Case Study - Underexposed to stocks?

[DustyD]

As usual, with the current market volatility I've started to think more about my asset allocation. Typically when the market dips I try to confirm that I haven't taken on too much risk, but now I am starting to think that I might be waaaay too conservative, depending on how my overall assets are viewed.
Breakdown
Age: 33
Total Assets: ~$1.5M
Cash: $45k
Home Equity: $300k (generates $12k annual rent)
VA Pension: Valuing at $250k ($8500 annual income, tax-free, adjusts for inflation)
VBMFX: $120k
Stocks (Index Funds, Small Cap/Tech tilt): $800k

As you can see, my bond allocation is only about 15% of my liquid assets. However, when adding in the value of my pension and home equity, it dawned on me that I only have about 50% of my total assets invested in stocks - which seems really low. I would be interested to hear any others' perspectives...would you be inclined to carry less cash/bonds in such a scenario? I still consider myself at least 3-5 years away from FIRE.

[Buffaloski Boris]

You’re young and presumably still employed. Let’s say that you put all of your savings (in my view, unwisely) into a US based, cap weighted index fund. And then let’s say the market completely craps the bed. You’re still young enough to recover. It may suck for many years, but you’ll recover probably before your 50s.

I’m not an investment advisor. So this is just the process I’d go through if I woke up in your shoes.

1. I’d wake up very happy being 33 years old and a millionaire!
2. Since the goal is to retire in 3-5 years, I would be spending time learning about Sequence of Return Risk. The best stuff I’ve seen on it, hands down, is at Early Retirement Now.
3. I’d have a healthy amount of skepticism towards the prevailing investment wisdom within the FI community. Typically, but not always(!) that wisdom means disproportionate amounts of net worth going to: (a)large cap stock index funds or (b)rental real estate.
4. Ray Dallio has some great advice that basically boils down to Diversify and step outside your comfort zone. I’d search it out and read it.
5. I’d spend my time and money investing in expanding my marketable talents. Particularly in learning how to run a business. 

[MDM]

I would be interested to hear any others' perspectives....

See Asset allocation calculator for one such perspective.  As always, the "correct" AA will become known only in hindsight.

[Buffaloski Boris]

I would be interested to hear any others' perspectives....

See Asset allocation calculator for one such perspective.  As always, the "correct" AA will become known only in hindsight.

That’s a cool calculator. Thanks for posting.

[DustyD]

I would be interested to hear any others' perspectives....

See Asset allocation calculator for one such perspective.  As always, the "correct" AA will become known only in hindsight.

That’s a cool calculator. Thanks for posting.

Thanks Buffalo Chip, always great to hear someone else's perspective. I am trying to consider a variety of different paths and scenarios for the future, and could very well end up venturing into running a business - although not sure what that would look like at this point.
MDM - that calculator is pretty cool, will definitely be playing around with it.

[2Birds1Stone]

Sort of off topic, but I love how you can get your NPV of social security using that calculator, just check the "show calculations" box on the bottom when you hit submit.

My net worth just shot up $150k ;)

[GoCubsGo]

Thanks 2 Birds, I didn't see that check box for "show calculations".  Pretty cool.  To tangent off your tangent... pretty much any retirement age I put in its telling me to have a high 90% stock allocation (in some cases 100%).   I guess now I'm confused at what the point of the calculator is (it's not super clear to me after reading the opening section)..

Anyone else run it and get the same thing?

[Buffaloski Boris]

Thanks 2 Birds, I didn't see that check box for "show calculations".  Pretty cool.  To tangent off your tangent... pretty much any retirement age I put in its telling me to have a high 90% stock allocation (in some cases 100%).   I guess now I'm confused at what the point of the calculator is (it's not super clear to me after reading the opening section)..

Anyone else run it and get the same thing?

I’m supposed to be 100%. Guess I’m an investment failure. 🤣

[frugledoc]

For a defined benefit pension, don’t use it for calculating your net worth.

The more logical way is to look at the income it will give you when you retire and then calculate the liquid net worth you would require to make up the rest of your income.

[GoCubsGo]

Yeah Buffalo Chip,  I played with all the inputs and it keeps coming up with 100%.  I don't have any pensions, I do have a lot of home equity and should get max SS.  Maybe that's why it's saying no bonds and all equities.  The net present value of the social security is really cool, but I'm not sure why I would want to go to 100% equities in my late 40's.