Author Topic: Determining nuances of asset allocation  (Read 306 times)

El Gringo

  • Bristles
  • ***
  • Posts: 314
  • Location: Washington, DC
Determining nuances of asset allocation
« on: August 18, 2020, 09:15:52 AM »
What do people recommend for determining the nuances of asset allocation, beyond the first tier of Equity-Bond-Alternatives. For example, picking what percentage to have in large/mid/small cap and international developed and emerging markets - it all seems fairly arbitrary to me. And then Personal Capital goes even detailed into Value and Growth, and I don't really know what to determine my asset allocation should be. It'd be helpful to find a resource that guides you in picking that level of allocation.

FWIW, right now I've been aiming at 60% US stock, 30% International, 8.5% Alternative and 1.5% bonds. For the 30% international, I split it 20% developed and 10% emerging markets. For the 60% of US stocks, I split it into 30% large cap, 18% mid cap, and 12% small cap. I'm not religious in keeping to those splits, but it's generally what I aim for if something is getting too out of whack. Using Personal Capital's asset allocation tool, I generally aim to keep Value-Core-Growth fairly even .

Context: I'm married, 33 years-old, no children. Total dual income $116,000. Net worth $259,000 (approximately $69,000 in cash, which I am reducing by DCAing into investments). 
« Last Edit: August 18, 2020, 10:07:18 AM by El Gringo »

vand

  • Handlebar Stache
  • *****
  • Posts: 1424
  • Location: UK
Re: Determining nuances of asset allocation
« Reply #1 on: August 19, 2020, 04:35:07 AM »
Don't kid yourself that you're practising asset allocation as it's commonly discussed. You're almost 100% in stocks and your correlation to the S&P will likely be above 0.95.
The point of asset allocation is that you diversify across asset classes, not just within an asset class.

Steeze

  • Pencil Stache
  • ****
  • Posts: 918
  • Age: 33
  • Location: NYC Area of Earth
Re: Determining nuances of asset allocation
« Reply #2 on: August 19, 2020, 04:58:01 AM »
You could check out the portfolio charts website for a decent collection of model portfolios. Each one of their creators wrote a book about why they choose that mix if you wanted to dive deep. At a minimum you could read up on the bogelheads wiki about each one. Maybe use the back testing tool to figure out your own mix.

Probably the most important thing is to use a mix that makes logical sense to you, something you are committed to, and stick with it over your investing career.

In my opinion simple is good.