Hello MMM,
About me:
I'm a relatively new 30 year old investor living in Canada. I consider myself quite comfortable with risk and being able to liquidate my assets quickly is not a priority for me. I have an adequate emergency fund. A year ago I took a job with an employer that will match my RRSP (Canada's 401k) contributions up to 9% for a total of 18%. Currently my portfolio which has a total value of about $15,000 is allocated as follows:
RBC Canadian stock index (25%)
RBC US stock index (25%)
RBC International stock index (20%)
RBC Canadian bond index (30%)
Nothing crazy, pretty boring, and aside from re balancing I have no intentions of touching this money until retirement (other than using some as a down payment on a house under the First Time Home Buyer's Plan eventually). Since I've began making RRSP contributions I've read a couple books (The Millionaire Teacher, The Four Pillars of Investing, The Wealthy Barber, Rich Dad, Poor Dad) and a ton of forums and blogs about index investing. One of the key lessons in these books is that it is advisable to increase your bond allocation as you get older (hence why I went with 30% bonds as a 30 year old).
Here's the kicker: I have a trust fund that was set up in my name when I was born that is worth close to $300,000 now. It is currently in an actively managed fund that I cannot touch until I turn 35 years old. The thought of paying 1.4% MER on $300,000 is a little disturbing, but this money is completely out of my control for the next five years so there's nothing I can do about that.
My question is in regards to portfolio theory when a person has a sizeable chunk of cash that is guaranteed to come in the future. I'm curious if this trust fund should influence the stock to bond ratio of my current portfolio.
The risk taker in me says that with such fund guaranteed me in a few years time, and no plans for this money in the near future (~25 years), I can move some of my bonds over to stocks until such time that I receive control of the trust fund (I have every intention of investing it into indexes).
The conservative person in me says I should stick to the plan and increase the percentage of bonds in my portfolio as I age regardless of external events, no matter how significant they may be.
Is there any good documentation or opinions out there about a situation like this, where a person is investing their income while waiting for a large amount of money to come to them? I'd imagine that inheritance, annuities, settlements, etc would all fall under the same category.
Thanks a ton