Stock AA [Asset Allocation]

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curveball
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Stock AA [Asset Allocation]

Post by curveball »

I have a relative who considers himself to be a very successful investor.I have 300,000 to allocate to stocks in my portfolio.He suggests the following:100,000 in Vang Dividend growth....100,000 in Vang Equity Income....33,333 each in Vang small cap value,midcap value and Reit.Any thoughts?
Rodc
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Re: Stock AA

Post by Rodc »

See this first:

http://www.bogleheads.org/forum/viewtop ... f=1&t=6212

More information is need before anyone can offer meaningful advice.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Random Musings
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Re: Stock AA

Post by Random Musings »

There are a lot of people who consider themselves to be very successful investors. Most of them, most likely are not when risk adjusted.

First question to ask:

Does the allocation (equity/bond) he recommends match your need of risk as stated in your IPS

Second question to ask:

Does the allocation of the equity recommended match your domestic/international split in your IPS.

My guess for both is no.

I would recommend that you start reading the wiki before doing anything and then start making your own decisions.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
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stemikger
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Re: Stock AA

Post by stemikger »

curveball wrote:I have a relative who considers himself to be a very successful investor.I have 300,000 to allocate to stocks in my portfolio.He suggests the following:100,000 in Vang Dividend growth....100,000 in Vang Equity Income....33,333 each in Vang small cap value,midcap value and Reit.Any thoughts?
I know two experts by the name of Bogle and Buffett. Bogle says most people can put everything in the Vanguard Balanced Index Fund and have a completely diversified portfolio and sleep easy at night. Buffett is a little more bullish on stocks and tells everyone to put everything in the Vanguard Index 500 fund and call it a day.

From what I hear these two fellows are experts also. And pretty successful at it. :wink:

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LadyGeek
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Re: Stock AA [Asset Allocation]

Post by LadyGeek »

This thread is now in the Investing - Help with Personal Investments forum (portfolio help). I also retitled the thread to help with the acronym.
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curveball
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Re: Stock AA [Asset Allocation]

Post by curveball »

Sorry.Did not want to get into posting so much info.From my time mostly lurking here,I thought it was a decent mix of stocks if one was not going to go the total market route.Easier to just put it in the total market.Thanks.
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stemikger
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Re: Stock AA [Asset Allocation]

Post by stemikger »

curveball wrote:Sorry.Did not want to get into posting so much info.From my time mostly lurking here,I thought it was a decent mix of stocks if one was not going to go the total market route.Easier to just put it in the total market.Thanks.
This is a great place to learn from a lot of very smart and generous people. The Bogleheads have saved me from myself on more occasions then I care to admit! Good Luck!
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JW-Retired
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Re: Stock AA [Asset Allocation]

Post by JW-Retired »

curveball wrote: I have a relative who considers himself to be a very successful investor.I have 300,000 to allocate to stocks in my portfolio.He suggests the following:100,000 in Vang Dividend growth....100,000 in Vang Equity Income....33,333 each in Vang small cap value,midcap value and Reit.Any thoughts?
You didn't say what this portfolio is for? Is this in a taxable account or a tax deferred retirement account? Your relative likes lots of dividend paying stocks that wouldn't be tax efficient in a taxable account. Do you need to take continuous income from this portfolio or do you want it to grow? What is your tax bracket?

We would need to know the full story to comment beyond saying it appears less diversified then we would normally want.
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Tamahome
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Re: Stock AA [Asset Allocation]

Post by Tamahome »

The stock AA that you mentioned is not a bad one. While many can argue over what is better, I think most on this board would agree that, even if other options may be better, the options that you suggest are solid. There IS the question of tax placement. You would not want REITs in taxable. I am under my desired allocation of REITs because I do not have enough space in tax-advantaged accounts at present (until this year's ROTH for myself and my wife). That is because I would forgo REITs altogether rather than have them in taxable (also a part of my IPS). Also, the Dividend-Growth and Equity-Income should be in tax advantaged space. Some frown on dividend strategies in this group, but most of the arguments wind up being matters of tax. In a tax advantaged account, I do not think you will have as many objections. Therefore, I would put both REITs and any dividend funds in tax advantaged space first. Of course, if it is all in tax advantaged, this does not matter as much.

Again, others (such as Larry Swedroe) would state that you are losing diversification by having dividend funds rather than a simple value play. If the tax issue is not an issue, though, I think that most would agree that you will do ok with the stated strategy (presuming that you stick to it).
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.
Topic Author
curveball
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Re: Stock AA [Asset Allocation]

Post by curveball »

Thanks Dulocracy.It is all in an IRA.It seems reasonable to me but when all is said and done it probably would not differ much from the total market unless I changed the percentages somewhat.He said I could go 75k 75k 50k 50k 50k if I wanted to be a little more aggressive.This is intended to be my stock selection forever,however long that winds up being.I would add to it a little bit yearly in the same percentages the next 5 years or so.About 70 pct of my investments are in a mix of bonds.
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Re: Stock AA [Asset Allocation]

Post by JW-Retired »

curveball wrote:Thanks Dulocracy.It is all in an IRA.It seems reasonable to me but when all is said and done it probably would not differ much from the total market unless I changed the percentages somewhat.He said I could go 75k 75k 50k 50k 50k if I wanted to be a little more aggressive.This is intended to be my stock selection forever,however long that winds up being.I would add to it a little bit yearly in the same percentages the next 5 years or so. About 70 pct of my investments are in a mix of bonds.
I don't really know what reasonable is defined as but agree this will not differ a huge amount from the total market. Still, I do think this "stock selection forever" you have chosen smacks of pure performance chasing. Why would this mix of mostly active management funds have been chosen by your friend if not for good recent past performance? Past performance usually doesn't continue.

If you are at 30% stocks it certainly can't matter all that much but I'm still bothered by the whole discussion. Good luck and please be sure to come back to gloat if you are still holding onto this forever stock selection in a couple of years. :beer
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Topic Author
curveball
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Re: Stock AA [Asset Allocation]

Post by curveball »

JW...I guess forever is a long time.I mainly wanted some opinions from some smart people to balance my relative's advice.I know my 30/70 AA is conservative but I feel more comfortable with it and do not see the need for more risk.I will probably end up with the total market and keep it simple.It just does not seem worth the stress and effort to try to get cute and beat the market by a very small amount or underperform by a small amount.
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