How was it that you chose the 2025-date fund originally?
What was your thought process?
You're basically asking a question about how 'aggressive' you need to be in your investments.
Do you need to be aggressive? You should think about your expenses vs. your savings, and what kind of return you'd need on those investments in order to achieve financial independence in 15 years.
Have you ever heard of an IPS? You might want to fill one out.
http://www.bogleheads.org/wiki/Investment_policy_statement
But yeah, off the cuff, a 2025-date fund (11 years from now) does seem rather conservative for someone who is 27 and doesn't plan to retire for 15-ish years.
I haven't heard of an IPS, I will look into it. Thanks for the link.
I was originally in target retirement 2035, but after I read Investor's Manifesto and some other resources that said "roughly your age in bonds... or 100 minus your age in stocks" I thought that I needed more bonds. Also, I believe in the book Bernstein says to go into your first bear market more conservative because people over-estimate their risk tolerance until they've actually experienced a drop. But now I'm thinking that I'm being too conservative.. I think that with everything I've read I now know enough to just wait it out and not sell at a low point.
Agree with shuffler. Risk tolerance is different for everyone.
If it were me (and if I was 27 again), I would be in the target retirement 2045. Higher stocks/lower bonds. You'll get a different answer from everyone you ask.
Lots of potential reading on assett allocation if interested ...
I'd love some reading recommendations :)
Consider your willingness, ability, and need to take risk. All three of these factors help you decide whether you should take on more or less risk than the conventional advice.
Willingness: how comfortable are you with volatility? Would you be tempted to sell at the bottom of the market because you're afraid it will go lower?
Ability: traditionally, this is "how long is your investment timeline and do you have any conceivable need for this money earlier?" For a Mustachian I think this is more of a "how flexible are your retirement plans? If your investment underperforms over the next ten years, are you willing/able to work longer to make up for it?" In other words, are you able to accept the tradeoff of probable better returns in exchange for less certainty in your plans?
Need: do your plans require a high rate of return to work? For early retirement this shouldn't apply. This is more of a concern for someone in their 50s or 60s and way behind on saving.
MMM and jlcollinsnh's aggressive advice is couched mainly in the recognition that aspiring early retirees have a high ability to take risk. If the market does poorly, just work an extra year or two. If you can accept this and adjust your willingness to take risk accordingly, you should be able to use more aggressive investment options (a lower bond %).
Good questions to think about.
Willingness- I guess I've never experienced this yet, but hypothetically I KNOW not to sell, so I would just wait it out.
Ability- Retirement plans are definitely flexible, I could always work longer.
Need- I am maxing 401k and will be saving additional outside of it. I will run some numbers as
shuffler suggested to see what type of return I would need to meet a goal of retirement in 15 years.
