Ok reasons for a 37 year old to have a 60/40 mix?

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Dottie57
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by Dottie57 » Fri Dec 01, 2017 2:59 pm

fire5soon wrote:
Mon Jun 12, 2017 11:32 am
Not too far from age in bonds either. Don't feel pressured to do what everyone else does. It's your money.
+1

I think 60/40 is a good all around allocation. Do what YOU want.

btownguy
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by btownguy » Fri Dec 01, 2017 4:22 pm

If you've already "won the game" absolutely it's fine. No need to go 90/10 when you already have a significant portfolio. Now your definition of significant...that's up in the air. :sharebeer

Admiral
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by Admiral » Sat Dec 02, 2017 7:12 pm

BashDash wrote:
Fri Dec 01, 2017 1:53 pm
OP here. The fact that we will be a dual pension household pension in retirement makes me feel no reason to take on unnecessary risk. Yes, pensions are not guaranteed but ours is stable and should be enough to provide for all of our expenses. I have read others on the board who would take more risk due to this but to me it feels like it is best to just stay at 60/40. Have been using Vanguard Balanced in our Roth while using 60/40 with some international in all other retirement tax deferred accounts that automatically rebalance quarterly back to 60/40. Plan on opening the envelope at age 55 and being surprised.
Just for clarification: You are 37 and you and spouse ALREADY have fully vested pensions that will cover ALL your expenses in retirement? This seems almost impossible. You've been working 16 years and have enough pension credits? You either have very low expenses or you are counting on a pension that is not yet fully vested/guaranteed. If this is really the case then 60/40 seems fine, but it seems like a very unusual situation. Perhaps you don't have the expense of children...?

Shikoku
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by Shikoku » Sun Dec 03, 2017 12:10 am

Vanguard did a study titled Recessions and Balanced Portfolio Returns
https://personal.vanguard.com/pdf/icrrbp.pdf
and found that a 50/50 "portfolio's returns ... are not drastically different in recessionary periods than in expansionary periods, in spite of its exposure to stocks." Your portfolio is not too far off.
"I don't worry too much about pointing fingers at the past. I operate on the theory that every saint has a past, every sinner has a future." -- Warren Buffett

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zonto
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by zonto » Mon Dec 04, 2017 11:35 am

Piggybacking on the above post, Vanguard released a white paper last week titled As U.S. stock prices rise, the risk-return trade-off gets tricky. Not only does it make the case for global diversification, I though the final paragraphs re: the outlook for balanced portfolios were especially relevant for this thread.
[A] global balanced 60% stock/40% bond portfolio has similar potential for return as U.S. equities, with much lower downside risk. Although global bonds are likely to have muted returns themselves, low correlation with equities provides a ballast during times of equity market turmoil, making diversification the only free lunch.

Given current valuations, risky portfolios appear to offer low return with even-higher-than-usual odds of loss, while a global balanced 60% stock/40% bond portfolio offers an unusually compelling trade-off. The next few years could be challenging for investors, who may have to navigate an environment with low returns and a compressed equity risk premium. Decisions around saving more or spending less will be as important as staying diversified and controlling costs. Adhering to investment principles such as long-term focus, disciplined asset allocation, and periodic portfolio rebalancing will be more crucial than ever before.
“Diversification is about accepting good enough while missing out on great but avoiding terrible.” - Ben Carlson

randomguy
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by randomguy » Mon Dec 04, 2017 11:46 am

Shikoku wrote:
Sun Dec 03, 2017 12:10 am
Vanguard did a study titled Recessions and Balanced Portfolio Returns
https://personal.vanguard.com/pdf/icrrbp.pdf
and found that a 50/50 "portfolio's returns ... are not drastically different in recessionary periods than in expansionary periods, in spite of its exposure to stocks." Your portfolio is not too far off.

A 2011 paper that leads off with ". Given the rising risk of a renewed U.S. recession,
investors may wonder about the merits of a more “defensive” posture for their
broad portfolio. ":)

I am a bit suspect of the idea that international has lower chances of 10%+ corrections. I sort of figure the odds of those happening are about the same (i.e. when the US crashes 20%+ I expect the rest of the world to follow) but international will win on the back side (i.e. it returns 15% while the US returns say 7%). But my crystal ball is about as accurate as anyone elses. Just wish I had finished switching from 30% to 40% international before this year started:)

snowox
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by snowox » Mon Dec 04, 2017 11:56 am

As others stated I think your reasons were great!

I am 53 and retired and currently 57 stocks/33 or 35 Bonds and the rest cash needing to re-balance to be closer to 60/40 as well . To much cash being a little guilty of market timing on income accumulation do to nerves of being retired being honest.

WhiteMaxima
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by WhiteMaxima » Mon Dec 04, 2017 12:14 pm

A little conservative but it's ok. You still have 30 years of time to withdraw your investment. There will be at least couple of recessions you will see. At 37, 80/20 is not too risky IMHO.

azanon
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by azanon » Mon Dec 04, 2017 3:48 pm

BashDash wrote:
Mon Jun 12, 2017 11:29 am
1) Helps me sleep at night easily.
2) If the stock allocation was higher ( 70/30 or 80/20 ) I don't feel confident on when in my life I would change it to a lower stock allocation.
3) I do feel confident holding 60/40 through a major downturn.
4) I do feel comfortable doing a change to 40/60 on year of retirement ( accompanied by a pension. )
5) I don't want to use a Vanguard target fund that includes international bonds which also carries a higher expense.
6) I feel it gives me exposure to the equity market while still giving me a smooth ride with the bonds.
I don't think you have anything to apologize for. If you can sleep easy at night with a 33% overweight of stocks, relative to the global market portfolio, you are already showing strong risk tolerance, AFAIK (A GMP has about 45% equities, give or take).

Are you really concerned about the "higher expense" of international bonds? By expense, you have to mean maybe 10 extra basis points (peanuts), and by cutting them out, you're cutting out (measured by size) the largest global asset class.

You're expecting a smooth ride with a 60/40? I'd do a little history checking on that. Going on memory, a 60/40 lost about 30% top to bottom either in 2000-2003, or 07-09 (or both). But again, one has to expect that over-weighting stocks. But what's smooth or not is ultimately relative to the person's senses. To me, a 30% drop isn't smooth though.

Don't get me wrong, I like stocks and wouldn't even consider a portfolio without them. But their wonderful return has a corresponding risk level. It's not a free lunch; you're paid for the risk, and not really any extra return/unit of risk relative to less risky choices.

Moonross1
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by Moonross1 » Mon Dec 04, 2017 9:18 pm

Dec 31, 1999-Dec 31, 2009 the S&P 500 produced -.95% including dividends. A 100% equity position was a loser and bonds did quite well during the period. I don't know whether 40% bonds is right but some bonds might be a good idea given the above. Never know...

n00b590
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by n00b590 » Tue Dec 05, 2017 12:46 am

livesoft wrote:
Mon Jun 12, 2017 11:59 am
In this post, I did a Portfolio Visualizer run comparing an 80/20 LifeStrategy fund and a 60/40 LifeStrategy fund for the 20-year time frame 1995 to 2015. The difference was about 0.2% CAGR per year. Ha!
The tax drag alone on a bond fund can cost upwards of 1% a year vs equities in the higher tax brackets...

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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by livesoft » Tue Dec 05, 2017 6:47 am

^Right. One should still invest tax-efficiently whether one has an allocation of 60/40 or 80/20 or SS/BB.
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BashDash
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by BashDash » Fri Sep 14, 2018 12:15 pm

OP here. Oh no! I just read an age in bonds thread and am getting the urge to tinker. Figure we will both have two pensions (NYSTRS well funded). Has anyone ever been in this situation and resisted the urge. Or maybe it is a good thing to make this change?

chevca
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by chevca » Fri Sep 14, 2018 12:43 pm

The thread is over a year old, so you're 38 now, yes? Are you thinking and asking about going from 60/40 to 62/38? Why bother... or, go for it... it doesn't matter much with that small of a change.

I'd just leave it at 60/40.

maj
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by maj » Fri Sep 14, 2018 1:54 pm

Is the OP invested in the Balanced Index Fund? Or a managed fund?
peace

WhiteMaxima
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by WhiteMaxima » Fri Sep 14, 2018 2:02 pm

60/40 is a forever AA for any age group. It is perfect fine. If you are more risk taken, you can go 80/20. I even see many BH here have 100/0 AA.

Thesaints
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Re: Ok reasons for a 37 year old to have a 60/40 mix?

Post by Thesaints » Fri Sep 14, 2018 2:05 pm

BashDash wrote:
Mon Jun 12, 2017 11:29 am
1) Helps me sleep at night easily.
2) If the stock allocation was higher ( 70/30 or 80/20 ) I don't feel confident on when in my life I would change it to a lower stock allocation.
3) I do feel confident holding 60/40 through a major downturn.
4) I do feel comfortable doing a change to 40/60 on year of retirement ( accompanied by a pension. )
5) I don't want to use a Vanguard target fund that includes international bonds which also carries a higher expense.
6) I feel it gives me exposure to the equity market while still giving me a smooth ride with the bonds.
Have you tried to estimate possible outcomes of those allocations ?
A lot of people thinks they feel confident and safe with a 60/40 split, reasoning "in poetic terms". Then we bring in numbers and the idea that it would not be impossible to see their total portfolio decrease by 30% changes things quite a bit.

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