Anybody 50/50?

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tennisplyr
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Re: Anybody 50/50?

Post by tennisplyr »

I am 65 and retired and at 50/50. I have a 30 year old daughter and I advise her to go with 70/30 (or even 80/20). At your age you have time to recoup that I don't have.
“Those who move forward with a happy spirit will find that things always work out.” -Retired 13 years 😀
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dbCooperAir
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Re: Anybody 50/50?

Post by dbCooperAir »

satxdrummer wrote:I don't know myself haha!!!!! That's my biggest problem I guess. I'm pretty sure I'd hold and continue to buy as much as I can when the market is down. I just wont be sure until it actually happens.
Its better to learn about yourself and your risk appetite when you are just starting out at age 25 then when you are 50. You have lots of years ahead of head you, bump it up a bit and see how you feel during the first downturn, you are going to have a few of them in your life time. A few sleepless nights will just prepare you to be a parent someday if you are not already :wink:
Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him. | -Dwight D. Eisenhower-
Solo Prosperity
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Re: Anybody 50/50?

Post by Solo Prosperity »

I do think that 50/50 is quite conservative given your age, but you know yourself better than a gang of forum poster's do. It's not a bad place to start, but given your time horizon, I would suggest exploring your risk tolerances further.

As an aside, and I know this isn't the purpose of these forums (market-timing) but I think it should be considered: We are possibly entering the end of the 30 year bond bull market. Now if this IS the case, and we enter a bond bear market, there is the possibility to lose capital with these "safer" investments. Make sure you understand what type of bond fund you are going to place the 50% in because if rates rise, some types of bonds could be hit very hard in terms of their capital pricing.
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archbish99
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Re: Anybody 50/50?

Post by archbish99 »

satxdrummer wrote:Basically go Total US and International for Stock and Total US bond (with maybe a little international) for my Roth and 401k. For taxable same stock but use tax exempt intermediate for the bonds.
Surprised no one else has commented, but regardless, you should probably handle your allocation across all accounts, rather than trying to maintain your allocation in each account. Check the wiki for the article on asset location.
I'm not a financial advisor, I just play one on the Internet.
dc81584
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Re: Anybody 50/50?

Post by dc81584 »

satxdrummer wrote:Thanks for all of the great input amazing people of Bogleheads. I think age in bonds will probably be my best bet. (75/25 currently) I'll have enough stock, that I wont feel like I'm leaving a ton of money on the table, but also have a nice little anchor of bonds. I really believe that I have the strength to hold during a down market, I think its just going to be stress and worry more than anything. Once I go through a bad market and get a real world assessment of my tolerance I might consider going to age in bonds-10 or something like that if I find I can stomach it or might I might dial back to 50/50 if the stress was to much.
I think this is a great decision. While a 75/25 portfolio will certainly hurt a little during a bear market, you will not get CREAMED.
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Re: Anybody 50/50?

Post by dc81584 »

dc81584 wrote:
satxdrummer wrote:Thanks for all of the great input amazing people of Bogleheads. I think age in bonds will probably be my best bet. (75/25 currently) I'll have enough stock, that I wont feel like I'm leaving a ton of money on the table, but also have a nice little anchor of bonds. I really believe that I have the strength to hold during a down market, I think its just going to be stress and worry more than anything. Once I go through a bad market and get a real world assessment of my tolerance I might consider going to age in bonds-10 or something like that if I find I can stomach it or might I might dial back to 50/50 if the stress was to much.
I think this is a great decision. While a 75/25 portfolio will certainly hurt a little during a bear market, your losses are not likely to be catastrophic (though you WILL lose some money, but hey -- that's how it goes, right?)
dc81584
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Re: Anybody 50/50?

Post by dc81584 »

dc81584 wrote:
dc81584 wrote:
satxdrummer wrote:Thanks for all of the great input amazing people of Bogleheads. I think age in bonds will probably be my best bet. (75/25 currently) I'll have enough stock, that I wont feel like I'm leaving a ton of money on the table, but also have a nice little anchor of bonds. I really believe that I have the strength to hold during a down market, I think its just going to be stress and worry more than anything. Once I go through a bad market and get a real world assessment of my tolerance I might consider going to age in bonds-10 or something like that if I find I can stomach it or might I might dial back to 50/50 if the stress was to much.
I think this is a great decision. While a 75/25 portfolio will certainly hurt a little during a bear market, your losses are not likely to be catastrophic (though you WILL lose some money in the short-term, but hey -- that's how it goes, right?)
enebyberg
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Re: Anybody 50/50?

Post by enebyberg »

I was 90/10 in 2008. Big mistake. I have now shifted to 50/50 since I hit my 50's and now sleep much better at night.
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Yesterdaysnews
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Re: Anybody 50/50?

Post by Yesterdaysnews »

If you stayed 90/10 and never looked at your account you would be richer. I only point this out to make a point about the psychological side of investing.

There is no way I would buy more bonds right now.
jayhawkerbeef
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Re: Anybody 50/50?

Post by jayhawkerbeef »

@yesterdaysnews is spot on! Great advice. The more you save the more you'll have no matter what you do. And don't sell ever.
Tozan13
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Re: Anybody 50/50?

Post by Tozan13 »

I started investing around the same age as OP, beginning at 60/40 and going to 90/10 over the next 1.5 years. Investing was new and a little scary at first, so I used a more conservative approach for getting my feet wet than perhaps my age warranted (I used the Vanguard Balance Fund [VBINX], and was happy with the result).

For what it's worth, 50/50 does seem a little conservative for a 25yo, but if it suits you then let it be so. You can always change it as you learn more, or decide in time that it is in fact right for you. It should be remembered, however, that all portfolios carry risks--some with more of one kind than another, but risks all the same. In some senses 50/50 is less risky than 60/40 or 90/10, but more risky in others. Deciding which risks you're more willing to take might be one of the more personal aspects of being an investor. That has been my experience, at least.

Happy Tuesday :)
"An investment said to have an 80% chance of success sounds far more attractive than one with a 20% chance of failure. The mind can't easily recognize that they are the same." -Daniel Kahneman
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stemikger
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Re: Anybody 50/50?

Post by stemikger »

Yesterdaysnews wrote:If you stayed 90/10 and never looked at your account you would be richer. I only point this out to make a point about the psychological side of investing.

There is no way I would buy more bonds right now.
One of John Bogle's rules. "Don't Peek"

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basspond
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Re: Anybody 50/50?

Post by basspond »

satxdrummer wrote:Once I go through a bad market and get a real world assessment of my tolerance I might consider going to age in bonds-10 or something like that if I find I can stomach it or might I might dial back to 50/50 if the stress was to much.
I was 25 and about to be married when Black Monday hit. Maybe I was naive, young love, didn't have much saved, or knew that we weren't going to touch that money for 30 years and the only way we were going to lose money is if we sold. If you don't know how stressed you are going to get that might lead to an emotional decision, spare yourself and don't even invest in the market.
Dude2
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Re: Anybody 50/50?

Post by Dude2 »

I base my 50/50 allocation on the results of "aft-casts" in a book by Otar which lays out the extreme variability in outcomes for various allocations.

http://www.amazon.com/Unveiling-The-Ret ... 0968963420

(The author made the book available for free at one point.)
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stemikger
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Re: Anybody 50/50?

Post by stemikger »

basspond wrote:
satxdrummer wrote:Once I go through a bad market and get a real world assessment of my tolerance I might consider going to age in bonds-10 or something like that if I find I can stomach it or might I might dial back to 50/50 if the stress was to much.
I was 25 and about to be married when Black Monday hit. Maybe I was naive, young love, didn't have much saved, or knew that we weren't going to touch that money for 30 years and the only way we were going to lose money is if we sold. If you don't know how stressed you are going to get that might lead to an emotional decision, spare yourself and don't even invest in the market.
He can't just throw away his chips and go home. He has to invest. He just has to learn to deal with the emotional response of a down market. To the OP ask yourself. Do you think the S&P and the Dow will be higher in 30 years? If you answered yes, then who cares about the ups and downs in between. As Warren Buffett often says, when you buy a house do you ask for a daily quote how much the home is worth. It should be the same with stocks. The short term does not matter.
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indexonlyplease
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Re: Anybody 50/50?

Post by indexonlyplease »

My son is 19 and we are getting ready to open his Roth IRA and purchase the Vanguard Target Dated Fund 2060 which is 90 percent stock and 10 percent bonds.


Could I be wrong with this idea. I always considered the long term risk is worth it. Also, since he know little about investing the fund does it all.

Also, Vanguard set the fund up this way. Should that not give us the thought that taking the risk now is worth. I know they think so.


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ankonaman
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Re: Anybody 50/50?

Post by ankonaman »

A 50/50 allocation at age 25 is not a good plan. With the time horizon you have you can ride out any down markets. Quite frankly you should hope for a down market to invest heavily in; with both fists. My youngest daughter & son-in-law are in their mid 20's. We discussed this scenario with their retirement allocations. 100% stocks split between US & International. No bonds at this point. Be aggressive, very agressive,; you have a lot of time on your side.
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Cernel
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Re: Anybody 50/50?

Post by Cernel »

satxdrummer wrote: I remember watching the news when I was 18/19 before I had investments. It was nothing but horrible news and they made it sound like the world as we knew it was ending. It must have been rough to hold through that
You're right, the financial news during this time was "doom and gloom." IMO, the News Media is all about sensationalism and whether it be in the domain of Financial news, World news, Sports news or any other domain, what we mostly get from the media is the negative side of the story. That is why I tune out most of what I see or hear from the media. I think you might read a lot of comments on this site that suggest that one should not over react to what they hear from the "Talking Heads."

So, rather than listening to these "Talking Heads" one might listen to, digest and determine for oneself, the great advice available on this site and from many of the recommended books/resources listed in the Wiki. For me, I have evolved to a position that includes:
- Understanding my financial goals
- determining my risk tolerance (and yes, this has evolved by living through the 1985 October Crash, the Tech Bubble of the early 2000's and the Great Recession of 2008-09)
- deciding on an Asset Allocation
- and most importantly, "Staying the Course."

As others have stated, your starting position of 50/50 is a reasonable starting point which can be adjusted as you gain more knowledge and experience. You may want to visit the Wiki page on "Investment Policy Statement" and develop for yourself your IPS. As you gain more knowledge and experience you can certainly adjust your IPS (it is recommended that you revisit your IPS annually). And as you go through this process, certainly seek advice from this forum, since as you have already stated, you have learned a lot from it and it will help you feel more comfortable.

One concept that I learned from Mr Bogle that was really helpful for me was "the enemy of a good financial plan/investment strategy is the pursuit of a perfect plan."
reneeh63
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Re: Anybody 50/50?

Post by reneeh63 »

enebyberg wrote:I was 90/10 in 2008. Big mistake. I have now shifted to 50/50 since I hit my 50's and now sleep much better at night.
I was 90/10 in 2008 and the same in the recession before then...the market always rebounds, just a matter of time. I'm in my 50's now and just went to 75/25 and I'll stay at that level probably until I retire...then maybe go to 60/40.
sawhorse
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Re: Anybody 50/50?

Post by sawhorse »

ankonaman wrote:A 50/50 allocation at age 25 is not a good plan. With the time horizon you have you can ride out any down markets. Quite frankly you should hope for a down market to invest heavily in; with both fists.
Unless you were 25 in 1990 in Japan. I'm working on a complicated calculation with dollar cost averaging and need some better data. Right now I'm using simplifications and assumptions. Based on those simplifications and assumptions, 25 years later, it's iffy between normal glidepath vs. panicking the first year and going 100% bonds since. 50/50 would have killed both of them.

Edit: Actually, I ran the 50/50 numbers, and they are only slightly better than traditional glidepath. Traditional glidepath with international finally pulled ahead in 2013 over panic-and-move-to-bonds. Interesting to see where it'll go from here. Japanese bond yields are awful now. These calculations use inflation-adjusted dollar cost averaging.
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siamond
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Re: Anybody 50/50?

Post by siamond »

indexonlyplease wrote:My son is 19 and we are getting ready to open his Roth IRA and purchase the Vanguard Target Dated Fund 2060 which is 90 percent stock and 10 percent bonds.

Could I be wrong with this idea. I always considered the long term risk is worth it. Also, since he know little about investing the fund does it all.

Also, Vanguard set the fund up this way. Should that not give us the thought that taking the risk now is worth. I know they think so.
There is absolutely NOTHING wrong with this idea. You should definitely pursue. It was my exact recommendation to the OP a few posts ago... And I am going to do the very exact same thing with my sons when they land their first job after college, getting them started with a one-year max contribution to their newly opened Roth-IRA.
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Meg77
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Re: Anybody 50/50?

Post by Meg77 »

You don't mention how much you plan to be investing each year, but unless you are starting out with a major inheritance then your balances are going to be relatively small for at least a few years. Asset allocation is important, but don't overthink it at this stage.

The single most significant factor when it comes to your portfolio over the next 5-10 years (at least) is simply how much you invest. Your rate of return, your expense ratios, even your asset allocation PALE in comparison to your savings rate until you have 6 figures or so invested. That's not to say they don't matter, but don't major in the minors. You may change your mind anyway over time as your situation changes.

Just buy the cheapest index fund in your 401k, which usually an S&P 500 index (you probably won't be with your company that long anyway if you're like most Millennials, and then you'll be rolling that 401k to an IRA in just a few years). Then use your Roth to add some bonds/international. Max these accounts out when/if you can, but remember to save in cash too so you don't ever have to raid your investment accounts for goals like buying a car, home, or wedding.

To answer your question directly: 50/50 is much too conservative for you. It's even too conservative for most people 20 years your senior. I'd go with 80/20 if I were you (I'm 31 and just moved from 90/10 to 86/13 since I got married and my husband is 6 years my senior). I plan to gradually shift toward 70/30 during middle age and bottom out in my 60's with 60/40. It's arbitrary, but you want heavy exposure to stocks until you have built some wealth you need to preserve.

Also, ignore the chatter about "finding out how you deal with a crisis." Instead, set about educating and training yourself how to deal with a future crisis correctly. You do have control over your actions and reactions to the market. Just remember when stocks fall that it's a great thing! For you at least, since you don't need to sell in the next 10 years. The goal is to buy LOW and sell HIGH. You should take advantage of those down years and grin as you scoop up shares at depressed prices.
"An investment in knowledge pays the best interest." - Benjamin Franklin
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stemikger
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Re: Anybody 50/50?

Post by stemikger »

Meg77 wrote:You don't mention how much you plan to be investing each year, but unless you are starting out with a major inheritance then your balances are going to be relatively small for at least a few years. Asset allocation is important, but don't overthink it at this stage.

The single most significant factor when it comes to your portfolio over the next 5-10 years (at least) is simply how much you invest. Your rate of return, your expense ratios, even your asset allocation PALE in comparison to your savings rate until you have 6 figures or so invested. That's not to say they don't matter, but don't major in the minors. You may change your mind anyway over time as your situation changes.

Just buy the cheapest index fund in your 401k, which usually an S&P 500 index (you probably won't be with your company that long anyway if you're like most Millennials, and then you'll be rolling that 401k to an IRA in just a few years). Then use your Roth to add some bonds/international. Max these accounts out when/if you can, but remember to save in cash too so you don't ever have to raid your investment accounts for goals like buying a car, home, or wedding.

To answer your question directly: 50/50 is much too conservative for you. It's even too conservative for most people 20 years your senior. I'd go with 80/20 if I were you (I'm 31 and just moved from 90/10 to 86/13 since I got married and my husband is 6 years my senior). I plan to gradually shift toward 70/30 during middle age and bottom out in my 60's with 60/40. It's arbitrary, but you want heavy exposure to stocks until you have built some wealth you need to preserve.

Also, ignore the chatter about "finding out how you deal with a crisis." Instead, set about educating and training yourself how to deal with a future crisis correctly. You do have control over your actions and reactions to the market. Just remember when stocks fall that it's a great thing! For you at least, since you don't need to sell in the next 10 years. The goal is to buy LOW and sell HIGH. You should take advantage of those down years and grin as you scoop up shares at depressed prices.
+1 Great Advice!!
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sergeant
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Re: Anybody 50/50?

Post by sergeant »

I'm 50% equities/50% stable value. 52 years old and very near retirement. I was at 70/30 at your age and slowly went to 50/50 as I aged. My pension will provide more than enough in retirement so I probably won't touch my nest egg. I have talked with my two heirs and they're happy with the 50/50. They're in their early 20's.
For the ashes of his fathers, And the temples of his gods. | Pensions= 2X yearly expenses. Portfolio= 40X yearly expenses.
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stemikger
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Re: Anybody 50/50?

Post by stemikger »

sergeant wrote:I'm 50% equities/50% stable value. 52 years old and very near retirement. I was at 70/30 at your age and slowly went to 50/50 as I aged. My pension will provide more than enough in retirement so I probably won't touch my nest egg. I have talked with my two heirs and they're happy with the 50/50. They're in their early 20's.
If it is money being left to your heirs, I would be much more aggressive.
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siamond
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Re: Anybody 50/50?

Post by siamond »

Meg77 wrote:Also, ignore the chatter about "finding out how you deal with a crisis." Instead, set about educating and training yourself how to deal with a future crisis correctly. You do have control over your actions and reactions to the market. Just remember when stocks fall that it's a great thing! For you at least, since you don't need to sell in the next 10 years. The goal is to buy LOW and sell HIGH. You should take advantage of those down years and grin as you scoop up shares at depressed prices.
Very well said, Meg. Can't agree more. Besides reading a few good books on passive investing, a really good learning experience is to study historical returns, and play around with a spreadsheet. After a little while, past historical patterns start to sink in. And then, you're in much better shape to properly react to future events. Better educate yourself ahead of time than waiting for a crisis to take you by surprise.
jcjc
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Re: Anybody 50/50?

Post by jcjc »

If you are 25 and reading this blog you will do well :happy I wish I could get my 20 something to read this!!
Cody
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Re: Anybody 50/50?

Post by Cody »

Didn't read every post here one but one can't forget the impact of taxes.

We are currently 48-52 before taxes and 44-56 after taxes (maybe not a big difference) but could come into more play with a different portfolio (meaning if you had more in say tax deferred or Roths or taxable than we do it might have more impact on true AA).

But that also complicates the spread sheet process too. So you have to decide if its worth figuring out.
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midareff
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Re: Anybody 50/50?

Post by midareff »

retired 3 years and yes we are.. actually 49/49/2 at the moment. The 2% being 1st of the month bank cash. The rear window being much clearer than the windshield brings lots of woulda, coulda, shoulda to the surface. Our AA has been in this general area the 5 or 6 years and when it gets a bit heavier in equities I play farmer and do a little harvesting. The harvest generally becomes ST or IT bonds although it may be CD's this time.
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