Asset Allocation

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
npatel3875
Posts: 1
Joined: Sat Mar 10, 2018 7:53 pm

Asset Allocation

Post by npatel3875 » Sat Mar 10, 2018 8:01 pm

Hello,

I am a recent graduate and have started making some money

In my taxable account I am planning on having 70% of my money in stocks and 30% in bonds. Of the stocks I plan on having 20% of it in an index fund with international exposure, 10% in a risky index fund like a small cap or growth fund, and 70% in an index fund tracking S&P 500. As far as the bonds I will be planning on having 100% of it in a US bond index fund. Not too sure about how to invest in bonds, some advice would be appreciated it.
Any thoughts/advice on my plan? Thanks!

pkcrafter
Posts: 13736
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Asset Allocation

Post by pkcrafter » Sat Mar 10, 2018 9:45 pm

Welcome to the forum,

Your idea is very close to the popular 3/4 fund portfolio. Three is total stock market, total international, and total bond. Adding total international bond makes it a 4. Your plan would include a "tilt" to small caps, meaning you will hold more than total stock market, which is about 9%.

The 3 fund portfolio

viewtopic.php?f=10&t=88005

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.

gostars
Posts: 439
Joined: Mon Oct 09, 2017 7:53 pm

Re: Asset Allocation

Post by gostars » Sat Mar 10, 2018 10:05 pm

I would suggest taking a look at Prioritizing investments in the wiki. Once you're making earned income, you want to be contributing to a Roth IRA and a workplace 401k/403b/457b plan (if available) before you even consider a taxable account. If you have those accounts already and are putting more money into taxable, then review Tax-efficient fund placement. For example, you don't want a bond fund in taxable if you can avoid it, and you may want to prioritize international investment in taxable.

Mors
Posts: 213
Joined: Wed Aug 16, 2017 10:06 am

Re: Asset Allocation

Post by Mors » Sat Mar 10, 2018 10:07 pm

A fine plan.

20% int is all right, maybe a bit conservative. Vanguard chooses 40%, closer to market cap.

johnra
Posts: 202
Joined: Sun Dec 28, 2014 12:07 pm

Re: Asset Allocation

Post by johnra » Sat Mar 10, 2018 11:56 pm

At your age, I would only have about 15-20% in bonds. You want growth. The only purpose of bonds is that if you need any cash between now and miuch later, you will have bonds to sell if the market is low.

Dominic
Posts: 211
Joined: Sat Jul 02, 2016 11:36 am

Re: Asset Allocation

Post by Dominic » Sun Mar 11, 2018 12:27 am

johnra wrote:
Sat Mar 10, 2018 11:56 pm
At your age, I would only have about 15-20% in bonds. You want growth. The only purpose of bonds is that if you need any cash between now and miuch later, you will have bonds to sell if the market is low.
The long-term return of a buy-and-hold portfolio with 80-85% stocks is significantly higher than one with 70% stocks, and the risk isn't much higher over a long time frame. However, this introduces behavioral risks. Get too aggressive, and there's a chance that the investor doesn't hold on to their asset allocation, and they lose money. Plus, if OP tilts to something like small-cap value or another factor fund, they can boost their returns while keeping 30% of the portfolio in safe bonds.

I am fully aware that I should be in 90-100% stocks at my age, but I hold only 80% stocks, because I don't trust myself to withstand the loss of 45-50% of my portfolio.

retiredjg
Posts: 38955
Joined: Thu Jan 10, 2008 12:56 pm

Re: Asset Allocation

Post by retiredjg » Sun Mar 11, 2018 9:16 am

npatel3875 wrote:
Sat Mar 10, 2018 8:01 pm
In my taxable account I am planning on having 70% of my money in stocks and 30% in bonds.
Rather than look at your taxable account alone, it is better to start with your work plan if you have one. Pick the best (lowest cost) funds from your work plan and build the rest of the portfolio around that.

If the money is for retirement, I would not hold bonds in the taxable account. I'd hold the bonds in a 401k/403b if one is available.

Post Reply