It is basically another way to write an IPS.
For the IT Bogleheads , here's my algorithm in pseudocode. I'm curious if others invest like this.
Code: Select all
SETUP:
BOND_ALLOCATION = ( age - 35 ) * 2 //at my current age ( 41.5 ) , this is 13% , at age 60 it will be 50/50
INTERNATIONAL_ALLOCATION = 35% // my preference
SAVING_RATE = 0.3 //30% as recommended to me in another thread
Adjust 401k incoming contrubutions to match asset allocation // currently 13% bonds, 87% stocks
Adjust 401k contributions to 15% of paycheck // goes to zero when annual max is hit
EVERY PAYCHEK // 2 times a month
deposit paycheck
total savings=gross pay * SAVING_RATE
taxable savings = total savings - 401k contribution this paycheck
round taxable savings to closest 100
if taxable savings < 1000 , wait till next paycheck
if taxable savings >1000 , send to vanguard
check current porfolio numbers ( taxable and non taxable)
if bonds > BOND_ALLOCATION //buy stocks
if international stock < INTERNATIONAL_ALLOCATION
buy VTIAX //vanguard international
else
buy VTSAX // total stock market
else //bond allocation is too low
buy VWITX // intermediate tax exempt
end
end
EVERY QUARTER :
//1) rebalance using 401k to avoid tax issues
check asset allocation in entire portfolio
if bonds > BOND_ALLOCATION + 5 // 5% tolerance band
buy equities in 401k to adjust bonds back to BOND_ALLOCATION
else if bonds < BOND_ALLOCATION - 5
buy bonds in 401k to adjust bonds back to BOND_ALLOCATION
end
//2) check for extra savings:
go to checking account
extra savings = total in checking - 30,000 //30K is for spending + first tier EF
if extra savings >0
pay down mortgage with extra savings
end
if extra savings < 0
throw exception ( "We need to spend less!")
end
EVERY YEAR:
recalculate BOND_ALLOCATION
adjust incoming contributions to 401k to match allocation
calculate net worth
reassess saving rate
//TO DO:
//incorporate I-bond purchases
//incorporate backdoor roth
//incorporate HSA contributions
//potential problems: may end up with too much VWITX from new contributions if stocks grow quickly