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

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

Post by grabiner » Sat Apr 14, 2018 4:42 pm

Age 50, 92% net stock (counting my mortgage as a negative bond), 84% gross stock.

And my target allocation is riskier than that, as I overweight small-cap, value, and emerging markets:

41% US stock: 1/8 large growth, 3/8 large value, 1/8 small growth, 3/8 small value
41% foreign stock: 3/8 large developed, 1/4 large emerging, 1/4 small developed, 1/8 small emerging (would be 1/4 each if costs and taxes were equal)
10% REITS: 1/2 US, 1/2 foreign
8% bonds: 16% bond fund, -8% mortgage
Wiki David Grabiner

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

Post by Leif » Sat Apr 14, 2018 5:19 pm

grabiner wrote:
Sat Apr 14, 2018 4:42 pm
Age 50, 92% net stock (counting my mortgage as a negative bond), 84% gross stock.
Pretty rich for a 50 year old. You must have a cast iron stomach with most of your needs met with current and future income.

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

Post by grabiner » Sat Apr 14, 2018 11:31 pm

Leif wrote:
Sat Apr 14, 2018 5:19 pm
grabiner wrote:
Sat Apr 14, 2018 4:42 pm
Age 50, 92% net stock (counting my mortgage as a negative bond), 84% gross stock.
Pretty rich for a 50 year old. You must have a cast iron stomach with most of your needs met with current and future income.
I do. This comes up on the forum every few years, and I always have one of the most aggressive allocations, because I know how I react to market declines. My first bear market was 2000-2002, when I lost a quarter of my 80%-stock portfolio. Having been through that bear market, I changed to a more aggressive portfolio. In 2007-2009, I knew that I would be able to react properly, and did this, selling bonds to go from 14% back to 10% in October 2008.

But I never recommend that anyone have a portfolio like mine. If my portfolio is right for you, then you know enough to ignore that advice.
Wiki David Grabiner

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

Post by CurlyDave » Sun Apr 15, 2018 1:29 am

Ben Mathew wrote:
Sat Apr 07, 2018 12:40 pm
I'm 41, wife is 43. Our allocation is 100% stocks : 0% bonds. We've stuck to that allocation since we started saving seriously in 2006. We plan to stick with it till we die. Our reasons for doing so:

- Stocks will almost certainly outperform bonds by a huge margin over horizons longer than 30 years. Small differences in expected returns compound to massive differences in expected value over a lifetime.

- We save enough that even if our portfolio drops by half, we'll have what we need to live on. The excess, if any, goes to the kids and charities after we die. So, the way I look at it, we're not taking the risk on stocks. The kids and charities are, and they can handle it! :happy

- Crash of '08 didn't cause us to panic and pull out, so we have confidence in our ability to stay calm and do nothing in a downturn.

- I very much dislike inflation risk. Unless short term or indexed to inflation, the value of bonds can be wiped out by inflation. I don't like the idea that a rotating cast of government officials will decide whether inflation should be 2% or 5% (or 10%!) over the next 30 years, and that my portfolio can be wiped out by their decisions. May be a black swan thing for me. I am less afraid of the diversified business risks of a diversified stock index.
+1 And from a much later stage in life.

We are 72/63 and our investable assets are 107% in stocks. (I have a small amount of margin.)

We also have an income floor from pensions and SS which is high enough that portfolio failure won't be a lot of fun, but we will survive it.

Also have rental real estate, which is another inflation hedge. I am not afraid of mortgage debt and have fixed rate mortgages on the rentals and the house. It is probably too late in life to add to the real estate portfolio, but I regret not doing it 2 years ago when a buying opportunity came up.

I consider inflation the greatest risk we face. All that "quantitative easing" has led to a substantial amount of pent up inflation which will come out as the economy picks up. I fight back by borrowing money now and paying it back in inflated dollars that my very nice tenants give me. They are young and have jobs with future raises.

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

Post by ThrustVectoring » Sun Apr 15, 2018 1:41 am

30, 100% stocks (excluding emergency fund in cash). Bonds suck over the long run and I spent my 20s digging myself out of student loan debt and getting my career set up rather than investing.

My glide path is going to be "start buying bonds at stock value == 18x annual expenses until getting 12 years of bonds".
Current portfolio: 60% VTI / 40% VXUS

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

Post by Nowizard » Sun Apr 15, 2018 10:43 am

We are in our 70's and have a 60/40 stock/bond ratio. There is sufficient flexibility within total assets as to allow a more aggressive approach than most would recommend.

Tim

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

Post by BC_Doc » Sun Apr 15, 2018 10:45 am

50-50 at age 51.
Was 90-10 until November 2016 when I realized I’d hit my magic number and effectively won the game.
I’m an ER doctor who continues to work despite now having enough to retire. I like what I do but it’s tiring and stressful so I’m not sure what age I’ll work to or when I’ll start working less shifts. Given this, it seemed sensible to lower the risk level in my asset allocation to a more conservative mix which is still getting me growth but will also preserve the nest egg in a market downturn.

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

Post by CFK » Sun Apr 15, 2018 11:40 am

32 years old

Emergency Fund/Short term investing goals: 20% Stocks, 80% bonds.

Long term investment:

17.5% Total Stock Market (VTI)
17.5% Small Cap (VB)
17.5% Developed Markets (VEA)
17.5% Emerging Markets (VWO)
30% Intermediate Bonds (BIV)

I change the allocation a little bit due to market pricing (i.e., a little more in bonds as 10year PE valuations increase). My thinking is that if the markets continue to rise, then I'll be fine because there is a heavy stock allocation. If prices collapse then as valuations decrease I'll buy more stocks. I don't expect that this will much affect my long-term returns - but by having money on hand to buy during market downturns, I hope to temper regret and not panic-sell. This also fits my contrarian nature.

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

Post by jadd806 » Sun Apr 15, 2018 11:46 am

100% stocks at age 24.

My monthly contributions to various accounts total about 5% of my portfolio currently. Therefore my contributions serve as an effective volatility damper, so I believe bonds would be redundant at this stage.

Once the scale starts to tip towards market volatility outweighing my contributions in a couple of years I'll have to re-evaluate.

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

Post by Sheepdog » Sun Apr 15, 2018 12:15 pm

I may be the most senior contributor on this thread. Present age is almost 85. Stock allocation has been based on my ability and need to take risk. At retirement at age 65 it was near 60% stock and all future income would be from SS and investments only. I only needed to invest for total return to maintain our standard of living and I needed my moderate investment amount to be reasonably safe.

At age 66 I changed my stock allocation to be 100 minus my age. I completed the gradual reduction to 23% stock at age 77 (2010) where it has remained. That conservative allocation has been more than adequate and reasonably safe as my annual average withdrawal of 4.58% has maintained our standard of living...plus the investment total has grown enough to cover our personal inflation.
My investment purpose was not to have ultimate growth but to live well and have enough growth as to not run out of funds. I will not.
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

rich126
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Re: What is your AA, given your age? and, Why?

Post by rich126 » Sun Apr 15, 2018 4:13 pm

I've never been invested in bonds. Either stocks or cash. Currently I'm 55 and plan to retire in 5 years.

When I was young I had mutual funds but gave up on them due to the taxes(cap gains) I had to pay even in losing years. Also once commissions started coming down to reasonable levels ($10) it made stock investing better for me.

Going forward I'm pondering what to do. Most likely I'm looking at putting a bunch of my savings in Vanguard and doing something like the 3 fund portfolio, Global Wellington, etc. I will still keep a portion at a brokerage and buy stocks such as BRK.

In the long run if I had been disciplined from the start, keeping everything in an index fund probably would have served me better. But I'm doing reasonably well. My mortgage will be paid off in 3 years, no other debts, one pension (provide about 25% of my needs), social security (25%) and my savings should be able to provide 50%. I have another small pension that I will get at 66 and consider that more of a cost of living adjustment. While you can always spend more, my needs are usually pretty simple and I'd rather retire by 60 and relax, then work until 65. I've seen too many people work too long and not be able to enjoy retirement due to health issues.

I wish I had kept records of my investing to see how I've done on my own. I did have records from 2012-2016 and I was doing better than index funds and last year was slightly below due to keeping more cash on hand.

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

Post by confusedinvestor » Sun Apr 15, 2018 4:56 pm

Grabiner,

Why do you have such a "high" stock % (84% gross) vs typical target date composite benchmark ? Is this b/c of your "need" to take risk ? or, your "willingness / iron stomach" to take risk ? or you know the stocks are safe in long run, given your experience on 2002+2008 and your understanding of capital markets ?

Thanks

ps: Thanks for all your contributions on this board

grabiner wrote:
Sat Apr 14, 2018 11:31 pm
Leif wrote:
Sat Apr 14, 2018 5:19 pm
grabiner wrote:
Sat Apr 14, 2018 4:42 pm
Age 50, 92% net stock (counting my mortgage as a negative bond), 84% gross stock.
Pretty rich for a 50 year old. You must have a cast iron stomach with most of your needs met with current and future income.
I do. This comes up on the forum every few years, and I always have one of the most aggressive allocations, because I know how I react to market declines. My first bear market was 2000-2002, when I lost a quarter of my 80%-stock portfolio. Having been through that bear market, I changed to a more aggressive portfolio. In 2007-2009, I knew that I would be able to react properly, and did this, selling bonds to go from 14% back to 10% in October 2008.

But I never recommend that anyone have a portfolio like mine. If my portfolio is right for you, then you know enough to ignore that advice.

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

Post by grabiner » Sun Apr 15, 2018 9:26 pm

confusedinvestor wrote:
Sun Apr 15, 2018 4:56 pm
Grabiner,

Why do you have such a "high" stock % (84% gross) vs typical target date composite benchmark ? Is this b/c of your "need" to take risk ? or, your "willingness / iron stomach" to take risk ? or you know the stocks are safe in long run, given your experience on 2002+2008 and your understanding of capital markets ?
I have long had the willingness to take the risk. But I also have the ability to take the risk, as I have a secure job situation, with a pension. And my only recent change to a more aggressive asset allocation was when my retirement became even more secure, as I bought a home (and thus will no longer pay rent in retirement). And despite being 50, I'm not that close to retiring.

The home is also the reason for the net asset allocation. The home will provide me a place to live at a low cost; however, for the next 11 years, I will be paying a fixed amount of money to the bank. Bonds which provide me enough money to make that mortgage payment cannot also contribute to my retirement needs, so I don't count them. When I bought the home, my bond holding was exactly equal to my mortgage, so I was 100% net stock; now, I am 92% net stock (and the mortgage is smaller as well).
Wiki David Grabiner

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

Post by yogesh » Sun Apr 15, 2018 9:39 pm

We are at approx 80/20. 39yrs. Using 120-Age in stock rule of thumb because I felt age in bonds was too conservative.
Emergency: FDIC | Taxable: VT | Retirement: TR2040

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