What is your AA, given your age? and, Why?

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bling
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Re: What is your AA, given your age? and, Why?

Post by bling » Sun Apr 08, 2018 11:08 am

i'm currently 70/30 stock/bond because i'm blindly following age in bonds for lack of a better alternative. i started investing seriously post 2008 so i don't really have any real test of my risk tolerance. the recent turbulence in markets has caught my attention, but more to just be on the watch out for TLH opportunities rather than freaking out and fleeing to cash.

i do aggressively save, and i'm currently in a HCOL area with high taxes, and plan to retire in a LCOL area with low taxes. that means eventually i'll seriously consider a "x years of retirement expenses in bonds" and "everything else in stocks" type of asset allocation.

ND Fan 1
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Re: What is your AA, given your age? and, Why?

Post by ND Fan 1 » Sun Apr 08, 2018 11:42 am

Wife and I are 33. We are 85/15, which breaks down to

Total US Stock- 30%
Small Cap- 10%
Small Cap Value- 20%
Total International- 15%
International Small- 10%
Bonds (G-Fund)- 15%

With the G fund, a pretty safe bond fund, I take additional risk on the equity side. I have real good job security and we live way below our means. So I'm actually thinking about maybe reducing to 80/20 and staying there for 15-20 years. Working towards a pension, so don't need income from investments for at least 40 years or so. Might as well capture the larger equity returns.

Jon H
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Re: What is your AA, given your age? and, Why?

Post by Jon H » Sun Apr 08, 2018 12:02 pm

:sharebeer
bling wrote:
Sun Apr 08, 2018 11:08 am
</s>
i'm currently 70/30 stock/bond because i'm blindly following age in bonds for lack of a better alternative. i started investing seriously post 2008 so i don't really have any real test of my risk tolerance. the recent turbulence in markets has caught my attention, but more to just be on the watch out for TLH opportunities rather than <B><s></s>freaking out and fleeing to cash<e></e></B>.<br/>
<br/>
i do aggressively save, and i'm currently in a HCOL area with high taxes, and plan to retire in a LCOL area with low taxes. that means eventually i'll seriously consider a "x years of retirement expenses in bonds" and "everything else in stocks" type of asset allocation.
<e>
</e></QUOTE>

What I am doing is not freaking out and fleeing to cash. Talking my rationale here is like trying to convince people to [deleted] replace their roof before it has a major failure (or a million other examples). Is that life timing? No, I'm not interested in trolling this board, instead providing another POV.

To those who might be interested in reading a rationale (or speculation if you will):
Market head winds:
1. PE valuations (fact): PE valuations are not really that low. Stock buybacks amongst tech and other high multiple companies have artifically lowered PE values have for a while. This will continue using tax break and overseas stash recoupment monies. This is not real earnings growth, but artificial PE deflation. So, PE multiples are actually expanded not as low as the superficial numbers show. It could be argued that cash is cash and it still represents capital in the company made in the past. No argument here, but it does not represent organic earnings.
2. Inflation (fact): Is increasing but slowly.
3. Interest rates (fact>speculation): The fed always overtightens because it cannot predict the market perfectly (nobody can).
4. Political risks (speculation): Tariffs, Syria, other. No need to elaborate.
5. Profit taking (fact>speculation): More and more "advisors" are recommending an increase in cash positions. During this earning season, expect to see some profit taking.
6. Late cycle/Market sentiment ((speculation): These factors are impossible to quantify but qualitatively are starting to turn. There is a bubble in the stock market and the bond market as a result of the Feds depression of interest rates. Eventually the bubble will pop.

For the bulls:
1. Political (fact): Monies for/deregulation of defense, oil, financials
2. Tax cut (fact): Already factored in. Unknown how huge it will impact.
3. Earning have been good (up to now) and expect to be growing for this and the next one or two quarters. Beyond that? Earnings guidance will vary with sector as it always does.
4. The market always goes up.

This does not mean the market will not continue to go up ... eventually. At what rate will it rise, who knows? Might the market stay down for a while, who knows?

My strategy is to invest in the dips. Yes, this is market timing.

I'm at 94.3% of my portfolio peak and would like to not "lose" another 20-30% during my accumulation phase (translation 2-3 years more work). There is little point to maintaining a 30% stock exposure (0.6-1 work year). That's why I'm selling any upticks. Why sell bonds? They too are in a bubble and are at some, albeit less risk than stocks

Flame away...
Last edited by Jon H on Sun Apr 08, 2018 12:48 pm, edited 1 time in total.
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UpperNwGuy
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Re: What is your AA, given your age? and, Why?

Post by UpperNwGuy » Sun Apr 08, 2018 12:32 pm

Mid-60s, single, retired, with living expenses fully covered by a pension. I have a fairly standard three fund portfolio.

AA is 60:40 because that's the amount of risk I am willing to take. I plan to glide to 50:50 in my 70s, then to 40:60 in my 80s and maintain that for the rest of my life.

You could describe my AA as age minus 25 in bonds (or 125 minus age in stock).
Last edited by UpperNwGuy on Sun Apr 08, 2018 12:37 pm, edited 3 times in total.

drk
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Re: What is your AA, given your age? and, Why?

Post by drk » Sun Apr 08, 2018 12:34 pm

Jon H wrote:
Sun Apr 08, 2018 12:02 pm
Flame away...
There's a lot going on here, but I'll opt to "flame" a particular part: this is off-topic for the thread. If you want to evangelize your thinking (or even discuss it, although you seem weary of doing so based on your comment about the Amish), you might consider creating your own thread.

Jon H
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Re: What is your AA, given your age? and, Why?

Post by Jon H » Sun Apr 08, 2018 12:46 pm

You’re quite right that was inappropriate. It’s going to be deleted.

The post otherwise is on topic n
Consider gain and loss, but never be greedy and everything will be alright (fortune cookie)

longinvest
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Re: What is your AA, given your age? and, Why?

Post by longinvest » Sun Apr 08, 2018 1:22 pm

rgs92 wrote:
Sun Apr 08, 2018 9:26 am
I'm surprised at the high stock allocations in this thread. If I use Firecalc, there seems to be a happy medium of about 60/40 stocks/bonds.
Isn't this the efficient frontier idea?

Maybe if you have enough in pensions or other income to deal with it it's OK, but I'm seeing older folks who need to draw income (or will soon) with 80%+ stock allocations.

Is this recency bias, meaning a focus on the big rally from the financial crisis 10 years ago?

I was at a get-together about 6 months ago with many people in their 40's saying confidently that they were in 100% stocks and I was thinking this was like the 1990s tech bubble all over again. (Or Partying like it was 1999...)
I think that very few people realize that one can easily retire with dignity while using a balanced portfolio all life long, during both accumulation and retirement. Simply reducing after-tax spending by a small percentage can increase savings by a significant percentage.

I've tried to explain this in the post: The Mathematics of Retirement Investing.

There's a cost to a balanced portfolio held all life long, which is lower overall spending. But, it comes with the huge benefit of a significantly more stable portfolio and, as a result, significantly more stable spending.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VLB/ZRR

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Leif
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Re: What is your AA, given your age? and, Why?

Post by Leif » Sun Apr 08, 2018 1:34 pm

In my 60s. Allocation is 50/50 now.

15 years ago I was at 70/30. I have been gliding down to 50/50 at 2016.
Last edited by Leif on Sun Apr 08, 2018 3:38 pm, edited 2 times in total.
Investors should diversify across many asset-classes so that whatever happens, we will not have all our investments in underperforming asset classes and thereby fail to meet our goals-Taylor Larimore

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Re: What is your AA, given your age? and, Why?

Post by daveydoo » Sun Apr 08, 2018 1:39 pm

confusedinvestor wrote:
Sat Apr 07, 2018 9:41 am

Without quantifying your need/ability/willing to take risk and/or goals, what is your AA (Stock:Bond), given your age? and why?
60:40-ish. The "why" is the forbidden first half of your question.
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

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Re: What is your AA, given your age? and, Why?

Post by Gnirk » Sun Apr 08, 2018 1:54 pm

I''m in my low 70's, retired for 10 years. My AA is 37% equities, 58% bonds (all muni's in taxable), and 5% cash. 90% is in a taxable account. This is my comfort level.

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Portfolio7
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Re: What is your AA, given your age? and, Why?

Post by Portfolio7 » Sun Apr 08, 2018 2:31 pm

I thought I'd posted, but don't see anything in the comments, so apologies if repeat:

About age 50. About 70/30 [or with a little more detail, 30/30/10/30 (US Eq/Int'l Eq/Real Estate/Stable Value Fund)]

I am still uncertain about glidepath. Probably 60/40 by around age 55. Maybe 40/60 when I retire. Then probably growing equity over time.

Edit: I've heard from 100 to 120 less age in stocks. I am pretty aggressive and am happy being near the extreme end of the range, roughly 120-age.
Last edited by Portfolio7 on Sun Apr 08, 2018 3:40 pm, edited 2 times in total.
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Cash is King
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Re: What is your AA, given your age? and, Why?

Post by Cash is King » Sun Apr 08, 2018 2:40 pm

All,
I highly recommend reading the following article/blog: https://www.joshuakennon.com/pay-attent ... portfolio/

The last part of the article titled: "Keep It Simple, Think Independently, and Don’t Let People Bully You Into Things You Don’t Want To Do" is great advice.

Especially the part where he says " Ignore people who have an emotional tantrum when you deviate from their preferred system"

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aj76er
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Re: What is your AA, given your age? and, Why?

Post by aj76er » Sun Apr 08, 2018 2:45 pm

Age: 42
AA w/o emergency fund: 72/28 Stock/Bond
AA w/ emergency fund: 67/33 Stock/Bond

My preference is AGE-15 (although my emergency fund puts me closer to AGE-10).

I maintain a large emergency fund because my job is in a niche technology field and I've never had much job security (and not confident about getting a comparable position if needed). However, in another few years, I expect to have a large enough taxable asset base such that I won't really need the emergency fund anymore, at which point I'll simply add it to the portfolio.

Once in retirement, I don't see much point in maintaining a glide path, so I'll probably just stick to a fixed AA based on need/willingness/ability to take risk. However, in accumulation phase, a glide path seems like a simple (automated) way to harvest some equity gains over time.

My equities are split as 67% World (includes U.S.) + 33% U.S. implemented in terms of Total U.S. Stock Market and Total xU.S. Stock Market funds. I feel like this allocation will track world growth trends while limiting currency risk.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

bearcub
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Re: What is your AA, given your age? and, Why?

Post by bearcub » Sun Apr 08, 2018 3:36 pm

50/50. 58 years old. May lower stock allocation soon. I"m ok with the split right now.

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burt
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Re: What is your AA, given your age? and, Why?

Post by burt » Sun Apr 08, 2018 5:55 pm

Age 62, retired.
30/70 stock/bond
Yes, conservative.
I'm not young, I'm not rich... I just want to maintain my modest but comfortable standard of living.

burt

remomnyc
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Re: What is your AA, given your age? and, Why?

Post by remomnyc » Sun Apr 08, 2018 8:01 pm

80/20 until i realized I was almost financially independent
70/30 2 yrs before retirement
55/45 at retirement (this year in early 50s)
60/40 at age 60
Not sure what I'll do afterward.

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Taylor Larimore
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Re: What is your AA, given your age? and, Why?

Post by Taylor Larimore » Sun Apr 08, 2018 8:32 pm

confusedinvestor:

My current asset-allocation is approximately 40% bonds (money that I cannot afford to lose) and 60% stocks.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

hmw
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Re: What is your AA, given your age? and, Why?

Post by hmw » Mon Apr 09, 2018 12:59 am

confusedinvestor wrote:
Sun Apr 08, 2018 12:15 am
Ditto, Wife and I are both 43. We were 85/15 until today. We are gliding back to 78/22 (120 - Age in Stocks), as our "need" to take risk decreased with concerns on human capital (our jobs, continue to keep jobs and health issues)

May I ask how you came up with 85/15 ?
hmw wrote:
Sat Apr 07, 2018 11:12 pm
Wife and I are both 43. We are at 85/15.
I don’t have any data back up my 85/15 AA. I am planning to retire in about 12 years, and I think my AA will be at 70/30 when I retire. So will gradually decrease equity over the next 12 years.

DetroitRick
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Re: What is your AA, given your age? and, Why?

Post by DetroitRick » Mon Apr 09, 2018 8:32 am

Cash is King wrote:
Sun Apr 08, 2018 2:40 pm
All,
I highly recommend reading the following article/blog: https://www.joshuakennon.com/pay-attent ... portfolio/

The last part of the article titled: "Keep It Simple, Think Independently, and Don’t Let People Bully You Into Things You Don’t Want To Do" is great advice.

Especially the part where he says " Ignore people who have an emotional tantrum when you deviate from their preferred system"
Extremely interesting blog, one which I've never seen before. Great perspectives on this issue and others (loved his Kodak case study). Especially useful for those of us who pay attention to portfolio construction.

JW-Retired
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Re: What is your AA, given your age? and, Why?

Post by JW-Retired » Mon Apr 09, 2018 8:59 am

Taylor Larimore wrote:
Sun Apr 08, 2018 8:32 pm
My current asset-allocation is approximately 40% bonds (money that I cannot afford to lose) and 60% stocks.
Likewise ...... plus wife and I don't re-balance when stocks are down. That means a comforting thing about our 60/40 AA is if equities lose 50% of their value like in 2008, we still have 70% of our investment money. That's a breeze, it just reduces it to about what it was in 2013 when we retired.

If stocks drop to 10% like in 1932 it's still half our current nest egg, which we could also live on with a little belt tightening.
JW
Retired at Last

LiterallyIronic
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Re: What is your AA, given your age? and, Why?

Post by LiterallyIronic » Mon Apr 09, 2018 9:09 am

confusedinvestor wrote:
Sat Apr 07, 2018 9:41 am
Folks,
1. Without quantifying your need/ability/willing to take risk and/or goals, what is your AA (Stock:Bond), given your age? and why?

2. How do you glide your AA as you approach financial independence (not retirement) ?

3. How does Vanguard/Fidelity/(everyone) typically follow "Target Retirement Year Composite Index" AA/glide which is 120 - Age in Stock ?

Love to get some theoretical inputs.
1. 90% stock / 10% bonds. Age 34. Why? Because that's the most aggressive Target Retirement Fund that Vanguard offers. I'd be at 95/5 if I could.

2. I'm actually probably going to remain at 90% stock until retirement and then immediately drop it down to maybe 70/30? Haven't really thought about it.

Random Walker
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Re: What is your AA, given your age? and, Why?

Post by Random Walker » Mon Apr 09, 2018 9:45 am

JW-Retired wrote:
Mon Apr 09, 2018 8:59 am
Taylor Larimore wrote:
Sun Apr 08, 2018 8:32 pm
My current asset-allocation is approximately 40% bonds (money that I cannot afford to lose) and 60% stocks.
Likewise ...... plus wife and I don't re-balance when stocks are down. That means a comforting thing about our 60/40 AA is if equities lose 50% of their value like in 2008, we still have 70% of our investment money. That's a breeze, it just reduces it to about what it was in 2013 when we retired.

If stocks drop to 10% like in 1932 it's still half our current nest egg, which we could also live on with a little belt tightening.
JW
By not rebalancing, it seems you are sort of considering your bond allocation a liability matching floor. Two separate portfolios: a liability matching portfolio and a risk portfolio. The more I learn, the more wisdom I see in this approach.

Dave

rg422
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Re: What is your AA, given your age? and, Why?

Post by rg422 » Mon Apr 09, 2018 10:15 am

33/32. Our investments are 100% stocks - 80% US, 20% international. Our plan is to start getting into bonds once we reach 50.

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stemikger
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Re: What is your AA, given your age? and, Why?

Post by stemikger » Mon Apr 09, 2018 2:10 pm

I turn 54 this June, my wife is 58

1. 401K is the bulk of my savings. 65/35 Vanguard Institutional Index Fund and Blackrock U.S. Debt Index Fund
2. I hold a small amount in my TIRA all in the Vanguard Balanced Index Fund (I look at this as a holding place for when I retire)
3. Upon retirement, it all goes in my TIRA for life
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

Artisan
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Re: What is your AA, given your age? and, Why?

Post by Artisan » Mon Apr 09, 2018 2:38 pm

We are 60% stock + or - 5 %
(15-20% in international),
40% fixed income assets (bond funds, stable value funds, CDs and cash)

I'm early 50's and my husband is late 50's. He retired last year and I will work another two years, then do part time for a few after that.

His pension will cover > 100% of our expenses once I retire until social security kicks in to supplement it.

May increase stock percentage once we reach our 70's.

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Re: What is your AA, given your age? and, Why?

Post by goodenyou » Mon Apr 09, 2018 6:22 pm

52yo. Wife 50yo. 62/28/10. S/B/Cash. Paid off house. 2 in college, one more in 3 years. Serious cash burn time even with fully funded 529 plans. Holding a lot of cash for a new "retirement" house that will cost twice as much as the house I am trying to unload. At current savings rate and AA, I figure that a (significant) drop in market (stocks or bonds) won't derail full retirement in 5-10 years. Have shortened bond duration to less than 2 years recently. Working toward flex-retirement in a year or 2.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

PhilosophyAndrew
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Re: What is your AA, given your age? and, Why?

Post by PhilosophyAndrew » Mon Apr 09, 2018 6:27 pm

confusedinvestor wrote:
Sat Apr 07, 2018 9:41 am
Folks,
1. Without quantifying your need/ability/willing to take risk and/or goals, what is your AA (Stock:Bond), given your age? and why?

2. How do you glide your AA as you approach financial independence (not retirement) ?

3. How does Vanguard/Fidelity/(everyone) typically follow "Target Retirement Year Composite Index" AA/glide which is 120 - Age in Stock ?

Love to get some theoretical inputs.
I’m confused by your first question. Are you assuming that need, ability, and willingness to take risk should play no role in justifying one’s AA?

I’m 52 and 80/20, but am not sure that I can explain my reasoning without appealing to the concepts and ability and willingness to assume equity risk.

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Rob54keep
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Re: What is your AA, given your age? and, Why?

Post by Rob54keep » Mon Apr 09, 2018 8:23 pm

I am 64 and wife is 60 (both retired but still waiting for SS). We are at about 40% stocks / 60% Bonds. Total of 5 funds. Why? I really don't need (or want) to take more risk than needed. I have two funds that I kept from my old 401k, a Stable Fund and PrimeCap. Both fairly low ER's and useful in my Portfolio.

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Re: What is your AA, given your age? and, Why?

Post by Shamb3 » Mon Apr 09, 2018 10:35 pm

Context matters for my answers. I am investing 35-40% of my gross income each year to take a shot at making it to FI by my early 50s (15 years from now). So things like a glide path are very compressed. There is not much time to compound. High contribution rates change some of the math.

1) 100% index funds / 0% bonds. Why? The next 3-5 years investments will each be between 7-18% the size of my portfolio. Missing more bull market would hurt me more right now than a crash where I would be pumping lots of money in at a discount.

2) Ideally a pretty steep glide to 60/40 over 3-5 years. I want to negate sequence of returns risk. Then a glide back out to 70/30 or 80/20 over 10 years. I will re-evaluate every year and may start buying bonds earlier if I think it is to my advantage.

3) I dislike target retirement funds because you can not re-balance bonds into stocks and stocks into bonds.

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Re: What is your AA, given your age? and, Why?

Post by confusedinvestor » Tue Apr 10, 2018 12:31 am

Excellent point, I just wanted to get a mean AA of BH cohort of my age (40-45 yrs) vs what AA is typically designed by TDF Composite of my age - Note TDF doesnt know the need, ability and willingness of anyone investing in them, except the "target" Ret age.

Need can measured but willingness and ability is hard to quantify and/or baselined. If you have any suggestion on measuring those, I'd love to know..
PhilosophyAndrew wrote:
Mon Apr 09, 2018 6:27 pm


I’m confused by your first question. Are you assuming that need, ability, and willingness to take risk should play no role in justifying one’s AA?

I’m 52 and 80/20, but am not sure that I can explain my reasoning without appealing to the concepts and ability and willingness to assume equity risk.

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Re: What is your AA, given your age? and, Why?

Post by FiveK » Tue Apr 10, 2018 12:45 am


Redfactor
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Re: What is your AA, given your age? and, Why?

Post by Redfactor » Tue Apr 10, 2018 12:55 am

Early 30's

100% equities
20% International
6% tilt to small cap


I have a lot of time to allow for the market to recover when it drops and I have a stable career with a pension. I feel I can shoulder the higher risks at the present moment to allow for greater rewards 25 years from now.

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Re: What is your AA, given your age? and, Why?

Post by Dead Man Walking » Tue Apr 10, 2018 1:12 am

My wife and I are septugenarians. Our portfolio is for long term care if needed and for our heirs if not. Our pensions more than cover our expenses. In fact our greatest problem is that our savings can not be tax-sheltered. Our current allocation is about 40/60 since we don't need to assume a lot of risk. Since I handle our investment portfolio and do any rebalancing that is needed, I have written instructions that tells my wife to transfer our IRA investments to Vanguard Target Retirement Income Fund and our taxable investments to Life Strategy Conservative Growth Fund if I die. Since she is not interested in investing, these transfers will allow the portfolio to be rebalanced to an appropriate asset allocation for as long as she lives.

DMW

confusedinvestor
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Re: What is your AA, given your age? and, Why?

Post by confusedinvestor » Tue Apr 10, 2018 1:50 am

FiveK, This helps, Thank you!
FiveK wrote:
Tue Apr 10, 2018 12:45 am
See Equity Glide Paths — Bogleheads versus Target Funds - Bogleheads.org and links therein for similar discussion.

msk
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Re: What is your AA, given your age? and, Why?

Post by msk » Tue Apr 10, 2018 3:02 am

Age 73, retired 18 years at age 55. COLA pension sufficient for comfortable lifestyle. Glide path:
Sold rental RE soon after retirement, into 100% stocks since (50% Global ETFs, 50% Individual Stocks). Last few years opportunistic selling of individual stocks into Global ETFs by free float market weight. Yes, market timing. Stopped playing with Options, but will resume if we have a 30+% market fall :mrgreen:
Why such slow conversion of individual stocks into global ETFs (individual stocks still 37% of total)? Just checked: my NW increased by 11.5% p.a. compounded over the last 18 years, despite giving away to charity more than my entire, cumulative COLA pension and cash flowing 2 kids through college. Must have been doing something right with those stock picks. Should not rock the boat impetuously, despite believing BH principles and steadily gliding into 100% global stocks ETFs.

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Re: What is your AA, given your age? and, Why?

Post by SGM » Tue Apr 10, 2018 3:56 am

Most of my investing years I have been 100% stock as I considered my work to be secure and never sold in a downturn. Currently at 70/30 in late 60s and retired. This does not include income producing real estate and other income streams. I may start adding a SPIA ladder after age 70 and am not taking SS until 70.

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Re: What is your AA, given your age? and, Why?

Post by BlackHat » Tue Apr 10, 2018 3:04 pm

1. Without quantifying your need/ability/willing to take risk and/or goals, what is your AA (Stock:Bond), given your age? and why?

I'm 100:0. All Total US Stock Market for equity. I'm 24. I hold enough cash to allow me to sleep well at night which I believe is the only point of bonds. I take my risk on the stock side. Once I have 250,000 of cash I'll buy some short term treasury bonds.

2. How do you glide your AA as you approach financial independence (not retirement) ?

I'm keeping it at 100:0. It's possible my sleep well at night cash may change but we'll see. It all depends on life situation and events.

3. How does Vanguard/Fidelity/(everyone) typically follow "Target Retirement Year Composite Index" AA/glide which is 120 - Age in Stock ?

I don't use that formula.
“Life is really simple, but we insist on making it complicated.” -- Confucius

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Re: What is your AA, given your age? and, Why?

Post by Mezzanine » Tue Apr 10, 2018 5:37 pm

AA: 100:0 Small/Value tilt

Age: 26

Because I have a long time horizon and have mostly just invested in tax advantaged retirement accounts which I don't plan to use for a long time.

Plan to hold at 100:0 until 33-35, at which point will evaluate feasibility of early retirement / semi-retirement plans (age 45-50) and stage of market cycle to determine how aggressively to start gliding.

If early retirement goals stay on track and if market cooperates I'll probably glide more aggressively than the "120- Age" rule.

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Re: What is your AA, given your age? and, Why?

Post by WhiteMaxima » Tue Apr 10, 2018 6:14 pm

75/25 Equity/Bond AA
Age 40

Use to be 100/0 so why change AA

We are at late bull, wage inflation is showing up, interest rate is going up.
After 10 year business cycle, equity value is already highly valued

Everything being said, I turned down my AA a bit. I am still saving 30% of my income into same AA. I will rebalance if market has a major correction to reflect the 75/25 AA.

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vectorizer
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Re: What is your AA, given your age? and, Why?

Post by vectorizer » Tue Apr 10, 2018 6:45 pm

I am a few days from age 60, retired a little over a year, and am currently 50:50.

I was on a 2-percentage-point glide to 50:50 since my mid-40s, and intend to be on a 1-percentage-point glide until 20:80 at age 90. (Not that I expect to even come close to 90yo.)

I guess I'm now on a 110-minus-age glide path. It always made sense to me for my portfolio to become more conservative as my remaining life gets shorter, but the best glide path is impossible to determine without knowing ones date of death -- which is of course the central problem in retirement savings and distribution.

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Re: What is your AA, given your age? and, Why?

Post by GAAP » Wed Apr 11, 2018 12:45 pm

I've done some more thinking about my past choices and what I would suggest to my children -- or do now if just starting out.

I came to realize that my issue with X-age is that it ties the allocation to my age, and only indirectly to my expected needs. I would be much happier with something that was based upon estimated years to retirement/FI -- or more generically, my need to draw from the portfolio. An age of 47 might mean 20 years to retirement for one person, 10 years for another, or even 3 years for some. Assuming a person desired a glide path of some sort, it would likely differ under those three scenarios.

I would probably now suggest something like 50% - Years-To-Need in Bonds. If you don't know enough to really say when the need will be, the full retirement age for Social Security might be a good start. We could argue about the 50%, but as livesoft noted earlier, anything from 40-60 could work -- do the math with the CSRI long term results, and you'll see that. If you're hoping to retire early, choose 40% instead of 50%, you'll need more growth up-front. If you can't save as much and choose a longer term, and you'll get a path that may help you get there faster than you expect. If volatility scares you, choose 60%. Regardless, adjust to meet your personal needs.

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Re: What is your AA, given your age? and, Why?

Post by Tamalak » Wed Apr 11, 2018 1:08 pm

Age 35. 100% stocks.

I agree with Warren Buffett that stocks are not just the best way to make money but also the best way to preserve your buying power.

The drawbacks of stocks are more obvious and dramatic than those of bonds/cash but I don't see them as worse.

The dollar lost 15% in the last 12 months. If stocks did that you'd see a giant bear and a screaming headline on CNBC. You'll NEVER see that for currency fluctuations.

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Re: What is your AA, given your age? and, Why?

Post by scone » Wed Apr 11, 2018 1:11 pm

30% stock, 55% intermediate Treasury bonds, 15% cash. Stock allocation divided evenly: large, small, domestic, international. Age 61, retired, about 46x income at current burn rate. Home paid off, no debt, taking widow's SS benefit.

For me, about 20% - 30% stock is the least stressful allocation (even less stress than all bonds), and that's what I want right now. The cash really helps with the 'sleep at night' aspect of staying the course, I find.
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore

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Re: What is your AA, given your age? and, Why?

Post by friar1610 » Wed Apr 11, 2018 5:14 pm

Tamalak wrote:
Wed Apr 11, 2018 1:08 pm
Age 35. 100% stocks.

I agree with Warren Buffett that stocks are not just the best way to make money but also the best way to preserve your buying power.

The drawbacks of stocks are more obvious and dramatic than those of bonds/cash but I don't see them as worse.

The dollar lost 15% in the last 12 months. If stocks did that you'd see a giant bear and a screaming headline on CNBC. You'll NEVER see that for currency fluctuations.
Could you elaborate on the statement regarding the dollar? With respect to what did it lose 15%?

Thank you,
Friar1610

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SeeMoe
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Re: What is your AA, given your age? and, Why?

Post by SeeMoe » Wed Apr 11, 2018 7:20 pm

AtlasShrugged? wrote:
Sat Apr 07, 2018 9:58 am
Answers below, I am in my early 50's.

1. 79/21.....with the 79 divided by 54% US and 25% international.
2. I am reducing equity exposure by ~2% each year, and increasing bonds. The plan is to be 60/40 by age 62, and 50/50 by age 67.
3. I don't use 120-age.
Sounds like a good plan. I kept a 60/40 AA until the RMD’s started just because our solid pensions are more than enough for us. Now we are 45/55 and the T-IRA’s are 100% bonds as suggested by a Vanguard CFP. Other bonds in the taxable folio are tax exempts, Plus index stock funds as well. May eventually go to an 40/60 AA in time.

SeeMoe.. :mrgreen:
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}

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Re: What is your AA, given your age? and, Why?

Post by harvestbook » Wed Apr 11, 2018 8:01 pm

Age 55, 90/10 with a modified Merriman portfolio (50/50 US/intl with small, value, and REIT tilts.)

No debt, so I have the ability to take more risk, and also started late, so I have the need to take more risk. Also, due to the nature of my work (writer), I have no retirement date to aim for. Most of my planning is built around age 65 simply for Medicare, and then for whatever age I take social security. However, my glide path is actually getting more conservative as my solo 401(k) is 80/20 LifeStrategy Growth and is the largest portion of my investing now.

Wife is 43 and is around 98/2 and her solo 401(K) is TargetDate 2060 so her bond portion slowly increases, but she'd be just as happy at 100 percent stocks. She's just now started her second career, self-employed, so basically we're aiming more for financial independence than "retirement" in the traditional sense so age is a secondary consideration.

If I had a pension or conventional career, I'd certainly plan differently, but this is where we are. I don't see ever being more than 20 percent bonds since we live pretty frugally.
I'm not smart enough to know, and I can't afford to guess.

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Re: What is your AA, given your age? and, Why?

Post by friar1610 » Wed Apr 11, 2018 8:27 pm

SeeMoe wrote:
Wed Apr 11, 2018 7:20 pm

Sounds like a good plan. I kept a 60/40 AA until the RMD’s started just because our solid pensions are more than enough for us. Now we are 45/55 and the T-IRA’s are 100% bonds as suggested by a Vanguard CFP. Other bonds in the taxable folio are tax exempts, Plus index stock funds as well. May eventually go to an 40/60 AA in time.

SeeMoe.. :mrgreen:
SeeMoe,

I'm in the same situation - both my wife and I are 100% bonds in our (quite modest) IRAs. Sometimes I think that we should juice them a bit by putting perhaps 20% in equities or switching to the Life Strategy Income fund (20/80). I'm curious if the Vanguard CFP recommended 100% bonds for you solely to maintain a desired AA? Or because he thought there was something inherently smart about 100% bonds in IRAs?

Like you, we get along fine on pension/SS. (The RMDs get reinvested in taxable or turned into QCDs.)

Thank you.
Friar1610

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Re: What is your AA, given your age? and, Why?

Post by Case59 » Wed Apr 11, 2018 8:56 pm

I'm 65, DW 60. Retired about six years ago. AA started at 65/35, but, having been fortunate to retire into the long-running bull market, I've let that drift up to 70/30 without significantly re-balancing. I have a potentially long horizon (my parents are alive and in their 90's, doing reasonably well), and per firecalc and other such back-testing, 70/30 is something of a sweet spot for long-horizon investing. We have enough cushion in our numbers to weather a steep down-turn (and I've never sold during all the down-turns of the past 30 years).

Stock portion is mostly made up of Vanguard Equity Income (probably a mistake, but as mistakes go, a fairly high-class one), Total Stock and Total International. Bond portion is mostly intermediate and L-T tax-exempt. No pension, and I took SS at age 62.

:sharebeer
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SeeMoe
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Re: What is your AA, given your age? and, Why?

Post by SeeMoe » Thu Apr 12, 2018 7:58 pm

friar1610 wrote:
Wed Apr 11, 2018 8:27 pm
SeeMoe wrote:
Wed Apr 11, 2018 7:20 pm

Sounds like a good plan. I kept a 60/40 AA until the RMD’s started just because our solid pensions are more than enough for us. Now we are 45/55 and the T-IRA’s are 100% bonds as suggested by a Vanguard CFP. Other bonds in the taxable folio are tax exempts, Plus index stock funds as well. May eventually go to an 40/60 AA in time.

SeeMoe.. :mrgreen:
g

SeeMoe,

I'm in the same situation - both my wife and I are 100% bonds in our (quite modest) IRAs. Sometimes I think that we should juice them a bit by putting perhaps 20% in equities or switching to the Life Strategy Income fund (20/80). I'm curious if the Vanguard CFP recommended 100% bonds for you solely to maintain a desired AA? Or because he thought there was something inherently smart about 100% bonds in IRAs?

Like you, we get along fine on pension/SS. (The RMDs get reinvested in taxable or turned into QCDs.)

Thank you.
The reasoning , by the advisor, for 100% bonds in the T-IRA’s is for less risk now that the accumulation period is over. I had a lot of The Vanguard Equity Income fund invested in mine, and it was a real good money maker as I recall. Didn’t want to part with it, but did as advised.we do the same investing the RMD’s in our taxable folio, keeping the 45/55 AA in mind. (I count the Prime MM as a part of the bonds for simplicity. It’s about 1.3% of the 55% in bonds.)

SeeMoe.. :D
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}

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Re: What is your AA, given your age? and, Why?

Post by TierArtz » Thu Apr 12, 2018 8:28 pm

The DW and I are both mid-50s and about half our projected retirement expenses are covered by my pension.

This week, I sold all the bonds in our Roth IRAs (all of them were international) to put us at roughly 72S/28B. We were at 60/40 last week. The myriad posts on keeping bonds out of Roth IRAs and that international bonds are not critical were the information that prompted me to act. I'll work the bond allocation toward age minus 20 in bonds via contributions to my 100% total bond index 401(k). If it's clear I'm never going to get there, I'll look into putting municipal bonds in our taxable account if we ever have any extra cash. But, for now, we've joined the 3-Index club.

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