Asset Allocation

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
JD101
Posts: 96
Joined: Sat Oct 21, 2017 9:07 pm

Asset Allocation

Post by JD101 » Thu Mar 26, 2020 9:47 pm

I understand asset allocation principles, theories and agree that is the way to go long term. You can not time the market and it is like chasing your tail which you can't do. I would think asset allocation would work if you are doing a dollar cost average and periodically put a sum of money, meaning you will buy some low, you will buy some high and you will buy some in the middle and over a period of time, your buying cost will be average and your returns will be what market return is.

I'm not sure how this would work if you are not putting any more money, for e.g if you have saved the money for retirement , there is no dollar cost averaging going on. I know there is something called balancing where you make sure your stocks to bonds ratio is as per the risk tolerance and where you are in your life. Target retirement funds just do that for you automatically.

Let's say about a month ago some one had 1 Million in a target retirement fund, now it is $750,000 and person is not doing DCA, meaning he/she is not buying low, can that person stay the course and still earn market return? In other words stay the course, whether DCA or not, just make sure stocks to bonds ratio is as per the risk and your age.

typical.investor
Posts: 1447
Joined: Mon Jun 11, 2018 3:17 am

Re: Asset Allocation

Post by typical.investor » Thu Mar 26, 2020 10:57 pm

JD101 wrote:
Thu Mar 26, 2020 9:47 pm
Let's say about a month ago some one had 1 Million in a target retirement fund, now it is $750,000 and person is not doing DCA, meaning he/she is not buying low, can that person stay the course and still earn market return? In other words stay the course, whether DCA or not, just make sure stocks to bonds ratio is as per the risk and your age.
Target Retirement Funds are golden. Yes, you will get market returns. No, you don't have to rebalance. The fund will do that for you.

And you won't go through the dilemma of thinking "Is my stock allocation too high" and deciding "I am going to lower my stock allocation now even though I know it's at a relative low. I am just too scared" - as we see in other threads.

It's like having an advisor there to hold your hand and reassure you without an advisor's high cost!

User avatar
Sandtrap
Posts: 9675
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Asset Allocation

Post by Sandtrap » Fri Mar 27, 2020 8:30 am

JD101 wrote:
Thu Mar 26, 2020 9:47 pm
I understand asset allocation principles, theories and agree that is the way to go long term. You can not time the market and it is like chasing your tail which you can't do. I would think asset allocation would work if you are doing a dollar cost average and periodically put a sum of money, meaning you will buy some low, you will buy some high and you will buy some in the middle and over a period of time, your buying cost will be average and your returns will be what market return is.

I'm not sure how this would work if you are not putting any more money, for e.g if you have saved the money for retirement , there is no dollar cost averaging going on. I know there is something called balancing where you make sure your stocks to bonds ratio is as per the risk tolerance and where you are in your life. Target retirement funds just do that for you automatically.

Let's say about a month ago some one had 1 Million in a target retirement fund, now it is $750,000 and person is not doing DCA, meaning he/she is not buying low, can that person stay the course and still earn market return?

In other words stay the course, whether DCA or not, just make sure stocks to bonds ratio is as per the risk and your age.
Exactly.

j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

Post Reply