Am I being too conservative?

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Topic Author
notmyhand
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Am I being too conservative?

Post by notmyhand »

30F with a DH and 2 year old
Making 160k a year between the two of us
House of 425k is paid off
Only debt is 9k on a tractor loan at 0% APR

My asset allocation was 90/10 and the 10% was in IBonds. However after maxing out 401ks/IRAs/529, I only have about 10k extra a year and I'm questioning whether I should put it into Ibonds or whether I should put it into VTI in taxable.

Investments: 700k, 70k in Ibonds and the rest in retirement stock funds

What would you do - put the extra 10k into Ibonds or into taxable stock ETFs?

Edited to add- I also have 8 months of expenses in a savings account as my designated emergency fund
Last edited by notmyhand on Sun Aug 23, 2020 6:13 am, edited 1 time in total.
Dominic
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Re: Am I being too conservative?

Post by Dominic »

I don't think a 10% bond allocation is very conservative. I think you could go up to 20% bonds without veering into conservative territory, honestly.

Do whichever you're comfortable with. If in doubt, mirror the 90/10 allocation, and invest $9,000 of it in taxable stocks and $1,000 into I Bonds.
Topic Author
notmyhand
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Re: Am I being too conservative?

Post by notmyhand »

Dominic wrote: Sat Aug 22, 2020 11:26 pm I don't think a 10% bond allocation is very conservative. I think you could go up to 20% bonds without veering into conservative territory, honestly.

Do whichever you're comfortable with. If in doubt, mirror the 90/10 allocation, and invest $9,000 of it in taxable stocks and $1,000 into I Bonds.
Thanks for your thoughts. With the cash and the paid off house, wasn't sure if 90/10 was appropriate.
MotoTrojan
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Re: Am I being too conservative?

Post by MotoTrojan »

Confusing post as you are in no-way being too conservative, and appear to be in the 1% of savers/investors (or received a generous gift/inheritance).

Is the 90% all in VTI? I personally would call that a problem, but you didn't ask about equity allocation breakdown.
mptfan
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Re: Am I being too conservative?

Post by mptfan »

Dominic wrote: Sat Aug 22, 2020 11:26 pm I don't think a 10% bond allocation is very conservative.
I agree, I think 90% stocks is the opposite of conservative, it is a very aggressive asset allocation.
typical.investor
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Re: Am I being too conservative?

Post by typical.investor »

notmyhand wrote: Sat Aug 22, 2020 11:19 pm Only debt is 9k on a tractor loan at 0% APR

What would you do - put the extra 10k into Ibonds or into taxable stock ETFs?
Definitely too conservative.

I'd get another tractor at 0% APR so I could race with the one we have and maybe use the 10K to make payments.

90% stocks / 10% bonds doesn't seem too conservative though.
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Watty
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Re: Am I being too conservative?

Post by Watty »

MotoTrojan wrote: Sat Aug 22, 2020 11:38 pm Confusing post as you are in no-way being too conservative, and appear to be in the 1% of savers/investors (or received a generous gift/inheritance).
+1

One thing that was not clear is if you have separate funds you did not mention for things like emergencies, buying future cars, college savings, etc.

If not then you may actually be too aggressive.
Topic Author
notmyhand
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Re: Am I being too conservative?

Post by notmyhand »

Thanks everyone!

For the stock portion, no I’m not all in VTI. I’m 30% international and then slice and dice in mid cap, small cap, reit and energy plus total stock market.

However I’ve heard Bogleheads treating paying mortgage principal as part of their bond allocation and we just paid off the house which made me think we shouldn’t put more into bonds. Sounds like I should keep putting 10% into IBonds however. Appreciate the advice.
fuddbogle
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Re: Am I being too conservative?

Post by fuddbogle »

Do you have an emergency fund?
flaccidsteele
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Re: Am I being too conservative?

Post by flaccidsteele »

notmyhand wrote: Sat Aug 22, 2020 11:19 pm 30F with a DH and 2 year old
Making 160k a year between the two of us
House of 425k is paid off
Only debt is 9k on a tractor loan at 0% APR

My asset allocation was 90/10 and the 10% was in IBonds. However after maxing out 401ks/IRAs/529, I only have about 10k extra a year and I'm questioning whether I should put it into Ibonds or whether I should put it into VTI in taxable.

Investments: 700k, 70k in Ibonds and the rest in retirement stock funds

What would you do - put the extra 10k into Ibonds or into taxable stock ETFs?
Speaking for myself, if I was in your situation, I wouldn’t even bother with the Ibonds but my temperament is different
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
Topic Author
notmyhand
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Re: Am I being too conservative?

Post by notmyhand »

fuddbogle wrote: Sun Aug 23, 2020 12:37 am Do you have an emergency fund?
Yes I do, 8 months worth of expenses in a savings account
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nisiprius
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Re: Am I being too conservative?

Post by nisiprius »

1) There is no objective criterion for what is "too conservative" or "too aggressive." It is a personal thing and only you know what is right for you. The challenge is to "know thyself" and not to let anyone convince you that you "should" be more or less conservative. It is possible that with increasing understanding of the behavior of stocks you might come to the conclusion that stocks are more risky or less risky than you thought they were.

Watch out for people who talk as if there is an objectively right risk tolerance. They may be projecting their own risk tolerance onto the world, or if they have any connection to the investment industry, they may have self-interested reasons for what they are recommending.

It is my personal opinion that risk tolerance is not well measured by quick questionnaires of the kinds brokerages offer. They are better than nothing, but I think their main function is not so much to help you, as to keep advisors out of trouble (by preventing situations where a client could complain that the advisor had put them into something unsuitable for them).

2) The better your financial situation gets, the wider the range of allocations that is workable. If you've "made it," there are two ways to interpret the situation and neither is objectively correct. People with "increasing relative risk aversion" say "why keep playing if you've won the game?" They now have enough without any need to take risk so the dial back on risk. People "decreasing relative risk aversion" say "Extra money now is money that I can afford to lose; now it is OK for me to grab for the brass ring and take more risk." Neither is "right," both are acceptable decisions that arise from "having enough."

3) This is only a guide to how language is used and what the conventional wisdom is. These are the glide slopes that Morningstar uses in benchmarking target-date funds. The "aggressive" and "conservative" lines actually come close to marking the limits of real funds that are actually offered, i.e. some firms offer target date funds everywhere within those two lines.

In Morningstar's judgement, a stock allocation of 90% at age 30 is labeled something in between "moderate" and "aggressive." "Conservative" would be something below 80%.

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Last edited by nisiprius on Sun Aug 23, 2020 7:08 am, edited 1 time in total.
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Olemiss540
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Re: Am I being too conservative?

Post by Olemiss540 »

At 30 with 700k in investments and a paid off house? I don't see a by reason to be that aggressive with your investments. You will be FI soon regardless of your asset allocation so why take on so much volatility? I would move to 70/30 personally....
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
jajlrajrf
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Re: Am I being too conservative?

Post by jajlrajrf »

mptfan wrote: Sat Aug 22, 2020 11:44 pm
Dominic wrote: Sat Aug 22, 2020 11:26 pm I don't think a 10% bond allocation is very conservative.
I agree, I think 90% stocks is the opposite of conservative, it is a very aggressive asset allocation.
Just to be explicit: at age 30, an aggressive allocation is almost surely the right choice.
toocold
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Re: Am I being too conservative?

Post by toocold »

Here is a good litmus test. In March when the market dropped by 30%, how did you feel? If you sold, you are being too aggressive. If you didn't notice, you could even go up. Right now, for an average investor around your age, you are about right or slightly aggressive.

You are doing awesome for a 30 year old!
mptfan
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Re: Am I being too conservative?

Post by mptfan »

jajlrajrf wrote: Sun Aug 23, 2020 6:55 am
mptfan wrote: Sat Aug 22, 2020 11:44 pm
Dominic wrote: Sat Aug 22, 2020 11:26 pm I don't think a 10% bond allocation is very conservative.
I agree, I think 90% stocks is the opposite of conservative, it is a very aggressive asset allocation.
Just to be explicit: at age 30, an aggressive allocation is almost surely the right choice.
I didn't offer an opinion about whether it is the right choice or not, but I think the OP is making a mistake by starting from the premise that 90% stocks is a conservative allocation.
gclancer
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Re: Am I being too conservative?

Post by gclancer »

flaccidsteele wrote: Sun Aug 23, 2020 12:57 am
notmyhand wrote: Sat Aug 22, 2020 11:19 pm 30F with a DH and 2 year old
Making 160k a year between the two of us
House of 425k is paid off
Only debt is 9k on a tractor loan at 0% APR

My asset allocation was 90/10 and the 10% was in IBonds. However after maxing out 401ks/IRAs/529, I only have about 10k extra a year and I'm questioning whether I should put it into Ibonds or whether I should put it into VTI in taxable.

Investments: 700k, 70k in Ibonds and the rest in retirement stock funds

What would you do - put the extra 10k into Ibonds or into taxable stock ETFs?
Speaking for myself, if I was in your situation, I wouldn’t even bother with the Ibonds but my temperament is different
I disagree, I think the I Bonds make a lot of sense in this scenario. The OP is definitely not “too conservative” but if she’s comfortable having a heavy stock allocation I think simply buying the annual maximum in I Bonds and investing the rest in stocks is a smart approach.
EddyB
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Re: Am I being too conservative?

Post by EddyB »

mptfan wrote: Sun Aug 23, 2020 9:29 am
jajlrajrf wrote: Sun Aug 23, 2020 6:55 am
mptfan wrote: Sat Aug 22, 2020 11:44 pm
Dominic wrote: Sat Aug 22, 2020 11:26 pm I don't think a 10% bond allocation is very conservative.
I agree, I think 90% stocks is the opposite of conservative, it is a very aggressive asset allocation.
Just to be explicit: at age 30, an aggressive allocation is almost surely the right choice.
I didn't offer an opinion about whether it is the right choice or not, but I think the OP is making a mistake by starting from the premise that 90% stocks is a conservative allocation.
I think it’s a mistake to make that statement without acknowledging the paid-off house.
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Clever_Username
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Re: Am I being too conservative?

Post by Clever_Username »

When I was 30 (I'm in my mid-to-late 30s currently), I was 30% in bonds. I don't think 10% bonds is too conservative, especially since they're iBonds which I strongly advocate for.
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wander
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Re: Am I being too conservative?

Post by wander »

No, you are not conservative. Your question maybe: Am I saving too much?
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