Age 30/29- need help with allocation

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njworldwide
Posts: 1
Joined: Mon Jan 22, 2018 2:32 am

Age 30/29- need help with allocation

Post by njworldwide » Mon Jan 22, 2018 2:46 am

Hi there - my wife and I are 30 and 29, and I'm a recent reader of the Boglehead book. Quick summary:

-3 months Emergency Fund
-0% car loan (paying off early this year) and 28 years on a 3.75% 30-year mortgage loan ($545k more to go!)
- Filing Married
-15-25% Federal and 6-8% State (California)
- Desired Asset allocation: 100% stocks / 0% bonds
- Desired International allocation: 30% of stocks
- Contributing minimum 10% of income (roughly $10k total for wife and I) in Simple IRA currently

We are business owners with a Simple IRA (20k), Rollover IRA ($60k) , and Roth (42k)- all at Fidelity.


Questions:
1) I want to be aggressive at this point in my retirement savings. Looking at 100% stock allocation with 70%US / 30% International. (index funds). Any thoughts/concerns with this?

2) For International, considering FTIGX... is this a wise Fidelity choice? (Fidelity® Total International Index Fund Investor Class)

3) For the other 70%, should I look at 1 index fund or perhaps split between two?
- Was considering FUSVX (Fidelity® 500 Index Fund Premium Class)
- Or a combination of that and FSSPX (Fidelity's small cap index fund)

Any thoughts appreciated - I'm somewhere between novice and intermediate in investing :)

Thank you!

quaternion
Posts: 31
Joined: Mon Apr 25, 2016 5:09 am

Re: Age 30/29- need help with allocation

Post by quaternion » Mon Jan 22, 2018 6:06 am

njworldwide wrote:
Mon Jan 22, 2018 2:46 am
1) I want to be aggressive at this point in my retirement savings. Looking at 100% stock allocation with 70%US / 30% International. (index funds). Any thoughts/concerns with this?
100% equities at 30 isn't crazy. For comparison, the 2050 and 2055 target date funds from Vanguard and Fidelity are both currently 90% equity / 10% bond.

70% US / 30% international is over-weighting US stocks compared to market cap, but again, both the Vanguard and Fidelity target dates funds are about this same ratio.
njworldwide wrote:
Mon Jan 22, 2018 2:46 am
2) For International, considering FTIGX... is this a wise Fidelity choice? (Fidelity® Total International Index Fund Investor Class)
That seems like Fidelity's best international offering.
njworldwide wrote:
Mon Jan 22, 2018 2:46 am
3) For the other 70%, should I look at 1 index fund or perhaps split between two?
- Was considering FUSVX (Fidelity® 500 Index Fund Premium Class)
- Or a combination of that and FSSPX (Fidelity's small cap index fund)
The total market fund (FSTMX) is probably a better choice than the S&P 500 index alone (you'd miss the mid and small caps with the S&P 500) or combing the S&P 500 and the extended market index (two funds to keep track of instead of one).

If you want to tilt to small caps (higher risk, higher expected return), then FSTMX+FSSPX is fine. You could also buy the iShares Small Value ETF (IJS) to tilt to small-value.

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ruralavalon
Posts: 12970
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Age 30/29- need help with allocation

Post by ruralavalon » Mon Jan 22, 2018 10:18 am

Welcome to the forum :) .
njworldwide wrote:
Mon Jan 22, 2018 2:46 am
Hi there - my wife and I are 30 and 29, and I'm a recent reader of the Boglehead book. Quick summary:

-3 months Emergency Fund
-0% car loan (paying off early this year) and 28 years on a 3.75% 30-year mortgage loan ($545k more to go!)
- Filing Married
-15-25% Federal and 6-8% State (California)
- Desired Asset allocation: 100% stocks / 0% bonds
- Desired International allocation: 30% of stocks
- Contributing minimum 10% of income (roughly $10k total for wife and I) in Simple IRA currently

We are business owners with a Simple IRA (20k), Rollover IRA ($60k) , and Roth (42k)- all at Fidelity.


Questions:
1) I want to be aggressive at this point in my retirement savings. Looking at 100% stock allocation with 70%US / 30% International. (index funds). Any thoughts/concerns with this?
At ages 29 and 30 I suggest around 20% in bonds. This is expected to significantly reduce portfolio volatility (risk), with only a relatively small impact on portfolio performance. Please see the wiki article "asset allocation" and part 3 of the wiki article "Boglehead's Investment Philosophy".

In my opinion 100% stocks is too risky, ignores the history of periodic bear markets, and lacks perspective. It's easy to feel that 100% stocks is a good idea because we are in a long bull market, but that will not last.

In my opinion 30% of stocks in international stocks is reasonable. Historically that would have captured about 99% of the maximum diversification benefit. For a pdf of a Vanguard paper on the subject you could Google "Considerations for Investing in Non-U.S Equities", see pp.5-6.


njworldwide wrote:2) For International, considering FTIGX... is this a wise Fidelity choice? (Fidelity® Total International Index Fund Investor Class)
That is a wise choice. Fidelity Total International Stock Index Fund (FTIGX) is the most diversified Fidelity international stock fund, so that is what I suggest.


njworldwide wrote:3) For the other 70%, should I look at 1 index fund or perhaps split between two?
- Was considering FUSVX (Fidelity® 500 Index Fund Premium Class)
- Or a combination of that and FSSPX (Fidelity's small cap index fund)
Instead I suggest Fidelity Total Stock Market Index Fund Premium Class (FSTVX) ER 0.035%.

I would not used two funds where one fund will do the job.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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