AA. Now 70/30. Thinking of 80/20.

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goru1
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AA. Now 70/30. Thinking of 80/20.

Postby goru1 » Mon Jul 15, 2013 1:37 pm

The thinking behind it is to reach my number faster. It is not based on any recent market performance. I will keep the same AA 80/20 even if stocks go down by 50% or more.

Please comment.

Thanks.

Age: 42
Times annual expenses accumulated: 7

Marginal Tax rate: 25%
Emergency fund: Yes
Debt: Mortgage
All Vanguard
Account types: 401k, Roth and Taxable
Me and spouse employed full time
Two kids less than 10 years old

Now 70/30:
30% Intl stocks = 15% large blend + 15% small blend
30% US stocks = 15% large blend + 15% small blend
10% REIT = 5% US + 5% Intl
30% US bonds = 30% intermediate

Thinking of 80/20:
35% Intl stocks = 17.5% large blend + 17.5% small blend
35% US stocks = 17.5% large blend + 17.5% small blend
10% REIT = 5% US + 5% Intl
20% US bonds = 20% intermediate

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stemikger
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Re: AA. Now 70/30. Thinking of 80/20.

Postby stemikger » Mon Jul 15, 2013 1:45 pm

I have no answers for you, but I'm curious to see what others have to say.
Press on Regardless!

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Re: AA. Now 70/30. Thinking of 80/20.

Postby YDNAL » Mon Jul 15, 2013 1:57 pm

goru1 wrote:AA. Now 70/30. Thinking of 80/20.

The thinking behind it is to reach my number faster.

Mostly insignificant !
1. Besides, raising Equity exposure guarantees nothing - the best guarantee is in increased savings.
2. A 20% shift to 90/10 - a la most aggressive Target Funds - may (maybe not) be more relevant.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

avalpert
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Re: AA. Now 70/30. Thinking of 80/20.

Postby avalpert » Mon Jul 15, 2013 1:59 pm

goru1 wrote:The thinking behind it is to reach my number faster. It is not based on any recent market performance. I will keep the same AA 80/20 even if stocks go down by 50% or more.

Are you sure it isn't? Are you sure you will? You had a 50/50 allocation at the start of the last down turn (in August 2007) and it looks like, based on your posting history, at 40/60 or 30/70 one year into the recovery. You have been slowly raising your equity stake as prices rose and now you want to raise it to a new aggressive high at 80/20 - that sure looks like the pattern of a performance chaser who keep buying into rising prices and is likely to crumble when things get bad.

Jim180
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Re: AA. Now 70/30. Thinking of 80/20.

Postby Jim180 » Mon Jul 15, 2013 2:02 pm

80/20 is a bit more than I would be comfortable with. I think you have too much International exposure.

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G-Money
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Re: AA. Now 70/30. Thinking of 80/20.

Postby G-Money » Mon Jul 15, 2013 2:08 pm

The difference between 80/20 and 70/30 isn't much. How much would you ballpark the difference in expected returns? 0.50%/year? More? Less?

I think your current and proposed AAs are both reasonable. If you were in the Target Retirement 2035 Fund, which Vanguard markets as appropriate for people between the ages of 41 and 45 (and about 22 years from retirement), your AA would be about 85/15 (with a significantly higher allocation to US stocks, and no REIT tilt).

I'm sure you already know that higher stock allocations do not guarantee you'll "reach your number faster." You may end up reaching your number slower, if the risk shows up.

The more important thing is to pick an allocation and stick to it. Even if you never end up changing your portfolio based on "recent market performance," there's a significant risk you'll be making your changes at precisely the wrong times. Consider, for example, that if you enact this change now, you'll be doing it when US stocks are up about 20% YTD, international stocks are up about 5% YTD, and bonds are down 3%. So you'll be buying high and selling low. Probably OK if you stick to your new AA long-term. Not if you change it in a few years (or months) when you decide you want to take some risk off the table (when stocks are down and bonds are up).

I'd recommend writing down your proposed change, but not doing anything for 3 months. Check back on your proposal on 8/15, 9/15, and again on 10/15. If you're still enthusiastic about the change each time, go ahead and pull the trigger on 10/15.
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CaliJim
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Re: AA. Now 70/30. Thinking of 80/20.

Postby CaliJim » Mon Jul 15, 2013 2:09 pm

goru1 wrote:The thinking behind it is to reach my number faster.


IMHO - best way to reach your number faster is to 1)save more, and 2)stay the course [don't tweak your AA!!!].

NOBODY KNOWS which allocation will be best in the next 5, 10, 15, or 20 years.

Having a decent chunk in bonds, despite all the recent doom gloom and anxiety with regard to the possibility of rising interest rates, could save your butt and provide a great rebalancing opportunity if stocks hit another air pocket.

And oh yeah - max out your IBonds every year and don't touch them until you really need them.
Last edited by CaliJim on Mon Jul 15, 2013 2:10 pm, edited 1 time in total.
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Re: AA. Now 70/30. Thinking of 80/20.

Postby gvsucavie03 » Mon Jul 15, 2013 2:10 pm

avalpert wrote:Are you sure it isn't? Are you sure you will? You had a 50/50 allocation at the start of the last down turn (in August 2007) and it looks like, based on your posting history, at 40/60 or 30/70 one year into the recovery. You have been slowly raising your equity stake as prices rose and now you want to raise it to a new aggressive high at 80/20 - that sure looks like the pattern of a performance chaser who keep buying into rising prices and is likely to crumble when things get bad.


Looking back into prior posts.... how evil :twisted:

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G-Money
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Re: AA. Now 70/30. Thinking of 80/20.

Postby G-Money » Mon Jul 15, 2013 2:15 pm

avalpert wrote:
goru1 wrote:The thinking behind it is to reach my number faster. It is not based on any recent market performance. I will keep the same AA 80/20 even if stocks go down by 50% or more.

Are you sure it isn't? Are you sure you will? You had a 50/50 allocation at the start of the last down turn (in August 2007) and it looks like, based on your posting history, at 40/60 or 30/70 one year into the recovery. You have been slowly raising your equity stake as prices rose and now you want to raise it to a new aggressive high at 80/20 - that sure looks like the pattern of a performance chaser who keep buying into rising prices and is likely to crumble when things get bad.

Whoa. Good catch.

goru1, unless you had a series of life-changing events which altered your need/willingness/ability to take risk 5 times (and now, perhaps a 6th time) in 6 years, I'd strongly recommend just sticking with 70/30 as a matter of principle. Stick with it for years. Don't make any more changes. I think mastering the discipline of sticking with an AA will be far more useful than guessing what the optimal portfolio will be over the remainder of your investing lifetime.
Don't assume I know what I'm talking about.

YDNAL
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Re: AA. Now 70/30. Thinking of 80/20.

Postby YDNAL » Mon Jul 15, 2013 2:22 pm

avalpert wrote:
goru1 wrote:The thinking behind it is to reach my number faster. It is not based on any recent market performance. I will keep the same AA 80/20 even if stocks go down by 50% or more.

Are you sure it isn't? Are you sure you will? You had a 50/50 allocation at the start of the last down turn (in August 2007) and it looks like, based on your posting history, at 40/60 or 30/70 one year into the recovery. You have been slowly raising your equity stake as prices rose and now you want to raise it to a new aggressive high at 80/20 - that sure looks like the pattern of a performance chaser who keep buying into rising prices and is likely to crumble when things get bad.

This is certainly not some new pattern seen during up-markets - versus those seen during down-markets. Glad to see the history research, avalpert. I remember this general pattern, but lazy as I am, just casted the 90/10 fishing line/hook in the water to see if goru1 bites ! :D
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

Quickfoot
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Re: AA. Now 70/30. Thinking of 80/20.

Postby Quickfoot » Mon Jul 15, 2013 2:27 pm

WIth the performance difference of 80/20 and 70/30 being very small I'd be hesitant to make the change, especially at this point with equities being up so much. I'm 10 years younger than you running 70/30 with 20% REITS, 10% Intermediate Bonds, 20% Hi Yield which effectively gives me between 80/20 and 75/25 traditional equity / bond mix equivalent risk wise. Even if bonds were not in a low yield state I would still hold 20% high yield and 10% traditional and will continue with this asset allocation for the next 18 years because of how the different asset classes behave differently, not because of performance.

I'd stay at 70/30 and smile big next time equities take a drop and all your friends experience a much larger drop in their portfolios from being more exposed. Also having bonds generates some interest income that your 401K will use to purchase more shares.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby Meg77 » Mon Jul 15, 2013 2:29 pm

I think this decision hinges on what kinds of jobs/income you and your wife have, and whether you plan to stay in those jobs/incomes for the foreseeable future (as opposed to one of you scaling back to raise kids or transition into another industry with higher or lower pay). If most of the family income comes from a fairly stable income stream - i.e. you work in a thriving growing industry, you have union or government wages, and/or you think you could easily replace your income in case of a job loss - then I think it's fine to decrease your bond stake and increase equities to 80%. Your asset allocation should be more conservative if your income stream is risker. A safe income stream is something you can probably draw on indefinitely (a tenured college professor) as opposed to a riskier income stream where you may be forced into retirement before you are ready due to physical constraints (manual labor job) or by younger savvier workers (if you work with computers/software).
"An investment in knowledge pays the best interest." - Benjamin Franklin

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Leif
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Re: AA. Now 70/30. Thinking of 80/20.

Postby Leif » Mon Jul 15, 2013 4:23 pm

IMO 80% is probably too high for a 42 year old. Also, based on others that have checked into your posting history it seems you are market timing.

About 10 years ago I set a target allocation. Every year I reduce the equity allocation target by 2% and increase my bond allocation by 2%. Depending on the market my change in a target allocation may or may not trigger buying/selling.

Of course if some life changing event occurred I could change my target. However, that has not happened so I'm sticking with my plan. You need to have a plan and stick with it.

BTW, I think you 50/50 US/Intl. is just fine. It actually underweights the International allocation versus US equity percentages.
Last edited by Leif on Wed Jul 17, 2013 11:12 am, edited 2 times in total.
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EternalOptimist
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Re: AA. Now 70/30. Thinking of 80/20.

Postby EternalOptimist » Mon Jul 15, 2013 4:55 pm

I'm 63 and retired. I'd rather see you save more and spend less. Just sayin'
"When nothing goes right....go left"

looking
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Re: AA. Now 70/30. Thinking of 80/20.

Postby looking » Mon Jul 15, 2013 5:45 pm

stemikger wrote:I have no answers for you, but I'm curious to see what others have to say.


is this vanguard fund --- international large blend and international small blend ?? then what is name of the vanguard fund

looking

looking
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Re: AA. Now 70/30. Thinking of 80/20.

Postby looking » Mon Jul 15, 2013 5:46 pm

goru1 wrote:The thinking behind it is to reach my number faster. It is not based on any recent market performance. I will keep the same AA 80/20 even if stocks go down by 50% or more.

Please comment.

Thanks.

Age: 42
Times annual expenses accumulated: 7

Marginal Tax rate: 25%
Emergency fund: Yes
Debt: Mortgage
All Vanguard
Account types: 401k, Roth and Taxable
Me and spouse employed full time
Two kids less than 10 years old

Now 70/30:
30% Intl stocks = 15% large blend + 15% small blend
30% US stocks = 15% large blend + 15% small blend
10% REIT = 5% US + 5% Intl
30% US bonds = 30% intermediate

Thinking of 80/20:
35% Intl stocks = 17.5% large blend + 17.5% small blend
35% US stocks = 17.5% large blend + 17.5% small blend
10% REIT = 5% US + 5% Intl
20% US bonds = 20% intermediate



is this vanguard fund --- international large blend and international small blend ?? then what is name of the vanguard fund

looking
Posts: 578
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Location: morgan hill ,ca

Re: AA. Now 70/30. Thinking of 80/20.

Postby looking » Mon Jul 15, 2013 5:50 pm

goru1 wrote:The thinking behind it is to reach my number faster. It is not based on any recent market performance. I will keep the same AA 80/20 even if stocks go down by 50% or more.

Please comment.

Thanks.

Age: 42
Times annual expenses accumulated: 7

Marginal Tax rate: 25%
Emergency fund: Yes
Debt: Mortgage
All Vanguard
Account types: 401k, Roth and Taxable
Me and spouse employed full time
Two kids less than 10 years old

Now 70/30:
30% Intl stocks = 15% large blend + 15% small blend
30% US stocks = 15% large blend + 15% small blend
10% REIT = 5% US + 5% Intl
30% US bonds = 30% intermediate

is this vanguard fund what is name of the fund--international large blend and small blend ??






Thinking of 80/20:
35% Intl stocks = 17.5% large blend + 17.5% small blend
35% US stocks = 17.5% large blend + 17.5% small blend
10% REIT = 5% US + 5% Intl
20% US bonds = 20% intermediate

inbox788
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Re: AA. Now 70/30. Thinking of 80/20.

Postby inbox788 » Mon Jul 15, 2013 5:58 pm

G-Money wrote:The more important thing is to pick an allocation and stick to it. Even if you never end up changing your portfolio based on "recent market performance," there's a significant risk you'll be making your changes at precisely the wrong times. Consider, for example, that if you enact this change now, you'll be doing it when US stocks are up about 20% YTD, international stocks are up about 5% YTD, and bonds are down 3%. So you'll be buying high and selling low. Probably OK if you stick to your new AA long-term. Not if you change it in a few years (or months) when you decide you want to take some risk off the table (when stocks are down and bonds are up).

I did a proposed change/optimization in funds, keeping AA similar about a year ago, but didn't make the move. Been tracking it and regret not doing it since the proposed funds were up about 17.5% vs 16% in a year. Still haven't moved yet, but last couple of months one small cap fund has out performed, and it's around 16.75% now vs 17.5, so making up about half the gap. Had I made the change a few month ago, it would have been the worst timing. In any case, AA is mostly responsible for the gain, with the differences small enough to be around the difference in expense fees. With bond returns increasing, any differences in AA may be diminished.
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Re: AA. Now 70/30. Thinking of 80/20.

Postby chipmonk » Mon Jul 15, 2013 6:01 pm

goru1 wrote:The thinking behind it is to reach my number faster. It is not based on any recent market performance. I will keep the same AA 80/20 even if stocks go down by 50% or more.
I am at 80/20, with a strong small-value tilt (15% vs. 3% market weight) and 40% of equities international.

I have been pretty happily sticking to my guns and buying more, rebalancing, and TLH-ing when things look bad for about 2 years. I haven't been through a 50% loss yet, though. I'm sure it will be an educational experience :D

looking
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Re: AA. Now 70/30. Thinking of 80/20.

Postby looking » Mon Jul 15, 2013 6:06 pm

I did raise 50% to 80% equity exposure it is helping adding numbers otherwise very slow to reach my goal
it is gamble or irrational or not bogleheads discipline i do not know .
looking

inbox788
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Re: AA. Now 70/30. Thinking of 80/20.

Postby inbox788 » Mon Jul 15, 2013 6:22 pm

Quickfoot wrote: I'm 10 years younger than you running 70/30 with 20% REITS, 10% Intermediate Bonds, 20% Hi Yield which effectively gives me between 80/20 and 75/25 traditional equity / bond mix equivalent risk wise. Even if bonds were not in a low yield state I would still hold 20% high yield and 10% traditional and will continue with this asset allocation for the next 18 years because of how the different asset classes behave differently, not because of performance.

How do you figure this? How are you adjusting for REIT? I thought they were somewhat treated as an intermediate with some equity like behavior at times frowned bond like on other occasions.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby RNJ » Mon Jul 15, 2013 6:53 pm

G-Money wrote:
avalpert wrote:
goru1 wrote:The thinking behind it is to reach my number faster. It is not based on any recent market performance. I will keep the same AA 80/20 even if stocks go down by 50% or more.

Are you sure it isn't? Are you sure you will? You had a 50/50 allocation at the start of the last down turn (in August 2007) and it looks like, based on your posting history, at 40/60 or 30/70 one year into the recovery. You have been slowly raising your equity stake as prices rose and now you want to raise it to a new aggressive high at 80/20 - that sure looks like the pattern of a performance chaser who keep buying into rising prices and is likely to crumble when things get bad.

Whoa. Good catch.

goru1, unless you had a series of life-changing events which altered your need/willingness/ability to take risk 5 times (and now, perhaps a 6th time) in 6 years, I'd strongly recommend just sticking with 70/30 as a matter of principle. Stick with it for years. Don't make any more changes. I think mastering the discipline of sticking with an AA will be far more useful than guessing what the optimal portfolio will be over the remainder of your investing lifetime.


Agreed. This may be tough to read but the EDIT advice on this board may be the best advice you'll get. Stay put. If you need to catch up, then save more or plan to work a little longer. If you were late for a party you'd think twice before (and hopefully refrain from) stepping on the accelerator and going from 60 mph to 80 mph (or 30 to 80, as you're planning) and the reason is risk. Most likely, you'll get to the party ok, but if the risk shows up the results could be catastrophic - especially if you're not used to such high speeds. Sorry about the extended metaphor. Good luck.
Last edited by RNJ on Tue Jul 16, 2013 7:31 pm, edited 1 time in total.

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pennstater2005
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Re: AA. Now 70/30. Thinking of 80/20.

Postby pennstater2005 » Mon Jul 15, 2013 8:46 pm

As others have said no big difference between the allocations you are looking at. Increase your savings rate to reach your number faster. Maybe an IPS would help so you don't make any sudden changes due to fluctuations in the market (avoiding recency bias).
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Re: AA. Now 70/30. Thinking of 80/20.

Postby vchiu25 » Tue Jul 16, 2013 10:34 am

I'm actually thinking about doing the same thing. I accumulate enough cash over the last year so my asset allocation has shifted to 70/30 instead of 80/20.
Last edited by vchiu25 on Sun Oct 13, 2013 6:02 am, edited 2 times in total.

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G-Money
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Re: AA. Now 70/30. Thinking of 80/20.

Postby G-Money » Tue Jul 16, 2013 11:54 am

vchiu25 wrote:According to Vanguard allocation the difference is was 9.1% vs 9.4%. So that was .3% a year from 1926-2012. 1.097^30/1.094^30=1.08. So your portfolio would might be 8% larger 30 years form now.

Fixed that for you. History needs not repeat itself.
Don't assume I know what I'm talking about.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby johng » Tue Jul 16, 2013 12:42 pm

Sometime between now and your retirement we may well hit a gut-wrenching, stomach-churning fall in equity values - perhaps 50%, perhaps much less, perhaps even more.

Imagine that you're then only a few years away from retirement and the TV, papers and the net are full of how the bottom hasn't been reached and values will keep falling. There are dozens of reasons I could think of, but imagine if the initial trigger was because of a major conflict somewhere in the world and there's a real possibility it could spiral further out of control. Put yourself in that position....are you really sure you're not going to be one of the ones that folds and sells ? Will you just wait until the end of the year and calmly re-balance into 80:20 as the markets plummet ?

The trade-off here is not between a small change in your asset allocation making a small difference to when you hit your number. It's about you continually increasing the risk that you will suffer great personal stress in even a small crash and that a big crash could cause you to sell out at or near a major market low, wiping out much more than the marginal gain you made increasing your equity allocation.

I'd urge you to have a conservative asset allocation that you can stick to.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby covertfantom » Tue Jul 16, 2013 1:48 pm

avalpert wrote:
goru1 wrote:The thinking behind it is to reach my number faster. It is not based on any recent market performance. I will keep the same AA 80/20 even if stocks go down by 50% or more.

Are you sure it isn't? Are you sure you will? You had a 50/50 allocation at the start of the last down turn (in August 2007) and it looks like, based on your posting history, at 40/60 or 30/70 one year into the recovery. You have been slowly raising your equity stake as prices rose and now you want to raise it to a new aggressive high at 80/20 - that sure looks like the pattern of a performance chaser who keep buying into rising prices and is likely to crumble when things get bad.

Based on the sound of that, you've already taken a beating by locking in your losses with bonds. Have you not learned your lesson yet?

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Re: AA. Now 70/30. Thinking of 80/20.

Postby inbox788 » Tue Jul 16, 2013 1:48 pm

vchiu25 wrote:According to Vanguard allocation the historic difference is 9.1% vs 9.4%. So that .3% a year. 1.097^30/1.094^30=1.08. So your portfolio cwould be 8% larger 30 years form now.

An easier edit, and I believe truer to OPs intent. Don't think anyone was really expecting any future guaranteed returns.

OP, do you have a pension? Mortgage? Did you refinance? Other loans? Other assets or investments that have been acquired or changed in the last few years? How have the pension vesting or loan balances changed in the last few years? IMHO, these differences in individuals lead to different AA and risk tolerances.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby yukon50 » Tue Jul 16, 2013 6:59 pm

avalpert wrote:
goru1 wrote:The thinking behind it is to reach my number faster. It is not based on any recent market performance. I will keep the same AA 80/20 even if stocks go down by 50% or more.

Are you sure it isn't? Are you sure you will? You had a 50/50 allocation at the start of the last down turn (in August 2007) and it looks like, based on your posting history, at 40/60 or 30/70 one year into the recovery. You have been slowly raising your equity stake as prices rose and now you want to raise it to a new aggressive high at 80/20 - that sure looks like the pattern of a performance chaser who keep buying into rising prices and is likely to crumble when things get bad.



Going from 30% to 80% is a big move!

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Re: AA. Now 70/30. Thinking of 80/20.

Postby Ice-9 » Wed Jul 17, 2013 8:33 am

goru1 wrote:I will keep the same AA 80/20 even if stocks go down by 50% or more.


I am close to your age. Prior to the 2008-9 crash, my AA was 85/15. Using my rebalancing bands, I needed to rebalance three times during the crash. The first time, I enthusiastically rebalanced to my target, with thoughts of "stocks on sale" running through my brain. The second time, my stomach felt discomfort as I did it, but I rebalanced to my target. The third time, in March 2009, after hearing nothing but pessimism about the market for months and coworkers telling me they sold all their stock funds to invest in our plan's stable value fund, I felt horrible. I decided that 70/30 was a more appropriate allocation for me, rebalanced to that instead, and have remained at 70/30 ever since.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby Dandy » Thu Jul 18, 2013 7:00 am

Equities usually outperform over the long run. To some that signals they should be 100% equities. I think 70% equities is aggressive for someone in their 40's. Personally, I'd rather try to catch up by cutting expenses and saving more rather than trying to increase my risk exposure. A lot depends on your total financial picture and true risk tolerance.

Coming up a little short on your "number" is painful and somewhat limiting -- missing it by a mile is a life game changer. Upping your equity allocation seems more like a roll of the dice than a well thought out plan.

Most of us face tough decisions as we try to glide into retirement. Good luck

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Re: AA. Now 70/30. Thinking of 80/20.

Postby SnapShots » Thu Jul 18, 2013 7:24 am

Did a double take on the title of the thread: AA. Now 70/30... First thought was Alcoholic Anonymous....someone is 70/30...going for 80/20. Hummmm :oops:
the best decision many times is the hardest to do

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Re: AA. Now 70/30. Thinking of 80/20.

Postby richard » Thu Jul 18, 2013 7:37 am

I believe anyone deciding to change their asset allocation should wait a while (months) and then do so slowly. If you're increasing something that has done well recently or making a change that reflects things in the news, double the time periods. The exception would be a change due to changes in personal circumstances.

There are good arguments for almost any reasonably diversified allocation. It's easy to convince yourself you're changing for very good reasons. Waiting and moving slowly helps insure you're not just reacting to current events.

If your allocation shifts with the wind, you're not going to do well over time.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby staythecourse » Thu Jul 18, 2013 7:44 am

I agree with many of the points above:

1. Changing extra 10% to equities doesn't matter either way. STAYING THE COURSE Is more important. So do whatever will make that happen. If that means a good FA so be it.
2. If you want to get to the end point faster save more!! Vanguard did a nice paper on comparing increasing saving rates from 3 to 6% and 6 to 9% and each situation gave the same portfolio a return of a 80/20 portfolio, but the volatility of a 50/50 portfolio. Can't get better then this. I would spend more time figuring out how to save more then how to re-arrange one's asset allocation every year.

Good luck.
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Re: AA. Now 70/30. Thinking of 80/20.

Postby sometimesinvestor » Thu Jul 18, 2013 8:10 am

I suggest macro market timing. Between 1994 and 2000 we had a bull market (about 5.5 years) Recently we had a bull matket 2009-date 4 years.I boldly predict that some time in the next 3 years stocks will drop 20% (If I am wrong I suspect someone will point out my error )At that time rebalance into 80-20 if you still want to.Till then and as noted it won't make much difference stay the course. Note that buying a 20% dip in 2008 looked pretty foolish for at least a few month but it worked out .

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Re: AA. Now 70/30. Thinking of 80/20.

Postby sschullo » Thu Jul 18, 2013 8:45 am

Ice-9 wrote:
goru1 wrote:I will keep the same AA 80/20 even if stocks go down by 50% or more.


I am close to your age. Prior to the 2008-9 crash, my AA was 85/15. Using my rebalancing bands, I needed to rebalance three times during the crash. The first time, I enthusiastically rebalanced to my target, with thoughts of "stocks on sale" running through my brain. The second time, my stomach felt discomfort as I did it, but I rebalanced to my target. The third time, in March 2009, after hearing nothing but pessimism about the market for months and coworkers telling me they sold all their stock funds to invest in our plan's stable value fund, I felt horrible. I decided that 70/30 was a more appropriate allocation for me, rebalanced to that instead, and have remained at 70/30 ever since.


goru,
Unless you experienced what Ice said with a significant reduction in your portfolio, I agree with the folks who said that you are performance chasing. You comment about "even if stocks go down by 50% or more." Or more, how much "more?" As somebody who has lost big time in bear markets, a 50% drop is a TERRIBLE experience. Talking about how you would react to a 50% drop means absolutely NOTHING, until you experienced it first hand. You have people here that really care for your financial well-being by looking up your history and pattern of gradually increasing your equity exposure since 2009. Your recent history IS a big deal. Now you want to get to your goal even "faster." This is a huge red flag and a typical reaction, but you are dead wrong to increase your equity allocation because of your recent history and to get to your goal "faster." Read Jason Zweig's book Your Money and Your Mind.

I congratulate you for the courage to post your situation. Since you have not responded, I worry that all of this good advice will be politely ignored because the temptation to do what you are thinking is deadly, its strong and its supported by the herd mentality everywhere that is saying that the future looks bright for stocks. Your current AA is aggressive enough, in fact, you should consider increasing your bond allocation by 10% in the next few years.
Public School K-12 Educators: "Ask NOT what your annuity sales person can do for you, ask what you can do to be a Do-It-Yourselfer (DIY)."

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Re: AA. Now 70/30. Thinking of 80/20.

Postby goru1 » Thu Jul 18, 2013 9:10 am

Thanks for all responses. I am staying at 70/30.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby jainn » Wed Apr 27, 2016 3:14 pm

sometimesinvestor wrote:I suggest macro market timing. Between 1994 and 2000 we had a bull market (about 5.5 years) Recently we had a bull matket 2009-date 4 years.I boldly predict that some time in the next 3 years stocks will drop 20% (If I am wrong I suspect someone will point out my error )At that time rebalance into 80-20 if you still want to.Till then and as noted it won't make much difference stay the course. Note that buying a 20% dip in 2008 looked pretty foolish for at least a few month but it worked out .


We had a 15% dip from SP500 @ 2135 in May 2015 to 1810 in Feb 2016. DOW also had 16% dip before moving back to near all time nominal highs. Dozens if not hundreds of Individual stocks that make up the indexes have been had dips 20% or higher, but the indices themselves have not made the magic 20% dip just yet.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby ruralavalon » Wed Apr 27, 2016 3:20 pm

goru1 wrote:Thanks for all responses. I am staying at 70/30.

That's a good idea, in my opinion.
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Re: AA. Now 70/30. Thinking of 80/20.

Postby nisiprius » Wed Apr 27, 2016 3:27 pm

goru1 wrote:...The thinking behind it is to reach my number faster...
Why? If you have the specific goal of reaching a number, shouldn't the thinking be how to have the greatest certainty of reaching it?

If what you need is to reach your number, why do you care about reaching it faster? Why isn't reaching it in time good enough?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby TonyDAntonio » Wed Apr 27, 2016 3:41 pm

I think you should DCA from 70/30 to 80/20 1 percentage point at a time in 1 year increments. In ten years you will be at 80/20 and all will be well.

Now were is that sarcasm emoji?

In all seriousness I don't think there is enough of a difference between 70/30 and 80/20 to warrant any action at all. Stay where you are at.

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This thread is nearly 3 years old.

Postby pennstater2005 » Wed Apr 27, 2016 6:53 pm

Just in case anyone missed it, this is a a nearly 3 year old thread.
“Life is short, Break the Rules, Forgive quickly, Kiss slowly, Love truly, Laugh uncontrollably, And never regret anything that made you smile" - Unknown

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Re: AA. Now 70/30. Thinking of 80/20.

Postby DetroitRick » Wed Apr 27, 2016 6:56 pm

I don't think that is an earth-shattering change, and based on what you outlined, I could see the 80/20 (but wouldn't personally consider any lower than 20%). That's actually what I targeted at your age, but so much depends on your individual situation. But you said you can handle equity volatility, you've accumulated 7 x annual expenses at 42 (I think that's great) and it's just not that huge of a shift that you are considering.

The other piece of the equation that I might factor in as well relates to your confidence in your personal capital - job options in the future, likely income and career trajectories, etc. That might support or detract from your choice.

You are higher in international allocation that I would, and have, chosen based on potential return vs. diversification benefits vs volatility. Not giving advice, but my own comfort zone has bounced around near 30% for the past 20 years.

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Re: This thread is nearly 3 years old.

Postby inbox788 » Wed Apr 27, 2016 8:03 pm

pennstater2005 wrote:Just in case anyone missed it, this is a a nearly 3 year old thread.

Hindsight is 20/20. By my estimation, last 3 years, US stocks are up 30%, World down 5% and Bonds down 2%. Net/net, I think there was about a 2% improvement over the 3 years. No statement of what it means going forward.

Now, tilting towards small caps in both US and World, may alter the results.


http://quotes.morningstar.com/chart/etf ... 2%3A955%7D

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Re: This thread is nearly 3 years old.

Postby longinvest » Wed Apr 27, 2016 8:19 pm

inbox788 wrote:
pennstater2005 wrote:Just in case anyone missed it, this is a a nearly 3 year old thread.

Hindsight is 20/20. By my estimation, last 3 years, US stocks are up 30%, World down 5% and Bonds down 2%. Net/net, I think there was about a 2% improvement over the 3 years. No statement of what it means going forward.

Now, tilting towards small caps in both US and World, may alter the results.


http://quotes.morningstar.com/chart/etf ... 2%3A955%7D


Inbox,

That's a price chart! How about looking at a total return chart, instead?

Morningstar chart:

Image
Bogleheads investment philosophy using a three-fund portfolio (VCN,VXC, and VAB)

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Re: AA. Now 70/30. Thinking of 80/20.

Postby pennstater2005 » Wed Apr 27, 2016 8:19 pm

^
Not sure why you quoted me. I was pointing out this is an old thread. I'm guessing the OP has, after 3 years, already made a decision. Maybe not. The OP might be routinely checking this thread, biting his/her nails and staring at the screen hotly anticipating any new advice. I was gonna throw in an emoji there but I just couldn't choose.
“Life is short, Break the Rules, Forgive quickly, Kiss slowly, Love truly, Laugh uncontrollably, And never regret anything that made you smile" - Unknown

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Re: AA. Now 70/30. Thinking of 80/20.

Postby inbox788 » Thu Apr 28, 2016 3:49 am

pennstater2005 wrote:^
Not sure why you quoted me. I was pointing out this is an old thread. I'm guessing the OP has, after 3 years, already made a decision. Maybe not. The OP might be routinely checking this thread, biting his/her nails and staring at the screen hotly anticipating any new advice. I was gonna throw in an emoji there but I just couldn't choose.

Well the thread was brought back to life, but since we're here, we have the data to see that the decision would have been right for the past three years. However, I don't know what criteria such a decision would have been reached that could be used to decide if staying 80/20 or going back to 70/30 or even going further to 90/10 would be the one going forward the next three years.

Btw, I didn't notice the price vs growth chart, and it does slightly change the numbers. I don't understand when Morningstar chooses price or growth, as I assumed it was always growth. Might have been ETFs vs mutual fund used.

Murphy says OP didnt switch and now regrets it, and switches tomorrow, and right before the next correction.

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Re: AA. Now 70/30. Thinking of 80/20.

Postby longinvest » Thu Apr 28, 2016 6:11 am

inbox788 wrote:Btw, I didn't notice the price vs growth chart, and it does slightly change the numbers. I don't understand when Morningstar chooses price or growth, as I assumed it was always growth. Might have been ETFs vs mutual fund used.

Here's the secret:

How to use Morningstar growth charts - Bogleheads wiki
9) Provided you plot a mutual fund first, with the quote box, you can choose an ETF or even an individual stock to "compare to" and it will give you a growth (not price) chart for the ETF or stock.
Bogleheads investment philosophy using a three-fund portfolio (VCN,VXC, and VAB)

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Re: AA. Now 70/30. Thinking of 80/20.

Postby azanon » Thu Apr 28, 2016 8:10 am

inbox788 wrote:Well the thread was brought back to life, but since we're here, we have the data to see that the decision would have been right for the past three years. However, I don't know what criteria such a decision would have been reached that could be used to decide if staying 80/20 or going back to 70/30 or even going further to 90/10 would be the one going forward the next three years.


The data shows that the decision would have resulted in more money, not that the decision would have been right.


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