hi guys,
I had it clear in my IPS that I would aways be 100% in stocks whilst working and then move to maybe a 20% bond allocation once retired to take some of the sting out of any market declines whilst retired - also, not sure if 100% stocks returns much better results than 80%? perhaps over 40 years but i guess by that point do you really care?
however, it kind of dawned on me whilst thinking on this, that if my timeframe is 10 years to FIRE, there have been very mixed results in markets etc... which is fine but I guess if you had a sharp decline whilst in the middle of resigning your position and working your notice - this would be less than ideal if 100% in stocks at that point?
if i didnt want anything to derail my 10 year timeframe too much that would force me to work another year or 2? has anyone worked out the most effective AA? or is it just one of those catch 22 scenarios where if a market goes against you right at the beginning, then you have to re-think? just think it would be kind of a right depressing bummer if your so close to getting to your goal then it gets pulled further away from you.
just wanted to pick some bright minds on this
I think you're asking the right questions. Unfortunately, no one has the answers. It's impossible to know what/if/how long your 10 year plan could change based on your asset allocation and market performance. Adding more bonds would definitely give you
more certainty, but given that the timeframe is still ~10 years, that's a long way away and it's hard to predict with much accuracy.
If I were you, I would switch to 80/20 right now. That will give you most of the returns of 100/0 while also allowing you some hedge against the next stock market decline. Then as you get closer, say 2 or 3 years out, consider increasing the bonds more.
Personally, I was around 90/10 for most of my investing timeline, switched to 70/30 this year in preparation for retirement next year. This worked out well (read as luck) for me because 2017 was a big market year. It could also have worked out poorly if the market moved in the opposite direction and I lost a lot more than I would've with a 70/30 AA. As such, there's still a lot of luck involved and there's no "correct" answer.