If you’ve followed this blog, you will know that I find tracking personal finances both fascinating and insightful.
With the recent bull market, our cumulative (nominal) investment gains since the birth of the blog 8 years ago surpassed $1M last month.
Some Backstory
A little over eight years ago, I completed my twelfth year of college (I’m a slow learner) at age 34, with a net worth of approximately $250k—comprised entirely of Roth IRAs. After graduation, we navigated the six-month gap between my last $2,500 stipend and my first professor paycheck by withdrawing from our Roth IRAs to cover living expenses and buy our first home, leaving us with about $120k in total investments when I started this blog.
This post documents how we grew our portfolio from $120k to ~$2.5M over eight years, accruing $1M in investment gains in the process.
The Accounting Identity
To track our investment growth, I use the following accounting identity:
Investment Balance_t+1 = Investment Balance_t + Investment Contributions_t+1 + Investment Gains_t+1
Rearranging the above to solve for investment gains:
Investment Gains_t+1 = Investment Balance_t+1 – Investment Balance_t – Investment Contributions_t+1
In simple terms, you can calculate your investment gains over any horizon—to the penny—by taking the difference in investment balances between the two time periods and subtracting your contributions over that time. Here’s what happens when I plug in our values from the birth of the blog to today over the past eight years:
Investment Gains since start of blog = Investment Balance today – Investment Balance at start of blog – Contributions between now and start of blog
Investment Gains since start of blog = $2,456,644 – $121,554 – $1,290,456 = $1,044,634.
Charts
A few observations:
- Sorry in advance if this blog post jinxes markets and triggers a global recession. Markets seem a bit frothy and I wouldn’t be surprised if prices come back to reality. But I’ve believed that markets have been frothy for a decade now…
- I’m obviously the beneficiary of enormous privilege—raised by supportive parents, born into a country with vast opportunities, and fortunate enough to have received an education that led to gainful employment. Despite a lack of personal finance education in my 12 years of college, I figured out the gist of it in my early 20s and have been staying the course ever since.
- Our ~$2.5M portfolio couldn’t be simpler: 70% US stock index (VTSAX, FSKAX, FZROX, etc.) + 30% International stock index (VTIAX, FTIHX, FZILX, etc.). We pay ~0.01% in fees across all investments, translating to ~$250 per year on our $2.5M portfolio. If we used high-fee funds and/or advisors charging 1%-2%, we’d be paying $25k-$50k annually—a very high number considering that’s about half of our family’s yearly living expenses.
- I believe that good, unbiased, and occasional financial advice is worth well over $500/hr. However, I find the ubiquitous Assets Under Management (AUM) model to be fundamentally flawed.
- I can think of infinite reasons why the financial industry would try to convince you that you are incapable of managing your own portfolio and nobody trying to convince you to can manage it on your own. Why is this the case? Follow the money — there’s no profit to be made when you’re paying ~$0 in fees on a $2.5M DIY portfolio. This is why you don’t see/hear commercials advocating a superior DIY Boglehead portfolio on TV/Podcasts/Online.
- Perhaps this social experiment of a poorly written blog can provide some roadmap on how one might successfully do that.
- We never tried to time the market in the last 8 years, nor were we particularly tempted to. We did not mess with our asset allocation a single time over that period — we simply stayed the course. Any time our bank account exceeded our desired level (~$500), we dumped the excess into investments, prioritizing tax-advantaged accounts over taxable accounts.
- Because investing in tax-advantaged accounts is superior to investing in taxable accounts, we front-load contributions to these accounts (403b/457/529/HSA/Roth IRA) as soon as we can early in the year.
- Only after those accounts are filled do we contribute to our taxable brokerage account.
- Here’s a related post: https://frugalprofessor.com/hierarchy-of-savings/
- Because investing in tax-advantaged accounts is superior to investing in taxable accounts, we front-load contributions to these accounts (403b/457/529/HSA/Roth IRA) as soon as we can early in the year.
- Here’s the breakdown of our $1.29M of contributions over the last 8 years:
- Tax-deferred (401a/403b/457/HSA): $696k, or 54%
- I realize HSA isn’t tax-deferred, but it went in pre-tax so I put it here anyway.
- Assuming a federal marginal tax rate of 22% and a state marginal tax rate of 7%, our combined marginal tax rate has been 29% since the 2018 tax cuts. Prior to the 2018 tax cuts, our marginal tax rate was ~50% thanks to the wonkiness of AMT.
- A 29% marginal tax rate on $696k of pre-tax contributions implies $202k of fed/state tax deferrals over 8 years, or $25k/year. That certainly adds up.
- To me, the arbitrage of transforming $0.71 (=$1 income – $0.22 federal tax – $0.07 state tax) of after-tax cash flow into $1 of wealth is immensely important, particularly when paired with tax-free withdrawals in retirement (e.g. https://frugalprofessor.com/5-kids-169817-income-0-taxes/). I call this financial alchemy “tax arbitrage” or “tax alpha,” and I believe it’s one of the most important and under-appreciated aspects of accumulating wealth.
- Tax-exempt (Roth IRA/529): $194k, or 15%
- Taxable: $400k, or 31%.
- Cumulative dividend tax drag since starting the blog: $7k.
- Not bad, but getting more pronounced with each year as our taxable account grows.
- Why contribute to taxable if tax-advantaged accounts are superior?
- Because of annual IRS contribution limits, of course.
- Cumulative dividend tax drag since starting the blog: $7k.
- Tax-deferred (401a/403b/457/HSA): $696k, or 54%
- We would have reached $1M in investment gains sooner had we invested less in underperforming international stocks, as we’ve maintained about 30% international exposure throughout the blog’s duration. In hindsight, this has proven slightly less than ideal. However, I’ve never claimed to have the elusive crystal ball when it comes to choosing investments, and I remain extremely skeptical of anyone who does.
- As of today, the U.S. accounts for 62.6% of global market capitalization, while international stocks make up 37.4% (Vanguard link => Portfolio Composition => Weighted Exposures => Markets) so we technically have a small “equity home bias.”
- Why do I invest in international stocks? Because I don’t have a crystal ball. For the same reason I let market prices dictate the appropriate weight of stocks in an indexed portfolio, I am comfortable roughly mimicking global equity weights in our portfolio, with a hint of “home bias” to appease my irrationality. A simpler approach to accomplish this would be to purchase the VT ETF, but it is trivially easy manage a DIY 2-fund portfolio through two tickers (one domestic + one international).
- I should probably de-risk our portfolio at some point in life through the introduction of fixed-income investments, but I have another many years of work ahead of me to ride out the volatility of a 100% equity portfolio. I’m grateful to have not jumped into fixed income investments when bond yields were stupidly low a few years ago and I’m not in any rush to add bonds to our portfolio in the near term.
- Part of me rationalizes a 100% equity portfolio with the following logic. I’m turning $0.71 of cash flow into $1 of wealth, so even if prices were to drop by 29% tomorrow, we’d essentially be no worse off than had we not deferred our income in the first place. Further, I rationalize a 100% equity allocation by accepting that we have plenty of runway to build up a large margin of safety to absorb large market fluctuations. Lastly, I’m a pretty simple man. The most enjoyable things I do in life are free or near free: sleeping on dirt, climbing mountains, etc. If a drop in our portfolio were to force me to live in a van by the river in retirement, it wouldn’t be the end of the world because I might be doing that anyway! Regularly backpacking in the wilderness helps me realize how little I actually need to live happily — a toilet (with $25 bidet) is an unimaginable luxury.
- In other words, if our portfolio drops by 50% tomorrow, would I lose any sleep? Not a wink. It’s this tolerance for risk that helps me justify the 100% equity allocation, but it certainly isn’t for the faint of heart. That said, this allocation has proven profitable recently.
Some closing thoughts:
- Thanks to compound interest, time is the biggest asset of younger investors. Develop a habit of investing as young as you can. Just like with planting a tree, the best time to start investing was years ago, but the second-best time is today.
- Spend an hour or two to learn the tax code. Doing so will have a better return on investment than anything I can think of. It could potentially save you over a million dollars of taxes over your lifetime. I wrote this “book” draft in 2018 to attempt to convey what I knew to my students: https://www.dropbox.com/s/lv96xgpfp95d3tk/20180531%20-%20Incomplete%20Rough%20Draft.pdf?dl=1.
- Spend 30 minutes learning what an index fund is and how you can easily manage your own 7-figure portfolio in a tax-efficient manner for free. Doing so could save you over a million dollars in investing fees over your lifetime. This is a great resource: https://www.bogleheads.org/wiki/Three-fund_portfolio.
- If you are sitting on a pile of cash, it’s probably a good sign to deploy some of it. For uninvested cash, you should be earning ~5% in money market funds. We literally have < $20 of the green stuff that isn’t earning ~5%. We strive to have no more than ~$500 in money markets at any point in time, but we have the benefit of growing investment accounts and $100k+ of available credit on credit cards to help smooth out any unforeseen shocks.
- If you don’t have a pile of excess cash, consider optimizing your spending to see if you can extract the same amount of happiness out of fewer dollars of spending. While it may seem impossible, I can assure you that there are likely squandered dollars in your budget. You’ll obviously get the most financial benefit from this activity by focusing on recurring expenses (subscriptions, TV, cell phones, haggling down insurance rates, etc), since recurring expenses are incurred with regularity (monthly expenses are incurred 12x/year or 120x/decade). I aggressively focus on cutting these expenses, as a single adjustment to a recurring cost can have 120x the impact per decade:
- A $10/mo reduction in recurring monthly spending translates to $1,200/decade (plus interest) more wealth.
- A $100/mo reduction in recurring monthly spending translates to $12,000/decade (plus interest) more wealth.
- A $1k/mo reduction in recurring monthly spending translates to $120k/decade (plus interest) more wealth.
- I realize these examples might sound like old-man ranting, but it’s not an exaggeration to say that optimizing these recurring costs over the past 20 years has significantly contributed to our wealth today:
- You don’t need cell phone data to live in 2024. For example, this barebones plan costs $2.50/mo for a minimum use between wifi hotspots (link).
- You don’t need cell minutes when connected to wifi and can utilize free/better alternatives (google meet, facetime, whatsapp, google voice, etc).
- You don’t need to pay for data to change your fantasy football team while on the toilet during halftime of your kid’s sporting event. Life goes on while being disconnected from the internet while outside of your home. Look around. Talk to people. You will somehow find a way to survive. Millions of years of human evolution have proven life without data to be possible. Heretical, I know.
- Our teens survive just fine with this draconian anti-data policy. They simply use the internet when connected to wifi. Life goes on. Ironically, they couldn’t care less about calling people on their phones — how archaic. All they care about is texting.
- HD (soon to be 4k) TV is streamed OTA. Throw in a Plex server and you have a highly functioning DVR on major networks for $0/month for life. Consider the investment to save a decade’s worth in TV fees.
- Our local library has a near-infinite DVD library.
- Contrary to what ISPs would have you believe, you don’t need gig internet speeds at home. We have 50 Mbps for 7 of us, and it’s roughly twice as fast as we need (but there are no slower options). If you are paying for more internet speed, you are getting duped. 4k streaming requires about 25 Mpbs, and it is by far the largest bandwidth hog in a typical home. 1 gig internet would be able to support 40 concurrent 4k streams in a house. Just say no to overpaying for bandwidth you don’t need.
- PB&J costs a few pennies. I’m too lazy to make PB&J ahead of time, so I keep a jar of peanut butter at work and use carrots/celery as my peanut butter delivery vehicles. Yes, I’m that cheap. I’m the guy at work lunches who comes with a jar of peanut butter. I eat oatmeal daily for a few pennies. The savings add up.
- I’ll wrap up my old-man ranting here. There is likely plenty of fat in your budget if you look hard enough, and cutting the fat shouldn’t adversely affect your happiness. Ironically, it may have the opposite effect as you improve your financial security and learn to live happily below your means.
- You don’t need cell phone data to live in 2024. For example, this barebones plan costs $2.50/mo for a minimum use between wifi hotspots (link).
- Recommended books:
End of rant. Good luck!
Frugal Professor,
Your blog is my favorite by far. Every post is so full of interesting things (financial & otherwise) to explore that it often takes me several days to explore all the links and ideas.
I wholeheartedly agree with you that if a person’s spending is low relative to their income and they are fairly confident in their job prospects then it only makes sense to invest your money to work hard for you… particularly if you are a long way from retirement. Your investing strategy seems to be ‘get diversity at the lowest possible cost and then auto let it run on auto pilot’. Our strategy is much the same. It takes all the mental gymnastics out that it seems others often deal with… market up/market down? fancy new investing option? Ignore and continue doing what you do. Your contributions & returns over the last 8 years have been incredible… and all that while you’ve been having a great time with family & friends! Love it!
Thanks for the kind words.
Given that there are three of us bloggers left in the world (a platform that fell out of vogue 20 years ago), I suppose it is getting easier to claim the title of favorite blog…
Investing needn’t be overly complicated. That’s the whole premise of our strategy and the foundation for this blog. Once the money/investing stuff is on autopilot, you can focus efforts on the stuff that really matters.
I wish you the best in your journey.
I agree with Jenn above. Your blog is also my favorite. Great post with a lot of actionable advice! Thank you for sharing.
Thanks!
Well done frugal prof! As with the prior commentators, I really enjoy your blog for its simple premise of saving money, investing simply and having fun. I’m an avid Boglehead and have been amazed at how successful the simple strategy has been for me as well.
Congratulations to you (and Mrs FrugalProf) for hitting this milestone.
Thanks! The building of wealth certainly takes time. It seems to move glacially slow at times, but it is rewarding to see the outcome of decades of staying the course. Not a sexy investing strategy by any means, but it seems to be a reasonably prudent one.
Cheers! I admire your reflections on your fortunate position. I too benefited from being born at the right place and time—not trying to discount hard work, but too many overlook the significance of good fortune.
Thanks for the inspiration to make my own monthly tracker. Here’s mine!
https://postimg.cc/gallery/Kx9rL9j
P.S. I know I’m too cash heavy. It’s definitely made an impact on my returns, but I am getting better.
I’m always happy to meet another tracker. Your charts look great! Congrats on the impressive growth in investments!
Are you to my level of OCD where you track every penny and reconcile the financial statements (statement of cash flows & balance sheet)?
Adding my applause along with the others here. I am definitely one of your anonymous groupies, and I can attest that this fully transparent blog has made me wealthier as a result of following it. Please share with your students that by following your straightforward advice, you can rise from poverty to relative wealth if you just stay the course. (I’m at $5.8M including my fully paid off $530k home, fully paid off education for my 2 kids, and ZERO debt). Specifically, if your students could just focus on the three gospels of your advice that have been most invaluable to me, then I’m certain you will be the most sought after professor in the country!
1) Learn the tax code, and invest optimally to your income level and available tax advantaged accounts
2) Simplify and stay disciplined with low cost index funds and ignore all AUM advisors (leeches to your personal wealth stream)
3) Copy/paste your net worth spreadsheet and religiously fill it out every month.
I’m much older than you (54) and thinking about early retirement. Just curious if and how you would change your allocation if you were approaching a similar decision point?
Thank you again for all that you do. It’s an impact for good.
RW,
Thanks for reaching out. $5.8M at 54 is impressive!
I’m glad that you have found some of my rantings to be helpful. It often feels like I’m just shouting at the wall in an empty room.
I’m happy that you have found value in my net worth spreadsheet. Do you use my spreadsheet? What did you use prior to it? I’m convinced that the process is incredibly important to me, but I ironically find it is hard for me to articulate why this is the case. Basically, I feel lost without it and can’t imagine how anyone navigates life without the clarity if provides. I’m really curious to learn what value you derive from it.
As far as asset allocation when approaching retirement, I haven’t put a terrible amount of thought into it yet. But 100% equities almost surely isn’t the answer. When I get to that point, I’ll probably reread BigERN’s countless posts on the topic to construct a strategy that is relatively immunized from sequence of returns risk.
But having a huge margin (large investment balance relative to spending rate) is another hedge against sequence of returns risk, and that could allow one to carry a more aggressive asset allocation through retirement.
I don’t know if you’ve read this post yet, but it talks about optimally withdrawing in retirement: https://frugalprofessor.com/hierarchy-of-dissavings/. I’d spend a lot of time in early retirement thinking about optimal amounts of Roth conversions.
Commendable discipline and sticking the course! I started investing 6ish years ago after my grad school and first ‘real’ job. Majority of my holdings are either SP500 / US-Total equivalent. I happen to have some individual stocks here and there, much smaller positions but since discovering Bogleheads couple years earlier I have this urge to close them out, haven’t taken the plunge yet due to the gains.
I believe you worked in Seattle and now in the midwest? What made you pick and stay in midwest? My wife & I have been wondering what to do with the increased expenses in the Seattle area and commute getting worse with each passing day. If we buy closer to the city, it means the mortgage is going to be crazy and we need to stick to our “high stress” jobs but the commute will be a little better, probably same/less savings being house poor. If we stay where we are (kinda far), the commute is terrible but we manage to save more. It’s a weird trade off and we have been considering more LCOL options to have both – better commute and with lower expenses maybe even accept some paycuts but have a better wlb. Would love to know your thoughts on moving from Seattle to ____ since you have done something similar what we have been wondering.
We lived in Mukilteo for 4 years and loved it. I loved access to the outdoors: sea kayaking, climbing, hiking, and backpacking.
But Seattle was a bit of a rat race. The cost of living is pretty high.
How did we end up in the midwest? Good question. During grad school, I applied to a dozen schools and went to the best school that would have me. It happened to be in the midwest. I’d spent one summer as a door-to-door salesman (dish network) in Indianapolis when I was an undergrad, so I had an idea of the vibe. Further, my wife grew up in a suburb of Chicago and had a great time.
Coming out of grad school, I applied to 50 jobs, had a dozen on-site interviews, and two offers. Not exactly the best conversion rate, but at least I had an offer. My two choices were my current employer and University of South Carolina. Before my offers exploded, Mrs FP flew to both cities and we both felt better about living in the midwest. In hindsight, I’m pretty sure it was the right decision. Our kids are thriving here.
I’ve had a few universities reach out to me to test my appetite for moving, but my appetite to uproot the 7 of us is pretty low at the moment.
Living in the midwest has its pros and cons:
Pros
* Cheap
* Safe
* Pretty stress-free existence (no traffic, etc)
Cons
* Uglier than places like seattle. No mountains. No ocean. Less interesting outdoor recreation (climbing, hiking, mtn biking)
* Weather
* My current city lacks the amenities that a bigger city has (better airport, etc)
* High state income tax (7% in my state) and property tax (2% of property value)
* Bugs (mosquitoes)
Four months out of the year I curse our decision to live in the midwest. A couple of the months in winter are brutal. A couple of the months in summer are brutal. But I realize not every place in the world has a climate like San Diego or San Fransisco….
The lower cost of living allows us to save more and use those savings to get out. I think it is a reasonable tradeoff.
I tried to reconcile, but it just took WAY too much effort for me. I think I have the expenses part down pretty accurately? But Income from non-employment sources (Interest, churns, gifts, surveys) is just too exhausting to keep up with and my spouse already thinks that I have an unhealthy obsession with tracking…
The first few years of the blog I could never get it perfect, but now I have it down to a science. It’s pretty rewarding to account for every penny in the income statement, balance statement, and statement of cash flows.
FP: Cheers on reaching the $1M milestone! That is wonderful and sure worth celebrating, frugally. (Treat yourself to a Costco hot dog?) You’ve mentioned that this blog is a money-loser (hosting costs + virtually no ads), but I’m confident that the ritual of publishing regularly on here has played an integral part in your successes. It serves as a mirror; you are intimate with your financial self. I came across your blog this past January (the “Banking w/ Fidelity” post ranked high on Google). I’m 36 y/o; my project for this year was to learn about finances. I’ve not had much clue what I have been doing or should be doing with money. A few leads led me to the Boglehead forum and your blog and subsequently a shelf full of books. That’s plenty of reading material for a novice. I am a little late to the game but thankful (again, much due to your writing—thank you!) to now be steering my dinghy into a tailwind.
Thanks for the kind note. Glad you’ve found some of this old man’s rantings helpful! Best of luck to you in your journey!
Someone told me that most places in the US have miserable weather 4 months out of the year . That made me feel better.
It’s so true!
Perhaps down the road I’ll be semi-nomadic and alternate between two places with offsetting miserable 4-month periods…
I’ve found immense value in using your net worth spreadsheet, especially in simplifying and highlighting areas of my household finances I previously overlooked. Specifically, it shines a glaring spotlight on the true cost of advisors, taxes, and personal spending. Before using it, I relied on disparate methods, mostly passive and after-the-fact. Examples include online spending reports from my bank and credit card providers, or passive reports from my brokerage firm. I never looked at my household from a total portfolio and cash flow perspective, because it was just too much tedious work piecing together accounts and estimates. Eventually, I tried account aggregation tools like Personal Capital and that somewhat improved the picture; however, behaviorally, these online tools remained decidedly passive and shoehorned my view into the available categories or reports of the provider.
Your spreadsheet brought everything into one clear framework, which makes tracking and decision-making much simpler. I now know where every cent goes, and how it can be better deployed. It was so illuminating when I started using it: I saw the clandestine robbery of my “financial advisors” and promptly fired them. I saw the loss of value incurred by high fund expense ratios, and how much more of my money was put to work in low/zero cost index funds. I saw clearly how much waste was in our personal spending budgets, and how even simple “no” decisions could amplify our savings rate (although as my girls hit college/early adulthood, this one remains a huge struggle). In short, I can see why you’d feel lost without it, as I can’t imagine trying to monitor these nuances without such a tool. It’s like having a financial compass that brings awareness to my choices and long-term progress. I hope you are sharing your creation with your students, as it would be worth the price of tuition, alone. I wish I had it when I was first starting out. I know more money can’t buy happiness, but neither can poverty, and this spreadsheet is definitely a map towards prosperity.
One last accolade from me, and I’ll shut up. Not only have you changed my approach to household finance, but somewhat relatedly, you have changed my wardrobe! Among the best nuggets of wisdom I’ve ever found on the internet: https://www.walmart.com/ip/Wrangler-Men-s-and-Big-Men-s-Outdoor-Performance-Zip-Cargo-Pant/324934715
Thanks again! Keep up your amazing public service!
Thanks for the thoughtful and thorough response! It put a goofy grin on my face.
I’m glad to hear that the tracking provided meaningful and actionable insights. I indeed share the sheet with my students, but their eyes mostly gloss over at the absurdity of voluntarily introducing accounting into their lives. But hopefully some of them stick with it…
Regarding the pants, I’m happy that you’ve joined the cult! I will never wear another pant again until I die. If I haven’t already convinced you to join the Darn Tough Sock cult, you have to give them a try. I’d even venture to say that they are even more life-changing than the Walmart Wrangler pants.
Would like to echo the sentiment of others. Reading these blog posts has become a weekly ritual and I find myself checking back every few days for new posts (I know I can subscribe to emails but I have made a conscious effort to not “subscribe” to anything to avoid mind clutter).
I was exposed to the world of financial literacy though white coat investor and even though I still follow it closely, your blog has become my go to for personal finance reading – in addition to the boglehead forums. I follow a simple two fund portfolio (80% US 20% INT stocks) and sometimes when it is difficult to “stay the course” – reading/listening to WCI and your blog reaffirms these principles.
Curios if you have thoughts about diving into the podcast world – WCI notes that the podcast category is by far the most popular of his, even though he did not anticipate this when starting it.
I have been using empower (previously personal capital) as my “net worth” tracker and find that it does an exceptional job for me but I am going to use the spreadsheet as an addition as I do think there is benefit to tracking things more actively down to the penny – this is advice reflected in my current financial reading – your money or your life.
Hope to read many more blog posts in the years to come. Thanks for what you do.
Btw – from a year around weather perspective – NC is wonderful!!
Thanks for stopping by! Happy to hear that the blog has helped you in some way.
I had vaguely considered podcasting in the past but never got around to it. Perhaps I should give it a try.
I’d recommend tracking every penny. If you are already using Personal Capital / Empower, you’re 90% of the way there already. I think it’s worth the small effort to go to the full-on financial statement. It is just so much more informative than what these websites give you.
I haven’t spent much time on the East coast in my life, but I very much enjoyed Charleston when I visited a friend there a decade ago. I should make an effort to get out there again.
This is more of a bogleheads forum question I have, but I hope you can help me. I currently have a good situation with healthcare (provided free of charge from wife’s employer). As such, I’ve never thought of an HSA, but it might actually be beneficial, even if I don’t use the health care. We are in a high marginal tax bracket 37% fed/9%. The annual premium for the HD health plan (for individual) is $1980; I’d be able to contribute $4300 to HSA (they’ll even kick in $500). So out of pocket would be $1480.
I could go a step further and get a family plan for $6576 annual. My employer would contribute $1000 and I would max out HSA at $8550. I think the single plan nets out in my favor, but not the family plan? Also, is this legal?
That is an interesting question. And I think it is probably a question better suited for the Bogleheads forum. There are a lot of people smarter than me there, and I would hate to give you the wrong answer.
A 48% combined marginal tax rate is quite high, so I don’t blame you for thinking outside of the box!
Why 2 funds when Vanguard total world index is available?
* Ability to DIY cheaper thanks to collective-investment-trusts at my employer
* Greater ability to tax-loss harvest
* Ability to choose the allocation I want rather than defaulting to market weights (I allow myself a bit of “home bias”
* Domestic index funds are more tax efficient to hold in taxable accounts due to their lower dividend yield and higher ratio of qualified dividends