Author Topic: 70/10/10/10  (Read 1063 times)

clarkfan1979

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70/10/10/10
« on: February 17, 2021, 06:27:32 PM »
I'm 18 months with a new employer and have $23,500 in a 401a account. For 2020, I was 70% large cap, 20% international and 10% small-mid cap. My overall return for 2020 was 33.84%. I bought a little extra near the bottom in early April. 

I re-balanced in mid-January and I currently have 70% large cap, 10% small/mid cap, 10% international and 10% bond.

I'm 41. I will probably start to withdraw the money in 20-30 years. What's my risk?

jeroly

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Re: 70/10/10/10
« Reply #1 on: February 17, 2021, 06:44:33 PM »
That US stocks underperform or that large caps underperform (you are 87% large cap out of your US funds, and they're not that heavily weighted in the total market) or that the dollar weakens significantly.  You now have only 10% international so you're overweight the US.  Now, many people argue that US stocks have a lot of exposure to international economic conditions/sales/etc., but you are still susceptible to weakening in the US dollar relative to world currencies (so the US market could outperform in absolute terms but in dollar terms could still underperform. Other than that it's fine but more work than just having US Total Market, Ex-US Total World, and a bond fund.

ChpBstrd

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Re: 70/10/10/10
« Reply #2 on: February 18, 2021, 02:10:31 PM »
If you are not retiring for 20-30 years, there's not much risk.

If you mean you are retiring sooner and the 401a will not be withdrawn from for another 20-30 years, then this $23.5k account is a small portion of your overall stash, and it's your overall AA that matters.

Beware. Nobody seems to care about diversification until an entire sector gets wiped out, like tech in 2000, finance in 2008, and energy in 2015-16. Contrarians outlive trend chasers.

cool7hand

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Re: 70/10/10/10
« Reply #3 on: February 19, 2021, 06:54:15 AM »
We have been convinced by those who advocate that not losing money is just as important, if not more so, than making it. As a result, we use Ray Dalio's All Season's Portfolio. If lower volatility suits your situation/goals, give it a Google.

talltexan

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Re: 70/10/10/10
« Reply #4 on: February 19, 2021, 07:15:44 AM »
If you're certain to not need the money for 20 years, I suppose you could sell the bonds stake and buy a REIT.

Spaarwalvis

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Re: 70/10/10/10
« Reply #5 on: February 26, 2021, 06:53:36 AM »
What jroly said is all true.  My secret recipe has equal exposure to U.S. and foreign stocks because we have every reason to expect future profit growth to be disproportionately "not here."

I'd advise you to mix in some bonds and maybe REITs, and perhaps to position your different assets classes in accounts with the best tax treatment, but maybe you're already doing these things.  I don't know the overall picture of your assets outside this one account.

If you're interested in the tax placement thing, this is a decent, if detailed, intro:  https://www.bogleheads.org/wiki/Tax-efficient_fund_placement .  TLDR:  bonds and REITs should preferentially go in the 401k, international stocks preferentially in unsheltered accounts.

talltexan

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Re: 70/10/10/10
« Reply #6 on: February 26, 2021, 11:25:03 AM »
+1 for the tax efficient placement. Bonds go in tax-deferred accounts.

FLBiker

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Re: 70/10/10/10
« Reply #7 on: March 10, 2021, 01:57:18 PM »
What jroly said is all true.  My secret recipe has equal exposure to U.S. and foreign stocks because we have every reason to expect future profit growth to be disproportionately "not here."

I'd advise you to mix in some bonds and maybe REITs, and perhaps to position your different assets classes in accounts with the best tax treatment, but maybe you're already doing these things.  I don't know the overall picture of your assets outside this one account.

If you're interested in the tax placement thing, this is a decent, if detailed, intro:  https://www.bogleheads.org/wiki/Tax-efficient_fund_placement .  TLDR:  bonds and REITs should preferentially go in the 401k, international stocks preferentially in unsheltered accounts.
+1 to increasing your international exposure and considering taxes

Our AA is 52% US stock, 38% INT Stock, 10% bond.  And we focus our taxable on the INT, and have our bonds in tax sheltered.  FWIW, we had a 5% REIT holding for many years, and I recently ditched it because I didn't feel like it really made a difference.  As we've gotten close to our FI number, I find I prefer simplicity.

Also, at the risk of being a market timer / active trader, I feel like the future of commercial / urban real estate with a shift to working from home isn't great.  I could absolutely be wrong about that, though.