Author Topic: help with asset allocation  (Read 1975 times)

cornbread

  • 5 O'Clock Shadow
  • *
  • Posts: 20
help with asset allocation
« on: August 01, 2015, 04:29:22 PM »
Hi,

We need help with the correct AA.  We are a couple of 40 year olds who do not exactly agree on the % of assets allocating to bonds.  My take on it is we should have the % in bonds = to our age (i.e. 40%).  He thinks we still have a lot of time and should take advantage of it and have only 10% in bonds and 90% in the stock market.

What do you suggest?

forummm

  • Walrus Stache
  • *******
  • Posts: 7389
  • Senior Mustachian
Re: help with asset allocation
« Reply #1 on: August 01, 2015, 04:34:39 PM »
www.bogleheads.org/wiki/investment_policy_statement

This is a personal decision for the both of you to make. There are pros and cons that essentially boil down to your personal preferences and risk tolerance.

What do your portfolios look like and how long until you plan to retire?

GGNoob

  • Pencil Stache
  • ****
  • Posts: 726
  • Age: 33
  • Location: Colorado
Re: help with asset allocation
« Reply #2 on: August 01, 2015, 10:59:09 PM »
Like forummm said, it's really a personal decision for you guys to decide. You may just have to meet in the middle at 25% bonds (Age - 15 in bonds).

Age in bonds is usually the most conservative method people follow. The most aggressive would be 100% stock for life. Otherwise age-10 or age-20 in bonds are some usual recommendations.

cornbread

  • 5 O'Clock Shadow
  • *
  • Posts: 20
Re: help with asset allocation
« Reply #3 on: August 02, 2015, 12:48:06 AM »
Thanks for your replies.

It's just that after suffering setbacks back in 2000 and 2008, we feel more risk adversed (me more than him).

We have 450k in vangurad acct. with 200k in bonds.  We want to be done with paid employment in 5 years.  Can we afford to be more risky?  We want 50k annual income by than.  There will be a defined benefits pension of 40k per year starting in 10 years.  But in 10 years, the buying power of the 40k may be only about 30k.

It seems to me it's less stressful to go with the % in bonds = to age and wait for the pension to kick in.  Help me to convince him please.

MDM

  • Senior Mustachian
  • ********
  • Posts: 10285
Re: help with asset allocation
« Reply #4 on: August 02, 2015, 01:21:45 AM »
It's just that after suffering setbacks back in 2000 and 2008
What type of setbacks: the temporary kind in which your net worth on paper dropped but then recovered, or the more lasting kind in which you sold equities and stayed in cash during the recoveries?

Quote
We have 450k in vangurad acct. with 200k in bonds.  We want to be done with paid employment in 5 years.  Can we afford to be more risky?  We want 50k annual income by than.  There will be a defined benefits pension of 40k per year starting in 10 years.  But in 10 years, the buying power of the 40k may be only about 30k.
Two types of risk: investing too aggressively and suffering losses, or investing too conservatively and not making enough gains.

Quote
It seems to me it's less stressful to go with the % in bonds = to age and wait for the pension to kick in.  Help me to convince him please.
I don't know which will be better for you.  It seems worthwhile for the two of you to look at planning tools (www.cfiresim.com and www.i-orp.com are two worth trying - see http://www.bogleheads.org/wiki/Retirement_calculators_and_spending for a longer list) together and see what they tell you about your specific situation.

fb132

  • Guest
Re: help with asset allocation
« Reply #5 on: August 02, 2015, 05:54:26 AM »
Like everyone says, if you are a worrier, than age = bonds is suited for you. if you are like most mustachians here, you simply put everything in stocks and little to bonds. Judging by your fears, I would stick with age = bonds %.

forummm

  • Walrus Stache
  • *******
  • Posts: 7389
  • Senior Mustachian
Re: help with asset allocation
« Reply #6 on: August 02, 2015, 06:20:50 AM »
I recommend putting your scenario into www.cfiresim.com, including desired income and pensions and SS, etc. You can choose to have the pension not adjusted for inflation. Let us know if you have questions about how to use it. It tests what would have happened if you started your retirement for each X-year period in the last 140 years.