Advice for 50 year old on optimizing stock allocation for the next five years.

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Crdemts
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Advice for 50 year old on optimizing stock allocation for the next five years.

Post by Crdemts »

Dear Bogleheads community,
I am a 50-year-old amateur investor seeking your expertise and advice to optimize my stock allocation for the next five years.
Below, I have provided details of my current investments across three different brokerage accounts (Fidelity, T_Row, and AIG).
I have three months of emergency funds.
Debt:200K in mortgage no other debt.
My tax filling status is head of household being sole wage earner with a family of four.
Tax rate is 22% Florida resident.
Ideal asset allocation 80% stock and 20% bonds.
The total portfolio is around 240K, and I actively contribute to my current employer's 401Kplan.

Fidelity 401K with former employer : 90K
1. PGIM HIGH YIELD Z: 5.15%, Active Core, Bond Investments, Income
2. PGIM J GROWTH Z: 9.40%, Active Core, Stock Investments, Large Cap
3. VANG EXT MKT IDX ISP: 31.49%, Indexed Core, Stock Investments, Mid-Cap
4. VANG INFL PROT INST: 5.24%, Active Core, Bond Investments, Income
5. VANG INST INDEX PLUS: 38.41%, Indexed Core, Stock Investments, Large Cap
6. VANG TOT BD MKT INST: 5.03%, Active Core, Bond Investments, Income
7. VANG TOT STK MKT IP: 5.28%, Indexed Core, Stock Investments, N/A

T_Row 401K with former employer: 80K
1. DODGE & COX STOCK X: 9.07%, Stock Investments
2. LOAN FUND: 4.62%, Bond Investments
3. PIMCO TOTAL RETURN INSTL: 4.71%, Bond Investments
4. T ROWE PRICE RETIRE 2040 TR F: 9.57%, mixture of stocks and bonds
5. T ROWE PRICE RETIRE 2060 TR F: 4.84%, mixture of stocks and bonds
6. VANGUARD EXT MARKET INDEX INST: 19.10%, Mid-Cap and Small-Cap
7. VANGUARD INST INDEX: 19.42%, Large Cap
8. VANGUARD TTL BND MRK INDX INST: 9.57%, Bond Investments
9. VANGUARD TTL INT STOCK IND ADM: 19.09%, Stock Investments (International)

AIG 401K with current employer : 70K
1. STATE STREET TARGET RET 2045 K (SSDEX): 43.81%, mixture of stocks and bonds, Retirement 2045
2. FIDELITY 500 INDEX INSTL PREM (FXAIX): 21.49%, Stock Investments, Large Cap
3. AMERICAN EUROPACIFIC GROWTH R6 (RERGX): 11.77%, Stock Investments, International / Global
4. FIDELITY EXT MKT IND INST PREM (FSMAX): 11.57%, Stock Investments, Mid-Cap and Small-Cap
5. SCHWAB PCRA (SPCRA): 5.03%, Personal Choice Retirement
6. FIXED INTEREST OPTION: 3.07%, Fixed income
7. DODGE & COX INCOME FUND (DODIX): 2.44%, Bond Investments
8. STATE STREET TARGET RET 2040 K (SSCQX): 0.84%, mixture of stocks and bonds, Retirement 2040

I would greatly appreciate your insights on allocating my investments to these accounts to maximize my returns over the next five years.
Thank you in advance for your valuable advice and expertise.
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arcticpineapplecorp.
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by arcticpineapplecorp. »

we can't tell you how to maximize them because that would require a crystal ball.

some might say 100% stock "might" maximize over say, your desired 80/20 because bonds "usually' are a drag on performance (around 0.5% for every 10% in bonds you hold, i.e. a 80/20 portfolio may earn 1% less than 100% stocks over a long time period).

thing is, there are three variables that come to mind:

1. there are time periods when 100% stock (or 80/20 for that matter) are suboptimal compared to some other portfolio (say like 70/30 or 60/40) if for no other reason bonds could outperform stocks over that 5 year (or whatever) period of time. It happened even over a 10 year period of time. see for yourself total stock vs total bond from 2000-2010:

https://www.portfoliovisualizer.com/bac ... ion2_2=100

some might even show over a longer period like 20 or 30 years due to the bond bull market of the past there was a long stretch (2 to 3 decades) where the return of stocks and bonds were similar, but bonds were far less riskier. So holding bonds, not stocks was more optimal because of risk adjust returns. But you're not asking that I think. You're asking for maximizing your returns, not maximizing your risk adjusted returns, which may be two different things.

2. you have to take risk into mind. just wanting maximal returns is meaningless if you're going to bail when the tough gets going (stocks fall). We simply don't know your willingness to take risk. Look at the chart below. Are you prepared for a loss of 41% if stocks were to fall by 50%...in the next 5 years? If not, are you sure you want to hold that allocation?

Image

3. because the time period is so short (1-5 years is considered short term, though some might consider 5 years intermediate) it's not guaranteed that your stocks will either help because compounding works long term more than short term and what if you do fine over 1-4 years and then year 5 stocks tank? Then what?

If you need the money in the short term, you really can't afford to take great risk. So you have to accept lower returns. You can't have it all baby.

i think you should take some more time reviewing your need, ability and willingness to take risk and then design your portfolio according to that (and also pay attention to competing factors like you might have a need to take risk, but you might not have the ability (due to short time frame) or the willingness. How will you deal with that:

How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/

finally, i think in addition to choosing the right allocation for you based on your goals and timeframe, I'd say you have too may funds, likely too costly too, your portfolio could be much more easily simplified (but this is a separate, but important issue, from the asset allocation you choose). Read up on The Three Fund Portfolio to learn more. It's really all you need. Once you simplify, you can spend your time determining your asset allocation, which drives most of your returns.

source:
https://www.researchgate.net/publicatio ... erformance
https://blogs.cfainstitute.org/investor ... llocation/
Last edited by arcticpineapplecorp. on Tue Mar 21, 2023 2:55 pm, edited 2 times in total.
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Johm221122
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by Johm221122 »


I am a 50-year-old amateur investor seeking your expertise and advice to optimize my stock allocation for the next five years.
The next 5 years? What happens after 5 years?
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KingRiggs
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by KingRiggs »

Since stocks are routinely thought of as long-term investments, why are limiting your focus to the next 5 years? Buy what you what like to own for the next 10+ years, or forever...
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Doctor Rhythm
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by Doctor Rhythm »

Welcome to the forum.

The only hard advice I have for you is to simplify your portfolio. That’s a lot of funds to divide $240K between. It would also be a lot of funds to divide $2.5M between. This isn’t a rule, but I think you should be able to articulate why you need more than 3 funds in any account. What does my Nth fund (which has less than $3000 invested) do that justifies its place in my portfolio?

We are by and large a community of market agnostics. We happily admit that we don’t know what will happen in five years because we don’t have to. Given this uncertainty, a reasonable default approach is diversification across the total market. Thus, I only hold broad market funds (total US or S&P 500 and total international).
Topic Author
Crdemts
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by Crdemts »

I sincerely appreciate all the valuable advice I've received so far.
Why a five-year horizon?
I started investing in 2006, but I have yet to be able to reach the 300K.
Despite my efforts, I've seen minimal progress in my investments, and I recognize that I must be making some mistakes. I hope that by maximizing my returns over the next five years, I might have better luck than the laissez-faire approach I held for the past 19 years.
Any advice or suggestions you can provide regarding portfolio simplification and maximizing returns would be beneficial.
@arcticpineapplecorp My goal is to maximize returns for the next ten years. And yes, I have at times considered going 100%.
@ Johm221122 Hoping to break into 500k by then.
Thank you @Doctor Rhythm! Agreed, I need to simplify my investment approach and would be grateful for any guidance.
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Wiggums
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by Wiggums »

One way to optimize your portfolio is to eliminate funds with high expense ratios.

If your current employer allows it, would you benefit by moving your old retirement accounts into the current employer 401k?

To reach your 500k goal, is your savings rate appropriate?

We hold the three fund portfolio plus a municipal bond fund. Most recently we added treasuries when they hit 5%.
Last edited by Wiggums on Tue Mar 21, 2023 2:44 pm, edited 2 times in total.
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steadyosmosis
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by steadyosmosis »

Crdemts wrote: Tue Mar 21, 2023 2:27 pm I sincerely appreciate all the valuable advice I've received so far.
Why a five-year horizon?
I started investing in 2006, but I have yet to be able to reach the 300K.
Despite my efforts, I've seen minimal progress in my investments, and I recognize that I must be making some mistakes. I hope that by maximizing my returns over the next five years, I might have better luck than the laissez-faire approach I held for the past 19 years.
Any advice or suggestions you can provide regarding portfolio simplification and maximizing returns would be beneficial.
@arcticpineapplecorp My goal is to maximize returns for the next ten years. And yes, I have at times considered going 100%.
@ Johm221122 Hoping to break into 500k by then.
Thank you @Doctor Rhythm! Agreed, I need to simplify my investment approach and would be grateful for any guidance.
Many people do the simple 3-fund portfolio mentioned in numerous threads.
Use the search box in the upper right looking for '3-fund portfolio' and read the historical threads.
It took me several years of trial-and-mostly-error to finally switch to it myself.
Age < 59.5. Early-retired. AA ~55/45. Taxable account and Roth IRA and HSA ... all 100% equities. 100% fixed income in tax-deferred. I spend from taxable and re-balance in tax-deferred.
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KingRiggs
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by KingRiggs »

No offense, OP, but my guess is that more of the “laissez-faire” approach is EXACTLY what you need, in the form of a simple portfolio of 3 or 4 index funds/ETFs.

Your savings rate is the single most important factor in your meeting you’re investing goals.
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David Jay
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by David Jay »

Let’s start at the very beginning:

1. We teach that the primary “control knob” for potential gain versus price stability is your stock-to-fixed income asset allocation (AA). More stocks, more opportunity for gain.

2. Now comes the behavioral aspect: I like the “stress test” of a 50% downturn in the stock market. Does one have the intestinal fortitude to stick with a 100% stock allocation when the value of your portfolio gets cut in half? Most people do not, especially not 5 or 10 years out from retirement. Looking back, most folks will experience 2 - 3 40% stock market drops in their investing lifetime.

3. Once one has selected an AA that an individual can stick with through thick-and-thin, the stock fund selection is almost meaningless, many here would say that one Total US Stock Market fund and one Total International stock market fund is all that is needed, with something around a quarter to a third of stocks in international. Some here would add in a couple more funds. But this is mostly nibbling around the edges.
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arcticpineapplecorp.
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by arcticpineapplecorp. »

Crdemts wrote: Tue Mar 21, 2023 2:27 pm I started investing in 2006, but I have yet to be able to reach the 300K.
Despite my efforts, I've seen minimal progress in my investments, and I recognize that I must be making some mistakes. I hope that by maximizing my returns over the next five years, I might have better luck than the laissez-faire approach I held for the past 19 years.
we don't know if you're making mistakes or not. A few mistakes you could be making is:
a. paying too much for investments (not sure, haven't reviewed all your funds and don't know how much your 401k administrator charges)
b. investing/saving too little (expecting too much from your investments to do the heavy lifing instead of your contributions)
c. behavioral mistakes (changing allocation during times of stress/declines, or rebalancing inproperly (selling at lows or buying at highs) or failing to rebalance when necessary.

investing comes down to:
money
time
rate of return (this can be affected by the costs of your investments)

if you want to maximize things, you have to maximize these three variables.

example of money:
two people each invest for 30 years and earn 8% per year. Only difference is person A invests $500 a month while person B invests $250 a month.
The difference is $745,179 for Person A at the end and $372,589 for Person B.

The savings made the difference. Not the time and not the rate of return (those two were equal). Moral of the story, save as much as you can.

example of time:
two people invest $500 a month and earn 8% per year. Only difference is person A invests for 30 years while person B invests for 20 years.
The difference is $745,179 for Person A at the end and $294,510 for Person B.

The time made the difference. Not the savings and not the rate of return (those two were equal). Moral of the story, invest for as long as you can. (this might mean starting early or working later).

example of rate of return:
two people invest $500 a month for 30 years Only difference is person A earns 8% a year while person B earns 4% a year.
The difference is $745,179 for Person A at the end and $347,024 for Person B.

The rate of return made the difference. Not the savings and time (those two were equal). Moral of the story, invest for as high a rate of return you have the need, ability and/or willingness to take.

if you sacrifice any one of these three variables, you will have to compensate one or both of the other two.

I.E., if you save too little, you will need higher returns and/or to work longer to compensate for your savings rate.
if you start investing too late, you will need higher savings rate and/or higher returns to compensate for your lack of time/compounding return
if you take too little risk (lower returns), you will need higher savings rate and/or more time to compensate for the lack of growth due to lower returns.

we don't know your details. I.E. are you behind the curve (in your mind, you may or may not be in reality, we don't know because we don't know what you'll need for retirement, etc) is it because you started late or have lower savings rate. The details matter. If you let us know those, we might be able to explain what's going on if you're confused about why your expectations haven't been met.

You've also only been investing for 16-17 years. There are many posts asking when the portfolio will get critical mass (look them up). Many say about 15 years (depending on how much you're saving) they start to see more growth from the portfolio than their contributions. You may just not have been at this long enough, but are getting impatient with growth you think is too slow.

what do you think?
Last edited by arcticpineapplecorp. on Tue Mar 21, 2023 6:49 pm, edited 1 time in total.
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Doctor Rhythm
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by Doctor Rhythm »

Simplification thoughts.

You have three 401(k) accounts. Can you roll the old ones into your current employer’s plan? This alone would reduce the number of funds you hold by two-thirds. But that’s just the start. Your current 401(k) holds 8 funds, including two different Target Date funds. I don’t know anything about those specific funds, but if one of these TDF has an asset allocation and glide path that you like and the expenses are low, you could put everything into it. 100% of all your workplace retirement savings from 3 employers into one fund with no need to rebalance or reallocate. There’s no reason to expect a more complex portfolio with the same stock/bond allocation will outperform this single fund.
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by miket29 »

Crdemts wrote: Tue Mar 21, 2023 2:27 pmI am a 50-year-old amateur investor
<snip>
Despite my efforts, I've seen minimal progress in my investments, and I recognize that I must be making some mistakes.
Looking at the large number of funds you hold and the quotes above describing yourself, I have to ask: have you been actively trading funds? Following the economic and market news, then selling your holdings you expect to underperform and buying the future winners? Stepping out of the market to avoid losses like after 2008 or when Covid struck?

For most people on Bogleheads there are no efforts involved other than saving. Realizing market timing and picking the next "hot" fund doesn't work they just pick an asset allocation they can live with and invest in a small number of index funds. Occasionally they rebalance. That's about it.
Last edited by miket29 on Tue Mar 21, 2023 6:09 pm, edited 1 time in total.
Johm221122
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by Johm221122 »

Wiggums wrote: Tue Mar 21, 2023 2:40 pm

To reach your 500k goal, is your savings rate appropriate?

.
This
What is your savings rate? What percentage gains do you need?

I need 6% (nominal)over the next 10 years for my goal. I'm 100% stocks I know I have good chance.
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arcticpineapplecorp.
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by arcticpineapplecorp. »

i'm confused. do you need to get to $500k in 5 years or 10?

if 5, and you have $240k currently and plan to earn 6% CAGR you'll need to invest:

$35,000 a year for the next 5 years.

in excel:

=FV(.06,5,-35000,-240000)

If 10, and you have $240k currently and plan to earn 6% CAGR you'll need to invest:

$7000 a year for the next 10 years

=FV(.06,10,-7000,-240000)

are these doable to hit your number?
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miket29
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by miket29 »

Crdemts wrote: Tue Mar 21, 2023 2:27 pm I started investing in 2006, but I have yet to be able to reach the 300K.
Despite my efforts, I've seen minimal progress in my investments, and I recognize that I must be making some mistakes.
Here's why I wonder if you've been exchanging between investments and trying to pick times to be in and out of the market.

You have $240K now, amassed since 2006. By minimal progress I assume you mean it hasn't grown much. $240K over 16 years with no growth is saving $15K/year, so lets assume an average investment of $12K/year to allow for modest growth.

Imagine someone with a 80% stock portfolio, 20% bonds, and they invested their stock holdings 25% international and the othere 75% in the S&P500. How much would they have today by investing $1K/month?

It turns out we can answer that question using a pair of calculators. with $800/mos going into stock, $600 would go into the S&P500. The calculator at https://dqydj.com/sp-500-periodic-reinv ... dividends/ shows that if you started in 2006 you'd have $320K today. For the international portion, which hasn't done nearly as well as the S&P500, lets use https://dqydj.com/mutual-fund-return-calculator/ with VFWSX (Vanguard FTSE All-Wld ex-US Idx Instl) as a proxy for international returns. That calculator shows investing $200/mos since 2007 (oldest data they have for this fund) would be worth about $53K today. And for the bond portion of 200/mos lets put it into VBTLX (Vanguard Total Bond) and use the 2nd calculator. It would be worth $49K today.

So a simple 3-fund portfolio with $1K monthly saving since 2006 would be worth $320 + $53 + $49 = $422K.

If $1K/mos works as a rough model of how you've been saving, since you actually have $240K I wonder if you've been trading funds and timing the market?
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by Johm221122 »

arcticpineapplecorp. wrote: Tue Mar 21, 2023 6:55 pm i'm confused. do you need to get to $500k in 5 years or 10?

if 5, and you have $240k currently and plan to earn 6% CAGR you'll need to invest:

$35,000 a year for the next 5 years.

in excel:

=FV(.06,5,-35000,-240000)

If 10, and you have $240k currently and plan to earn 6% CAGR you'll need to invest:

$7000 a year for the next 10 years

=FV(.06,10,-7000,-240000)

are these doable to hit your number?
I think your mistaken my numbers I gave OP
I gave my numbers to OP just to let him know you need a realistic goal. The OP can't expect a miracle
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arcticpineapplecorp.
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by arcticpineapplecorp. »

Johm221122 wrote: Tue Mar 21, 2023 7:44 pm
arcticpineapplecorp. wrote: Tue Mar 21, 2023 6:55 pm i'm confused. do you need to get to $500k in 5 years or 10?

if 5, and you have $240k currently and plan to earn 6% CAGR you'll need to invest:

$35,000 a year for the next 5 years.

in excel:

=FV(.06,5,-35000,-240000)

If 10, and you have $240k currently and plan to earn 6% CAGR you'll need to invest:

$7000 a year for the next 10 years

=FV(.06,10,-7000,-240000)

are these doable to hit your number?
I think your mistaken my numbers I gave OP
I gave my numbers to OP just to let him know you need a realistic goal. The OP can't expect a miracle
weird. i was just reading from the OP's response to what I thought was your question:
Crdemts wrote: Tue Mar 21, 2023 2:27 pm I sincerely appreciate all the valuable advice I've received so far.
Why a five-year horizon?
I started investing in 2006, but I have yet to be able to reach the 300K.
Despite my efforts, I've seen minimal progress in my investments, and I recognize that I must be making some mistakes. I hope that by maximizing my returns over the next five years, I might have better luck than the laissez-faire approach I held for the past 19 years.
Any advice or suggestions you can provide regarding portfolio simplification and maximizing returns would be beneficial.
@arcticpineapplecorp My goal is to maximize returns for the next ten years. And yes, I have at times considered going 100%.
@ Johm221122 Hoping to break into 500k by then.
Thank you @Doctor Rhythm! Agreed, I need to simplify my investment approach and would be grateful for any guidance.
so do we not know what the OP is actually shooting for?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Johm221122
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by Johm221122 »

arcticpineapplecorp. wrote: Tue Mar 21, 2023 8:00 pm
Johm221122 wrote: Tue Mar 21, 2023 7:44 pm
arcticpineapplecorp. wrote: Tue Mar 21, 2023 6:55 pm i'm confused. do you need to get to $500k in 5 years or 10?

if 5, and you have $240k currently and plan to earn 6% CAGR you'll need to invest:

$35,000 a year for the next 5 years.

in excel:

=FV(.06,5,-35000,-240000)

If 10, and you have $240k currently and plan to earn 6% CAGR you'll need to invest:

$7000 a year for the next 10 years

=FV(.06,10,-7000,-240000)

are these doable to hit your number?
I think your mistaken my numbers I gave OP
I gave my numbers to OP just to let him know you need a realistic goal. The OP can't expect a miracle
weird. i was just reading from the OP's response to what I thought was your question:
[color=#FF0000 wrote:Crdemts [/color]post_id=7180084 time=1679426845 user_id=188888]
I sincerely appreciate all the valuable advice I've received so far.
Why a five-year horizon?
I started investing in 2006, but I have yet to be able to reach the 300K.
Despite my efforts, I've seen minimal progress in my investments, and I recognize that I must be making some mistakes. I hope that by maximizing my returns over the next five years, I might have better luck than the laissez-faire approach I held for the past 19 years.
Any advice or suggestions you can provide regarding portfolio simplification and maximizing returns would be beneficial.
@arcticpineapplecorp My goal is to maximize returns for the next ten years. And yes, I have at times considered going 100%.
@ Johm221122 Hoping to break into 500k by then.
Thank you @Doctor Rhythm! Agreed, I need to simplify my investment approach and would be grateful for any guidance.
so do we not know what the OP is actually shooting for?
No just that he has $240,000 and wants $500,000 in 5 years. We need his yearly contributions to even know if it is remotely possible
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arcticpineapplecorp.
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Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by arcticpineapplecorp. »

Johm221122 wrote: Tue Mar 21, 2023 8:02 pm
arcticpineapplecorp. wrote: Tue Mar 21, 2023 8:00 pm
Johm221122 wrote: Tue Mar 21, 2023 7:44 pm
arcticpineapplecorp. wrote: Tue Mar 21, 2023 6:55 pm i'm confused. do you need to get to $500k in 5 years or 10?

if 5, and you have $240k currently and plan to earn 6% CAGR you'll need to invest:

$35,000 a year for the next 5 years.

in excel:

=FV(.06,5,-35000,-240000)

If 10, and you have $240k currently and plan to earn 6% CAGR you'll need to invest:

$7000 a year for the next 10 years

=FV(.06,10,-7000,-240000)

are these doable to hit your number?
I think your mistaken my numbers I gave OP
I gave my numbers to OP just to let him know you need a realistic goal. The OP can't expect a miracle
weird. i was just reading from the OP's response to what I thought was your question:
[color=#FF0000 wrote:Crdemts [/color]post_id=7180084 time=1679426845 user_id=188888]
I sincerely appreciate all the valuable advice I've received so far.
Why a five-year horizon?
I started investing in 2006, but I have yet to be able to reach the 300K.
Despite my efforts, I've seen minimal progress in my investments, and I recognize that I must be making some mistakes. I hope that by maximizing my returns over the next five years, I might have better luck than the laissez-faire approach I held for the past 19 years.
Any advice or suggestions you can provide regarding portfolio simplification and maximizing returns would be beneficial.
@arcticpineapplecorp My goal is to maximize returns for the next ten years. And yes, I have at times considered going 100%.
@ Johm221122 Hoping to break into 500k by then.
Thank you @Doctor Rhythm! Agreed, I need to simplify my investment approach and would be grateful for any guidance.
so do we not know what the OP is actually shooting for?
No just that he has $240,000 and wants $500,000 in 5 years. We need his yearly contributions to even know if it is remotely possible
ok, then my numbers still stand. $7000 a year if OP earns 6% CAGR for 10 years or $35,000 a year if OP earns 6% CAGR for 5 years.

OP, either of those doable?
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Topic Author
Crdemts
Posts: 3
Joined: Mon Oct 17, 2022 12:37 pm

Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by Crdemts »

You folks rock! Very enlightening in a way therapeutic, and I now have to assess the mistakes made and correct course.
Yes, I had, on occasion, dipped into my 401k.
Once to pay for the down payment of my primary residence. In retrospect, it was absolutely worth it.
I've consistently contributed. I cannot tell precisely the amount, but if I had to guess at least 5k per year for the past 16 years.
Some of the takeaways:
-I will roll over the funds from T-Row Price into the Fidelity account because my current employer's AIG 401K needs a better fund selection.
- I have started looking into the three fund portfolios to simplify things.
-500K is attainable in five years if I increase my contributions.
Again thank you all for your invaluable direction.
CoAndy
Posts: 891
Joined: Thu Jun 06, 2013 4:45 pm

Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by CoAndy »

arcticpineapplecorp. wrote: Tue Mar 21, 2023 3:22 pm
Crdemts wrote: Tue Mar 21, 2023 2:27 pm I started investing in 2006, but I have yet to be able to reach the 300K.
Despite my efforts, I've seen minimal progress in my investments, and I recognize that I must be making some mistakes. I hope that by maximizing my returns over the next five years, I might have better luck than the laissez-faire approach I held for the past 19 years.
we don't know if you're making mistakes or not. A few mistakes you could be making is:
a. paying too much for investments (not sure, haven't reviewed all your funds and don't know how much your 401k administrator charges)
b. investing/saving too little (expecting too much from your investments to do the heavy lifing instead of your contributions)
c. behavioral mistakes (changing allocation during times of stress/declines, or rebalancing inproperly (selling at lows or buying at highs) or failing to rebalance when necessary.

investing comes down to:
money
time
rate of return (this can be affected by the costs of your investments)

if you want to maximize things, you have to maximize these three variables.

example of money:
two people each invest for 30 years and earn 8% per year. Only difference is person A invests $500 a month while person B invests $250 a month.
The difference is $745,179 for Person A at the end and $372,589 for Person B.

The savings made the difference. Not the time and not the rate of return (those two were equal). Moral of the story, save as much as you can.

example of time:
two people invest $500 a month and earn 8% per year. Only difference is person A invests for 30 years while person B invests for 20 years.
The difference is $745,179 for Person A at the end and $294,510 for Person B.

The time made the difference. Not the savings and not the rate of return (those two were equal). Moral of the story, invest for as long as you can. (this might mean starting early or working later).

example of rate of return:
two people invest $500 a month for 30 years Only difference is person A earns 8% a year while person B earns 4% a year.
The difference is $745,179 for Person A at the end and $347,024 for Person B.

The rate of return made the difference. Not the savings and time (those two were equal). Moral of the story, invest for as high a rate of return you have the need, ability and/or willingness to take.

if you sacrifice any one of these three variables, you will have to compensate one or both of the other two.

I.E., if you save too little, you will need higher returns and/or to work longer to compensate for your savings rate.
if you start investing too late, you will need higher savings rate and/or higher returns to compensate for your lack of time/compounding return
if you take too little risk (lower returns), you will need higher savings rate and/or more time to compensate for the lack of growth due to lower returns.

we don't know your details. I.E. are you behind the curve (in your mind, you may or may not be in reality, we don't know because we don't know what you'll need for retirement, etc) is it because you started late or have lower savings rate. The details matter. If you let us know those, we might be able to explain what's going on if you're confused about why your expectations haven't been met.

You've also only been investing for 16-17 years. There are many posts asking when the portfolio will get critical mass (look them up). Many say about 15 years (depending on how much you're saving) they start to see more growth from the portfolio than their contributions. You may just not have been at this long enough, but are getting impatient with growth you think is too slow.

what do you think?
Truly an excellent post sir. :beer
User avatar
arcticpineapplecorp.
Posts: 15014
Joined: Tue Mar 06, 2012 8:22 pm

Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by arcticpineapplecorp. »

CoAndy wrote: Wed Mar 22, 2023 9:08 am
arcticpineapplecorp. wrote: Tue Mar 21, 2023 3:22 pm
Crdemts wrote: Tue Mar 21, 2023 2:27 pm I started investing in 2006, but I have yet to be able to reach the 300K.
Despite my efforts, I've seen minimal progress in my investments, and I recognize that I must be making some mistakes. I hope that by maximizing my returns over the next five years, I might have better luck than the laissez-faire approach I held for the past 19 years.
we don't know if you're making mistakes or not. A few mistakes you could be making is:
a. paying too much for investments (not sure, haven't reviewed all your funds and don't know how much your 401k administrator charges)
b. investing/saving too little (expecting too much from your investments to do the heavy lifing instead of your contributions)
c. behavioral mistakes (changing allocation during times of stress/declines, or rebalancing inproperly (selling at lows or buying at highs) or failing to rebalance when necessary.

investing comes down to:
money
time
rate of return (this can be affected by the costs of your investments)

if you want to maximize things, you have to maximize these three variables.

example of money:
two people each invest for 30 years and earn 8% per year. Only difference is person A invests $500 a month while person B invests $250 a month.
The difference is $745,179 for Person A at the end and $372,589 for Person B.

The savings made the difference. Not the time and not the rate of return (those two were equal). Moral of the story, save as much as you can.

example of time:
two people invest $500 a month and earn 8% per year. Only difference is person A invests for 30 years while person B invests for 20 years.
The difference is $745,179 for Person A at the end and $294,510 for Person B.

The time made the difference. Not the savings and not the rate of return (those two were equal). Moral of the story, invest for as long as you can. (this might mean starting early or working later).

example of rate of return:
two people invest $500 a month for 30 years Only difference is person A earns 8% a year while person B earns 4% a year.
The difference is $745,179 for Person A at the end and $347,024 for Person B.

The rate of return made the difference. Not the savings and time (those two were equal). Moral of the story, invest for as high a rate of return you have the need, ability and/or willingness to take.

if you sacrifice any one of these three variables, you will have to compensate one or both of the other two.

I.E., if you save too little, you will need higher returns and/or to work longer to compensate for your savings rate.
if you start investing too late, you will need higher savings rate and/or higher returns to compensate for your lack of time/compounding return
if you take too little risk (lower returns), you will need higher savings rate and/or more time to compensate for the lack of growth due to lower returns.

we don't know your details. I.E. are you behind the curve (in your mind, you may or may not be in reality, we don't know because we don't know what you'll need for retirement, etc) is it because you started late or have lower savings rate. The details matter. If you let us know those, we might be able to explain what's going on if you're confused about why your expectations haven't been met.

You've also only been investing for 16-17 years. There are many posts asking when the portfolio will get critical mass (look them up). Many say about 15 years (depending on how much you're saving) they start to see more growth from the portfolio than their contributions. You may just not have been at this long enough, but are getting impatient with growth you think is too slow.

what do you think?
Truly an excellent post sir. :beer
thank you.

and for the OP, remember that Warren Buffett made 99.7% after the age of 52

and Warren Buffett Has Amassed Over 90% of His Wealth Since He Turned 65

and here's an interesting chart showing Warren Buffett’s Net Worth Over the Years
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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KingRiggs
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Location: Indiana

Re: Advice for 50 year old on optimizing stock allocation for the next five years.

Post by KingRiggs »

at $5k per year, it's going to be a verrrrry slow ride to $500k...
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