Getting my stocks/bonds mix correct

[MrMoneySaver]

Hi everyone. I have a question about how to create a balanced portfolio -- probably a 3-fund portfolio of US equities, international equities, and a bond fund.

First of all, does anyone have a suggestion for the proper balance at age 45? I have done tons of reading and I think I've even asked a specific question about it on this forum -- and yet I've still never felt comfortable that I had the magic number.

Second, let's say I have a work 401k, a Roth IRA, and an old rollover IRA (traditional). After I decide on the overall allocation -- lets say 50/25/25 for example -- do I simply replicate this mix in each account? Or should I weight more equities in one type of account and more bonds in another type of account? (For example, I could see holding more of the bond fund in the Roth IRA, because bonds would be less volatile and could double as an emergency fund, and would be more accessible in the Roth IRA since the principle can always be withdrawn.)

Finally, any thoughts on just using target-date funds instead of DIY allocation? The target-date funds always seem to have a more aggressive equities allocation than the recommended amounts for my age.

[Laserjet3051]

What is your need, ability, and willingness to assume risk at this juncture? The answer will be instructive as to your bond to stock ratio.

[Watchmaker]

Hi everyone. I have a question about how to create a balanced portfolio -- probably a 3-fund portfolio of US equities, international equities, and a bond fun.

First of all, does anyone have a suggestion for the proper balance at age 45? I have done tons of reading and I think I've even asked a specific question about it on this forum -- and yet I've still never felt comfortable that I had the magic number.

There is no magic number, so stop worrying about finding it. Just choose a mix that is reasonable and go from there.

Any of the following will probably be good enough--
USA-Int-Bnd
50-25-25
34-33-33
40-40-20
30-30-40
40-20-40

Second, let's say I have a work 401k, a Roth IRA, and an old rollover IRA (traditional). After I decide on the overall allocation -- lets say 50/25/25 for example -- do I simply replicate this mix in each account? Or should I weight more equities in one type of account and more bonds in another type of account? (For example, I could see holding more of the bond fund in the Roth IRA, because bonds would be less volatile and could double as an emergency fund, and would be more accessible in the Roth IRA since the principle can always be withdrawn.)

Finally, any thoughts on just using target-date funds instead of DIY allocation? The target-date funds always seem to have a more aggressive equities allocation than the recommended amounts for my age.

I like target date funds. And no one says you have to use the Target Date that actually corresponds with your age. If there's a target date fund you like the mix of-- use it.

[draco44]

@Laserjet3051 is correct that your risk tolerance will be a huge part of your answer. Some people on this forum are 100% equities and wouldn't touch bonds with a 10-ft pole. Based on your question, however, that's not you.

This is a very personal decision, but if you would find it stressful to need to rebalance your portfolio, target date funds could be an excellent option for you. Do be sure to look at the glide path of the target date fund in addition to the allocation when you first buy in. What may start as a fund that seems too aggressive might quickly shift to be at or even more conservative than you are comfortable with. One other thing to watch out for with target date funds is that depending on who you invest through, some firms charge slightly higher fees for a target date fund vs. buying separate funds that equate to a target date fund's holdings.

[FLBiker]

I'm 44, 52% US, 38% INT, 10% bond.  And I'd be comfortable with 0% bond, even though we're very close to FIRE, but my wife is more conservative.

And I focus my taxable accounts on INT for the foreign tax credit.

[cool7hand]

Most folks here rely on 100% stocks. Others 60/40, Golden Butterfly, or All Seasons (including us): https://portfoliocharts.com. You just have to go with your risk tolerance.

As for how to manage a portfolio of multiple asset classes across multiple platforms, it usually requires holding some classes in only one place. For example, most work portfolios don't have robust options that include REITs, gold, etc. So you'll probably have to hold those in an IRA or personal brokerage account. We've used Schwab for our personal accounts for years because of the low fees, free ATM withdrawals, and robust investing options, including ETFs. We used a global spreadsheet to help us rebalance no less frequently than quarterly and sometimes more often during periods of high volatility.

[lutorm]

You don't say how far out you are from RE. The most important consideration during the accumulation phase is maximizing returns, since (if you can stomach it) volatility doesn't matter when you're just saving. If you're getting close to beginning to draw down, then you have to worry about sequence of returns risk.

Have you read Kitces article about the "bond tent"? https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/