Hello Mustachians!
I just got finished reading "The Four Pillars of Investing" and am halfway through reading "The Intelligent Asset Allocator", both by William Bernstein, and I have come up with a rough draft for an asset allocation. If you would be so charitable, please tell me if I am making any glaring mistakes.
Currently my wife and I's combined income will soon be somewhere around $133k. We expect something like $110k after taxes, $80-90k of which we will save short term to complete a house purchase in around 3 years. After the house is completely paid off, we plan to start investing our excess money in tax-sheltered accounts and taxable accounts, filling up the former before the latter. We plan to be able to stop working sometime within 15 years to live on $40k per year passive income from our investments.
The asset allocation I have planned out goes as follows with Vanguard. In reality, our allocation in IRA might be much lower due to the contribution cap.
75% Stock
25% Bond
Taxable - 95% of Portfolio
Total Stock Market Index Fund 28.5%
Tax-Managed Small-Cap Index Fund 14.25%
European Stock Index Fund 9.5%
Pacific Stock Index Fund 9.5%
Emerging Markets Stock Index Fund 9.5%
Limited-Term Tax-Exempt Fund 23.75%
IRA - 5% of Portfolio
Value Index Fund 1.5%
Small-Cap Value Index Fund 1.5%
REIT Index Fund 0.75%
Short-Term Corporate Fund 1.25%
There is the distinct possibility that somewhere during the next 10 years, we won't be able to contribute to an IRA because we exceed the income cap. My plan is to contribute to it every year that we can, but when we can't, to allocate the money entirely to the taxable account. We plan to rebalance every 2-3 years, as Bernstein suggests.
Is there anything glaringly obvious that I have forgotten while coming up with this asset allocation? Or is it a good starting point that reasonably won't end with our family living in the gutter?
Thank you for your help!