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Learning, Sharing, and Teaching => Investor Alley => Topic started by: pigpen on December 29, 2019, 08:39:55 AM

Title: Basic asset alocation question
Post by: pigpen on December 29, 2019, 08:39:55 AM
So, we're at 70/30 stocks/bonds, which works for us, but I'm currently looking at the finer details of our investment plan and any possible year-end rebalancing and want to make sure I understand a basic principle -- or at least the way people talk about a basic principle.

My question: (using a hypothetical $1,000,000 total portfolio for easy math). When someone recommends, say, that you should be "30% in international stocks," do you read that as a recommendation to put $300,000 into international stocks (30% of the grand total of $1M), or as a recommendation to put $210,000 into international stocks (30% of the total equity allocation of $700,000?

Thanks.

PP

Title: Re: Basic asset alocation question
Post by: terran on December 29, 2019, 09:20:14 AM
No, 30% international stock would generally mean 30% of the total stock allocation. So in your case with a 70/30 stock/bond and a 70/30 US/international stock allocation:

Title: Re: Basic asset alocation question
Post by: pigpen on December 30, 2019, 06:23:50 AM
Thanks!
Title: Re: Basic asset alocation question
Post by: seattlecyclone on December 30, 2019, 09:44:32 AM
I don't know, I think that recommendation could easily be interpreted either way. You'd have to ask the person recommending it to clarify.
Title: Re: Basic asset alocation question
Post by: MustacheAndaHalf on December 31, 2019, 05:32:45 AM
put $210,000 into international stocks (30% of the total equity allocation of $700,000?

It means a percentage of equities.  Within your equity allocation, you are trying to diversify.  So you allocate to domestic, and some percentage to international.  It's a separate split than stocks vs bonds.