMIX, $41,000 VPOIX)
Roth IRA: $21,000 (VGSLX)
Cash: $7000

Debt:
Mortgage: $89,000 @ 6.5%

I've applied for a Treasury Direct account and have sent in the notarized form.  Still, as listed above, nearly all of my wealth is tied up in 457b and Roth IRA accounts.  Should the contributions to the Roth IRA and 457 be lowered until funds are available for purchasing bonds and bullion?

With the assets spread across the Roth IRA, 457b, and taxable accounts, how does one rebalance?  Would funds representing all four of the classes (gold, cash, bond, stock) need to be in place in each of the accounts (Roth IRA, 475b, taxable) for rebalancing to be able take place?  Rebalancing in this situation confuses me especially as I can't remove money from the Roth IRA or 457b.  Also, ICMARC and Vanguard do not have funds for gold.  I would prefer to buy physical gold to buying shares in a gold fund.  Is it safe to assume that resources should be pooled toward gold for the time being?  This is frightening given the record high price of gold.

Regarding gold, how do the savers here purchase it, a little at a time or in bulk?

Regarding the REIT, I'm interested in retaining this account.  It has performed solidly and like the idea of owning "land".  I also found this interesting: http://gyroscopicinvesting.com/forum/ht ... ic.php?t=2.  Could the REIT count toward my stock or gold allocation?  If so, which?  Also, How do REITs generally sit with the Permanent Portfolios fans here?

Regarding cash, I've seen suggestions to use money market accounts such as those at Vanguard.  Wouldn't it be preferable to have this asset *outside* of a retirement account?  I keep seeing recommendations like the following: "prioritize tax inefficient assets in the non-taxable account", and I've seen cash listed as a tax inefficient asset, yet I'm not sure I'd want to put cash in somewhere that I could not reach it without penalty for several decades.

I have a Vanguard Brokerage Service (VBS) account and am fine with ETFs, though it seems like it would be harder to keep the proportions equal across classes given that ETFs need to be purchased one unit at a time, rather than fractionally like a mutual fund.  Does anyone else here have this problem with ETFs when routinely investing small amounts?

Thanks in advance.

Welcome! Congratulations on making the jump. The PP is a great portfolio and I think you'll find this forum to be an incredible resource. I sure have!

Regarding splitting assets up across accounts with different tax treatments, I too struggled with this conundrum, and I don't think there's a perfect answer for it. You have to do what seems best to you. For me, what I wound up being comfortable with was creating 3 PPs: one in the 401k, one split across my wife and my Roth IRAs, and one in a taxable account. This works well for me because each PP is for a different purpose and time horizon, so I didn't want the risk of needing to use the money in one of them only to discover that that half of the PP had been doing poorly!

The only money market fund you want to put your cash into is a treasury-only fund. Some people like to hold physical cash these days, since the super-low interest rates make it barely worse than having it tied up in T-bills or some fund. I Like SHY and VFISX for this.

In your Vanguard Roth IRA, you can create a very serviceable PP with VTI, EDV, VFISX, and a gold ETF of your choice (I use IAU for this). That's only one asset that has a commission attached to it, and $7 per trade ain't too bad. A big disadvantage here is counterparty risk (nearly everything is with Vanguard) but I mitigate this somewhat with my two other PPs with different brokerage houses that are very light on Vanguard assets.

You don't want that REIT to serve the role that's meant for gold or stocks, since it won't behave in the same manner to the market conditions you want to exploit. Also, since you already own a home, you aren't really benefiting from even more exposure to the real estate market. I'd consider selling the VGSLX and purchasing more PP-compatible funds in your Roth IRA. Vanguard has some good ones, such as VTI, EDV, and VFISX.

Hello MWKXJ,

1 key question is: within your 457b, do you have access to a Brokerage Window, where for instance you would be able to buy a gold ETF or 30 yr Treasury ETF/mutual fund.  If you could investigate this, this would help me to help you implement the Perm Port asset allocation (AA).

You may want to list your 457b fund list that you have available to pick from, although feel free to exclude the non-index stock funds.

In general, you always want to max your Roth IRA contribution ($5K) each & every year if possible.  Assuming your $21K Roth IRA custodian is Vanguard Brokerage Services (VBS), as Pointedstick said you can buy all 4 HBPP assets in a VBS account.

As far as the 457b, in general it's similarly good to contribute as much as possible up to the max ($17K iirc).  Keep in mind that if you ever change jobs, you can roll that job 457b, into a Traditional IRA at a custodian like VBS. If you have a Brokerage Window, you should definitely contribute as much as possible.

If you do NOT have a 457b Brokerage Window, it may be a personal preference issue.  If you primarily value having a HBPP AA now & always in the future, then I suppose you might reduce your 457b new contribs in order to buy taxable gold.  If you primarily value maxing your 457b annual space, then you may not be able to implement a PP, but you could do a Variable Portfolio on the "remainder" 457b using a decent alternative AA, a Boglehead AA 50% stock index 50% US bond index (a fund like BND that tracks "Barclays Capital U.S. Aggregate Float Adjusted Index").  You could see that this decision could depend on how long you plan to stay at this employer.  For instance, if you plan to change employers say by 2017, you may prefer the latter option, knowing that you can roll-over the 457b.  OTOH at the other spectrum end if you plan to be a "lifer", at the employer until retirement in say 2042, then you might prefer the former option.

Side note on your mortgage.  I vaguely understand that mortgage rates are at least somewhat influence by US Treasury rates.  The yield on the 30-yr (iirc data series goes back to 1977) & 10-yr Treasuries (iirc Robert Shiller data series back to 1871 http://www.econ.yale.edu/~shiller/data/ie_data.xls ) is very close to the historical low.  As such you may be able to refinance the mortgage.  If you are NOT able to refinance the mortgage, after contributing to your tax-advantaged accounts each year (Roth IRA & 457b), you might consider pre-paying this mortgage BEFORE investing in taxable accounts.  Actually I do not know much about home mortgages, but others here do, you might want to ask this question to this Forum.

Some other notes:

MWKXJ wrote:I've applied for a Treasury Direct account

This would be good for buying I-Bond flavor of US Savings Bonds for your CASH asset.  However you wouldn't want to do this before your annual maxing of your Roth IRA, & possibly also maxing your 457b.  Note that Treasury Direct cannot be done as an IRA type account (although I-Bonds themselves are somewhat a lesser form of pseudo tax-advantaged space in certain ways), so you would want to avoid buy 30 yr Treasuries in Treasury Direct.  Instead, you can buy the Bond asset in your Roth IRA with a fund like EDV.  Recall craigr's prioritized sequence for shielding PP assets with tax-advantaged accounts:
1 30 yr T-Bonds
2 Cash
3 Stock
4 Gold

MWKXJ wrote: Should the contributions to the Roth IRA and 457 be lowered until funds are available for purchasing bonds and bullion?

NEVER lower your Roth IRA, always try to max it if possible.  It could possibly make sense to lower your 457 contribution to buy taxable bullion, as I described above.  Also you don't need to buy 30-yr Treasuries in a taxable account, unless at some time you make & save so much money in a year that you already making the $5K IRA, $17K 401b, $15K I-Bonds that year; & had so much taxable gold, stock, & cash that you finally had to also buy taxable 30 yr T-Bonds to be balanced within the 15-35% rebalancing limits.

MWKXJ wrote: Would funds representing all four of the classes (gold, cash, bond, stock) need to be in place in each of the accounts (Roth IRA, 475b, taxable) for rebalancing to be able take place?

  Definitely not.

MWKXJ wrote: Rebalancing in this situation confuses me especially as I can't remove money from the Roth IRA or 457b.

  I have not faced the situation myself, where say an asset hit the 35% threshold in a tax-adv account where it is not possible to buy all 4 HBPP assets, like say your 457b if it doesn't have a Brokerage Window.  afaict, especially for a worker/accumulator (eg not a retired guy living of the PP), you just redirect new contributions to other assets in your other accounts until the "high" assets eventually becomes less than 35% of your HBPP pie again.  This is imperfect, but is useful in that it allows you to max your tax-adv account space.

MWKXJ wrote: Also, ICMARC and Vanguard do not have funds for gold.

  At VBS you can buy paper gold for the generic $7 non-Vanguard fund commission, including the closed-end fund GTU (only buy this if at a discount or tiny premium), or ETF like SGOL/IAU/etc. 

MWKXJ wrote: I would prefer to buy physical gold to buying shares in a gold fund.

Note that the Forum consensus seems to be keep "some paper gold in a tax-adv account for rebalancing purposes", since the long-term capital gains tax on taxable gold is the higher "collectible" rate (max rate for top tax bracket of 28%), not the generic long-term stock cap gains tax of 15%.  iirc 1 person here claimed that a good rule of thumb, tested by him spreadsheet crunching historical data, is to have 70% (taxable) gold coins, 30% tax-adv paper gold for rebalancing.  I guess this mix is somewhat a personal preference of what you're personally comfortable with.  I would again stress to always max your Roth IRA each year.  If you are going to sacrifice tax-adv space to buy taxable gold coins, sacrifice your 457 space.

MWKXJ wrote: Is it safe to assume that resources should be pooled toward gold for the time being?  This is frightening given the record high price of gold.

What would Harry Brown say?:
1 the future, & the future individual asset prices, is unknowable to everyone & you & me.  Gold could crash to $500/oz or skyrocket to $4000/oz: nobody can know.  Example: Note that many of us Forumers here were worried about T-Bonds given the 2011-July US debt ceiling politician-self-inflicted "crisis".  But since then T-Bonds by far have outperformed the other 3 assets.
2 don't look at an asset in isolation, they are a package

MWKXJ wrote: Regarding the REIT, I'm interested in retaining this account.

I'd advise you to drop the REIT idea
1 as Pointedstick, you have much real estate with your house
2 if your 457b doesn't have Brokerage Window, you will absolutely need every penny of your Roth IRA space for PP assets not avail in your 457b, like 30-yr Bonds.
If I was not convincing, consider your REIT fund as a Variable Port, NOT as part of your PP gold or stock.  Also recall the Var Port rules: you can move Var Port funds into your PP, but NEVER sell a chunk of your PP into your VP.  Only way to fund more VP is via new contribs.  "VP is money you could afford to lose if the entire VP went down to $0.  PP is money you can NOT afford to lose".

on cash, you want to keep a liquid "emergency fund", presumably this is what your $7K is, in a bank/credit union account, correct?  beyond the emergency fund, I-Bonds are great, especially if you already maxed your Roth IRA + 457b space.  Note that a 13-month old I-Bond can be redeemed any time, and as such could be part of your "emergency fund", although to redeem said I Bond would presumably take a few business days.

MWKXJ wrote: I have a Vanguard Brokerage Service (VBS) account and am fine with ETFs, though it seems like it would be harder to keep the proportions equal across classes given that ETFs need to be purchased one unit at a time, rather than fractionally like a mutual fund.

I use VBS myself, & this fractional is not an issue.  btw note that VBS offers free fractional div-reinvest on ETFs, which is useful in a tax-adv/IRA acct.  So you don't have to worry about having to manually reinvest the dividends.  btw I wouldnt recommend using this VBS feature in a taxable acct, because it would overly complicate your annual tax forms with reporting the many little trades.

after doing a rebalancing action, you can handle the small (say at most $70) remainder amount in either of 2 ways, which imho is a personal preference - either method chosen yield the same PP performance:

method #1: Keep a small amount (<$70) in the VMMXX sweep money market account.  For example, VTI is currently $68.77 & EDV is $129.71.  Note that all Vanguard ETFs have no commission at VBS.  So if you rebalancing trades left you with say a $80 balance, buy 1 share of VTI - now you have a $11.23 balance in VMMXX.

method #2: Keep 1 Vanguard mutual fund that fills 1 of the HBPP assets.  Unfortunately, EDV is only in ETF format.  OTOH, for instance, the same VTI fund is avaiable as a mutual fund, say VTSMX 0.18% exp ratio with a $3K minimum, or VTSAX - same 0.06%er as VTI, it has a $10K min.  Then, after your rebalancing trade, you just transfer whatever remainder, say the $80 from the sweep VMMXX, into this mutual fund.

MWKXJ wrote: Does anyone else here have this problem with ETFs when routinely investing small amounts?

  For simplicity, I recommend just contributing once per year to your VBS Roth IRA, the $5K or whatever amount you are able to for that yr.

For VBS taxable, personally I'd do the same of accumulating say $5K min before buying, for personal preference & tax-reporting simplicity.  Having said that, afaict it is possible at VBS to do automatic periodic (monthly, bi-weekly, etc) contributions from a linked bank account.  If I were to do this, again I'd suggest using 1 specific Vanguard mutual fund, & contributing to this fund.  Then later when you need to rebalance your PP, you can rebalance from this mutual fund to your other funds/ETFs in your VBS taxable account.

Hope some of my comments help.  Cheers

MWKXJ wrote: Regarding cash, I've seen suggestions to use money market accounts such as those at Vanguard.  Wouldn't it be preferable to have this asset *outside* of a retirement account?  I keep seeing recommendations like the following: "prioritize tax inefficient assets in the non-taxable account", and I've seen cash listed as a tax inefficient asset, yet I'm not sure I'd want to put cash in somewhere that I could not reach it without penalty for several decades.

With cash, I also think it's good to hold your emergency fund in taxable.  I'm not sure I'd call it a consensus, but several people here like to have 6-12 months of expenses set aside as an emergency fund.  I personally keep six months in taxable in cash, which I will be moving into a Treasury Money Market Fund in a few months.  Looking at your situation, my number 1 priority for you would be to get your emergency fund up to at least six months as quickly as possible.

Once you have the emergency fund in place, I would personally be paying down the mortgage aggressively.  It's a risk free 6.5% return.  Otherwise, I'd starting building a position in physical gold.

Good luck and welcome.  There are a lot of good minds here and I'm sure you'll be able to find a way to make the portfolio work for your situation with everyone's help.

MWKXJ wrote: With the assets spread across the Roth IRA, 457b, and taxable accounts, how does one rebalance? 

I love the simplicity of the PP but this is one area I have discovered that you actually have to think about it. Personally, I have 7 accounts I have to juggle between, all with varying restrictions on investment options and different tax liabilities (Personal Roth, company Roth, company 401k, SEP-IRA - multiply for spouse).

I re-balanced in January with the help of a spread sheet that allows me to enter what-if scenarios and managed to achieve the feat of being 100% invested in the PP right down to the reserve cash sitting in my checking account. It helped that I had some PP friendly options available in the restricted investment accounts (S&P index funds in my company 401k) so this was the constant and the starting point in the spreadsheet by necessity. I am also allowed to do in-service rollovers from part of my company 401k so that was also a big help.

As for tax liabilities the spread sheet was getting too complicated to factor that in so I just kept it in the back of my mind while I worked out my different scenarios.

If you're lazy like me, I think this gives one a great incentive to only look at re-balancing once a year, like HB suggested.

If I semi-retire from my career in software development in the next few years, as I am hoping, I may write a more sophisticated program where I can input all the factors including tax obligations and come up with the best possible strategies.

within your 457b, do you have access to a Brokerage Window

I couldn't find anything on the 457 provider's website regarding this.  I will check into this with the benefits coordinator come Monday.

You may want to list your 457b fund list that you have available to pick from, although feel free to exclude the non-index stock funds.

• VantageTrust PLUS fund - Tracks U.S. 91-Day T-Bill (Annualized) - 0.56% er
• VantageTrust Cash Management - Tracks U.S. 30-Day T-Bill - 0.61% er
• Vantagepoint Core Bond Index - http://quote.morningstar.com/fund/f.aspx?t=VPCIX - Tracks Barclays U.S. Aggregate Bond Index - 0.42% er
• VT PIMCO Total Return - 0.71% er
• VT Vantagepoint Inflation Protected Securities Fund - http://www.morningstar.com/invest/funds ... -secs.html - Tracks Barclays U.S. TIPS index - 0.65% er
• VT PIMCO High Yield - Tracks BofA Merrill Lynch US High Yield BB-B Rated Constrained Index - 0.80% er

In terms of stock funds, the only index funds are those that I have already selected and an S&P 500 index, namely:

• VT Vantagepoint Broad Market Index - http://quote.morningstar.com/fund/f.aspx?t=VPMIX - Tracks the Wilshire 5000 index - 0.42% er
• VT Vantagepoint Overseas Equity Index - http://quote.morningstar.com/fund/f.aspx?t=VPOIX - Tracks EAFE Index - 0.55% er
• VT Vantagepoint 500 Stock Index - http://quote.morningstar.com/fund/f.asp ... mbol=VPFIX - Tracks S&P 500 - 0.43% er

All of the funds come with an ~0.50% administration fee in addition to the expense ratio which brings up the total fund expenses to ~1%.

Do any of these funds look suitable for the permanent portfolio?

You could see that this decision could depend on how long you plan to stay at this employer.

I'll probably be a lifer.  I've been working in my present job for 13 years and am comfortable.

you might consider pre-paying this mortgage BEFORE investing in taxable accounts.

I have been making double payments and should have the mortgage paid off far ahead of schedule.  This is one of the best historic homes in my town, IHMO, and I have no intention of "trading up".

This would be good for buying I-Bond flavor of US Savings Bonds for your CASH asset.  However you wouldn't want to do this before your annual maxing of your Roth IRA, & possibly also maxing your 457b.

Thank you for clarifying this.  Perhaps when I'm further toward retirement I will look into this option.  For the time being I will focus on the Roth IRA and 457b.  I do not see myself hitting the maximums for those two accounts any time soon.

especially for a worker/accumulator (eg not a retired guy living of the PP), you just redirect new contributions to other assets in your other accounts until the "high" assets eventually becomes less than 35% of your HBPP pie again.

Again, thank you for the clarification.  I beleive I'm starting to see the big picture. 

At VBS you can buy paper gold for the generic $7 non-Vanguard fund commission, including the closed-end fund GTU (only buy this if at a discount or tiny premium), or ETF like SGOL/IAU/etc.

Sorry, what do you mean by "discount" here.  Do you mean timing the market?

1 as Pointedstick, you have much real estate with your house

Yes, I thank both you and pointedstick for this thought.  I had not considered this before and it does make sense.  When transitioning from the REIT into the other assets in the VBS account, you recommend dollar cost averaging over an extended period, correct?

In sum, given that the preferred sequence of shielding PP assets is...

1 30 yr T-Bonds
2 Cash
3 Stock
4 Gold

...and that I am so far ahead in 3) Stock, I'm thinking of suspending contributions to the 457b and leaving the Wilshire 5000 / EAFE Index funds alone, instead focusing on 1) 30 yr T-Bonds (EDV) in the Roth IRA, 2) Cash (VFISX) in the Roth IRA and a taxable money market account outside of it, and, 4) Paper Gold (IAU) in the Roth IRA, and physical Gold assets outside of it.  Perhaps I should reallocate in the 457b as well if one of the funds available would work with the permanant portfolio.  Please let me know what you think of the funds available in the 457b listed above.  Also, a brokerage window may be available.  I should know sometime on Monday.

Also, "VFISX" corresponds with the "Cash" portion of the portfolio because it is short term, correct?  In other words, it behaves similarly to me having manually set up a CD ladder, except the "ladder" in this case was constructed by the fund manager with very short term bonds.  "EDV" corresponds with the "Bond" portion because it is long term, right?  Sorry if this is elementary, but I'm not entirely positive where bond and cash funds are differentiated given that they both often use some form of bond.

jackh wrote: I am also allowed to do in-service rollovers from part of my company 401k so that was also a big help.

jackh, thanks for me teaching me about this concept of a in-service rollover.  This would be even better than a Brokerage Window, but it is unclear to me when In-service Rollover is allowed.  For example, is it only allowed for those at least 59.5 yr old?  On Bogleheads it seems 1 person claimed to In-Service Rollover a limited portion of their 401k while being younger than 59.5; while another said this is impossible, so I'm confused.  Here's 2 links I found
http://www.bogleheads.org/forum/viewtopic.php?t=3414
http://wiki.fool.com/Can_an_Employee_Ro ... mployed%3F

MWKXJ, you should research to see if you are eligible for this In-Service Rollover, as well as the Brokerage Window

cabronjames wrote:

jackh wrote: I am also allowed to do in-service rollovers from part of my company 401k so that was also a big help.

jackh, thanks for me teaching me about this concept of a in-service rollover.  This would be even better than a Brokerage Window, but it is unclear to me when In-service Rollover is allowed.  For example, is it only allowed for those at least 59.5 yr old?  On Bogleheads it seems 1 person claimed to In-Service Rollover a limited portion of their 401k while being younger than 59.5; while another said this is impossible, so I'm confused.  Here's 2 links I found
http://www.bogleheads.org/forum/viewtopic.php?t=3414
http://wiki.fool.com/Can_an_Employee_Ro ... mployed%3F

MWKXJ, you should research to see if you are eligible for this In-Service Rollover, as well as the Brokerage Window

I can only speak about my own company plan but I found out just last year that in-service rollovers were allowed after age 59 1/2 - but only the traditional 401k portion, not the ROTH. All I have to do is pick up the phone and ask for a check to be made out to Fidelity for deposit to my SEP-IRA, FBO myself. There isn't even a limit on how often I can do it though I plan on no more than once a year at re-balance time. Wished I had found out about this earlier but unfortunately I am the oldest among my co-workers and nobody else read the fine print before.

MWKXJ, if you wish, perhaps it would help to estimate your planned total annual investment say over the next few years 2012-14 period.  From your prior comments as far as I can tell you max your Roth but do not expect to max your 457, it's somewhere bt 5K & 22K annually.  Knowing this estimate (even roughly to nearest $5K, say $5K, $10K, etc) would better help me suggest a plan, especially in the Lemonade Scenario where there is no choice of Brokerage Window/In-Service Rollover.

MWKXJ wrote: VantageTrust PLUS fund - Tracks U.S. 91-Day T-Bill (Annualized) - 0.56% er

I googled & found this
http://www5.icmarc.org/xp/funds/profile ... rccodes=no

It seems this VantageTrust PLUS fund, is a "stable value fund". 
defn: http://www.investopedia.com/terms/s/sta ... e-fund.asp
They might "benchmark"/"compare" themselves to the 91-day T-Bill index, but they do NOT invest mostly in said asset.  iirc Forum guru MediumTex noted they are OK to use as a Cash asset when doing "457 Lemonade", but they are not as safe as an actual US Treasury bond like an I Bond, nor fund of USTs like SHY.  They are also probably more risky than deposit accounts FDIC/NCUA bank/credit union.  The risk comes from Credit Risk: VantageTrust &/or an insurance company VantageTrust hires to "guarantee" a certain return - this guarantee could fail & there isn't some type of government backup/bailout should this occur.  This risk is probably similar in probability to a money market fund "breaking the buck" - it is rare but it could occur.

Having said that, in the worst-case scenario where you don't have any/much Brokerage Window/In-Service Rollover choice (let me refer to hereafter as "Lemonade scenario"), you will have to use this VantageTrust PLUS fund for the bulk of your Cash asset.  Perhaps your true actual emergency fund in "safest cash" assets, like an I Bond or 100% Treasury fund, a few $100s in literal cash at home, etc.

MWKXJ wrote: VantageTrust Cash Management - Tracks U.S. 30-Day T-Bill - 0.61% er

http://www5.icmarc.org/xp/funds/profile ... rccodes=no
This looks like a money market fund.  I would avoid using this fund, afaict it seems inferior to VantageTrust PLUS fund - similar risk, with a near-0 return/reward.

The 3 stock funds & 1 bond fund VPCIX seem to be decent index funds.  For a quick rough test of an index fund, I like to use google finance chart to compare them to the relevant Vanguard fund (Vanguard/J Bogle invented the index fund & have 30+ yr history of running index funds with as far as I know little problems with tracking error vs the index).  These 4 funds "pass" the test:

VPMIX ~ VTI/VTSMX.  Note VTI's index iirc is ~3000 biggest US corps; your VPMIX is 5000 biggest corps, but you can see in google finance this is a trivial difference in returns - the ~3000 biggest companies already represent close the entire market cap value anyways.  As such either index is theoretically appropriate as a US stock index to use in the Perm Port.  For that matter the S&P500 is also valid, although craigr preferred the VTI ~3000 index, & I would guesstimate would also prefer VPMIX over S&P500 since VPMIX is so similar to VTI.

VPOIX ~ VDMIX ~ VEA/VTMGX  Note: Reminder that the orthodox HBPP uses solely US stock.  You will find many posts on this Forum asking about using Global (mix of US & ex-US) stock vs US stock.  afaict a minority of Forumers (myself included) use Global stock for their PP.  imho using solely US vs Global it's a personal preference; some Forumers disagree & think ex-US stock should only be in Variable Port.  imho  similarly to what craigr said about those who overweight with US small cap value/VBR: just be consistent in your stock sub-allocation - don't randomly change it every few years or market-time - consistency will make you more likely to over time buy low - sell high & not visa-versa.  Your current stock sub-allocation of 50% US/VPMIX, 50% EAFE/VPOIX is valid imho.  OTOH if you want to be orthodox 100% US/VPMIX is also obviously valid.

VPFIX ~ VOO/VFINX  Note: as mentioned above, I'd avoid this & use VPMIX.

VPCIX ~ BND/VBMFX  Note: A few weeks ago when I last checked BND is only 38.5% US Treasuries; the other 61.5% is non-UST bond issuers like Fannie Mae or Morgan Stanley - which are garbage from a HBPP perspective.  So personally I don't like BND for a PP perspective.

However, as in the Lemonade Scenario, you could take the remainder of your 457 that can't be PP'd, & use the Boglehead AA - 50% stock, 50% US Bond index like VPCIX.
--

The remaining funds on your list seem useless from a PP perspective.

MWKXJ wrote: All of the funds come with an ~0.50% administration fee in addition to the expense ratio which brings up the total fund expenses to ~1%

That sux bro/sis.  I feel your pain, no Bill Clinton just in case.  My sense is that this extortionist 1% fee is still worth it, for the chance to accumulate a bigger tax-adv space.  Remember that each yr's tax-adv space is perishable like an airline ticket or fruit - if you don't use it, you lose it.  Even if you end up "a lifer" at your job, you can still roll the 457 in retirement.

I should mention that a CPA accountant here (forget the username) mentioned the tactic of using a certain type of Health Savings Acct as a pseudo extra $3200 annual Roth IRA space.  iirc at age 65 you can use it for any cost, not just health.  I would like to understand this idea better myself - I thought I should mention it.  If this HSA can be done at VBS with the same funds avail & costs as the Roth IRA, for you in the Lemonade Scenario it could be more useful than the 457.  Perhaps for you, your annual savings scheme might be as follows:

1 IF employer matches 457 contribution, fund up to the match max
2 Roth IRA $5K
3 IF this HSA pseudo Roth tactic works, $3200 in this HSA
4 457 up to $17K limit
5 Prepaying a portion of the house 6.5% mortgage (assuming refinancing not currently possible)
6 I Bond up to $15K limit

I would say steps #1-3 are no-brainer, beyond that the sequence might be more a personal preference.

* possible exceptions of investing some taxable before step 4 is finished:
a some physical gold coins for SHTF protection, & possibly also to actually implement PP AA in Lemonade Scenario
b I Bonds equal to your Emergency Fund requirements

cabronjames wrote:At VBS you can buy paper gold for the generic $7 non-Vanguard fund commission, including the closed-end fund GTU (only buy this if at a discount or tiny premium), or ETF like SGOL/IAU/etc.

MWKXJ wrote: Sorry, what do you mean by "discount" here.  Do you mean timing the market?

NO, not market timing.  GTU is a closed-end fund, closed-end funds trade at a premium or discount to the Net Asset Value (NAV)
http://en.wikipedia.org/wiki/Closed_end_fund
So I'm just suggesting if you used a closed-end fund for your gold like GTU, just make sure to do so at a discount or small premium.  What is small premium?  I would say make sure it's small relative to the historical premium data (which is googlable), in the lowest quintile or at least the lowest half.  Note: technically ETFs' prices can also vary from NAV, but iirc the widely used gold ETFs like SGOL/IAU, & stock ETFs like VTI, the ETF price stays very close to NAV.  EDV, which has less trading volume than SGOL/VTI, tends to have a small premium (1% iirc), that you likely get back anyways upon selling EDV (in this attribute EDV is similar to physical 1 oz gold coins).

MWKXJ wrote: When transitioning from the REIT into the other assets in the VBS account, you recommend dollar cost averaging over an extended period, correct?

No dollar cost avg.  Just sell the REIT, & buy the relevant funds in VBS like EDV, IAU, etc.  Do It Live, no Bill O'Reilly jic.

MWKXJ wrote:Sorry if this is elementary, but I'm not entirely positive where bond and cash funds are differentiated given that they both often use some form of bond.

I'd recommend re-reading CraigR's FAQs on crawlingroad.com for each of Stock, Bond, Gold, Cash as a starting point.  Obvs there are many Forum articles, HB books more detail.  Also read the CraigR/MediumTex books when it releases (Fall 2012?).

from PP perspective, just know that
Bond = 30 yr T-Bond, or any mix of 20-30 yr T-Bonds.  Note that the orthodox HBPP theory is buy the longest dated 30-yr T-Bond (iirc right now this is 2042-May-15) & sell it once it has less than 20 yrs till maturity (rt now this would mean sell any T-Bond that matures any earlier than 2032-July).  Funds which hold said T-Bond assets like TLT are alternative, perhaps inferior but acceptable, methods of holding the Bond asset.  a fund like TLT roughly "hold a bond ladder" of the approriate mix of T-bonds for the HBPP Bond asset.  SHY does similarly for the Cash asset. imho within VBS, EDV is the best Vanguard fund for the Bond asset (iirc VUSTX has some garbage non-USTs or USTs of <20 yr duration).  But note that EDV actually has UST Zero Coupons, not Traditioanl UST.  I personally use EDV, but with the MediumTex 3/2 rule: EDV has 3/2 the volatility of a 30 yr T-Bond (or TLT), hence it needs to be held in 2/3X the usual portion of Bond.  What this means then is a PP with EDV, there are 11 parts: 2/3 for EDV, 3/3 for stock/gold/cash, the target allocation for EDV is 2/11 ~18.1%, the stock/gold/cash 3/11 ~27.3%.  Note that in your Lemonade Scenario, the lower EDV target alloc is actually a benefit, since you are trying to maximize the use of your limited VBS Roth IRA space.  Within VBS you actually could buy the 30 yr T-Bond, but I recommend EDV due to the limit space.

Cash = mix of 0-3 yr USTs.  I haven't used VFISX; look at its Detailed Holdings - if it's 90-100% USTs of 0-3 yr maturity it could be used for Cash.  However, in your Lemonade Scenario you will use that 457b stable value fund "VantageTrust PLUS fund" for the bulk on your Cash.

MWKXJ,

I created a topic to learn more about the aforementioned HSA tactic.  I'd encourage you to read it, & add any questions/comments there that I missed/didn't consider

http://gyroscopicinvesting.com/forum/in ... topic=2749

I'm interested to hear what you find out what you learn about Brokerage Window/In-Service Rollover.

Having said that, here's a draft MWKXJ Perm Port implementation plan that could be used as at a starting point that you could tweak as needed/desired, assuming the Lemonade Scenario (no Brokerage Window/In-Service Rollover choice)

--
Assumptions
1 Lemonade Scenario: no Brokerage Window nor In-Service Rollover

2 Assume you want to implement the Perm Port AA, having Stock, Bond, Gold, & Cash

3 Assume that you prioritize:
3a implementing the Perm Port AA, & barring the ability to do that immediately, directing this yr/2012's investment dollars in a way that will allow you to shorten the time until your Perm Port AA is possible
more than
3b maximizing the usage of 401K space, even it prohibits progress towards implementing the Perm Port AA

4 Assume this aforementioned HSA as pseudo Roth IRA tactic not available

5 Assume that you will Stable Value Fund to implement most of your Cash, acknowledging that a Stable Value Fund is NOT USTreasury-Notes, but an acceptable risk, especially given this 457 Lemonade Scenario of limited useful funds.

6 Assume that you are OK with using EDV (Zero Coupon USTs) maturing for the 30-yr Bond asset, using the MediumTex EDV rule that EDV is held in 2/3X amount as a 30-yr T-Bond or TLT would be, since EDV has 3/2V of 30-yr T-Bond (V = volatility)

7 Given #6, the target allocs will be altered from the orthodox HBPP.  In the orthodox HBPP, each asset stock/bond/gold/cash has a target alloc of 25% (3/12), & need to be in a range of 0.6X-to-1.4X of the target alloc: between a low reblancing threshold (let's call it LRT) of 15% & high rebalancing treshold (HRT) of 35%.  If an asset dips down to 15%, you need to rebalance sell off part ot the highest asset(s), & use this chunk to buy up this lowest asset back up to 25%.  Conversely if an asset hits 35%, you need to rebalance by selling off a chunk of this asset so it hits 25%, & use this chunk to buy up the lowest asset(s).  Given #6, EDV needs to be held as 2/11 ~18.1%, with (rounding up) LRT = 0.6 * 2/11 ~11.0%, (rounding down) HRT = 1.4 * 2/11 ~25.4%.  Similarly, for each of Stock/Gold/Cash, the target alloc = 3/11 ~27.3%, LRT ~16.4%, HRT ~38.1%.

8 You stated your preference is to hold physical gold over paper gold fund.  So your taxable investing priority will be to purchase physical gold, such as 1 oz sovereign gold coins like American Eagle.

9 It appears from your comments that your preferred paper gold fund, is the ETF IAU (personally I recommend a mix of SGOL &/or GTU), so I'll assume the use of IAU in this plan.

10 From your comments I assume you want to maintain your stock sub-allocation of
50% US stock index (VPMIX)
50% ex-US EAFE region stock index (VPOIX)

11 Assume that you follow an orthodox PP approach, whereby one considers their emergency cash fund as part of their PP pie.  As such, I'll consider the "$7K cash" as part of your Investable Pie which we are allocating into a PP.

12 Your Investable Pie is $110K
457b: $82K (currently $41K VPMIX, $41K VPOIX)
VBS Roth IRA: $21K (currently VGSLX)
(presumably your local taxable FDIC/NCUA deposit acct you use for emergency cash savings): $7K cash

13 You would like to have your entire Investable Pie be used to implement the PP AA.  Per your comments you do not explicity want a Variable Port (VP) in general.  Specifically you no longer want VP of REIT, & thus will sell you VGSLX.

14 Assume employer does not match any 457 contribs.

15 Assume that since your Roth IRA space is limited, & necessary to purchase enough EDV & also possibly IAU/gold in order to keep your PP balanced, agressively contribute the Roth IRA by funding it as soon as possible each year.  Eg, in 2012, once you've earned $5K in work income, & have enough emergency cash to permit it, go ahead at immediately fund the Roth IRA, say in Jul 2012, as opposed to the latest possible time when you file the 2012 tax return say in Apr 2013.

16 Per #15, assume that you've earned >=$5K work income by July 2012, & that you can take $5K of your $7K in your FDIC deposit Cash account, & make your 2012 Roth IRA contribution.  Note: I understand this may not actually be possible in Jul 2012, & in reality you could your 2012 Roth IRA contrib anytime bt Jul 2012 and Apr 2013 anyways.

This will change your Investable Pie of $110K
457b: $82K
VBS Roth IRA: $26K
FDIC deposit acct: $2K cash

17 Setup your new 457 payroll contribs to be directed as follows (eg, evenly between stock & cash):
50% VantageTrust PLUS fund
25% VPMIX
25% VPOIX
--

Here's your Jul 2012 PP:
Stock $42K.  Note: 43K/110K ~38.2% of Pie, slightly above the HRT = 38.1%.  Note: right now it's impossible to rebalance given the VBS Roth IRA is not large enough to buy enough EDV & gold.  We plan to eventually rebalance via contributions to VBS Roth IRA, & possible also taxable gold coins.
Holding 1 (H1): $21K in 457b in VPMIX (assume 0.92% expense ratio per your earlier comment, 0.42% fund er + 0.50% generic account er)
H2: $21K in 457b in VPOIX (1.05%er - 0.55%fund + 0.50%generic acct)

Bond $12.1K ~11.0% of Pie, balanced, within the 11.0% <= EDV <= 25.4% rebalancing treshholds (RTs)
H3: $12.1K in VBS Roth IRA in EDV (0.13%er)

Cash $42K, ~38.2% of Pie (see Note for stock, same situation applies for Cash)
H4: $40K in 457b in VantageTrust PLUS fund (1.06%er, 0.56%fund + 0.50%generic acct)
H5: $2K in FDIC deposit acct (assume 0%er)
H6: ~$0 in VMMXX in VBS Roth IRA

Gold $13.9K ~12.6% of Pie. Note: This is the only asset significant out of balance, since Gold LRT = 16.4%.  You will try to remedy this by accumulating cash in your FDIC account, so that
a once you've earned $5K in calendar 2013, say by Mar 2013, you can immediately purchase your $5K 2013 Roth IRA contrib
b after #a, if you are able to invest more duirng 2013, buy gold coins.
H7: $13.9K in VBS Roth IRA in IAU (0.25%er)
--

Portfolio Expense Ratio =
(21 * 0.92%) + (21 * 1.05%) + (12.1 * 0.13%) + (40 * 1.06%) + (2 * 0.00%) + (0 * 0.20%) + (13.9 * 0.25%)
=0.89%
comment: the 0.89% seems absurdly high at first glance, but note this is a consequence of mediocre 457s.  Note that over the next few years, as you add to your VBS Roth IRA, & possibly taxable gold coins, your Port Exp Ratio will gradually decline.
--

Transactions required to implement this plan
1 In 457b, sell $20K of your $41K VPMIX
2 In 457b, sell $20K of your $41K VPOIX
3 In 457b, buy $40K of VantageTrust PLUS fund
4 In FDIC deposit acct, withdraw $5K of your $7K, send it to VBS for your 2012 Roth IRA contrib
5 In VBS Roth IRA, temporarily put this $5K Roth IRA contrib in the VMMXX (0.20%er) sweep fund
6 In VBS Roth IRA, sell all of your $21K VGSLX
7 In VBS Roth IRA, buy $12.1K EDV
8 In VBS Roth IRA, buy $13.9K IAU Note1: there will be a $7 commission for IAU since it's a non-Vanguard ETF.  OTOH, EDV is a Vanguard ETF, so it had No comission.  Note2: there'll be a small trivial remainder of <=$16 in VMMXX (since IAU's price currently =$15.84, account for this VMMXX as Cash.
--

Let me know what you think of this draft PP implementation plan

cabronjames wrote: I'm interested to hear what you find out what you learn about Brokerage Window/In-Service Rollover.

I called ICMA and found that they offer a "VantageBroker" product which allows access to TDAmeritrade products through the 457b, however, my employer has not elected to enroll in this service.  I called the benefits coordinator and found that the earliest the employer would consider enrolling is in November.

Having said that, here's a draft MWKXJ Perm Port implementation plan that could be used as at a starting point that you could tweak as needed/desired, assuming the Lemonade Scenario (no Brokerage Window/In-Service Rollover choice)
--
Assumptions
1 Lemonade Scenario: no Brokerage Window nor In-Service Rollover

2 Assume you want to implement the Perm Port AA, having Stock, Bond, Gold, & Cash

3 Assume that you prioritize:
3a implementing the Perm Port AA, & barring the ability to do that immediately, directing this yr/2012's investment dollars in a way that will allow you to shorten the time until your Perm Port AA is possible
more than
3b maximizing the usage of 401K space, even it prohibits progress towards implementing the Perm Port AA

Yes on all counts.  I assume "Roth IRA" in 3b.

4 Assume this aforementioned HSA as pseudo Roth IRA tactic not available

There is a HSA plan available at my employer, but one must elect to have the high-deductible health coverage.  This does not make sense for me as my wife has MS and her medical expenses typically fall into the range where the high deductible is not cost effective.

5 Assume that you will Stable Value Fund to implement most of your Cash, acknowledging that a Stable Value Fund is NOT USTreasury-Notes, but an acceptable risk, especially given this 457 Lemonade Scenario of limited useful funds.

6 Assume that you are OK with using EDV (Zero Coupon USTs) maturing for the 30-yr Bond asset, using the MediumTex EDV rule that EDV is held in 2/3X amount as a 30-yr T-Bond or TLT would be, since EDV has 3/2V of 30-yr T-Bond (V = volatility)

7 Given #6, the target allocs will be altered from the orthodox HBPP.  In the orthodox HBPP, each asset stock/bond/gold/cash has a target alloc of 25% (3/12), & need to be in a range of 0.6X-to-1.4X of the target alloc: between a low reblancing threshold (let's call it LRT) of 15% & high rebalancing treshold (HRT) of 35%.  If an asset dips down to 15%, you need to rebalance sell off part ot the highest asset(s), & use this chunk to buy up this lowest asset back up to 25%.  Conversely if an asset hits 35%, you need to rebalance by selling off a chunk of this asset so it hits 25%, & use this chunk to buy up the lowest asset(s).  Given #6, EDV needs to be held as 2/11 ~18.1%, with (rounding up) LRT = 0.6 * 2/11 ~11.0%, (rounding down) HRT = 1.4 * 2/11 ~25.4%.  Similarly, for each of Stock/Gold/Cash, the target alloc = 3/11 ~27.3%, LRT ~16.4%, HRT ~38.1%.

The assumptions are correct for the previous points, though I'll have to do more research on the 18/27/27/27 as I don't completely understand the effect of EDV's zero coupons.  "Zero coupon" means that the derivatives (sp) are paid one time correct?

8 You stated your preference is to hold physical gold over paper gold fund.  So your taxable investing priority will be to purchase physical gold, such as 1 oz sovereign gold coins like American Eagle.

9 It appears from your comments that your preferred paper gold fund, is the ETF IAU (personally I recommend a mix of SGOL &/or GTU), so I'll assume the use of IAU in this plan.

Yes on both counts.  Could you explain why you prefer SGOL and GTU to IAU.  I believe the latter has a lower E.R.

10 From your comments I assume you want to maintain your stock sub-allocation of
50% US stock index (VPMIX)
50% ex-US EAFE region stock index (VPOIX)

11 Assume that you follow an orthodox PP approach, whereby one considers their emergency cash fund as part of their PP pie.  As such, I'll consider the "$7K cash" as part of your Investable Pie which we are allocating into a PP.

Yes on all counts.  The $7K cash is in a credit union money market account.

12 Your Investable Pie is $110K
457b: $82K (currently $41K VPMIX, $41K VPOIX)
VBS Roth IRA: $21K (currently VGSLX)
(presumably your local taxable FDIC/NCUA deposit acct you use for emergency cash savings): $7K cash

13 You would like to have your entire Investable Pie be used to implement the PP AA.  Per your comments you do not explicity want a Variable Port (VP) in general.  Specifically you no longer want VP of REIT, & thus will sell you VGSLX.

14 Assume employer does not match any 457 contribs.

Correct assumptions.

15 Assume that since your Roth IRA space is limited, & necessary to purchase enough EDV & also possibly IAU/gold in order to keep your PP balanced, agressively contribute the Roth IRA by funding it as soon as possible each year.  Eg, in 2012, once you've earned $5K in work income, & have enough emergency cash to permit it, go ahead at immediately fund the Roth IRA, say in Jul 2012, as opposed to the latest possible time when you file the 2012 tax return say in Apr 2013.

Yes, but from the stated prioritization of shielding assets in tax advantaged funds...

1 30 yr T-Bonds
2 Cash
3 Stock
4 Gold

...assuming a brokerage window does appear for the 457b in the future, wouldn't it be optimal to keep EDV and something like VFISX in the Roth IRA and stock and gold certificates in the 457?  Again, your assumptions seem sound to me, but in the future, with a brokerage window, I should plan on re-balancing again, correct?

16 Per #15, assume that you've earned >=$5K work income by July 2012, & that you can take $5K of your $7K in your FDIC deposit Cash account, & make your 2012 Roth IRA contribution.  Note: I understand this may not actually be possible in Jul 2012, & in reality you could your 2012 Roth IRA contrib anytime bt Jul 2012 and Apr 2013 anyways.

This will change your Investable Pie of $110K
457b: $82K
VBS Roth IRA: $26K
FDIC deposit acct: $2K cash

Yes, that is a safe assumption.  I can invest ~$6000 a year and potentially more in the future after paying off the mortgage.

17 Setup your new 457 payroll contribs to be directed as follows (eg, evenly between stock & cash):
50% VantageTrust PLUS fund
25% VPMIX
25% VPOIX
--

Here's your Jul 2012 PP:
Stock $42K.  Note: 43K/110K ~38.2% of Pie, slightly above the HRT = 38.1%.  Note: right now it's impossible to rebalance given the VBS Roth IRA is not large enough to buy enough EDV & gold.  We plan to eventually rebalance via contributions to VBS Roth IRA, & possible also taxable gold coins.
Holding 1 (H1): $21K in 457b in VPMIX (assume 0.92% expense ratio per your earlier comment, 0.42% fund er + 0.50% generic account er)
H2: $21K in 457b in VPOIX (1.05%er - 0.55%fund + 0.50%generic acct)

Bond $12.1K ~11.0% of Pie, balanced, within the 11.0% <= EDV <= 25.4% rebalancing treshholds (RTs)
H3: $12.1K in VBS Roth IRA in EDV (0.13%er)

Cash $42K, ~38.2% of Pie (see Note for stock, same situation applies for Cash)
H4: $40K in 457b in VantageTrust PLUS fund (1.06%er, 0.56%fund + 0.50%generic acct)
H5: $2K in FDIC deposit acct (assume 0%er)
H6: ~$0 in VMMXX in VBS Roth IRA

Gold $13.9K ~12.6% of Pie. Note: This is the only asset significant out of balance, since Gold LRT = 16.4%.  You will try to remedy this by accumulating cash in your FDIC account, so that
a once you've earned $5K in calendar 2013, say by Mar 2013, you can immediately purchase your $5K 2013 Roth IRA contrib
b after #a, if you are able to invest more duirng 2013, buy gold coins.
H7: $13.9K in VBS Roth IRA in IAU (0.25%er)
--

Portfolio Expense Ratio =
(21 * 0.92%) + (21 * 1.05%) + (12.1 * 0.13%) + (40 * 1.06%) + (2 * 0.00%) + (0 * 0.20%) + (13.9 * 0.25%)
=0.89%
comment: the 0.89% seems absurdly high at first glance, but note this is a consequence of mediocre 457s.  Note that over the next few years, as you add to your VBS Roth IRA, & possibly taxable gold coins, your Port Exp Ratio will gradually decline.
--

Transactions required to implement this plan
1 In 457b, sell $20K of your $41K VPMIX
2 In 457b, sell $20K of your $41K VPOIX
3 In 457b, buy $40K of VantageTrust PLUS fund
4 In FDIC deposit acct, withdraw $5K of your $7K, send it to VBS for your 2012 Roth IRA contrib
5 In VBS Roth IRA, temporarily put this $5K Roth IRA contrib in the VMMXX (0.20%er) sweep fund
6 In VBS Roth IRA, sell all of your $21K VGSLX
7 In VBS Roth IRA, buy $12.1K EDV
8 In VBS Roth IRA, buy $13.9K IAU Note1: there will be a $7 commission for IAU since it's a non-Vanguard ETF.  OTOH, EDV is a Vanguard ETF, so it had No comission.  Note2: there'll be a small trivial remainder of <=$16 in VMMXX (since IAU's price currently =$15.84, account for this VMMXX as Cash.
--

Let me know what you think of this draft PP implementation plan

This looks excellent.  Thank you.

MWKXJ wrote: Yes on both counts.  Could you explain why you prefer SGOL and GTU to IAU.  I believe the latter has a lower E.R.

GTU is a Canadian fund, so you can file IRS form 8261 every year you hold it and then when you sell it, you're taxed at ordinary capital gains tax rates rather than the nearly twice as high 28% collectibles tax rate. This only matters for taxable accounts.

MWKXJ wrote:I can invest ~$6000 a year and potentially more in the future after paying off the mortgage.

OK, I'm assuming this $6K is total annual investment.  Thus,

#1st-5000th $: Roth IRA

5001th-6000th $: accumulate cash in your credit union money mkt acct, to buy a few physical 1 oz sovereign gold coins.  Note: I don't know much about gold coins, so do your own research.  Presumably you would be buying 1 coin every 1-2 years given this $1K per year available.  I'm suggesting the gold coins with this 5001th-6000th dollar because
1 you specifically mentioned you prioritized owning some physical gold
2 you need to accumulate more gold anyways to eventually establish a balanced PP asset alloc.

MWKXJ, reminder to ask your employer about jackh's aforementioned In-Service Rollover idea.

In-Service Rollover is actually likely superior than a Brokerage Window!

Even if you were allowed to Rollover say a minority (something like 30%) portion of you 457 to a VBS Tradl IRA, that would allow you to achieve a balanced PP AA immediately.  Obviously the bigger the portion the better, since your both choices & exp ratio costs at VBS Tradl IRA are superior than that of your 457.

On the Brokerage Window possibly being avail Nov 2012 "VantageBroker" product.  It's great if you ask for it, but I would advise to plan as if it won't be available.  If it is made avail it's a pleasant surprise, & you can review the potential of using it at that time.

I project that even without the Brokerage Window, you probably be able (depending on asset price changes obviously) to have a balanced PP AA within the rebalancing treshholds by the time you contribute your $6K annual investment in 2013.

Recall that the draft plan assumed you had contributed your 2012 $5K Roth IRA contribution, but NOT your $1K physical gold coin investment.

So let's project your Investable Pie after having made your $6K annual investment in 2013, let's say Dec 2013 (or earlier, depending on when you've made the $6K investment).  We need to add $7K to your Investable pie:
2012's $1K physical gold coin
2013's $1K physical gold coin + $5K Roth IRA

Dec 2013 transactions
1 The current (2012-Jun-18) gold spot price is $1630, so let's assume you can buy 1 oz gold coin in Dec 2013 for $1630 (ignoring premium over spot price, also obvs noting that all asset prices will be diff in Dec 2013 than Jun 2012, this is just an example), & the remaining $370 stays in your NCUA deposit money mkt acct.
2 Put your Dec 2013 $5K VBS Roth IRA contrib temporarily in VMMXX sweep account
3 Buy $800 of EDV
4 Buy $4200 of IAU

Dec 2013 Portfolio ($117K)

Stock $42K.  42/117 ~35.9% of Pie: Balanced, since  16.4%<35.9% Stock<38.1%
H1: $21K in 457b in VPMIX (0.92%er)
H2: $21K in 457b in VPOIX (1.05%er)

Bond $12.9K ~11.0% of Pie: Balanced, within the 11.0%<=11.0% EDV<25.4%
H3: $12.1K in VBS Roth IRA in EDV (0.13%er)

Cash $42.37K, ~36.2% of Pie: Balanced, since 16.4%<36.2% Cash<38.1%
H4: $40K in 457b in VantageTrust PLUS fund (1.06%er)
H5: $2.370K in NCUA deposit acct (assume 0%er)
H6: ~$0 in VMMXX (0.20%er) in VBS Roth IRA

Gold $19.73K ~16.9% of Pie: Balanced, since 16.4%<16.9% Gold<38.1%
H7: $18.1K in VBS Roth IRA in IAU (0.25%er)
H8: $1.63K in MWKXJ's ownership in 1 oz American Eagle gold coin (0%er)
--

MWKXJ wrote: I don't completely understand the effect of EDV's zero coupons.  "Zero coupon" means that the derivatives (sp) are paid one time correct?

some background
http://en.wikipedia.org/wiki/United_Sta ... asury_bond
http://en.wikipedia.org/wiki/Zero-coupon_bond

Let me attempt to explain the diff bt a UST-Bond; & a Zero Coupon UST, which is actually an indivdual payment/coupon of an actual UST-Bond

For example, let's look the longest-dated 30yr UST-Bond currently,a UST-Bond maturing 2042-May-15, with a Coupon of $3.  afaict, what this means, is that if Joe Investor bought this UST-Bond for $100 at auction on 2012-May-15, this is the series of payments bt Joe & the UST (note this series of payments is similar to your mortgage; in other words a mortgage is a type of Bond in terms of it sets up a series of payments between a lender & borrower).  Let's assume that Joe holds this UST-Bond until maturity in 2042-May-15

2012-May-15: Joe buys this UST-Bond, eg Joe (lender) pays the UST (borrower) $100
2012-Nov-15: there's an interest payment every 6 months.  UST pays Joe $1.50 interest
2013-May-15: UST pays Joe $1.50 interest
...
2041-Nov-15: UST pays Joe $1.50 interest
2042-May-15: UST pays Joe $1.50 interest AND UST pays Joe back the Principal of $100

A fund like TLT has a group of UST-Bonds that mature between 20-30 years.

OTOH a fund like EDV has a group of INDIVIDUAL INTEREST/PRINCIPAL PAYMENTS aka Zero Coupon Bonds, that mature in 20-30 years.

Let's say another investor, Mary, offers to buy Joe's 2042-May-15 $100 Principal payment owed to him by the UST, today on 2012-Jun-18, for $41.92.  Mary just bought a Zero Coupon Bond from Joe.
--

We hold 2/3X EDV that we would for a UST-Bond, since EDV is 3/2X as volatile as a UST-Bond.  Go to google finance & compare EDV to TLT on a 5 yr graph; you'll see that when TLT is up, EDV is up even higher; & when TLT is down, EDV is down even lower
--

MWKXJ wrote:Could you explain why you prefer SGOL and GTU to IAU

Read the Gold FAQ & Forum posts.  Personally I liked SGOL over the other gold ETFs, it appears that its auditing of the gold process was relatively better, & the SGOL's vault is in Switzerland, which is a pseudo-geographical diversification HB/CraigR recommend.  For me I guesstimated these factors made SGOL worth the slightly higher exp ratio.

On GTU, recall GTU is a closed end fund, which is different than an ETF as iirc I decribed before.  GTU also offers pseudo-geographical diversification with vaults in Canada, & the fund is actually a Canadian fund/company, although it trades on both the US & Canada stock exchange, so it cost $7 commission at VBS just as an non-Vanguard ETF like SGOL/IAU does.

Do your due dilligence/research, but in the end pick which of SGOL/IAU/GTU/etc gold fund to use in your VBS Roth IRA.  I suppose since you plan to buy some physical gold coins, you could just use 1 gold fund in VBS Roth IRA, since you will be diversifying your gold holdings with your physical coins.

--

MWKXJ wrote: assuming a brokerage window does appear for the 457b in the future, wouldn't it be optimal to keep EDV and something like VFISX in the Roth IRA and stock and gold certificates in the 457?

Your VBS Roth IRA & 457 are both tax-advantaged accounts.  So putting Cash in 457 is the same as putting Cash in the VBS Roth IRA, in the sense that you don't pay taxes on dividends, or cap gain taxes from a rebalance, either way.  In the draft plan I did you MUST keep Stock/Cash in your 457 to come close to having a balanced PP AA, since it's CURRENTLY IMPOSSIBLE to invest EDV/Gold in your 457 (only possible in your VBS Roth IRA).

MWKXJ wrote:but in the future, with a brokerage window, I should plan on re-balancing again

Maybe.  Depends on the Brokerage Window commissions/costs/etc.  imho it's impossible to plan for this right now, since you don't know these costs, which is why I suggest planning as if Brokerage Window is not available.  You can always review/modify the plan later if Brokerage Window is available.

--