What is a good Asset Allocation

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investing1012
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What is a good Asset Allocation

Post by investing1012 » Tue Oct 10, 2017 10:59 am

What's a Good Asset Allocation for a couple in their mid 30s with relatively high stable incomes in terms of Stock/Bond asset allocation? Their main goal is to be financially independent sooner rather than later.

dbr
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Re: What is a good Asset Allocation

Post by dbr » Tue Oct 10, 2017 11:17 am

Asset allocation is a question of trading return and risk. Larry Swedroe suggest the following analysis to help make this decision:

Need to take risk: How much return is needed to meet your objectives. In your case you need to run a statistical simulation to see what savings rate, asset allocation, investment returns, inflation, and timeline will result in you being able to support your spending objectives at a given point in the future. There are many retirement planning models that do this.

Ability to take risk: This means how severe the consequences are if expectations fail and the worst scenarios materialize. Young people looking forward to a lifetime of earnings have more ability to take risk. People who might have pensions, inheritances, other sources of wealth and income, have ability to take risk. Social Security benefits allow people ability to take risk. People who can tolerate a reduction in hoped for spending have high ability to take risk.

Willingness to take risk: This is the psychological ability to tolerate the wild swings in risky portfolios without doing stupid things like bailing out in a panic at the bottom of a market crash.

You can familiarize yourself with the relative returns and uncertainty of returns of stocks and bonds, evaluate your objectives, consider your overall financial situation, and try to understand your behavioral weaknesses in arriving at a judgement and a preference for your asset allocation.

CnC
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Re: What is a good Asset Allocation

Post by CnC » Tue Oct 10, 2017 11:18 am

investing1012 wrote:
Tue Oct 10, 2017 10:59 am
What's a Good Asset Allocation for a couple in their mid 30s with relatively high stable incomes in terms of Stock/Bond asset allocation? Their main goal is to be financially independent sooner rather than later.
I would say it depends on your testicular fortitude portfolio size and savings rate.

I personally am 100% invested in stocks at 32 but I have a pension. Once I hit 1/2 a million I plan to be 90/10 stocks to bonds. At 1 million I plan to be 80/20 and 70/30 by 3 mil.

You might be able to watch your 100k portfolio drop to 50k knowing that you can bump up Contributions and end the year with no sweat.

But it may be much harder to watch a 1,000,000 portfolio drop to 500k and it take 5 years of Contributions to get back to that 1 million dollar range.

The rule of thumb
If you are agressive and unafraid of loss 120-130 minus age = amount of stocks.
If you are (normal) 110-100 minus age = amount of stocks
If you are skiddish 90 minus age = amount of stocks.

Basically as much stock as will allow you to sleep at night and not panic sell is typically best for 20-40 year olds.

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Hyperborea
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Re: What is a good Asset Allocation

Post by Hyperborea » Tue Oct 10, 2017 11:31 am

If you want to be financially independent as soon as possible then 100% equity. It will have the widest time variation in getting there but the lowest expected time.

But you also need an allocation that you can live with. If you are too aggressive and you change the allocation at the wrong times because you are afraid then it will be worse than a lower equity allocation that you can stick too.

To help you stick with a high equity allocation then things that help are good job security, two income family, a decent emergency fund, and in demand job skills.

Jack FFR1846
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Re: What is a good Asset Allocation

Post by Jack FFR1846 » Tue Oct 10, 2017 11:38 am

Your age in bonds.
Stocks split 70% US, 30% international.
Bogle: Smart Beta is stupid

investing1012
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Re: What is a good Asset Allocation

Post by investing1012 » Tue Oct 10, 2017 11:46 am

Thank you for the input, I'm doing a combination of the above. My assets have reached a million and that definitely makes me more skittish with our current political environment and the high value of stocks.

I'm moving towards 80/20 stock bond ratio and 30% of stocks in international.
Last edited by investing1012 on Tue Oct 10, 2017 1:02 pm, edited 1 time in total.

CnC
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Re: What is a good Asset Allocation

Post by CnC » Tue Oct 10, 2017 11:50 am

investing1012 wrote:
Tue Oct 10, 2017 11:46 am
Thank you for the input, I'm doing a combination of the above. My assets have reached a million and that definitely makes me more skiddish with our current political environment and the high value of stocks.

I'm moving towards 80/20 stock bond ratio and 30% of stocks in international.
That is well within reason.

MindTheGAAP
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Re: What is a good Asset Allocation

Post by MindTheGAAP » Tue Oct 10, 2017 12:16 pm

investing1012 wrote:
Tue Oct 10, 2017 11:46 am
Thank you for the input, I'm doing a combination of the above. My assets have reached a million and that definitely makes me more skiddish with our current political environment and the high value of stocks.

I'm moving towards 80/20 stock bond ratio and 30% of stocks in international.
Don't want to throw a kink in your plans but wouldn't you want higher than 30% if you are feeling "skiddish about our current political environment"?

Example, I certainly am skittish about the same things but as a result, I went 45% international. It is more of a global weighting but I also have a tilt to small cap to reduce correlation to US equities (theoretically).
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

gowest
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Re: What is a good Asset Allocation

Post by gowest » Tue Oct 10, 2017 12:52 pm

investing1012 wrote:
Tue Oct 10, 2017 11:46 am
My assets have reached a million and that definitely makes me more skiddish with our current political environment and the high value of stocks.

I'm moving towards 80/20 stock bond ratio and 30% of stocks in international.
This sounds like a market-timing approach, which isn't recommended. You need to have an asset allocation (split among stocks/bonds/etc.) that you keep regardless of what the current political or financial environment may feel like.

It sounds like you may want to consider a more conservative allocation than you currently have. But you shouldn't implement a more conservative allocation only to get a new feeling (in a few years) that the then-current political/financial environment makes you want to be more aggressive. That's just market timing (or an attempt at it). Best to pick an allocation that suits your risk tolerance and goals, contribute regularly, rebalance periodically (maybe once per year), and otherwise ignore the environment or your perception of it.

Best of luck.

investing1012
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Re: What is a good Asset Allocation

Post by investing1012 » Tue Oct 10, 2017 1:04 pm

gowest wrote:
Tue Oct 10, 2017 12:52 pm
investing1012 wrote:
Tue Oct 10, 2017 11:46 am
My assets have reached a million and that definitely makes me more skiddish with our current political environment and the high value of stocks.

I'm moving towards 80/20 stock bond ratio and 30% of stocks in international.
This sounds like a market-timing approach, which isn't recommended. You need to have an asset allocation (split among stocks/bonds/etc.) that you keep regardless of what the current political or financial environment may feel like.

It sounds like you may want to consider a more conservative allocation than you currently have. But you shouldn't implement a more conservative allocation only to get a new feeling (in a few years) that the then-current political/financial environment makes you want to be more aggressive. That's just market timing (or an attempt at it). Best to pick an allocation that suits your risk tolerance and goals, contribute regularly, rebalance periodically (maybe once per year), and otherwise ignore the environment or your perception of it.

Best of luck.
That's the tricky part that I don't know the answer to. Should I be more conservative and forgo the potential gains in the stock market or be more conservative and avoid a disastrous bear market? I think I'll be equally regretful with both losing out on potential gains or being hit hard by a financial market meltdown. I liked CnC's approach which seems like a good balance to me.

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Watty
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Re: What is a good Asset Allocation

Post by Watty » Tue Oct 10, 2017 1:12 pm

investing1012 wrote:
Tue Oct 10, 2017 10:59 am
What's a Good Asset Allocation for a couple in their mid 30s with relatively high stable incomes in terms of Stock/Bond asset allocation? Their main goal is to be financially independent sooner rather than later.
As a starting point I like to look at what asset allocation a target date fund uses for when I plan on retiring. For example if you would like to retire in 2040 then the 2040 Target Date Fund uses 15% bonds and 85% stocks which seems a bit aggressive to me but that is what they use.

https://personal.vanguard.com/us/funds/ ... =INT#tab=0

You can see how they break out the international investments on the Portfolio tab.

Different mutual fund companies will use different asset allocations for their 2040 fund so you can check several of them to get an idea of what range to use.

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randomizer
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Re: What is a good Asset Allocation

Post by randomizer » Tue Oct 10, 2017 1:18 pm

75:25

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Hyperborea
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Re: What is a good Asset Allocation

Post by Hyperborea » Tue Oct 10, 2017 1:32 pm

Watty wrote:
Tue Oct 10, 2017 1:12 pm
investing1012 wrote:
Tue Oct 10, 2017 10:59 am
What's a Good Asset Allocation for a couple in their mid 30s with relatively high stable incomes in terms of Stock/Bond asset allocation? Their main goal is to be financially independent sooner rather than later.
As a starting point I like to look at what asset allocation a target date fund uses for when I plan on retiring. For example if you would like to retire in 2040 then the 2040 Target Date Fund uses 15% bonds and 85% stocks which seems a bit aggressive to me but that is what they use.

https://personal.vanguard.com/us/funds/ ... =INT#tab=0

You can see how they break out the international investments on the Portfolio tab.

Different mutual fund companies will use different asset allocations for their 2040 fund so you can check several of them to get an idea of what range to use.
I think that the fund companies will be more conservative than they should because of the audience for the funds. Those buying these funds will tend to be more risk averse and less knowledgable. Looking at the allocations for these funds can be educational but I would suggest these allocations are a lower bound on how aggressive one should be.

KlangFool
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Re: What is a good Asset Allocation

Post by KlangFool » Tue Oct 10, 2017 1:57 pm

investing1012 wrote:
Tue Oct 10, 2017 1:04 pm
gowest wrote:
Tue Oct 10, 2017 12:52 pm
investing1012 wrote:
Tue Oct 10, 2017 11:46 am
My assets have reached a million and that definitely makes me more skiddish with our current political environment and the high value of stocks.

I'm moving towards 80/20 stock bond ratio and 30% of stocks in international.
This sounds like a market-timing approach, which isn't recommended. You need to have an asset allocation (split among stocks/bonds/etc.) that you keep regardless of what the current political or financial environment may feel like.

It sounds like you may want to consider a more conservative allocation than you currently have. But you shouldn't implement a more conservative allocation only to get a new feeling (in a few years) that the then-current political/financial environment makes you want to be more aggressive. That's just market timing (or an attempt at it). Best to pick an allocation that suits your risk tolerance and goals, contribute regularly, rebalance periodically (maybe once per year), and otherwise ignore the environment or your perception of it.

Best of luck.
That's the tricky part that I don't know the answer to. Should I be more conservative and forgo the potential gains in the stock market or be more conservative and avoid a disastrous bear market? I think I'll be equally regretful with both losing out on potential gains or being hit hard by a financial market meltdown. I liked CnC's approach which seems like a good balance to me.
https://personal.vanguard.com/us/insigh ... llocations

investing1012,

Please check out above URL.

How many years from retirement with 80/20 using average return? Ditto for 70/30 and 60/40? In general, unless you are 20 years from retirement, it is not worth the risk. 70/30 to 30/70 has the best risk-adjusted return.

The average return for 80/20 is 9.5%. The worst one year return for 80/20 is -34.9%

The average return for 70/30 is 9.1%. The worst one year return for 70/30 is -30.7%

The average return for 60/40 is 8.7%. The worst one year return for 60/40 is -26.6%.

80/20 versus 70/30. You are getting 0.4% more return for taking the risk of losing 4.2% more in any year. So, if you hit the worst year, it will take you 10 years to recover.

70/30 versus 60/40. You are getting 0.4% more return for taking the risk of losing 4.1% more in any year. So, if you hit the worst year, it will take you 10 years to recover.

It is not worth taking the risk if you are less than 10 years from retirement.

KlangFool

investing1012
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Re: What is a good Asset Allocation

Post by investing1012 » Tue Oct 10, 2017 5:44 pm

KlangFool wrote:
Tue Oct 10, 2017 1:57 pm
investing1012 wrote:
Tue Oct 10, 2017 1:04 pm
gowest wrote:
Tue Oct 10, 2017 12:52 pm
investing1012 wrote:
Tue Oct 10, 2017 11:46 am
My assets have reached a million and that definitely makes me more skiddish with our current political environment and the high value of stocks.

I'm moving towards 80/20 stock bond ratio and 30% of stocks in international.
This sounds like a market-timing approach, which isn't recommended. You need to have an asset allocation (split among stocks/bonds/etc.) that you keep regardless of what the current political or financial environment may feel like.

It sounds like you may want to consider a more conservative allocation than you currently have. But you shouldn't implement a more conservative allocation only to get a new feeling (in a few years) that the then-current political/financial environment makes you want to be more aggressive. That's just market timing (or an attempt at it). Best to pick an allocation that suits your risk tolerance and goals, contribute regularly, rebalance periodically (maybe once per year), and otherwise ignore the environment or your perception of it.

Best of luck.
That's the tricky part that I don't know the answer to. Should I be more conservative and forgo the potential gains in the stock market or be more conservative and avoid a disastrous bear market? I think I'll be equally regretful with both losing out on potential gains or being hit hard by a financial market meltdown. I liked CnC's approach which seems like a good balance to me.
https://personal.vanguard.com/us/insigh ... llocations

investing1012,

Please check out above URL.

How many years from retirement with 80/20 using average return? Ditto for 70/30 and 60/40? In general, unless you are 20 years from retirement, it is not worth the risk. 70/30 to 30/70 has the best risk-adjusted return.

The average return for 80/20 is 9.5%. The worst one year return for 80/20 is -34.9%

The average return for 70/30 is 9.1%. The worst one year return for 70/30 is -30.7%

The average return for 60/40 is 8.7%. The worst one year return for 60/40 is -26.6%.

80/20 versus 70/30. You are getting 0.4% more return for taking the risk of losing 4.2% more in any year. So, if you hit the worst year, it will take you 10 years to recover.

70/30 versus 60/40. You are getting 0.4% more return for taking the risk of losing 4.1% more in any year. So, if you hit the worst year, it will take you 10 years to recover.

It is not worth taking the risk if you are less than 10 years from retirement.

KlangFool
Thank you for this input, however past performance is not indicative of future performance.

ThrustVectoring
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Re: What is a good Asset Allocation

Post by ThrustVectoring » Tue Oct 10, 2017 6:02 pm

Watty wrote:
Tue Oct 10, 2017 1:12 pm
investing1012 wrote:
Tue Oct 10, 2017 10:59 am
What's a Good Asset Allocation for a couple in their mid 30s with relatively high stable incomes in terms of Stock/Bond asset allocation? Their main goal is to be financially independent sooner rather than later.
As a starting point I like to look at what asset allocation a target date fund uses for when I plan on retiring. For example if you would like to retire in 2040 then the 2040 Target Date Fund uses 15% bonds and 85% stocks which seems a bit aggressive to me but that is what they use.

https://personal.vanguard.com/us/funds/ ... =INT#tab=0

You can see how they break out the international investments on the Portfolio tab.

Different mutual fund companies will use different asset allocations for their 2040 fund so you can check several of them to get an idea of what range to use.
It's far cheaper to fund a relatively distant retirement portfolio by buying stocks first. The problem that target date funds have is that they can't customize the asset allocation by portfolio size - all they have is number of years remaining, so they have to guess and hedge their bets.

If you're DIYing it, you can glide far more aggressively if you have the ability and willingness to take risks early. My glide path includes zero bonds until hitting 12x annual expenses.

KlangFool
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Re: What is a good Asset Allocation

Post by KlangFool » Tue Oct 10, 2017 6:54 pm

investing1012 wrote:
Tue Oct 10, 2017 5:44 pm


Thank you for this input, however past performance is not indicative of future performance.
investing1012,

If you believe that, then, why are you 100/0 and 80/20? If you use past performance to justify 100/0 and 80/20, then, you could not ignore that it is risky to have that kind of AA when you are not 20 years from retirement.

KlangFool

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Hyperborea
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Re: What is a good Asset Allocation

Post by Hyperborea » Tue Oct 10, 2017 7:22 pm

KlangFool wrote:
Tue Oct 10, 2017 6:54 pm
investing1012 wrote:
Tue Oct 10, 2017 5:44 pm


Thank you for this input, however past performance is not indicative of future performance.
investing1012,

If you believe that, then, why are you 100/0 and 80/20? If you use past performance to justify 100/0 and 80/20, then, you could not ignore that it is risky to have that kind of AA when you are not 20 years from retirement.

KlangFool

Ok, so can you explain how the link you posted supports your fear of 80/20 or 100/0 portfolios for a 20 year horizon? I can't see anything there that supports that assertion.There's never been a 20 year period where the S&P500 had a negative total return - not even close. So, why are you ignoring that past performance?

WanderingDoc
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Re: What is a good Asset Allocation

Post by WanderingDoc » Tue Oct 10, 2017 7:40 pm

Hyperborea wrote:
Tue Oct 10, 2017 11:31 am
If you want to be financially independent as soon as possible then 100% equity. It will have the widest time variation in getting there but the lowest expected time.

But you also need an allocation that you can live with. If you are too aggressive and you change the allocation at the wrong times because you are afraid then it will be worse than a lower equity allocation that you can stick too.

To help you stick with a high equity allocation then things that help are good job security, two income family, a decent emergency fund, and in demand job skills.
I don't see how you can make that statement. Say you are 32 years old and want to be FI by 40. There has been a 9-year bull run with >15% annualized stock market returns, and the most likely scenario is that stock will have a real return of 0-3% over the next 15 years. You will still say 100% stocks?

For the OP, I would personally recommend at least half your investible assets go towards income-producing real estate. Why? Because you can evaluate for a good deal and buy under market. You will cash flow in good and bad real estate markets. You can use proceeds and savings to buy more real estate, then you will be FI in 5-7 years. You can do this in almost any market, since good deals exist almost anywhere. And you don't have to risk 100% of your capital in doing so, since the bank will loan you money to do this.

If you are trying to put all your savings into equities, you have to 'hope' that when you decide to be FI in 8 or 10 years, there is a huge bull market going on in the previous few years. EVEN THEN, the math doesn't work out that you will be FI in less than 10 years. Even if there is a bull market for another 10 years, making a 20 year bull run. Good luck with that happening. :twisted:
One day it suddenly dawned on me that I had won the real estate lottery.

KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: What is a good Asset Allocation

Post by KlangFool » Tue Oct 10, 2017 7:43 pm

Hyperborea wrote:
Tue Oct 10, 2017 7:22 pm
KlangFool wrote:
Tue Oct 10, 2017 6:54 pm
investing1012 wrote:
Tue Oct 10, 2017 5:44 pm


Thank you for this input, however past performance is not indicative of future performance.
investing1012,

If you believe that, then, why are you 100/0 and 80/20? If you use past performance to justify 100/0 and 80/20, then, you could not ignore that it is risky to have that kind of AA when you are not 20 years from retirement.

KlangFool

Ok, so can you explain how the link you posted supports your fear of 80/20 or 100/0 portfolios for a 20 year horizon? I can't see anything there that supports that assertion.There's never been a 20 year period where the S&P500 had a negative total return - not even close. So, why are you ignoring that past performance?
Hyperborea,

If OP is not 20 years from retirement, how could the 20 years return relevant to OP?

Is your statement accurate for the 5 years or 10 years period? The answer would have to be no.

KlangFool

WanderingDoc
Posts: 234
Joined: Sat Aug 05, 2017 8:21 pm

Re: What is a good Asset Allocation

Post by WanderingDoc » Tue Oct 10, 2017 7:48 pm

KlangFool wrote:
Tue Oct 10, 2017 1:57 pm
investing1012 wrote:
Tue Oct 10, 2017 1:04 pm
gowest wrote:
Tue Oct 10, 2017 12:52 pm
investing1012 wrote:
Tue Oct 10, 2017 11:46 am
My assets have reached a million and that definitely makes me more skiddish with our current political environment and the high value of stocks.

I'm moving towards 80/20 stock bond ratio and 30% of stocks in international.
This sounds like a market-timing approach, which isn't recommended. You need to have an asset allocation (split among stocks/bonds/etc.) that you keep regardless of what the current political or financial environment may feel like.

It sounds like you may want to consider a more conservative allocation than you currently have. But you shouldn't implement a more conservative allocation only to get a new feeling (in a few years) that the then-current political/financial environment makes you want to be more aggressive. That's just market timing (or an attempt at it). Best to pick an allocation that suits your risk tolerance and goals, contribute regularly, rebalance periodically (maybe once per year), and otherwise ignore the environment or your perception of it.

Best of luck.
That's the tricky part that I don't know the answer to. Should I be more conservative and forgo the potential gains in the stock market or be more conservative and avoid a disastrous bear market? I think I'll be equally regretful with both losing out on potential gains or being hit hard by a financial market meltdown. I liked CnC's approach which seems like a good balance to me.
https://personal.vanguard.com/us/insigh ... llocations

investing1012,

Please check out above URL.

How many years from retirement with 80/20 using average return? Ditto for 70/30 and 60/40? In general, unless you are 20 years from retirement, it is not worth the risk. 70/30 to 30/70 has the best risk-adjusted return.

The average return for 80/20 is 9.5%. The worst one year return for 80/20 is -34.9%

The average return for 70/30 is 9.1%. The worst one year return for 70/30 is -30.7%

The average return for 60/40 is 8.7%. The worst one year return for 60/40 is -26.6%.

80/20 versus 70/30. You are getting 0.4% more return for taking the risk of losing 4.2% more in any year. So, if you hit the worst year, it will take you 10 years to recover.

70/30 versus 60/40. You are getting 0.4% more return for taking the risk of losing 4.1% more in any year. So, if you hit the worst year, it will take you 10 years to recover.

It is not worth taking the risk if you are less than 10 years from retirement.

KlangFool
Very well put. Which is why having 'all your eggs in one basket' is a bad idea. If you want to retire in 5, 10, 15 years you need assets which give you at least SOME level of control - in that you can choose at what price you pay for them, in what market/submarket, with what customers, with a solid return you can use NOW to eat or reinvest ;) You know I love ya Klang.
One day it suddenly dawned on me that I had won the real estate lottery.

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Hyperborea
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Re: What is a good Asset Allocation

Post by Hyperborea » Tue Oct 10, 2017 7:58 pm

WanderingDoc wrote:
Tue Oct 10, 2017 7:40 pm
Hyperborea wrote:
Tue Oct 10, 2017 11:31 am
If you want to be financially independent as soon as possible then 100% equity. It will have the widest time variation in getting there but the lowest expected time.

But you also need an allocation that you can live with. If you are too aggressive and you change the allocation at the wrong times because you are afraid then it will be worse than a lower equity allocation that you can stick too.

To help you stick with a high equity allocation then things that help are good job security, two income family, a decent emergency fund, and in demand job skills.
I don't see how you can make that statement. Say you are 32 years old and want to be FI by 40. There has been a 9-year bull run with >15% annualized stock market returns, and the most likely scenario is that stock will have a real return of 0-3% over the next 15 years. You will still say 100% stocks?

For the OP, I would personally recommend at least half your investible assets go towards income-producing real estate. Why? Because you can evaluate for a good deal and buy under market. You will cash flow in good and bad real estate markets. You can use proceeds and savings to buy more real estate, then you will be FI in 5-7 years. You can do this in almost any market, since good deals exist almost anywhere. And you don't have to risk 100% of your capital in doing so, since the bank will loan you money to do this.

If you are trying to put all your savings into equities, you have to 'hope' that when you decide to be FI in 8 or 10 years, there is a huge bull market going on in the previous few years. EVEN THEN, the math doesn't work out that you will be FI in less than 10 years. Even if there is a bull market for another 10 years, making a 20 year bull run. Good luck with that happening. :twisted:
The problem with not using equities (or using even more risky single market real estate as I gather some people do) is that you are then only working on the saving side. Even if you save a pretty prodigious 50% of your take home (far more than even most on this site) then you still need 25-30 years to get to enough savings to retire. Possibly longer because you aren't keeping up with inflation.

There is nothing wrong with real estate if you both want a part time job, have the extra time to do so, the temperament to handle it, and the spare cash to cover bad tenants/repairs/etc. I think if the OP wants to do that they should probably dig out the number of great threads on here by folks who've been in the landlord business for longer than 3-4 years.

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Hyperborea
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Re: What is a good Asset Allocation

Post by Hyperborea » Tue Oct 10, 2017 8:03 pm

KlangFool wrote:
Tue Oct 10, 2017 7:43 pm
Hyperborea wrote:
Tue Oct 10, 2017 7:22 pm
KlangFool wrote:
Tue Oct 10, 2017 6:54 pm
investing1012 wrote:
Tue Oct 10, 2017 5:44 pm


Thank you for this input, however past performance is not indicative of future performance.
investing1012,

If you believe that, then, why are you 100/0 and 80/20? If you use past performance to justify 100/0 and 80/20, then, you could not ignore that it is risky to have that kind of AA when you are not 20 years from retirement.

KlangFool

Ok, so can you explain how the link you posted supports your fear of 80/20 or 100/0 portfolios for a 20 year horizon? I can't see anything there that supports that assertion.There's never been a 20 year period where the S&P500 had a negative total return - not even close. So, why are you ignoring that past performance?
Hyperborea,

If OP is not 20 years from retirement, how could the 20 years return relevant to OP?

Is your statement accurate for the 5 years or 10 years period? The answer would have to be no.

KlangFool
So, the moment you retire your investment horizon is over? It's not. You've got another 30-60 years depending on how young you've retired. I'm retired and I'm looking at a 40-50 year investing horizon. Why is the fact that stocks go up and down potentially a large amount in a single year going to stop me holding them for the long run? If you truly have less than a 20 year horizon left then first I'm sorry because I thought you were still in your 40's and second you can just buy TIPs and take 5% or more per year.

WanderingDoc
Posts: 234
Joined: Sat Aug 05, 2017 8:21 pm

Re: What is a good Asset Allocation

Post by WanderingDoc » Tue Oct 10, 2017 8:06 pm

Hyperborea wrote:
Tue Oct 10, 2017 7:58 pm
WanderingDoc wrote:
Tue Oct 10, 2017 7:40 pm
Hyperborea wrote:
Tue Oct 10, 2017 11:31 am
If you want to be financially independent as soon as possible then 100% equity. It will have the widest time variation in getting there but the lowest expected time.

But you also need an allocation that you can live with. If you are too aggressive and you change the allocation at the wrong times because you are afraid then it will be worse than a lower equity allocation that you can stick too.

To help you stick with a high equity allocation then things that help are good job security, two income family, a decent emergency fund, and in demand job skills.
I don't see how you can make that statement. Say you are 32 years old and want to be FI by 40. There has been a 9-year bull run with >15% annualized stock market returns, and the most likely scenario is that stock will have a real return of 0-3% over the next 15 years. You will still say 100% stocks?

For the OP, I would personally recommend at least half your investible assets go towards income-producing real estate. Why? Because you can evaluate for a good deal and buy under market. You will cash flow in good and bad real estate markets. You can use proceeds and savings to buy more real estate, then you will be FI in 5-7 years. You can do this in almost any market, since good deals exist almost anywhere. And you don't have to risk 100% of your capital in doing so, since the bank will loan you money to do this.

If you are trying to put all your savings into equities, you have to 'hope' that when you decide to be FI in 8 or 10 years, there is a huge bull market going on in the previous few years. EVEN THEN, the math doesn't work out that you will be FI in less than 10 years. Even if there is a bull market for another 10 years, making a 20 year bull run. Good luck with that happening. :twisted:
The problem with not using equities (or using even more risky single market real estate as I gather some people do) is that you are then only working on the saving side. Even if you save a pretty prodigious 50% of your take home (far more than even most on this site) then you still need 25-30 years to get to enough savings to retire. Possibly longer because you aren't keeping up with inflation.

There is nothing wrong with real estate if you both want a part time job, have the extra time to do so, the temperament to handle it, and the spare cash to cover bad tenants/repairs/etc. I think if the OP wants to do that they should probably dig out the number of great threads on here by folks who've been in the landlord business for longer than 3-4 years.
Well, I don't know where you get 25-30 years from, unless you were referring to how long it will take to retire if you put your savings into a 401k and IRA if you are fairly lucky. Personally, my real estate net income already covers my living expenses. Therefore, I am FI in less than 4 years investing in real estate.

There is a difference between becoming an accidental landlord / decide to dabble in real estate because you heard your uncle was doing so vs. actually learning the game.

I do not question that it takes more time to do real estate then it is to index. But this stuff is too important to leave to hope and chance. Some folks (OP) are looking to be FI before the age of 65. I don't want to get rich quick. I don't want to get rich slowwww (indexing). I want to get rich for sure.
One day it suddenly dawned on me that I had won the real estate lottery.

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Re: What is a good Asset Allocation

Post by CantPassAgain » Tue Oct 10, 2017 9:13 pm

WanderingDoc wrote:
Tue Oct 10, 2017 8:06 pm
Well, I don't know where you get 25-30 years from, unless you were referring to how long it will take to retire if you put your savings into a 401k and IRA if you are fairly lucky. Personally, my real estate net income already covers my living expenses. Therefore, I am FI in less than 4 years investing in real estate.

There is a difference between becoming an accidental landlord / decide to dabble in real estate because you heard your uncle was doing so vs. actually learning the game.

I do not question that it takes more time to do real estate then it is to index. But this stuff is too important to leave to hope and chance. Some folks (OP) are looking to be FI before the age of 65. I don't want to get rich quick. I don't want to get rich slowwww (indexing). I want to get rich for sure.
So easy

Step 1) Med School
Step 2) Residency
Step 3) Pay for it somehow
Step 4) Buy real estate
Step 5) do all the above by your early 30's
Step 6) though 27) Buy my newsletter
Step 5) Profit!

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Re: What is a good Asset Allocation

Post by WanderingDoc » Tue Oct 10, 2017 9:22 pm

CantPassAgain wrote:
Tue Oct 10, 2017 9:13 pm
WanderingDoc wrote:
Tue Oct 10, 2017 8:06 pm
Well, I don't know where you get 25-30 years from, unless you were referring to how long it will take to retire if you put your savings into a 401k and IRA if you are fairly lucky. Personally, my real estate net income already covers my living expenses. Therefore, I am FI in less than 4 years investing in real estate.

There is a difference between becoming an accidental landlord / decide to dabble in real estate because you heard your uncle was doing so vs. actually learning the game.

I do not question that it takes more time to do real estate then it is to index. But this stuff is too important to leave to hope and chance. Some folks (OP) are looking to be FI before the age of 65. I don't want to get rich quick. I don't want to get rich slowwww (indexing). I want to get rich for sure.
So easy

Step 1) Med School
Step 2) Residency
Step 3) Pay for it somehow
Step 4) Buy real estate
Step 5) do all the above by your early 30's
Step 6) though 27) Buy my newsletter
Step 5) Profit!
Who said easy? Nobody. No need for cynicism.

Plenty of teachers, police officers, and other moderate-income workers became FI through real estate. Its not even a story anymore because of how common it is as of late.

Its a lot harder for a physician to do since (in most cases) you amass a lot of debt and many would delay their investing.
One day it suddenly dawned on me that I had won the real estate lottery.

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Re: What is a good Asset Allocation

Post by KlangFool » Tue Oct 10, 2017 9:28 pm

Hyperborea wrote:
Tue Oct 10, 2017 8:03 pm

So, the moment you retire your investment horizon is over? It's not. You've got another 30-60 years depending on how young you've retired. I'm retired and I'm looking at a 40-50 year investing horizon. Why is the fact that stocks go up and down potentially a large amount in a single year going to stop me holding them for the long run? If you truly have less than a 20 year horizon left then first I'm sorry because I thought you were still in your 40's and second you can just buy TIPs and take 5% or more per year.
Hyperborea,

<<I'm retired and I'm looking at a 40-50 year investing horizon. Why is the fact that stocks go up and down potentially a large amount in a single year going to stop me holding them for the long run?>>

1) How big is your portfolio as compared to your retirement expense? 50X? 100X?

2) Or, you live on your pension and social security. You do not need to withdraw from your portfolio at all.

3) What is your AA now?

KlangFool

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Re: What is a good Asset Allocation

Post by chuppi » Tue Oct 10, 2017 9:44 pm

Related question. Is it possible to simulate the affect of the market swings on my asset allocation/funds with a reasonable accuracy? For example key in s&p falls to 1800 abruptly, how it might affect various funds and how much I might lose in a portfolio.
I have ~30% bonds. How is it different from a 20% or 40% bond portfolio if and when there is a meltdown.
Thanks

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Re: What is a good Asset Allocation

Post by KlangFool » Tue Oct 10, 2017 9:50 pm

chuppi wrote:
Tue Oct 10, 2017 9:44 pm
Related question. Is it possible to simulate the affect of the market swings on my asset allocation/funds with a reasonable accuracy? For example key in s&p falls to 1800 abruptly, how it might affect various funds and how much I might lose in a portfolio.
I have ~30% bonds. How is it different from a 20% or 40% bond portfolio if and when there is a meltdown.
Thanks
chuppi,

It is very simple. Assume that you stock portion drop by 50% and your bond stay the same. Then, see how long can your portfolio last if you lose your job at the same time.

KlangFool

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Re: What is a good Asset Allocation

Post by Hyperborea » Tue Oct 10, 2017 9:56 pm

KlangFool wrote:
Tue Oct 10, 2017 9:28 pm
Hyperborea wrote:
Tue Oct 10, 2017 8:03 pm

So, the moment you retire your investment horizon is over? It's not. You've got another 30-60 years depending on how young you've retired. I'm retired and I'm looking at a 40-50 year investing horizon. Why is the fact that stocks go up and down potentially a large amount in a single year going to stop me holding them for the long run? If you truly have less than a 20 year horizon left then first I'm sorry because I thought you were still in your 40's and second you can just buy TIPs and take 5% or more per year.
Hyperborea,

<<I'm retired and I'm looking at a 40-50 year investing horizon. Why is the fact that stocks go up and down potentially a large amount in a single year going to stop me holding them for the long run?>>

1) How big is your portfolio as compared to your retirement expense? 50X? 100X?
It's about 33x of my current spend or a 3% WR. It's about 50x of my minimal spend but that would be cutting way back. A 3.5% WR for a long 40-50 year retirement would suggest having about 29x. We overshot by a little bit at the end of working and maybe could have cut out a year or two earlier.
KlangFool wrote:
Tue Oct 10, 2017 9:28 pm
2) Or, you live on your pension and social security. You do not need to withdraw from your portfolio at all.
No pension. SS is about 15 years to full retirement age and 18 years until I plan to take it at 70.
KlangFool wrote:
Tue Oct 10, 2017 9:28 pm
3) What is your AA now?
I was at 100/0/0 in my investments since the early 90's except for a fixed amount in emergency funds or for short term savings (house downpayment etc.). I'm currently at 90/0/10. Next year will be messy but after we sell the house and transfer assets between myself and my wife (needed for US expatriation and to keep on the right side of the tax laws where we are going) I will end up in something like a 70/10/20. From there we will spend down the 20% in cash and reinvest the 10% in bonds in a glide path towards a nearly 100% equity portfolio again. Maybe something like 95/0/5.

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Re: What is a good Asset Allocation

Post by Grt2bOutdoors » Tue Oct 10, 2017 10:01 pm

KlangFool wrote:
Tue Oct 10, 2017 9:50 pm
chuppi wrote:
Tue Oct 10, 2017 9:44 pm
Related question. Is it possible to simulate the affect of the market swings on my asset allocation/funds with a reasonable accuracy? For example key in s&p falls to 1800 abruptly, how it might affect various funds and how much I might lose in a portfolio.
I have ~30% bonds. How is it different from a 20% or 40% bond portfolio if and when there is a meltdown.
Thanks
chuppi,

It is very simple. Assume that you stock portion drop by 50% and your bond stay the same.
KlangFool
Not quite. Traditional asset allocation is equities, bonds and/or cash.
If you have 70% in equities and the general market declines by 50%, your portfolio will decline by (70%*.50) less general increase in fixed income. Why is there an increase in fixed income returns? During flight to quality (ie. market disruptions), proceeds flow to the more stable of investment options that are considered to be risk-free, U.S. Treasuries are considered a proxy for that. Next time the market sells off, notice what happens to the yield on the 10 year Treasury note, same for treasuries of equal to shorter duration. You can calculate the effects on a portfolio holding 20% or 40% fixed income.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: What is a good Asset Allocation

Post by chuppi » Tue Oct 10, 2017 10:16 pm

KlangFool wrote:
Tue Oct 10, 2017 9:50 pm

chuppi,

It is very simple. Assume that you stock portion drop by 50% and your bond stay the same. Then, see how long can your portfolio last if you lose your job at the same time.

KlangFool
Thanks. I thought bond fund might fluctuate a little bit. Looks like it is not significant. So I think the original poster should crunch the numbers and see how the portfolio would behave with a 20%, 30% or 40% drop in the stock market at different stock/bond ratio. Of course there is more investment opportunity, rebalancing, etc... which comes with the bear market.

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Re: What is a good Asset Allocation

Post by stemikger » Wed Oct 11, 2017 6:30 am

If you use John Bogle's very rough rule of thumb (age in bonds) it would be 70/30.

If you use Ben Graham's guide no more than 75/25 stocks/bonds and no less than 25/75 stocks/bonds.

So that is close enough. I would go with 75/25 at that age.

However, if you use Warren Buffett's advice, it would be 90/10. So it really is a personal thing but conventional wisdom sides with the more conservative allocation of 75/25 or 70/30 (won't really make much of a difference either way).
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Re: What is a good Asset Allocation

Post by ruralavalon » Wed Oct 11, 2017 8:06 am

investing1012 wrote:
Tue Oct 10, 2017 10:59 am
What's a Good Asset Allocation for a couple in their mid 30s with relatively high stable incomes in terms of Stock/Bond asset allocation? Their main goal is to be financially independent sooner rather than later.
Asset allocation is a very personal decision, which you need to make based on your own ability, willingness and need to take risk. Please see the wiki article "asset allocation" and the wiki article Bogleheads Investment Philosophy part 3 "never bear too much or too little risk".

in the mid-30s I often suggest about an asset allocation of about 80/20 stock/bond.

I usually suggest about 20-30% of stocks in international stocks. Historically that would have captured about 84-99% of the maximum historical diversification benefit. For a pdf of a Vanguard paper on this s please Google "Considerations for Investing in Non-U.S Equities".
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Re: What is a good Asset Allocation

Post by KlangFool » Wed Oct 11, 2017 8:18 am

ruralavalon wrote:
Wed Oct 11, 2017 8:06 am
investing1012 wrote:
Tue Oct 10, 2017 10:59 am
What's a Good Asset Allocation for a couple in their mid 30s with relatively high stable incomes in terms of Stock/Bond asset allocation? Their main goal is to be financially independent sooner rather than later.
Asset allocation is a very personal decision, which you need to make based on your own ability, willingness and need to take risk. Please see the wiki article "asset allocation" and the wiki article Bogleheads Investment Philosophy part 3 "never bear too much or too little risk".

in the mid-30s I often suggest about an asset allocation of about 80/20 stock/bond.

I usually suggest about 20-30% of stocks in international stocks. Historically that would have captured about 84-99% of the maximum historical diversification benefit. For a pdf of a Vanguard paper on this s please Google "Considerations for Investing in Non-U.S Equities".
ruralavalon,

<<in the mid-30s I often suggest about an asset allocation of about 80/20 stock/bond.>>

OP has 1 million now. I do not believe that he is 20 to 30 years from retirement.
It is more likely to be 10 years. Would you keep the same recommendation?

KlangFool

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Re: What is a good Asset Allocation

Post by parsi1 » Wed Oct 11, 2017 8:20 am

take a look at vanguard's target retirement funds (~TR2040)

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Re: What is a good Asset Allocation

Post by ruralavalon » Wed Oct 11, 2017 8:32 am

KlangFool wrote:
Wed Oct 11, 2017 8:18 am
ruralavalon wrote:
Wed Oct 11, 2017 8:06 am
investing1012 wrote:
Tue Oct 10, 2017 10:59 am
What's a Good Asset Allocation for a couple in their mid 30s with relatively high stable incomes in terms of Stock/Bond asset allocation? Their main goal is to be financially independent sooner rather than later.
Asset allocation is a very personal decision, which you need to make based on your own ability, willingness and need to take risk. Please see the wiki article "asset allocation" and the wiki article Bogleheads Investment Philosophy part 3 "never bear too much or too little risk".

in the mid-30s I often suggest about an asset allocation of about 80/20 stock/bond.

I usually suggest about 20-30% of stocks in international stocks. Historically that would have captured about 84-99% of the maximum historical diversification benefit. For a pdf of a Vanguard paper on this s please Google "Considerations for Investing in Non-U.S Equities".
ruralavalon,

<<in the mid-30s I often suggest about an asset allocation of about 80/20 stock/bond.>>

OP has 1 million now. I do not believe that he is 20 to 30 years from retirement.
It is more likely to be 10 years. Would you keep the same recommendation?

KlangFool
I don't see anyplace where the OP (investing1012) says or implies that he or she intends to retire in 10 years, or anytime other than normal retirement age.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: What is a good Asset Allocation

Post by KlangFool » Wed Oct 11, 2017 9:18 am

ruralavalon wrote:
Wed Oct 11, 2017 8:32 am
KlangFool wrote:
Wed Oct 11, 2017 8:18 am
ruralavalon wrote:
Wed Oct 11, 2017 8:06 am
investing1012 wrote:
Tue Oct 10, 2017 10:59 am
What's a Good Asset Allocation for a couple in their mid 30s with relatively high stable incomes in terms of Stock/Bond asset allocation? Their main goal is to be financially independent sooner rather than later.
Asset allocation is a very personal decision, which you need to make based on your own ability, willingness and need to take risk. Please see the wiki article "asset allocation" and the wiki article Bogleheads Investment Philosophy part 3 "never bear too much or too little risk".

in the mid-30s I often suggest about an asset allocation of about 80/20 stock/bond.

I usually suggest about 20-30% of stocks in international stocks. Historically that would have captured about 84-99% of the maximum historical diversification benefit. For a pdf of a Vanguard paper on this s please Google "Considerations for Investing in Non-U.S Equities".
ruralavalon,

<<in the mid-30s I often suggest about an asset allocation of about 80/20 stock/bond.>>

OP has 1 million now. I do not believe that he is 20 to 30 years from retirement.
It is more likely to be 10 years. Would you keep the same recommendation?

KlangFool
I don't see anyplace where the OP (investing1012) says or implies that he or she intends to retire in 10 years, or anytime other than normal retirement age.
I do not think it is safe to assume that OP at 30+ with 1 million will retire in 30 years. OP would have to answer this question in order to any recommendation of AA to be useful.

KlangFool

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Re: What is a good Asset Allocation

Post by Tyler9000 » Wed Oct 11, 2017 9:31 am

investing1012 wrote:
Tue Oct 10, 2017 10:59 am
What's a Good Asset Allocation for a couple in their mid 30s with relatively high stable incomes in terms of Stock/Bond asset allocation? Their main goal is to be financially independent sooner rather than later.
I recommend browsing these popular portfolio options and looking for one that resonates with you. Based on your FI goal, pay particular attention to the Financial Independence charts based on this calculator.

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Re: What is a good Asset Allocation

Post by Toons » Wed Oct 11, 2017 9:37 am

60/40 :happy
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Re: What is a good Asset Allocation

Post by Hyperborea » Wed Oct 11, 2017 10:22 am

KlangFool wrote:
Wed Oct 11, 2017 9:18 am
I do not think it is safe to assume that OP at 30+ with 1 million will retire in 30 years. OP would have to answer this question in order to any recommendation of AA to be useful.

KlangFool
If the OP is planning to retire early/very early then a higher stock allocation is needed for the longer retirement or a much lower withdrawal rate (WR). He may wish to reduce from a high allocation around the time of retirement as that can help avoid sequence of return (SOR) risks. However, if planning to retire early he also has the option to move the retirement year back a year or three without the same negative impact that would have if one was trying to retire at 65. If he did glide down from a high equity allocation for the SOR risks then he would need to glide back up again because of the very long length of his retirement (50-60 years).

I'll point you to this very nicely done series on retirement withdrawals at Early Retirement Now. Particularly to the glidepath sections - part 1 and part 2.

I'll leave you with the table of success rates of various WR to allocation for various retirement lengths. Note that the success rate for the long retirements falls (more than I would be comfortable with) for low equity allocations.

Image

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Re: What is a good Asset Allocation

Post by KlangFool » Wed Oct 11, 2017 11:08 am

Hyperborea wrote:
Wed Oct 11, 2017 10:22 am
KlangFool wrote:
Wed Oct 11, 2017 9:18 am
I do not think it is safe to assume that OP at 30+ with 1 million will retire in 30 years. OP would have to answer this question in order to any recommendation of AA to be useful.

KlangFool
If the OP is planning to retire early/very early then a higher stock allocation is needed for the longer retirement or a much lower withdrawal rate (WR). He may wish to reduce from a high allocation around the time of retirement as that can help avoid sequence of return (SOR) risks. However, if planning to retire early he also has the option to move the retirement year back a year or three without the same negative impact that would have if one was trying to retire at 65. If he did glide down from a high equity allocation for the SOR risks then he would need to glide back up again because of the very long length of his retirement (50-60 years).
Hyperborea,

Your assumption is a person could plan for early retirement and has the choice to move the retirement back by a few years. I work in an industry where many of my peers are forced into early retirement, permanent unemployment or under-employment in their 40s and 50s. OP needs to assess where he falls in the spectrum of job security.

"Man plan, God laughs"
- Yiddish Proverb

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Re: What is a good Asset Allocation

Post by Tyler9000 » Wed Oct 11, 2017 11:11 am

Hyperborea wrote:
Wed Oct 11, 2017 10:22 am
If the OP is planning to retire early/very early then a higher stock allocation is needed for the longer retirement or a much lower withdrawal rate (WR).
Another way to look at it is that the percentage of stocks and bonds in your portfolio really doesn't tell the whole story because not all stocks and bonds are created equal. Look at the withdrawal rates of portfolios that diversify beyond the S&P500 and intermediate bonds, and retirement analysis gets a lot more interesting.

Image

Lots more information on this topic can be found here: https://portfoliocharts.com/portfolio/r ... nt-income/

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Re: What is a good Asset Allocation

Post by Hyperborea » Wed Oct 11, 2017 11:37 am

KlangFool wrote:
Wed Oct 11, 2017 11:08 am
Your assumption is a person could plan for early retirement and has the choice to move the retirement back by a few years. I work in an industry where many of my peers are forced into early retirement, permanent unemployment or under-employment in their 40s and 50s. OP needs to assess where he falls in the spectrum of job security.

"Man plan, God laughs"
- Yiddish Proverb

KlangFool
I did say that adjusting early retirement year by a year or three was a possibility. Barring some catastrophic life event, which would also impact those not planning early retirement in a worse way, that's a reasonable option for most people. Plan for 45 or 50 or even 55 and if life throws you a curve ball - unexpected expense, bad market at the time you plan to retire, etc. - then delay by a year or three.

I'm not sure what it is you do that you have both a less than 20 year investment horizon (as you said above) AND will cause you to be unemployed at 40 to 50 years old. Are you a coal miner with black lung disease? If you are in tech then you do need to keep your skills up - you can't coast like you can in other jobs but 40 and 50 are not death sentences. I've been a hiring manager and been hired by one of the reputed "only young people" tech companies and it comes down to skills.


Tyler9000 wrote:
Wed Oct 11, 2017 11:11 am
Hyperborea wrote:
Wed Oct 11, 2017 10:22 am
If the OP is planning to retire early/very early then a higher stock allocation is needed for the longer retirement or a much lower withdrawal rate (WR).
Another way to look at it is that the percentage of stocks and bonds in your portfolio really doesn't tell the whole story because not all stocks and bonds are created equal. Look at the withdrawal rates of portfolios that diversify beyond the S&P500 and intermediate bonds, and retirement analysis gets a lot more interesting.

<snip>image</snip>

Lots more information on this topic can be found here: https://portfoliocharts.com/portfolio/r ... nt-income/
I've seen this site before and it's interesting and got really nice web production values but I'm a bit sceptical of the numbers. The WRs seem very high for even simple stock/bond portfolios. Higher than any of the other studies show. Maybe he's right and all the others are wrong but as the outlier he needs to tell us why that's so.

He's also using an incredibly limited data set - 1970 on. That means that there are 7 full real 40 year retirement scenarios to draw data from. Those 7 scenarios all start at the point that the US went off the gold standard and will heavily boost any of those portfolios that are gold-based (quite a number of them in your chart). I understand why he's only using data from 1970 - a lot of it didn't exist before that.

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Re: What is a good Asset Allocation

Post by KlangFool » Wed Oct 11, 2017 11:50 am

Hyperborea wrote:
Wed Oct 11, 2017 11:37 am
KlangFool wrote:
Wed Oct 11, 2017 11:08 am
Your assumption is a person could plan for early retirement and has the choice to move the retirement back by a few years. I work in an industry where many of my peers are forced into early retirement, permanent unemployment or under-employment in their 40s and 50s. OP needs to assess where he falls in the spectrum of job security.

"Man plan, God laughs"
- Yiddish Proverb

KlangFool
I did say that adjusting early retirement year by a year or three was a possibility. Barring some catastrophic life event, which would also impact those not planning early retirement in a worse way, that's a reasonable option for most people. Plan for 45 or 50 or even 55 and if life throws you a curve ball - unexpected expense, bad market at the time you plan to retire, etc. - then delay by a year or three.

I'm not sure what it is you do that you have both a less than 20 year investment horizon (as you said above) AND will cause you to be unemployed at 40 to 50 years old. Are you a coal miner with black lung disease? If you are in tech then you do need to keep your skills up - you can't coast like you can in other jobs but 40 and 50 are not death sentences. I've been a hiring manager and been hired by one of the reputed "only young people" tech companies and it comes down to skills.
Hyperborea,

<< If you are in tech then you do need to keep your skills up - you can't coast like you can in other jobs but 40 and 50 are not death sentences. I've been a hiring manager and been hired by one of the reputed "only young people" tech companies and it comes down to skills.>>

Your experience does not match my first-hand experience. Age discrimination is real and prevalent in the tech industry.

KlangFool

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Re: What is a good Asset Allocation

Post by Hyperborea » Wed Oct 11, 2017 12:00 pm

KlangFool wrote:
Wed Oct 11, 2017 11:50 am
Hyperborea,

<< If you are in tech then you do need to keep your skills up - you can't coast like you can in other jobs but 40 and 50 are not death sentences. I've been a hiring manager and been hired by one of the reputed "only young people" tech companies and it comes down to skills.>>

Your experience does not match my first-hand experience. Age discrimination is real and prevalent in the tech industry.

KlangFool
We've wandered way off topic of the OPs question but my experience (not "first-hand" like yours I guess) as an engineer, hiring manager, and being hired by one of those claimed "young people only" companies well into my 40's is that it's not true or at least not any different from other industries.

What is apparent is that tech skills change incredibly fast or at least the tools used do. If you don't keep up with those tools, often in your own time, then you fall behind. Tech is a continuous treadmill and if you don't keep running then you will fall off the back. Young people fresh out of school have been using the latest tech. Older people will have used older tech 20 years ago in school and may not have kept up with the latest tools. It's correlation but not causation.

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Tyler9000
Posts: 281
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Re: What is a good Asset Allocation

Post by Tyler9000 » Wed Oct 11, 2017 12:11 pm

Hyperborea wrote:
Wed Oct 11, 2017 11:37 am
I've seen this site before and it's interesting and got really nice web production values but I'm a bit sceptical of the numbers. The WRs seem very high for even simple stock/bond portfolios. Higher than any of the other studies show. Maybe he's right and all the others are wrong but as the outlier he needs to tell us why that's so.

He's also using an incredibly limited data set - 1970 on. That means that there are 7 full real 40 year retirement scenarios to draw data from. Those 7 scenarios all start at the point that the US went off the gold standard and will heavily boost any of those portfolios that are gold-based (quite a number of them in your chart). I understand why he's only using data from 1970 - a lot of it didn't exist before that.


Without getting off topic, answers to a lot of your questions can be found in the Withdrawal Rates FAQ. And FYI -- along with being a Bogleheads fan I'm also the author of the Portfolio Charts. :wink:
Last edited by Tyler9000 on Wed Oct 11, 2017 2:17 pm, edited 5 times in total.

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Watty
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Joined: Wed Oct 10, 2007 3:55 pm

Re: What is a good Asset Allocation

Post by Watty » Wed Oct 11, 2017 12:28 pm

parsi1 wrote:
Wed Oct 11, 2017 8:20 am
take a look at vanguard's target retirement funds (~TR2040)
+1

To the OP,

Some very well trained and experienced people set the asset allocation for the targets date funds at companies like Vanguard, Fidelity, T.Rowe Price, Schwab, and others. There can of course be reasons that your situation is a bit different and needs to be tweaked but you should really have a compelling reason, which is possible, to have a radically different asset allocation.

By most measures the stock market is near an all time high and interest rates are as low as they have been in several generations so lots of non-conventional investing strategies may seem to work in this environment.

There is a Warren Buffett quote;
Only when the tide goes out do you discover who's been swimming naked.


And it has been a while since the tide has gone out.

investing1012
Posts: 117
Joined: Sun Aug 07, 2016 5:19 pm

Re: What is a good Asset Allocation

Post by investing1012 » Wed Oct 11, 2017 2:29 pm

Watty wrote:
Wed Oct 11, 2017 12:28 pm
parsi1 wrote:
Wed Oct 11, 2017 8:20 am
take a look at vanguard's target retirement funds (~TR2040)
+1

To the OP,

Some very well trained and experienced people set the asset allocation for the targets date funds at companies like Vanguard, Fidelity, T.Rowe Price, Schwab, and others. There can of course be reasons that your situation is a bit different and needs to be tweaked but you should really have a compelling reason, which is possible, to have a radically different asset allocation.

By most measures the stock market is near an all time high and interest rates are as low as they have been in several generations so lots of non-conventional investing strategies may seem to work in this environment.

There is a Warren Buffett quote;
Only when the tide goes out do you discover who's been swimming naked.


And it has been a while since the tide has gone out.
Lol I wonder if being naked in this pool are those without bond allocations. What's funny is Buffet is a promoter of the 90/10 plans as per some of the others quoted. After reading all of these posts i'm leaning to either a 75/25 plan or an 80/20 plan.

Another thing I've recently been thinking is instead of putting the (25%) of money in bonds is to put that allocation in real-estate. There are some obvious problems with that including the hassles of being a land-lord, even with a property manager. I have a fairly busy job and don't have the time or energy to manage properties myself. BTW I don't consider my personal residence as an investment or part of my net worth.

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