AA if you were just starting out again

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pkcrafter
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AA if you were just starting out again

Post by pkcrafter » Wed Sep 20, 2017 6:41 pm

I'm wondering just how good new information is in choosing an asset allocation (AA) vs experience. So, if starting all over again, would you use the same AA as you had before, or would you change it? What has experience taught you about risk and AA? Are the available information and the risk questionnaires really useful for creating an AA, or does it take hard knocks?



Paul
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Taylor Larimore
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Re: AA if you were just starting out again

Post by Taylor Larimore » Wed Sep 20, 2017 6:55 pm

pkcrafter wrote:
Wed Sep 20, 2017 6:41 pm
I'm wondering just how good new information is in choosing an asset allocation (AA) vs experience. So, if starting all over again, would you use the same AA as you had before, or would you change it? What has experience taught you about risk and AA? Are the available information and the risk questionnaires really useful for creating an AA, or does it take hard knocks?
Paul
Paul:

I have been investing for over 50 years and I've made most of the mistakes we read about.

If I could start over again, and if the funds were available (they weren't), these are the funds I would choose:

The Three-Fund Portfolio

Best wishes.
Taylor
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livesoft
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Re: AA if you were just starting out again

Post by livesoft » Wed Sep 20, 2017 7:00 pm

I am pretty sure that I would choose the same asset allocations in terms of equities, bonds, US:foreign, but of course the actual products would be different.

Back in the early 1980s, we used GNMA funds and something called Ivy International fund, Vanguard Money Market Prime, and Vanguard S&P500 index fund. In the 1990s we used Vanguard NY-insured tax-exempt bond fund.

Our AA was probably at least 90:10 in the 1980s, but I can not be certain until the late 1990s when I started using software to help out. And history shows that the 1980s were a great time to start investing.

Hard knocks help as does the experience that things recover (at least so far they have).
Last edited by livesoft on Wed Sep 20, 2017 7:08 pm, edited 1 time in total.
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Re: AA if you were just starting out again

Post by Dude2 » Wed Sep 20, 2017 7:04 pm

Hard knocks is what it took for me. If I had it to do over, I'd probably stick with the traditional balanced fund 60/40 approach and just try to save.

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Re: AA if you were just starting out again

Post by mega317 » Wed Sep 20, 2017 7:21 pm

I started investing in August 2008, and (this is a guess) lost around $1,000 in the crash. So I have no real experience. I like to think the experience of the posters here has given me a small taste. I have dialed back my stock allocation a bit since finding this site.

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Re: AA if you were just starting out again

Post by Peter Foley » Wed Sep 20, 2017 7:25 pm

I think if I were starting over again, adopting index investing over stock picking would be a greater priority than getting my AA right. Especially in one's early years, unless one is too conservative or totally oblivious to risk tolerance, AA is not a critical factor.

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Re: AA if you were just starting out again

Post by iceport » Wed Sep 20, 2017 8:39 pm

pkcrafter wrote:
Wed Sep 20, 2017 6:41 pm
I'm wondering just how good new information is in choosing an asset allocation (AA) vs experience. So, if starting all over again, would you use the same AA as you had before, or would you change it? What has experience taught you about risk and AA? Are the available information and the risk questionnaires really useful for creating an AA, or does it take hard knocks?
This is tough to answer, Paul. I'm assuming, based on your two references to risk, that you are focusing on the basic equity/fixed income ratio meaning of AA.

The trouble is, in my real life experience, anything new I learned about the right equity exposure for me was accompanied by probably more significant insight into: improving other aspects of AA (i.e. diversifying better and not chasing performance); saving more; lowering costs; and improving tax efficiency. All in all, based on everything I've learned through experience, I'd say the importance of getting the basic equity exposure "correct" is diluted by these other aspects of investing.

Through experience, I would have selected a fixed AA of something like 70/30 right from the start and stuck to it until the final approach to retirement. It isn't so much a question of risk tolerance as it is an understanding that, particularly when the portfolio is small, other factors combined can be even more important to overall success.
"Discipline matters more than allocation.” ─William Bernstein

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Re: AA if you were just starting out again

Post by KlangFool » Wed Sep 20, 2017 8:48 pm

OP,

If I were starting out again, I would not be 100/0 and gamble on Telecom stock. Then, I would not lose 50% of my investment 10+ years ago. I would start with AA of 70/30 and glide towards AA of 60/40. I would be FI a few years ago.

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Re: AA if you were just starting out again

Post by dwickenh » Wed Sep 20, 2017 10:05 pm

Same for me starting over at 70/30 and slowly dialed to 50/50 in retirement. Would have used index funds sooner.
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Re: AA if you were just starting out again

Post by GoldenFinch » Wed Sep 20, 2017 10:23 pm

Considering I was 100% stocks until 2014 when I found Bogleheads and read about asset allocation and bonds, I guess I would keep the past the same because it all worked out really well (as of today).

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Re: AA if you were just starting out again

Post by FIREchief » Wed Sep 20, 2017 10:29 pm

100/0 throughout accumulation phase. Same as it ever was. 8-)
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Re: AA if you were just starting out again

Post by pascalwager » Wed Sep 20, 2017 10:30 pm

I would use Sharpe's world market portfolio, but without the bonds.

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Svensk Anga
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Re: AA if you were just starting out again

Post by Svensk Anga » Wed Sep 20, 2017 10:33 pm

When I started in the early 80's, there was very little good information readily available, so I was stumbling around, feeling my way in the dark. I made many questionable choices. But maybe they were questionable only in hindsight. In alternate histories, maybe my choices would have served me better than what I might pick now.

Several things come to mind:

I was too timid with equity allocation early on. Accepting the concept of human capital as potential low risk asset, I might have been more aggressive. If there had been target date funds back then, I might have been more aggressive, outside our emergency fund.

Our emergency fund was arguably too large and too conservative. It was all in money market (back when those paid better though). A second tier in short term bonds (or I bonds later on) would have been better. But both equity allocation and emergency fund may have been good choices given that my wife was a SAHM for some years and I was employed in a shaky industry. It turned out well in this history.

I was a fund collector, chasing past performance. Overall AA was haphazard in consequence. Yes, index funds were available, but had nowhere near the visibility as today. Even no-load funds were a fairly novel concept when I started. There were no tools to tell you that your fund collection was over market weight in LC-growth, so one ran blind. GNMA came and went. Gold came and went.

I elected to put a substantial fraction of my 401k in the stable value fund. Starting in 1982, this paid 13% or so. I probably would have done better with a straight bond fund as rates declined and the nice big SVF yield faded. Who knew a 35-year bull in bonds was coming?

I missed a once in a lifetime opportunity to grab fairly high real returns with low risk when TIPS and I-bonds were introduced. I passed on TIPS because I did not understand how they would behave as interest rates gyrated. I-bonds were not on the radar, probably because they were not a financial industry product. I suspect the high beginning real rates were necessary to move a novel product into the market and might not be seen again.

I was late ramping down my equities as (early) retirement loomed. I got caught in 2008/9 with 90-95% equity at age 50. I figured my best choice was to ride it out and keep on saving. It worked out very well due to the very nice rebound and continuous employment, but could have played out much less favorably.

Not AA, but asset LOCATION tripped me up. I could have done better with this and now will face large RMD's at ordinary income rates. (Nice problem to have. :D ) OTOH, I think favored tax treatment for QDI and LTCG has come and gone in cycles over the last 35 years and there is no guarantee it wont go again.

There is so much better guidance available these days. Still, I don't know that it can really help the new investor judge where his portfolio should lie on the risk spectrum. Perhaps he should pick a target date fund earlier than his own target date. Experience helps but it could mislead too. Newer investors may think that equities always bounce back quickly after a severe drop. They think they can ride out the storm with a high equity allocation. But we could get the 1970's again, when inflation killed real returns and the "death of equities" was at hand. You don't want to be caught with the wrong allocation when your human capital is dwindling. I try to invest with not just the last 35 years in mind. Stocks have had horrible decades. Bonds have had poor decades in real terms.

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Re: AA if you were just starting out again

Post by Ari » Thu Sep 21, 2017 3:28 am

In the very beginning, I just had an account with some randomly chosen funds with fancy names that I knew nothing about. Pretty much no money there, and "saving for retirent" wasn't a thing people did that I heard about. I didn't really know you could get a steady income from investments. I didn't care about money since I made more than I spent.

When I realized that you can actually retire from your own savings (that was a shock I got when I was in my late 20's), I started considering whether this was something I could do. I started saving when I was 30 and I had a complex setup with small value and all that jazz, all Vanguard funds.

Today I've sold all my Vanguard funds and use local funds to keep complexity and tax costs low. I'm still 100% stock, and I wouldn't have it any other way. I still don't know anyone who has ever saved anything for retirement, but I'm running my own show now, with a 70% savings rate, due to reach FI after some 7-8 years of saving, if we don't have a crash. And if we do, I'll just keep buying and postpone my retirement. :beer
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Re: AA if you were just starting out again

Post by stemikger » Thu Sep 21, 2017 5:23 am

I would stop second guessing my plan and stick with it instead of jumping around so much.

Possibly 60/40 for life and never even look at it. That's what I'm doing now, but it took me this long to get here.

I never invested in international funds, that is something I would not change. I'm happy I listened to John Bogle, it was one less thing I had to worry about.

Here is a thread I started a while back on that concept. Vanguard Balanced Index Fund from Cradle to Grave.

viewtopic.php?t=164521
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Re: AA if you were just starting out again

Post by climber2020 » Thu Sep 21, 2017 5:54 am

Ari wrote:
Thu Sep 21, 2017 3:28 am


Today I've sold all my Vanguard funds and use local funds to keep complexity and tax costs low. I'm still 100% stock, and I wouldn't have it any other way.
What are local funds? I haven't heard about that before.

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Re: AA if you were just starting out again

Post by stemikger » Thu Sep 21, 2017 6:15 am

climber2020 wrote:
Thu Sep 21, 2017 5:54 am
Ari wrote:
Thu Sep 21, 2017 3:28 am


Today I've sold all my Vanguard funds and use local funds to keep complexity and tax costs low. I'm still 100% stock, and I wouldn't have it any other way.
What are local funds? I haven't heard about that before.
Me neither. Something having to do with localities?
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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Re: AA if you were just starting out again

Post by Top99% » Thu Sep 21, 2017 7:13 am

Going back in time and getting a do-over would be a great way to boost one's returns :moneybag
We started investing via 401Ks in the mid-80s but I really can't even remember what we were buying.
In the late 90s during the waning our of the big tech bubble party I dabbled in some individual stocks with predictably poor results. Finally in 2001 after seeing my $,$$$,$$$ in Nortel stock options go permanently underwater right before my eyes I started actually paying attention. Scott Burn's "couch potato" articles influenced me a lot. So we started saving about 75% of our income and dumping it into TSM, Vanguard Intermediate Term and REITs (a mix of individual and the Vanguard index). In around 2004 we changed our AA to the Coffee House AA. Very fortunately for us our high savings rate coincided with two crashes which allowed us to get FI in about 16 years.
So, if I could do it again:
1) Skip the individual stocks
2) Exercise all vested Nortel stock options at the top
3) Do a Coffee House allocation less the bond funds
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Re: AA if you were just starting out again

Post by Toons » Thu Sep 21, 2017 7:30 am

I would have done very little if anything different. :happy
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Re: AA if you were just starting out again

Post by Dottie57 » Thu Sep 21, 2017 8:22 am

My starting allocation would be 80/20. I wish I had a bit more equities at the beginning.

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Re: AA if you were just starting out again

Post by Ari » Thu Sep 21, 2017 8:23 am

climber2020 wrote:
Thu Sep 21, 2017 5:54 am
What are local funds? I haven't heard about that before.
Swedish funds. I live in Sweden. Fewer tax complications, fewer currency exchange fees, less hassle than American funds.
All in, all the time.

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Re: AA if you were just starting out again

Post by parsi1 » Thu Sep 21, 2017 8:42 am

Target Retirement Funds

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Re: AA if you were just starting out again

Post by Morse Code » Thu Sep 21, 2017 10:43 am

Same stock/bond glide path, but I would include more factor exposure on the equity side. Here's my simple three fund portfolio:

Small Cap Value (39%)
Int'l Small Cap (39%)
Intermediate Treasuries (22%)
Livin' the dream

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Re: AA if you were just starting out again

Post by bigred77 » Thu Sep 21, 2017 10:47 am

Today I'm 75/25 with some factor tilts.

If I could go back to when i started I'd implement the same portfolio I have today.

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Re: AA if you were just starting out again

Post by Fallible » Thu Sep 21, 2017 10:48 am

pkcrafter wrote:
Wed Sep 20, 2017 6:41 pm
I'm wondering just how good new information is in choosing an asset allocation (AA) vs experience. So, if starting all over again, would you use the same AA as you had before, or would you change it? What has experience taught you about risk and AA? Are the available information and the risk questionnaires really useful for creating an AA, or does it take hard knocks?
Paul
I probably would go with the same relatively conservative AA I eventually settled on in the late '80s, based on the '87 crash and lots of reading up on investing, especially by Jack Bogle. That was the nurture part, but underlying it all was a conservative nature regarding financial risk, which I think first became apparent as a kid playing Monopoly. I was leery of expensive Boardwalk, liked the railroads, utilities, cheaper properties to buy and build on, was always dismayed at the luck involved, and loved a nice cash reserve (which often led to losing the game). So I think all those things, experience, good advice, and recognizing a conservative nature, went into choosing an AA I could stay with.
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Re: AA if you were just starting out again

Post by Terraplane » Thu Sep 21, 2017 11:05 am

Started investing in the 80's without a plan, put money in anything with a good story in the 90's. Sure enjoyed those Janus funds in 1999 (one up 160%!) but glad I got smarter about buy and hold after that. Made no changes in 2008 or really since, stay the course.

Terraplane

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Re: AA if you were just starting out again

Post by Earl Lemongrab » Thu Sep 21, 2017 12:06 pm

I would use the same basic strategy with small and value tilt, but I'd look hard at a simpler version like Trev's Ultimate 4 Fund version.
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Re: AA if you were just starting out again

Post by asif408 » Thu Sep 21, 2017 12:57 pm

pkcrafter wrote:
Wed Sep 20, 2017 6:41 pm
I'm wondering just how good new information is in choosing an asset allocation (AA) vs experience. So, if starting all over again, would you use the same AA as you had before, or would you change it? What has experience taught you about risk and AA? Are the available information and the risk questionnaires really useful for creating an AA, or does it take hard knocks?
I would change it, but that has been based on experience.

It was good for me to see and experience the bear markets in foreign developed and emerging markets stocks and commodities since 2011, and understanding the emotional difficulty in buying more of something while it is going down (it did feel bad initially doing it) and then to keep seeing it going down for a while and even buying more, or over rebalancing. This rebalancing act has finally started to pay off in 2016 & 2017 for foreign, and it's nice to see the buy low/sell high concept work in real time.

I was investing in 2007-2009 during the financial crisis but wasn't paying as much attention as I have in the last 4-5 years, so I didn't experience all of the emotional swings. But I understand by not doing nothing during that time I probably did ok (of course, I would have been smarter rebalancing, but my mind was elsewhere and I didn't care about those types of things at the time). And I actually had most of my money in Target Date type funds, so even then before I had much knowledge, I made ok selections and had some basic understanding of diversification.

So I'm not sure I would trade those experiences, they've taught me a lot. I'm also glad I made small mistakes with small amounts of money, I think that was beneficial. I'm not sure questionnaires help much without some level of experience. It's sort of like asking a college student with no work experience how they work under pressure. They can give examples from school, but with any actual job experience they don't really know how they will react in those situations.

I think the concept of starting on the more conservative side early and then adjusting up after a correction and/or bear market (if you feel you have a higher risk tolerance) it the best way to go if you don't have any investing experience.

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Re: AA if you were just starting out again

Post by bloom2708 » Thu Sep 21, 2017 1:05 pm

If I had a do-over:

80/20 - 20s

70/30 - 30s, 40s (Currently 60/40 at 46/47)

60/40 - 50 to 5X

50/50 - Retired (Floor)

When the next big correction comes, I'll be just fine with 60/40.
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Re: AA if you were just starting out again

Post by Portfolio7 » Thu Sep 21, 2017 1:42 pm

I'd save more. Pensions dissappearing make it tougher, and I'd give a lot to be FI now, at 50. I undervalued FI when I was younger.
I'd start earlier. I started investing at age 29, my wife at 25.
My initial post-tax investing strategy would be be more consistent, and avoid several mistakes.

My AA was all over the place when I was younger. I'd likely be 90/10 to start, with a considered plan. In general, I was 70-100% equity.
An investment in knowledge pays the best interest.

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Re: AA if you were just starting out again

Post by Earl Lemongrab » Thu Sep 21, 2017 3:25 pm

I'm assuming that we're not talking about going back in time to invest, but rather starting over right now. My portfolio if I could start over at some past point would be radically different.
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Re: AA if you were just starting out again

Post by Fclevz » Thu Sep 21, 2017 4:09 pm

  • Any known money needed within the next five years to be covered by a treasury bill/note of similar maturity
  • Two years living expenses in a money market fund
  • The remainder in equities

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Re: AA if you were just starting out again

Post by Simple Simon » Fri Sep 22, 2017 2:10 am

We are all just starting out again.

The future is a blank page, we have just scribbled our investments in the top left corner.

How will your story unfold?

When I was younger, I set out to write a thriller. As time went by there were moments of comedy, and elements of tragedy too. There is unrequited love, for the tech stocks which I never bought. As I get older it turns out I may be writing a safety manual.

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Re: AA if you were just starting out again

Post by indexonlyplease » Fri Sep 22, 2017 5:46 am

When I started investing in my 457 plan in 1985 the talk was only about stock mutual funds. Never heard anyone talk about bonds until I found this site 3 yrs ago. So my only choices were picking one fund from each asset large, small, mid and international. That is all I knew.

If I had to do it all over I would do the same AA 100% stock funds but with index funds if they were offered.

Now I enjoy the 3 fund portfolio thanks to this site.

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Re: AA if you were just starting out again

Post by Compound » Fri Sep 22, 2017 5:49 am

I found this prompt amusing for my situation.

When I started out investing I had no idea what an asset allocation even was. When I first became eligible for a 401k and started contributing to it, I picked funds largely based on what sounded good at the time without any thought as to a comprehensive portfolio strategy. I eventually learned about asset allocation and shifted strategies.

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Re: AA if you were just starting out again

Post by indexonlyplease » Fri Sep 22, 2017 5:59 am

stemikger wrote:
Thu Sep 21, 2017 5:23 am
I would stop second guessing my plan and stick with it instead of jumping around so much.

Possibly 60/40 for life and never even look at it. That's what I'm doing now, but it took me this long to get here.

I never invested in international funds, that is something I would not change. I'm happy I listened to John Bogle, it was one less thing I had to worry about.

Here is a thread I started a while back on that concept. Vanguard Balanced Index Fund from Cradle to Grave.

viewtopic.php?t=164521
You have a good point on the balance fund. My thought for my 21 yr old son when he started working was the target dated fund in his Roth IRA. Why, my thinking was how can I go against the Pros at Vanguard. They set up this fund for his age and made it really easy to invest in just one fund. But who knows what the future returns will be. So, I decided to follow their plan. I guess he will have to see what happens in 40 years.

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Re: AA if you were just starting out again

Post by DaleMaley » Fri Sep 22, 2017 6:58 am

I started out investing in 1979 with 100:0 AA, then 90:10 around age 40, then 60:40 age 50 and into retirement.

In retrospect, I would not change my AA versus age if I did it over again.

Spending less than you earn and investing the savings each month is probably more important to most people verses the age and AA glide path.
Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. – Warren Buffett

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Re: AA if you were just starting out again

Post by pkcrafter » Fri Sep 22, 2017 2:03 pm

Toons wrote:
Thu Sep 21, 2017 7:30 am
I would have done very little if anything different. :happy
What was your original AA and how has it changed since then?

Paul
Last edited by pkcrafter on Fri Sep 22, 2017 2:47 pm, edited 1 time in total.
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Re: AA if you were just starting out again

Post by pkcrafter » Fri Sep 22, 2017 2:20 pm

asif408 wrote:
Thu Sep 21, 2017 12:57 pm
I would change it, but that has been based on experience.

It was good for me to see and experience the bear markets in foreign developed and emerging markets stocks and commodities since 2011, and understanding the emotional difficulty in buying more of something while it is going down (it did feel bad initially doing it) and then to keep seeing it going down for a while and even buying more, or over rebalancing. This rebalancing act has finally started to pay off in 2016 & 2017 for foreign, and it's nice to see the buy low/sell high concept work in real time.

I was investing in 2007-2009 during the financial crisis but wasn't paying as much attention as I have in the last 4-5 years, so I didn't experience all of the emotional swings. But I understand by not doing nothing during that time I probably did ok (of course, I would have been smarter rebalancing, but my mind was elsewhere and I didn't care about those types of things at the time). And I actually had most of my money in Target Date type funds, so even then before I had much knowledge, I made ok selections and had some basic understanding of diversification.

So I'm not sure I would trade those experiences, they've taught me a lot. I'm also glad I made small mistakes with small amounts of money, I think that was beneficial. I'm not sure questionnaires help much without some level of experience. It's sort of like asking a college student with no work experience how they work under pressure. They can give examples from school, but with any actual job experience they don't really know how they will react in those situations.

I think the concept of starting on the more conservative side early and then adjusting up after a correction and/or bear market (if you feel you have a higher risk tolerance) it the best way to go if you don't have any investing experience.
Thanks, lots of good feedback.

I also think starting with a somewhat conservative AA is a good idea, but there are some posters who would not agree. We have 4 who started with, and stayed with, 100% stock, and who's to tell them they were wrong. We also have some who learned the hard way that a very high stock allocation was not a good choice for them.

You make a good point about questionnaires too. I think the problem with them is the tests are taken when the investor is not under stress and may even be a bit pumped up by recent returns or just the idea that they are working to make some money off of investments. the fact that so many individual investors bail in a hard fall tells us that their AA was too risky or they lacked some fundamental information about volatility and market falls.

I guess what I'm concluding from the replies is that it's difficult to choose the "right" amount of risk to take. There is a lot of information available that did not exist 25 years ago, but information alone may not be enough to select the optimal AA for any one individual. It's also true that any reasonable AA, when starting out, may not be as important as disciple and savings rate. It's probably not wise to suggest 100% stock to a new investor even if the person recommending it has no problem with being 100%, because most investors won't be able to handle that much loss, even if only temporary.



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: AA if you were just starting out again

Post by sco » Fri Sep 22, 2017 11:11 pm

at 20 100 Equities and 0 Bonds. At 40 I am 80/20 ish.. Depends what you call a bond (could be less)

I could see it going to 60/40 or extreme 40/60 in retirement.

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Re: AA if you were just starting out again

Post by heyyou » Sat Sep 23, 2017 12:15 am

I wish that better allocating was all that I needed in my late 1970s and 1980s investing.

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Re: AA if you were just starting out again

Post by digarei » Sat Sep 23, 2017 5:55 am

pkcrafter wrote:
Wed Sep 20, 2017 6:41 pm
I'm wondering just how good new information is in choosing an asset allocation (AA) vs experience. So, if starting all over again, would you use the same AA as you had before, or would you change it? What has experience taught you about risk and AA? Are the available information and the risk questionnaires really useful for creating an AA, or does it take hard knocks?


Paul
Whether risk questionnaires are "really useful" could be debated forever but they're useful enough given their limitations: a small number of constrained input variables effectively restricts the range and number of possible outputs—at least partly by design, I think. The results are not exactly 'one size fits all' but are like variations on a theme revealed early in the first movement of a symphony. I came late to investing and knew soon enough to discount the results of questionnaires that weren't asking me the right questions—"ahh, too many assumptions. they think because I said X that I'm going to need Y but they don't know about Z".

However, in retrospect, the experience did serve to accelerate my learning curve. I developed a more thorough understanding of asset allocation to ensure that I wasn't entirely wrong in my contrariness. The recommendations of risk questionnaires may have also anchored my choice if unconsciously.

Whatever "experience has taught me about risk and AA" may be not be valid for others or could just be flat-out wrong, for most. I haven't been investing long enough to know whether I have been lucky or smart—and I use the latter term euphemistically. Not enough data since the capital markets were formed to provide overwhelming support for any specific allocation, 60/40, 30/70... some assurance, yes--mostly from recent decades or a century, at most.

Would I change my AA, looking back? The answer is simpler here: I wouldn't change it as much (as I did in those early years). I would start with somewhere between 80% and 100% equities, consisting of 1/3 C. international and 2/3 C. US stock in ETFs or funds. The bonds, a mix of durations and credit worthiness, would include a large proportion of high quality government issue, up to a third of a cup foreign debt and just a pinch of high yield. They, like the stocks, are confined to mutual funds, then placed into a preheated 350°F. oven and baked—for the rest of my life.

It's a good recipe: Buy, hold and bake. That's it! :annoyed


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Re: AA if you were just starting out again

Post by DaftInvestor » Sat Sep 23, 2017 6:05 am

I don't think I knew what asset allocation was when I was starting out. I simply picked some "hot" mutual funds in my 401k (got lucky with picks like fidelity Magellan- but not so lucky with some others) and then a bunch of misc stocks in taxable. I went with the silly "buy companies you know and understand" mantra for stocks so bought a lot of tech stocks (since I worked in that area) and did things like: when I bought my first home and bought a Toro lawn mower I bought some of their stock to go along with it.

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Re: AA if you were just starting out again

Post by oldcomputerguy » Sat Sep 23, 2017 6:41 am

When I was starting out in my 401(k), there were no good resources to learn just how one should allocate one's investments (this was over 30 years ago). Someone somewhere along the line (likely from the fund provider) suggested an allocation, and not knowing anything to the contrary, I went along. This was back when Vanguard's S&P500 index fund was called "Bogle's Folly", so index funds were not widely available. Heaven alone knows what I was investing in, or how much expense I was paying.

I would certainly have done things differently "if I had known then what I know now". The original suggestion (which, sadly, I realized later had been in place in every bear market and correction since 1985 with no rebalancing) was 100% stock. Back then, in my late twenties, that was probably okay, but somewhere along the line I'd have certainly transitioned to a 60/40 mix. I only wish I could have educated myself sooner.
Anybody know why there's a 20-pound frozen turkey up in the light grid?

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Re: AA if you were just starting out again

Post by bayview » Sat Sep 23, 2017 8:12 am

(1) I would have started earlier.
(2) I would have used Roth IRAs more in contrast/ in addition to traditional 401k and TSP.
(3) I might have been heavier in stocks, but still at least 10% fixed initially, dialing it back over the years, although I'm not particularly unhappy with what I did.
(4) Same funds, assuming that they had been available then.
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Re: AA if you were just starting out again

Post by bayview » Sat Sep 23, 2017 8:16 am

oldcomputerguy wrote:
Sat Sep 23, 2017 6:41 am
Anybody know why there's a 20-pound frozen turkey up in the light grid?
oldcomputerguy, I just have to ask about your signature. :D What provoked that question? And did you ever find out how the turkey got up there??
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: AA if you were just starting out again

Post by Fallible » Sat Sep 23, 2017 9:04 am

oldcomputerguy wrote:
Sat Sep 23, 2017 6:41 am
When I was starting out in my 401(k), there were no good resources to learn just how one should allocate one's investments (this was over 30 years ago). Someone somewhere along the line (likely from the fund provider) suggested an allocation, and not knowing anything to the contrary, I went along. This was back when Vanguard's S&P500 index fund was called "Bogle's Folly", so index funds were not widely available. Heaven alone knows what I was investing in, or how much expense I was paying.

I would certainly have done things differently "if I had known then what I know now". The original suggestion (which, sadly, I realized later had been in place in every bear market and correction since 1985 with no rebalancing) was 100% stock. Back then, in my late twenties, that was probably okay, but somewhere along the line I'd have certainly transitioned to a 60/40 mix. I only wish I could have educated myself sooner.
Probably the wisest source of information ever for new investors, including asset allocation (suggested 25%/75% from a 50/50 baseline) was Ben Graham's classic book The Intelligent Investor, which first came out in the late '40s and with many revisions. Unfortunately, I did not learn of it until some time after I began investing in the market in the late '80s. If I had known of it, I might have gotten into a good market much sooner, rather than staying primarily with CDs.
Last edited by Fallible on Sat Sep 23, 2017 9:25 am, edited 1 time in total.
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Re: AA if you were just starting out again

Post by Small Law Survivor » Sat Sep 23, 2017 9:12 am

I'm 66 years old. If I could take a time machine back and speak to my 22 year old self (when I started investing, albeit small dollars), I would tell myself to be 100% stocks, from 1973 until today.

With a couple of exceptions in the late '90s, when I got a bit caught up in the dot com craze, every sale of a stock mutual fund has been, in retrospect, a mistake. :oops:

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Re: AA if you were just starting out again

Post by dbr » Sat Sep 23, 2017 9:22 am

We made the mistake of investing too conservatively early on. That was so long ago that I can't supply a number for asset allocation. If we had a do-over, I would start at 75/25 or 70/30.

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Re: AA if you were just starting out again

Post by oldcomputerguy » Sat Sep 23, 2017 10:35 am

bayview wrote:
Sat Sep 23, 2017 8:16 am
oldcomputerguy wrote:
Sat Sep 23, 2017 6:41 am
Anybody know why there's a 20-pound frozen turkey up in the light grid?
oldcomputerguy, I just have to ask about your signature. :D What provoked that question? And did you ever find out how the turkey got up there??
:)

That's a line from the Aaron Sorkin show "Sports Night" that aired back around 1999 on ABC, which was set in a fictional cable TV network whose flagship program was a late-night sports news show called "Sports Night" (which I always took to be a nod to ESPN's "Sports Center"). It's from the episode "Thespis". In that episode, the show's executive producer (played by Felicity Huffman) was overly anxious about having to cook Thanksgiving dinner for her family for the first time, and she had no idea how long a turkey took to thaw, so she came up with the genius idea of doing a "dry run on the turkey" by putting a frozen turkey up in the light grid near the hot studio lights and seeing how long it took to thaw. Unfortunately, as it thawed, the turkey began to drip onto the anchor desk, then during a commercial break it came falling down to land with a wet sloppy "SPLAT!" in front of the anchors and the producer.

(In fact I've been wondering if anyone would pick up on that and ask. :twisted: )
Anybody know why there's a 20-pound frozen turkey up in the light grid?

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