Very Basic Asset Allocation Help Needed

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Nevada2012
Posts: 5
Joined: Wed Jan 24, 2018 5:11 pm

Very Basic Asset Allocation Help Needed

Post by Nevada2012 » Thu Oct 11, 2018 10:47 am

I am pretty conservative in financial matters.

I was gonna post this last week, never got around to it, and now the markets are moving....

Like everybody else got nailed back in the Great Recession , picked one stock WFC, went all in and have gotten healthy again.

I am 56, retiring in a little over 5 years from now.
I am not attempting a Market Timing, just want a little more stability going forward.

Here is my current AA in 401K.

Stable Fund ....690K ...has consistently outperformed Treasury Money Market by 1.5 % each year.

S & P 500 Index....517K

Nasdaq 100 Index ...122K

So I have Target Funds available (Morningstar Lifetime Index) , US Bond Index - (Bloomberg Barclays US Agg. ), Various small, mid, and large cap (Russel Index).

I have no desire to go International in stocks or bonds.....
Does this seem reasonable or do I need to add in some bonds/ Target funds....

Any thoughts would be greatly appreciated !

alex_686
Posts: 4071
Joined: Mon Feb 09, 2015 2:39 pm

Re: Very Basic Asset Allocation Help Needed

Post by alex_686 » Thu Oct 11, 2018 10:58 am

First, there is not much for us to work there. Here is a link on how to ask portfolio questions.
viewtopic.php?t=6212

What you really want to do is step back and answer the big questions first, then move on to the asset allocation. What are your goals? How much are you going to need to retire? What is your risk tolerance? If we don't have answers to those questions next, then we really can't answer the AA question.

Second, You say you are not market timing, then mention the recent stock movements. If the history of the stock market has taught us one thing, it is that recent price movements mean nothing. I know it is temping, but don't.

Third, almost any investment should outperform cash. i.e. Treasury Money Market. No great surprise here.

Kevin8696
Posts: 155
Joined: Mon Oct 08, 2012 7:45 pm

Re: Very Basic Asset Allocation Help Needed

Post by Kevin8696 » Thu Oct 11, 2018 11:04 am

Nevada2012 wrote:
Thu Oct 11, 2018 10:47 am

I have no desire to go International in stocks or bonds.....
Does this seem reasonable or do I need to add in some bonds/ Target funds....

Any thoughts would be greatly appreciated !
Beware of those Target date funds... most all of them are loaded with international stocks and bonds !!
Last edited by Kevin8696 on Thu Oct 11, 2018 1:07 pm, edited 1 time in total.

carofe
Posts: 350
Joined: Thu Mar 20, 2014 7:21 pm

Re: Very Basic Asset Allocation Help Needed

Post by carofe » Thu Oct 11, 2018 11:12 am

You have 52% Bonds (assuming the Stable Fund is a Bond Fund) and 48% in Stocks.

I think it doesn't look bad at all. If I were you I would probably go 55% Stock/ 45% Bonds and put all my stocks in SP500 to make it even simpler, but it won't make much difference.

You are retiring in 5years. There are good predictions saying that the coming decade will be volatile and with low Net Returns. Whatever you do, I recommend you keep an allocation close to 50%/50% and keep rebalancing to keep the risk at that level. That will keep your money safer and help you to stay invested.
US Total Stock Market + Intermediate Term Bond. That's it.

Living Free
Posts: 132
Joined: Thu Jul 19, 2018 7:31 pm

Re: Very Basic Asset Allocation Help Needed

Post by Living Free » Thu Oct 11, 2018 11:42 am

I agree with considering consolidating from your nasdaq 100 index and S&P 500 index to just one US stock index fund. It seem you have some sort of Russell index which might be more broadly diversified than either of those. Between nasdaq index and S&P 500 index I'd choose the S&P as it's more diversified. And the Russell index (if it's like a Russell 3000 index) might also include small/mid caps and therefore be more diversified then even the S&P 500 index fund.

Nevada2012
Posts: 5
Joined: Wed Jan 24, 2018 5:11 pm

Re: Very Basic Asset Allocation Help Needed

Post by Nevada2012 » Thu Oct 11, 2018 12:59 pm

alex_686 wrote:
Thu Oct 11, 2018 10:58 am
First, there is not much for us to work there. Here is a link on how to ask portfolio questions.
viewtopic.php?t=6212

What you really want to do is step back and answer the big questions first, then move on to the asset allocation. What are your goals? How much are you going to need to retire? What is your risk tolerance? If we don't have answers to those questions next, then we really can't answer the AA question.

Second, You say you are not market timing, then mention the recent stock movements. If the history of the stock market has taught us one thing, it is that recent price movements mean nothing. I know it is temping, but don't.

Third, almost any investment should outperform cash. i.e. Treasury Money Market. No great surprise here.
Thanks for replying.
I have the portfolio link, I was just looking for the very basics....

Looking for a very basic AA allocation and some other opinions. I don't have much confidence in myself around this stuff, no matter how many articles I read.
carofe wrote:
Thu Oct 11, 2018 11:12 am
You have 52% Bonds (assuming the Stable Fund is a Bond Fund) and 48% in Stocks.
My Stable FUnd is a glorified Money Market account.
Living Free wrote:
Thu Oct 11, 2018 11:42 am
I agree with considering consolidating from your nasdaq 100 index and S&P 500 index to just one US stock index fund. It seem you have some sort of Russell index which might be more broadly diversified than either of those. Between nasdaq index and S&P 500 index I'd choose the S&P as it's more diversified. And the Russell index (if it's like a Russell 3000 index) might also include small/mid caps and therefore be more diversified then even the S&P 500 index fund.
I have access to Russell Small Index and a Mid State Street Mid Cap Index..
The Large Cap is actively managed....

Again thanks everybody for your take on things...

carofe
Posts: 350
Joined: Thu Mar 20, 2014 7:21 pm

Re: Very Basic Asset Allocation Help Needed

Post by carofe » Thu Oct 11, 2018 2:07 pm

You should probably replace the stable fund with the bond index fund to get better return and still low volatility.
US Total Stock Market + Intermediate Term Bond. That's it.

alex_686
Posts: 4071
Joined: Mon Feb 09, 2015 2:39 pm

Re: Very Basic Asset Allocation Help Needed

Post by alex_686 » Thu Oct 11, 2018 2:48 pm

Nevada2012 wrote:
Thu Oct 11, 2018 12:59 pm
Looking for a very basic AA allocation and some other opinions. I don't have much confidence in myself around this stuff, no matter how many articles I read.
As a start, look at some target date funds. These are all in one funds with high quality AA.

In theory you should just be able to look up your retirement age and select the one and off you go. The problem is that these funds have a very generic idea of what your required returns are and your risk tolerance. How much do you need to retire? How are you going to get there. What trips most people up is that the required risk that they must take on to meet their goals does not match their ability or willingness to take risk. Until we get that squared away we really can't talk about AA. Don't put the cart in front of the horse.

Nevada2012
Posts: 5
Joined: Wed Jan 24, 2018 5:11 pm

Re: Very Basic Asset Allocation Help Needed

Post by Nevada2012 » Thu Oct 11, 2018 3:33 pm

carofe wrote:
Thu Oct 11, 2018 2:07 pm
You should probably replace the stable fund with the bond index fund to get better return and still low volatility.
Noted and thanks again....

[/quote]

As a start, look at some target date funds. These are all in one funds with high quality AA.

In theory you should just be able to look up your retirement age and select the one and off you go. The problem is that these funds have a very generic idea of what your required returns are and your risk tolerance. How much do you need to retire? How are you going to get there. What trips most people up is that the required risk that they must take on to meet their goals does not match their ability or willingness to take risk. Until we get that squared away we really can't talk about AA. Don't put the cart in front of the horse.

[/quote]

My risk tolerance at this time is low.
I would like 1.7 million to retire - (currently 1.45million including house) not counting SS and a small pension.
If I lost 50 percent of my "in play" money, my retirement would be nice.
SO I would say I am looking for less volatility overall, I would like a nice small and steady wins the race type of portfolio.

Again, thanks.
These ideas from everybody are helping me clear my head and focusing on what I need to focus on.

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