lloydbraun wrote:My thought process with regard to avoiding int'l diversification is that mature economies will likely tend to underperform the US in the long run
lloydbraun wrote: So, does my reasoning sound good?
• International stocks should be included in a domestic portfolio.
• Empirical and practical issues suggest a starting allocation to international
stocks of 20%, with an upper limit based on the proportion of the global
market they represent.
livesoft wrote:Nope, doesn't sound good to me.
Taylor Larimore wrote:Hi Lloyd:
I like your current portfolio very much.The enemy of a good plan is the dream of a perfect plan. -- Jack Bogle
midareff wrote:livesoft wrote:Nope, doesn't sound good to me.
+1 .. when (not if) the market tanks the next 35% or 40% or so you are going to want that solid bond allocation to use to rebalance (aka: sell high and buy low) your portfolio. Without it you are simply stuck down 35% or 40% or whatever the number turns out to be. Reaching for return, reaching for yield, throw out the risks and full speed ahead will not get you to the finish line faster than the tried and proven methods of a sensible equity/bond AA.
lloydbraun wrote:I've posed a similar question before but I just wanted to ask if others believe my new asset allocation is a good idea.
I am a 33 year old Prof. with a 403 (B) through TIAA-CREF but I have access to several Vanguard Funds (500 Index, Total Bond Market Index, Total Int'l Market Index, Extended Market Index). We have other fund options but none of them touch the Vanguard ERs. I have an 8% match if I put in 4% and I've been contributing since I became eligible about a year and a half ago.
Initially I had the following allocation:
25% Vanguard 500 (.04 ER)
25% Extended Market (.12 ER)
30% Total Int'l Stock Market (.13 ER)
20% Total Bond Market Index (.10 ER
After reading Bogle's updated Common Sense on Mutual Funds alongside my daily econ nerd readings (Financial Times, Economist, anything else I have time to look at!) I've decided to move out of both the Total Int'l Stock Market Index and the Total Bond Market Index and to just focus on mirroring the entire US Stock Market, at least within my 403 (B). So I've decided to switch to the following to stick with for the next 20 years or so:
75% Vanguard 500 (.04 ER)
25% Extended Market (.12)
My thought process here is that bond yields aren't great right now and coupled with the probability of interest rate increases sometime in the middle part of the decade, this isn't the best time for a person with a 40 year investment horizon to invest in a bond fund. If I were older I'd be for it but I just don't see the need right now when I should be focusing on building as much wealth as possible until middle age. With regard to the Int'l Stock Market, I agree with Bogle's recent comments that the US is a better bet than mature developed economies like those in the EU and Japan and that foreign exposure can be limited to the Emerging Market Index. Unfortunately my plan does not include any Emerging Market Index Funds so in a few years when I can save some additional money, I can invest in Vanguard's Emerging Market Index fund in a Roth IRA but until then I won't worry about it.
So, does my reasoning sound good?
lloydbraun wrote:My thought process with regard to avoiding int'l diversification is that mature economies will likely tend to underperform the US in the long run, not that returns are necessarily based on economic growth, and that mature markets will tend to duplicate the type of stocks/companies the US market indexes hold.