Two Questions [Asset allocation]
Two Questions [Asset allocation]
I've just reviewed my portfolio that I put together from the good advice that is given here. I have two questions. My Total International is 14.8% of my portfolio. My age is 53 and my wife's age is 56. My domestic equity position is 42% giving me a 56.8 stock and 43.2 bond mix. Do I have enough international, and is this mix suitable for mine and my wife's ages? I've been here many times with questions. Please be kind. I think I'm getting it. Thank you all so much for your input.
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Re: Two Questions
It's entirely up to you what percentage of international stocks you want in your portfolio.
I'm happy with around 30% of my stocks international.
They are more volatile than domestic stocks if that's an issue for you.
Also, I think the combined stock total percentage is the thing to adjust with age. If you like 20% international, then keep that the same as you ramp down the total...
I'm happy with around 30% of my stocks international.
They are more volatile than domestic stocks if that's an issue for you.
Also, I think the combined stock total percentage is the thing to adjust with age. If you like 20% international, then keep that the same as you ramp down the total...
Last edited by The Wizard on Fri Sep 05, 2014 7:47 pm, edited 1 time in total.
Attempted new signature...
Re: Two Questions
We can only know the answers to those questions in retrospect. But your choices seem rational and appropriate.
Re: Two Questions
Read this study from Vanguard then reevaluate.
https://personal.vanguard.com/pdf/icriecr.pdf
Fig. 3 shows that the optimal allocation is between 30 and 40%, at least in the time frame studied. I think you can be lower or higher, but I think 20% is about as low as you should go. I'm 35%.
Paul
https://personal.vanguard.com/pdf/icriecr.pdf
Fig. 3 shows that the optimal allocation is between 30 and 40%, at least in the time frame studied. I think you can be lower or higher, but I think 20% is about as low as you should go. I'm 35%.
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Re: Two Questions
From the info you've given looks pretty good. If I was in my mid 50's and on track to retire, I'd be happy with what you've got. Maybe go a little heavier with international (30-50% of stocks), but no one can say which is going to wind up better. That would be closer to assets held in VTWSX (though a lot of those US companies have plenty of exposure to foreign countries too).
If I was far from where I needed to be at that point in my life, I'd need to take on some additional risk and go a little heavier on stocks.
If you are saving what you need to, buying diversified funds with low expenses, taking advantage of all the tax breaks you can get, and placing your stock/bonds in the correct investment account, then you probably shouldn't have to worry so much if you are holding 14.8% or 24.8% international. Just choose where you think it should be, balance it out as you continue to add funds or hit a rebalance band.
If I was far from where I needed to be at that point in my life, I'd need to take on some additional risk and go a little heavier on stocks.
If you are saving what you need to, buying diversified funds with low expenses, taking advantage of all the tax breaks you can get, and placing your stock/bonds in the correct investment account, then you probably shouldn't have to worry so much if you are holding 14.8% or 24.8% international. Just choose where you think it should be, balance it out as you continue to add funds or hit a rebalance band.
Re: Two Questions
I ashes a very similar question a few weeks ago. Common answer was between 20 and 50%, with most around 30 to 40. I decided on 20, although I am slightly higher than I would like (about 24%)
Re: Two Questions [Asset allocation]
I would like to very much thank all who responded to my post. I've made the necessary changes to increase my International to 24%. I had to sell the Total Stock Market in both my and my wife's accounts, so the only domestic is what I have in my TSP. Once again thank you all.
Re: Two Questions [Asset allocation]
Your international allocation above is 26% of stocks. That's pretty good if you ask me. Changing it to 24% of the portfolio while keeping a 56.8% stock allocation makes it 42% of stocks. That's fine, too, but is it what you wanted?peddler12 wrote:I've just reviewed my portfolio that I put together from the good advice that is given here. I have two questions. My Total International is 14.8% of my portfolio. My age is 53 and my wife's age is 56. My domestic equity position is 42% giving me a 56.8 stock and 43.2 bond mix. Do I have enough international, and is this mix suitable for mine and my wife's ages? I've been here many times with questions. Please be kind. I think I'm getting it. Thank you all so much for your input.
Last edited by pingo on Sat Sep 06, 2014 3:59 pm, edited 1 time in total.
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Re: Two Questions [Asset allocation]
I read the way he phrased that as well. Percentages and statistics can often be misunderstood or misrepresented depending on how the words are used.pingo wrote:Your international allocation above is 26% of stocks. That's pretty good if you ask me. Changing it to 24% of the portfolio while keeping a 56.8% stock allocation makes it 42% of stocks. That's fine, too, but is it what you wanted?peddler12 wrote:I've just reviewed my portfolio that I put together from the good advice that is given here. I have two questions. My Total International is 14.8% of my portfolio. My age is 53 and my wife's age is 56. My domestic equity position is 42% giving me a 56.8 stock and 43.2 bond mix. Do I have enough international, and is this mix suitable for mine and my wife's ages? I've been here many times with questions. Please be kind. I think I'm getting it. Thank you all so much for your input.
OP: International stock allocations are typically presented as a percent of your stock allocation not as a percent of your total portfolio. For instance a 60/40 allocation of stock and bonds with a 30% international stock portion would be 18% of the total portfolio (0.60x0.30=0.18)
Phylomath
Re: Two Questions [Asset allocation]
Thank you Pingo and MrBachelor. I've made a mistake. I will correct in November when I can move back into Total Stock Market. Thank you for explaining this to me. I'm grateful.
Re: Two Questions [Asset allocation]
As stated, there's nothing with inherently wrong with 26% or 42% of stocks being international, unless your personal tastes, philosophy, willingness, need and/or tolerance for risk dictates otherwise.
The "percent of portfolio" versus "percent of stocks" thing usually needs clarification at some point. I'm glad it was helpful.
If markets go haywire between now and the day you'd like to shave off some of those international equities, you can always sit tight and simply put new equity contributions strictly into U.S. stocks to help push your U.S. percent back up.
The "percent of portfolio" versus "percent of stocks" thing usually needs clarification at some point. I'm glad it was helpful.
If markets go haywire between now and the day you'd like to shave off some of those international equities, you can always sit tight and simply put new equity contributions strictly into U.S. stocks to help push your U.S. percent back up.
Re: Two Questions [Asset allocation]
As an Update.
Since I went to 24% of portfolio into international, the fund is down 9%. I'm not happy about this, but I'm not selling either. I've taken the opportunity to buy more shares at the lower prices. I bought shares today. I'm hoping that the fund will recover between now and the end of December, but if it doesn't I plan to buy more shares at $24.00. If it drops to $21.00 I'm buying a boatload and wait for the recovery. If the fund goes to $29.50 by the end of the year I'll be ahead by a little over 12%. I'm thankful I'm not reacting the way I used to react. In the other thread about what did you do in October of '08 by that time I was out of the market. I think I got out in July and only lost 10% that year which was good. However I missed much of the recovery because I didn't go back in until a long time later. I'm just sharing. Thanks for all the good advice here. I really do enjoy reading all the different threads. The search field is my friend. I've answered many of my questions using it. Thanks all.
Since I went to 24% of portfolio into international, the fund is down 9%. I'm not happy about this, but I'm not selling either. I've taken the opportunity to buy more shares at the lower prices. I bought shares today. I'm hoping that the fund will recover between now and the end of December, but if it doesn't I plan to buy more shares at $24.00. If it drops to $21.00 I'm buying a boatload and wait for the recovery. If the fund goes to $29.50 by the end of the year I'll be ahead by a little over 12%. I'm thankful I'm not reacting the way I used to react. In the other thread about what did you do in October of '08 by that time I was out of the market. I think I got out in July and only lost 10% that year which was good. However I missed much of the recovery because I didn't go back in until a long time later. I'm just sharing. Thanks for all the good advice here. I really do enjoy reading all the different threads. The search field is my friend. I've answered many of my questions using it. Thanks all.