Author Topic: Portfolio Balance - Accumulation vs FIRE  (Read 2502 times)

Tyson

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Portfolio Balance - Accumulation vs FIRE
« on: March 28, 2016, 11:29:48 AM »
Hello all - I am trying to figure out how to best optimize my investing strategy.  I'm at 100% equities now for my after tax savings/investments and I"m thinking about getting some bonds.  But I'm wondering if Bonds are ideal (or even necessary) during the accumulation stage?  It seem like during this stage, stocks are a win/win - if the market goes up, my portfolio grows.  If it goes down, then "yay, stocks are on sale and I can buy more".  It seems like you don't really even need bonds during this phase, but rather they would become more useful during FIRE, to provide more stability, especially during the first 5 or 10 years or so. 

So is that correct?  That sticking with high levels of equities during accumulation gets you greatest return (and greatest volatility), while brining in bonds later during FIRE makes more sense?  Or am I missing something here?

Other info - I'm 44 years old, I max out my 401k with a 6% match from my company into a Fidelity/Vanguard Target 2035 fund.  I also have a Roth IRA that I max out which is 100% VTSAX (stock), plus an after tax investment account also 100% VTSAX. 

The breakdown for the 401k Target 2035 fund is:

Cash   0.82%
Domestic Bond   11.59%
Preferred Stock   0.04%
Foreign Bond   6.59%
Foreign Stock   31.54%
Others   0.25%
Domestic Stock   49.17%
« Last Edit: March 28, 2016, 11:59:32 AM by tyort1 »

Lucky Girl

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Re: Portfolio Balance - Accumulation vs FIRE
« Reply #1 on: March 28, 2016, 11:44:28 AM »
I do a 90/10 stock/bond (and cash) ratio.  I would tend to agree, there isn't a lot of downside to just going all in on stocks in the accumulation phase.  It is purely a matter of your ability to stomach the volatility.  How did you do in the 2008 market crash?  Did you wish you had put all your money in bonds, or were you able to ride it out?  Its about peace of mind as opposed to maximizing returns.

My DH was talking through the crash about how we should have put our money in bonds.  We didn't, but his thought process demonstrated a degree of risk aversion that does not come out when markets are stronger.  Which is why I do hold a little in bonds in my own 401(k) fund, even though he doesn't!

boarder42

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Re: Portfolio Balance - Accumulation vs FIRE
« Reply #2 on: March 28, 2016, 12:03:06 PM »
your target date fund likely has way more bond exposure than you should have

Crazycarl

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Re: Portfolio Balance - Accumulation vs FIRE
« Reply #3 on: April 01, 2016, 02:20:03 PM »
Target Dates funds tend to have a very high fee also. >1%

BarkyardBQ

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Re: Portfolio Balance - Accumulation vs FIRE
« Reply #4 on: April 01, 2016, 02:21:50 PM »
Target Dates funds tend to have a very high fee also. >1%

Vanguard's are .16%

We are in the 100% equity camp. We have 10 years of accumulation left, and will reassess the need for bonds closure to FIRE.

I agreed with boarder42, in that the Target Fund probably has a higher than necessary bond balance for accumulation.
« Last Edit: April 01, 2016, 02:27:39 PM by BackyarBQ »

Crazycarl

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Re: Portfolio Balance - Accumulation vs FIRE
« Reply #5 on: April 01, 2016, 02:54:12 PM »
I wish I had access to your Target Date funds. My companies Fidelity 401k has the Pimco which average around 1.5% in fees. So I just diversified into other funds. 

BarkyardBQ

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Re: Portfolio Balance - Accumulation vs FIRE
« Reply #6 on: April 01, 2016, 02:59:23 PM »
I wish I had access to your Target Date funds. My companies Fidelity 401k has the Pimco which average around 1.5% in fees. So I just diversified into other funds.

Ouch! I use Fidelity Spartan funds for mine, and Vanguard everywhere else.