How are my allocations?

[LiseE]

Hi all ..  the majority of our investments are in our corporate 401K's (accept for one inherited IRA).  Here's the allocation breakdown:

110K (bonds) - Inherited IRA
370K (100% Stock) - My 401K with very limited selection of funds from TRowe
  - 25% International
  - 75% S&P 500 Index

200K (100% Stock) - Hubby's 401K with great selections through Vanguard

We are both 50 years old and plan on not pulling from these accounts for another 10-15 years.  We are also risk tolerant. 

Thoughts?

[matchewed]

So you have an 84/16 split between stocks and bonds. Depending on what Hubby's particular fund/funds is/are it seems fine. It's simple and easy to see/adjust as needed. What is your planned AA?

[LiseE]

Well from what I've read/learned we should have a 75/25 allocation but I kinda feel like the 15 year horizon until we'll tap into this money warrants a little more of an aggressive nature.  I'm finding it hard as we get older to change my mindset from (long horizon, buy and hold, aggressive portfolio) to short horizon and less aggressive allocation.  And by aggressive I mean index funds that are mostly equities.  I'm not a day trader or trading options .. nothing that aggressive as i don't have the time right now to learn about those investments .. and I've also learned here that index funds are the way to go.

I kind of feel like our strategy should be shifting at this point in life but I'm not sure how to put the shift on.  We both work fulltime IT jobs but I was planning to leave in a year or two and work at something less stressful and demanding.  Although a funny things has happened .. the closer we get to FI the more I'm enjoying my work! 

Should we be changing our AA?  While it's mostly in equities, they are index funds so diverse in nature and not crazy aggressive.

- L

[matchewed]

You don't have to change your AA per se. Some people believe in moving to a more conservative allocation as they get older or have "won the game" (higher percentage in bonds as time goes on). Others believe that sticking with a singular AA works. Others feel that staying the course is just fine. There isn't really a wrong answer in the outcome side of things. There is only a wrong answer in the idea that your choice has to jive with you. If it doesn't it may cause you to react in a poor manner to financial events.

What I would do in your shoes is write out a plan (an Investment Policy Statement can be the foundation for this plan). This is mainly an encouragement to understand the why's of the various options and go with the one that will work best for you, your goals, your acceptance of risks, and your anticipated (conservative) returns.

[Scandium]

With a 6+ year bull market there is a lot of 100% stocks 4 eva out there. I don't know how that will change if we see a drop. Frankly I don't see much use for bonds myself now either. Everything I read say bonds is just to avoid behavior problems. Then I'd work on not panic selling, not patching the symptom to make myself feel better.

[forummm]

This is an example of a perfectly reasonable portfolio allocation. But as the previous posters have said, it's all about you and your investment policy statement. If you've thought through it and settled on this, it sounds good to me. If you'll panic and sell when the market dips 50%, then maybe go more into bonds now.

[LiseE]

Thanks .. I like the Investment Strategy Policy idea .. will write one up.  As for the market if it should dip after this bull market, I'm the type of investor that see that as a golden opportunity to add to my holdings. :)

[forummm]

Thanks .. I like the Investment Strategy Policy idea .. will write one up.  As for the market if it should dip after this bull market, I'm the type of investor that see that as a golden opportunity to add to my holdings. :)

Ding ding ding! You are CORRECT!