Author Topic: Equities versus Balanced allocations  (Read 1454 times)

FLStache

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Equities versus Balanced allocations
« on: October 23, 2017, 10:08:40 AM »
I'm 49 and plan to RE late next year.  I'm comfortable with my portfolio and pension numbers and now reviewing my allocations.  I feel like I should probably reallocate, but don't really want to given how well the stock market is performing.  So looking for some perspectives/feedback/input.  Here's my current accounts/allocations:

401k (~$600,000):  84% in Growth, 16% in Balanced (ongoing contributions are at 53%/47%)
Mutual Fund ($221,000):  86% Large Cap, 14% Balanced (ongoing contributions are at 56%/44%)
VG Total Stock Market Index ($16,000):  100% Stocks (ongoing contributions 100% stocks)
Roth IRA ($10,000):  'Growth' (no ongoing contributions)
Traditional IRA ($23,000):  'Aggressive Growth' (no ongoing contributions)

I understand the rule of thumb for asset allocation  is 110 minus your age so that probably means I should reallocate those bigger accounts to a 60/40 split.  But again, hate to lose out on the stock market gains.  Perhaps I could compromise at a 70/30 or 75/25 split.

I don't feel particularly savvy in my approach which has basically been to save a bunch and let it ride, so really would appreciate any input on how to approach managing these funds moving forward.

Thanks!

MDM

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Re: Equities versus Balanced allocations
« Reply #1 on: October 23, 2017, 11:57:29 AM »
I understand the rule of thumb....
There are multiple rules of thumb for this.  Given that you seem interested in understanding "why?" instead of a generic "what?", see Asset allocation - Bogleheads and links therein.  Happy reading!

ZiziPB

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Re: Equities versus Balanced allocations
« Reply #2 on: October 23, 2017, 12:14:28 PM »

I feel like I should probably reallocate, but don't really want to given how well the stock market is performing. 

Thanks!

Sounds to me like you're engaging in market timing.  Would you feel the same about your allocation if the market was moving down? 

The right asset allocation is an allocation that will carry you comfortably both through ups and downs.  Something that will not cause you to panic and sell when the market has a sudden downturn.  And equally, something that will not make you feel regret about missing out on gains when the market is going up.  So it needs to be just right for you, taking into account your own risk appetite.

For what it's worth, I'm 49 and planning to FIRE next year.  I'm at about 65/35 stocks to fixed income. 

ETA: "Balanced" or "growth" are not really indicators of a specific asset class.  You need to drill down to see how much stocks (US and international), how much bonds and what other assets you have in the portfolio.
« Last Edit: October 23, 2017, 12:18:14 PM by ZiziPB »

alexpkeaton

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Re: Equities versus Balanced allocations
« Reply #3 on: October 23, 2017, 12:37:18 PM »
ETA: "Balanced" or "growth" are not really indicators of a specific asset class.

Are these index funds? It may be a stupid question to ask here, but just making sure. Whenever I see mention of a "growth" fund I get skeptical.

FLStache

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Re: Equities versus Balanced allocations
« Reply #4 on: October 23, 2017, 12:51:26 PM »
Thanks for these replies!  I have been on auto pilot with my investing and with the commitment to FIRE a year from now (given an anticipated severance package) it's just made me start working through a checklist that includes getting a better understanding of my asset allocation and adjusting as needed.  Have read a number of articles this afternoon and it seems rebalancing is prudent.

I will also drill down into these various funds to get a better handle on the mix of assets in my portfolio.  I was making some assumptions as to what 'growth,' 'balanced,' etc means, but know making assumptions can be dangerous.

Thanks for sharing your perspectives and thoughts.