My husband and I recently tried to change our portfolio allocation along the lines of Paul Merriman’s 2 fund portfolio.
My husband has a 403(b) with his company and they have decent fund options. However, their target date funds are American Funds - we are not a fan of that. Because he wanted to avoid the high expense ratios with the American Funds target date funds, he put his asset allocation to 2 Vanguard funds instead.
He’s using the same formula that Merriman indicates for the target date fund + small cap value fund, except he is using VFIAX (instead of the target date fund) with VSMAX.
My husband is 29. We figure that what we aren’t getting with VFIAX is the small bond allocation and international allocations that would be seen with a target date fund. Do you think this strategy works well enough to replicate the two fund portfolio over the long term? Or do you think the expense ratio (it looks to 0.45%) is not worth worrying about with the American Funds target date fund (RFVTX)?