Basic asset alocation question

[pigpen]

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

[terran]

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:

• 30% x $1M = $300k bonds
• 70% x 70% x $1M = $490k US stock
• 70% x 30% x $1M = $210k international stock

[pigpen]

Thanks!

[seattlecyclone]

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.

[MustacheAndaHalf]

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.