Static vs Changing Asset Allocation

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mikeguima
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Static vs Changing Asset Allocation

Post by mikeguima » Mon Dec 19, 2016 3:46 pm

Hey guys! So, I'd like to share some confusions I'm facing with you.

Ok, so during I've been reading on what risks to take into account in order to decide on AA lately and I found that the ability, willingness and need to take risk does sum things up pretty well. Now, with that in mind, let's say I have moderate willingness (risk aversion) and need, but changing ability, i.e., I have different goals spread throughout time, so I build 3 different portfolios depending on hypothetical estimates for the duration of each of the assets, so I can match the duration of the portfolios to my spending needs:

Portfolio 1 - 100% Cash, goals within 1-2 years
Portfolio 2 - 30% Cash, 40% Bonds, 30% Stocks, goals within 2-10 years
Portfolio 3 - 20% Bonds, 80% Stocks, goals over 10 years

This is just a rough example. So, depending on my big ticket items spending needs, I'd be allocating money between the 3 portfolios in order to get the final average allocation, that would always be changing over time.
This sort of thinking as underlying the principle that different assets are more or less volatile for short periods of time and that should be taken into account when choosing the AA.

Now, let's take, for instance, a portfolio like the Golden Butterlfy, which is more diversified inter assets. Something like 20% Cash, 20% Bonds, 20% Commodities/ Gold, 20% Stocks, 20% REIT, for instance. So, such a portfolio would most likely provide smooth returns over time, like the Golden Butterfly itself (with good returns at low relative volatility being its strongest selling point), since it's quite diversified between assets.

Now, the question is: instead of tweaking the portfolio over time like I would with the first portfolio, in order to account for goals within different time frames, why not invest in a static portfolio like the last one which, due to more stable returns, would most likely "eliminate" the problem of withdrawing the money at unfavourable times, since it's very little volatile?

Not sure I was very clear, but this question was bugging me today.

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patrick013
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Re: Static vs Changing Asset Allocation

Post by patrick013 » Mon Dec 19, 2016 5:04 pm

Portfolio Allocation Models

What does age-in-bonds tell you ?

I'd stay with investment grade funds anyway as opposed to
commodities and preferred's, etc.. Even small tilts to small
or medium cap, REIT, dividend yield, or utility funds are good
enough for the higher quality investor.
age in bonds, buy-and-hold, 10 year business cycle

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mikeguima
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Re: Static vs Changing Asset Allocation

Post by mikeguima » Mon Dec 19, 2016 5:28 pm

I don't like age in bonds and have a hard time figuring out why anybody would use age in bonds only in order to determine AA. It makes sense from the point of view that as one get older the ability to take risk diminishes, since one has less time to recover from losses and is getting closer to using most of the investments (in retirement), but disregards risk aversion and other financial goals in the meantime.

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goingup
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Re: Static vs Changing Asset Allocation

Post by goingup » Mon Dec 19, 2016 6:26 pm

Mike-
We only have one portfolio.

Say you have $100K portfolio and need $20K in 1-2 years for a downpayment. Put that in Hi-yield savings or CDs. Say you need another $10K for remodeling/furniture shortly after. That goes in ST instruments too.

Then you're 30% Cash (CD, Hi-Yield) and 70% equity (Stock mutual funds)

I wouldn't get tangled up into mental accounting. Just secure what you'll in the short-term and put the rest in equities. Not many people try to maintain 3 different portfolios with different AA's. It helps to think more fluidly than that. :)

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patrick013
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Re: Static vs Changing Asset Allocation

Post by patrick013 » Mon Dec 19, 2016 10:57 pm

mikeguima wrote:I don't like age in bonds and have a hard time figuring out why anybody would use age in bonds only in order to determine AA. It makes sense from the point of view that as one get older the ability to take risk diminishes, since one has less time to recover from losses and is getting closer to using most of the investments (in retirement), but disregards risk aversion and other financial goals in the meantime.
Knowing that stocks can do strange things and govt. supported
trillion dollar bailouts may not always happen, age-in-bonds will
capture stock capital gains to stable bond funds for future retirement
distribution. Funds that are not at risk, accumulated for retirement.
That's all AIB's wants to do.

I suppose you could allocate funds for 10 year expenditure or 20 year
expenditure in different accounts or target date funds or even zero
coupon bonds of several varieties.
age in bonds, buy-and-hold, 10 year business cycle

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Portfolio7
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Re: Static vs Changing Asset Allocation

Post by Portfolio7 » Mon Dec 19, 2016 11:21 pm

Since you mentioned it, one word of caution about the 'Golden Butterfly', the Permanent Portfolio, or any portfolio with a significant (>5%) allocation to Gold. I personally Ignore the first half of the 1970's for any backtest. Gold was legalized for general purchase. It did not behave normally, and it is not likely to ever behave that way again. For those two years it was the perfect diversifier, but after that... meh. I always remove that period from backtests and see if the portfolio is still as interesting as I first thought. You may still want to use gold, but normalized data may help you set realistic expectations. (A similar warning for TIPS, that liquidity issues may have impacted the returns up until as recently as the 2008 decline. I still have Tips in my portfolio for the inflation protection, but I'm... wary of their risk/reward characteristics.)
"An investment in knowledge pays the best interest" - Benjamin Franklin

Topic Author
mikeguima
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Re: Static vs Changing Asset Allocation

Post by mikeguima » Tue Dec 20, 2016 8:04 am

Sure, it was just an example of a diversified portfolio between assets, not meaning it's a good one :D
Mike-
We only have one portfolio.

Say you have $100K portfolio and need $20K in 1-2 years for a downpayment. Put that in Hi-yield savings or CDs. Say you need another $10K for remodeling/furniture shortly after. That goes in ST instruments too.

Then you're 30% Cash (CD, Hi-Yield) and 70% equity (Stock mutual funds)

I wouldn't get tangled up into mental accounting. Just secure what you'll in the short-term and put the rest in equities. Not many people try to maintain 3 different portfolios with different AA's. It helps to think more fluidly than that. :)
It is a single portfolio, perhaps I didn't metion that. Meaning if you allocate 30% to A, 40% to B and 30% to C, you just have to multiply the percentages to get your final portfolio. In this case it would be:
Cash - 30% x 100% + 40% x 30% + 30% x 0% = 42%
Bonds - 30% x 0% + 40% x 40% + 30% x 20% = 22%
Stocks - 30% x 0% + 40% x 30% + 30% x 80% = 36%
Total = 100%

So, if I had 30% of my funds for consumption within 1-2 years, 40% within 2-10 years and 30% for over 10 years, my current portfolio would be 42% cash, 22% bonds, 36% stocks.

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Re: Static vs Changing Asset Allocation

Post by cherijoh » Tue Dec 20, 2016 8:16 am

mikeguima wrote:Now, let's take, for instance, a portfolio like the Golden Butterlfy, which is more diversified inter assets. Something like 20% Cash, 20% Bonds, 20% Commodities/ Gold, 20% Stocks, 20% REIT, for instance. So, such a portfolio would most likely provide smooth returns over time, like the Golden Butterfly itself (with good returns at low relative volatility being its strongest selling point), since it's quite diversified between assets.

Now, the question is: instead of tweaking the portfolio over time like I would with the first portfolio, in order to account for goals within different time frames, why not invest in a static portfolio like the last one which, due to more stable returns, would most likely "eliminate" the problem of withdrawing the money at unfavourable times, since it's very little volatile?

Not sure I was very clear, but this question was bugging me today.
IMO, the problem with this proposal is that you have assumed that the correlation (or lack of correlation) between asset classes remains stable over time to limit the volatility of the total portfolio. But this is a really bad assumption - and often it falls apart just when you need it most. Just look at the great recession - real estate and stocks tanked at around the same time. Oil prices also dropped substantially which had a significant impact on commodity prices.

You are on much safer ground by setting your AA to correspond with the time frame.

weedf16
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Re: Static vs Changing Asset Allocation

Post by weedf16 » Tue Dec 20, 2016 8:29 am

goingup wrote:Mike-
We only have one portfolio.
Not me. I have two portfolios.

Maybe portfolios is not the most accurate word, maybe buckets is a better description. My first 'bucket' is my retirement bucket which has an AA of 75/25 and encompasses all my tax preferential accounts (401k and Roth IRAs). My second 'bucket' is my house downpayment bucket which I expect to need in about 5-6 years. This bucket has it's own AA of 20/80 and is kept in a taxable account.

It all boils down to your intended use of the 'bucket' of money, what the time horizon is, and how much risk you are willing to take with each bucket.

Cheers :sharebeer

remomnyc
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Re: Static vs Changing Asset Allocation

Post by remomnyc » Tue Dec 20, 2016 10:52 am

weedf16 wrote:
goingup wrote:Mike-
We only have one portfolio.
Not me. I have two portfolios.

Maybe portfolios is not the most accurate word, maybe buckets is a better description. My first 'bucket' is my retirement bucket which has an AA of 75/25 and encompasses all my tax preferential accounts (401k and Roth IRAs). My second 'bucket' is my house downpayment bucket which I expect to need in about 5-6 years. This bucket has it's own AA of 20/80 and is kept in a taxable account.

It all boils down to your intended use of the 'bucket' of money, what the time horizon is, and how much risk you are willing to take with each bucket.

Cheers :sharebeer
Same here. The retirement portfolio is 80/20 and is tax deferred and won't be tapped for 15 yrs. The house downpayment portfolio is 40/60 (of which 30% is savings earning a paltry 1%) and is in taxable and could be used in the next 1-10 yrs .

Edit: The taxable portfolio also includes the early retirement funds.

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Phineas J. Whoopee
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Re: Static vs Changing Asset Allocation

Post by Phineas J. Whoopee » Tue Dec 20, 2016 2:04 pm

mikeguima wrote:I don't like age in bonds and have a hard time figuring out why anybody would use age in bonds only in order to determine AA. ...
[Cue exasperation from everybody who is sick and tired of me posting these links.]

I settled on an asset allocation approach not based on age. Here's what I did, and a couple of years later I answered some questions about it.

Lest there be any misunderstandings, unlike another poster I do not think it is a very good approach for most investors. I think for most individual investors most of the time an age-based approach is far more practical. My plan is deeply rooted in my own personal situation. My reasoning is in the links. I did not develop it for the purpose of writing a book telling everybody else to follow it.

I'd be happy to answer any questions.

PJW

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Re: Static vs Changing Asset Allocation

Post by KlangFool » Tue Dec 20, 2016 2:16 pm

mikeguima wrote:
so I can match the duration of the portfolios to my spending needs:

Portfolio 1 - 100% Cash, goals within 1-2 years
Portfolio 2 - 30% Cash, 40% Bonds, 30% Stocks, goals within 2-10 years
Portfolio 3 - 20% Bonds, 80% Stocks, goals over 10 years

Not sure I was very clear, but this question was bugging me today.
mikeguima,

<< so I can match the duration of the portfolios to my spending needs:>>

Why do you have to do that? It looks overly complicated. I don't. I only have one portfolio.

1) I have 1 year worth of the emergency fund.

2) I save 1 years of expense every year.

3) My portfolio was 70/30. Now 64/36. It will be 60/40.

I fund my big expense out of my annual "cash flow", savings, and emergency fund.

KlangFool

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mikeguima
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Re: Static vs Changing Asset Allocation

Post by mikeguima » Thu Dec 22, 2016 2:33 pm

Hey Klang!

It's not 3 portfolios. It's one portfolio whose % are calculated by allocating X amount to each of those "sub portfolios". See my previous post for that :happy

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Re: Static vs Changing Asset Allocation

Post by KlangFool » Thu Dec 22, 2016 2:42 pm

mikeguima wrote:Hey Klang!

It's not 3 portfolios. It's one portfolio whose % are calculated by allocating X amount to each of those "sub portfolios". See my previous post for that :happy
mikeguima,

I understand what you are trying to do. But, my question to you is still the same. Why do you have to explicitly save for expenditure in the future? This does not make any sense to me. In my system, I fund all those expenditures out of my emergency fund.

KlangFool

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mikeguima
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Re: Static vs Changing Asset Allocation

Post by mikeguima » Thu Dec 22, 2016 3:00 pm

So you use your emergency fund to fund current expenses, as if it were a cash account? The role of the fund shouldn't be for emergency expenses only? Let's say I have an emergency fund and want to buy a car this year. I wouldn't tap into the fund. Instead, I could have my investments already set up so that the money is readily available for the car payments.

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Re: Static vs Changing Asset Allocation

Post by KlangFool » Thu Dec 22, 2016 3:08 pm

mikeguima wrote:So you use your emergency fund to fund current expenses, as if it were a cash account? The role of the fund shouldn't be for emergency expenses only? Let's say I have an emergency fund and want to buy a car this year. I wouldn't tap into the fund. Instead, I could have my investments already set up so that the money is readily available for the car payments.
mikeguima,

<< Let's say I have an emergency fund and want to buy a car this year. I wouldn't tap into the fund. Instead, I could have my investments already set up so that the money is readily available for the car payments.>>

1) Why not?

2) How is your overly complicated system of setting a separate investment for the car work better? Then, you need one for the house down payment and so on. Plus, a lot more.

3) What car payment? If you are setting up investment for the car, you should be able to pay for the car with cash. If not, why bother? It is just part of your normal expenses.

Having a bigger emergency fund let you deal with a lot more than buying a new car and whatever.

K.I.S.S.

KlangFool

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One Ping
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Re: Static vs Changing Asset Allocation

Post by One Ping » Thu Dec 22, 2016 3:41 pm

KlangFool wrote: In my system, I fund all those expenditures out of my emergency fund.

KlangFool
That doesn't sound so much like an emergency fund to me as it does an escrow fund for ad hoc expenses (e.ge, cars), including emergencies (e.g., unemployment or large medical bills). Sure you may pay for emergencies out it, but it sounds like it also funds other expenditures not just emergencies.

You say tah-may-toe, I say tow-mah-toe ... Money is fungible so I'm not sure it matters what you call it, just so long you know why you have it where you have it.

One Ping
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Re: Static vs Changing Asset Allocation

Post by KlangFool » Thu Dec 22, 2016 4:29 pm

One Ping wrote:
KlangFool wrote: In my system, I fund all those expenditures out of my emergency fund.

KlangFool
That doesn't sound so much like an emergency fund to me as it does an escrow fund for ad hoc expenses (e.ge, cars), including emergencies (e.g., unemployment or large medical bills). Sure you may pay for emergencies out it, but it sounds like it also funds other expenditures not just emergencies.

You say tah-may-toe, I say tow-mah-toe ... Money is fungible so I'm not sure it matters what you call it, just so long you know why you have it where you have it.

One Ping
One Ping,

And, why this is not a better system? It is simple and less complicated. Keep the emergency fund large enough and you can handle any kind of large expense and emergency.

KlangFool

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goingup
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Re: Static vs Changing Asset Allocation

Post by goingup » Thu Dec 22, 2016 4:55 pm

Save up your downpayment in a MM or hi-yield savings. Contribute the rest to a Target Fund in your 401K and/or Roth.

The downside of what you're doing is that it is really complex. And it has you with an allocation of 36% stocks which is probably too conservative for someone under 70.

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One Ping
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Re: Static vs Changing Asset Allocation

Post by One Ping » Thu Dec 22, 2016 5:10 pm

KlangFool wrote:
One Ping wrote:
KlangFool wrote: In my system, I fund all those expenditures out of my emergency fund.

KlangFool
That doesn't sound so much like an emergency fund to me as it does an escrow fund for ad hoc expenses (e.ge, cars), including emergencies (e.g., unemployment or large medical bills). Sure you may pay for emergencies out it, but it sounds like it also funds other expenditures not just emergencies.

You say tah-may-toe, I say tow-mah-toe ... Money is fungible so I'm not sure it matters what you call it, just so long you know why you have it where you have it.

One Ping
One Ping,

And, why this is not a better system? It is simple and less complicated. Keep the emergency fund large enough and you can handle any kind of large expense and emergency.

KlangFool
IMO they are the same thing, just depends what you want to call them. Both approaches use pile(s) of money set aside for expenses of various sorts some are emergencies, some ... not so much. If you want to call it an emergency fund, fine, but sounds like you use it for things I would not consider emergencies (e.g., cars). Fine, it doesn't really matter what you call it/them.

Whether one is simpler or less complicated than the other is in the eye/mind of the individual user.

One Ping
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Re: Static vs Changing Asset Allocation

Post by pkcrafter » Thu Dec 22, 2016 7:44 pm

mikeguima wrote:
So, if I had 30% of my funds for consumption within 1-2 years, 40% within 2-10 years and 30% for over 10 years, my current portfolio would be 42% cash, 22% bonds, 36% stocks.
I don't think that works, Mike. It compromises both risk on the short end and the long end. 36% stock needed in 2 years is too much. 36% stock for the long term is too little. I think you have to match risk and need according to the specific time frames.

KangFool's idea of a large emergency fund for other goals doesn't sound solid either. It may leave too much money doing nothing, or if may contain risk that shouldn't be there. If it works for KangFool, that's great, but it I would not be comfortable with it.

KangFool wrote:
I understand what you are trying to do. But, my question to you is still the same. Why do you have to explicitly save for expenditure in the future? This does not make any sense to me.
Well, if you want a certain amount of money available for a specific need, seems reasonable to have a plan and a goal. Saving for a house for instance, or even a vacation. If you pulling money out of a pool, then spending for things other than the target goal are easy to do.

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.

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Re: Static vs Changing Asset Allocation

Post by Grogs » Thu Dec 22, 2016 8:10 pm

pkcrafter wrote:mikeguima wrote:
So, if I had 30% of my funds for consumption within 1-2 years, 40% within 2-10 years and 30% for over 10 years, my current portfolio would be 42% cash, 22% bonds, 36% stocks.
I don't think that works, Mike. It compromises both risk on the short end and the long end. 36% stock needed in 2 years is too much. 36% stock for the long term is too little. I think you have to match risk and need according to the specific time frames.

KangFool's idea of a large emergency fund for other goals doesn't sound solid either. It may leave too much money doing nothing, or if may contain risk that shouldn't be there. If it works for KangFool, that's great, but it I would not be comfortable with it.

KangFool wrote:
I understand what you are trying to do. But, my question to you is still the same. Why do you have to explicitly save for expenditure in the future? This does not make any sense to me.
Well, if you want a certain amount of money available for a specific need, seems reasonable to have a plan and a goal. Saving for a house for instance, or even a vacation. If you pulling money out of a pool, then spending for things other than the target goal are easy to do.

Paul
I keep a two level emergency fund. The first is six month's expenses for true emergencies, e.g., extended unemployment. The second is what I call a large expense fund. It's intended for those large, infrequent expenses like replacing a car or an HVAC. I add a certain amount to the large expense fund every year. If I have say $10k in the large expense fund, and a $5k bill comes in, no adjustment is necessary. On the other hand, if a $20k expense comes in, I have to drain the large expense fund, plus pull $10k from the true emergency fund. In that case, I would stop investments and charitable donations until the true emergency component was replenished. To me, the mental accounting is worth it to minimize the risk of having a diminished emergency fund just at the time I lose my job.

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Re: Static vs Changing Asset Allocation

Post by pkcrafter » Thu Dec 22, 2016 8:27 pm

Ok, it seems that would work, and I guess it's very similar to what KangFool is doing. I suppose what you and KangFool are doing is a bit of mental accounting in a fund that is not exposed to stock risk.

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.

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Re: Static vs Changing Asset Allocation

Post by KlangFool » Thu Dec 22, 2016 9:03 pm

pkcrafter wrote:Ok, it seems that would work, and I guess it's very similar to what KangFool is doing. I suppose what you and KangFool are doing is a bit of mental accounting in a fund that is not exposed to stock risk.

Paul
Paul,

I keep one year worth of emergency fund. If I need to spend on large expense and I know ahead of time, I could increase my emergency fund to account for that. Or else, I spend the money from my emergency fund and replenish it later.

Right now, I am keeping an emergency fund of 1 year of expense and 1/2 years worth of college expenses for my 2 kids.

I have enough savings, capital distribution, and dividend coming in all the time. It is just a question of whether I invest that money or flow into my emergency fund.

KlangFool

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Re: Static vs Changing Asset Allocation

Post by pkcrafter » Thu Dec 22, 2016 9:29 pm

KlangFool wrote:
pkcrafter wrote:Ok, it seems that would work, and I guess it's very similar to what KangFool is doing. I suppose what you and KangFool are doing is a bit of mental accounting in a fund that is not exposed to stock risk.

Paul
Paul,

I keep one year worth of emergency fund. If I need to spend on large expense and I know ahead of time, I could increase my emergency fund to account for that. Or else, I spend the money from my emergency fund and replenish it later.

Right now, I am keeping an emergency fund of 1 year of expense and 1/2 years worth of college expenses for my 2 kids.

I have enough savings, capital distribution, and dividend coming in all the time. It is just a question of whether I invest that money or flow into my emergency fund.

KlangFool
Got it, thanks,

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.

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mikeguima
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Re: Static vs Changing Asset Allocation

Post by mikeguima » Fri Dec 23, 2016 9:52 am

KlangFool wrote:
mikeguima wrote:So you use your emergency fund to fund current expenses, as if it were a cash account? The role of the fund shouldn't be for emergency expenses only? Let's say I have an emergency fund and want to buy a car this year. I wouldn't tap into the fund. Instead, I could have my investments already set up so that the money is readily available for the car payments.
mikeguima,

<< Let's say I have an emergency fund and want to buy a car this year. I wouldn't tap into the fund. Instead, I could have my investments already set up so that the money is readily available for the car payments.>>

1) Why not?

2) How is your overly complicated system of setting a separate investment for the car work better? Then, you need one for the house down payment and so on. Plus, a lot more.

3) What car payment? If you are setting up investment for the car, you should be able to pay for the car with cash. If not, why bother? It is just part of your normal expenses.

Having a bigger emergency fund let you deal with a lot more than buying a new car and whatever.

K.I.S.S.

KlangFool
I'm talking about one single car payment, upfront. Lets say it's 5 years until I have the purchase planned. Should I already be setting cash apart for the purchase? Why not invest all that cash in a relatively safe portfolio for the time being (still earning more than cash) and then, once I'm 1-2 years from the purchase, I'll get the money I need for the car from my riskier investments and let it sit in cash so there's little risk it'll fluctuate.

By always having 1 year worth of emergency fund, be it for real emergencies or big ticket purchases such as the car, you have a good amount of cash always stitting there, not invested, without actually being needed. Having like 6 months or so of emergency fund makes total sense since it's for emergencies, i.e., expenses that aren't planned. Now, other big expenses that can be planned, such as the car, house, etc... why not plan investments accordingly, since I know when they'll happen, in order to maximize returns? Because having too much money in cash for years and years certainly is going to constitute a big ooportunity cost than if it had been invested in bonds or stocks.

And I'm only thinking about car and house as big, planned, expenses, really. None other is coming to my mind. Asside from vacations, probably, but that one isn't nearly as big.

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Re: Static vs Changing Asset Allocation

Post by KlangFool » Fri Dec 23, 2016 10:55 am

mikeguima wrote:
I'm talking about one single car payment, upfront. Lets say it's 5 years until I have the purchase planned. Should I already be setting cash apart for the purchase? Why not invest all that cash in a relatively safe portfolio for the time being (still earning more than cash) and then, once I'm 1-2 years from the purchase, I'll get the money I need for the car from my riskier investments and let it sit in cash so there's little risk it'll fluctuate.
mikeguima.

1) I only have one portfolio: 64/36.

2) I save 30+% of my gross income.

3) My taxable account generates enough distribution and dividend for a few months of my expense every year.

4) I have 1 year worth of emergency fund.

I do not need to set aside cash to buy a new car or house down payment. I have enough cash flow to handle that kind of events.

I am showing you a different way of handling this kind of expense.

A) How many months of savings is needed to buy a new car? If it is less than 6 months, why do you need to set aside money for that?

B) How many months of savings is needed for the house down payment? If it is less than 1 year, why do you need to set aside money for that?

<<Why not invest all that cash in a relatively safe portfolio for the time being >>

I am investing all my money except for the emergency fund. I have one portfolio. I use my cash flow to handle those expenses.

KlangFool

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Re: Static vs Changing Asset Allocation

Post by KlangFool » Fri Dec 23, 2016 10:59 am

mikeguima wrote:
By always having 1 year worth of emergency fund, be it for real emergencies or big ticket purchases such as the car, you have a good amount of cash always stitting there, not invested, without actually being needed.
mikeguima,

<<without actually being needed. >>

1) I was unemployed for more than 1 year a few times.

2) I save 30+% of my gross income. That means I save 1 year worth of expense every year. At my saving rate, I could afford to keep 1 year worth of emergency fund and it would not change my retirement date a bit.

KlangFool

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