Author Topic: Suggested Asset Allocation  (Read 1786 times)

Deadlift

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Suggested Asset Allocation
« on: March 07, 2014, 07:12:28 AM »
Hi All,

I'm currently 27 years of age and about 4.5 years away from FI. I'm currently 100% in VTSAX and am thinking about transferring some of that into bonds but I'm not sure how much. I'm fine being very aggressive but I am also a bit concerned that another stock market crash will happen in the next 4.5 years.

Thoughts?

arebelspy

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Re: Suggested Asset Allocation
« Reply #1 on: March 07, 2014, 07:18:02 AM »
http://www.bogleheads.org/wiki/Investment_policy_statement

http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit

It all depends on your personal preferences - risk tolerance being a big one.

I'm of the opinion anyone looking to FIRE in their early 30s has a long ER ahead of them to fund, and should be fairly aggressive with their AA and learn to stomach the drops.  Obviously your 100% equities falls in there, and should work for when you're accumulating assets.  After that, the rule of thumb I like is half your age in bonds.  So right now, you'd be about 85/15 if you implemented that. 

You may want to also consider some other asset classes, like REITs (or physical real estate). 

Jim Collins has some good recommendations on simple but effective AAs: http://jlcollinsnh.com/stock-series/

It's hard for us to suggest specifics, because much of it will depend on you.

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hodedofome

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Re: Suggested Asset Allocation
« Reply #2 on: March 11, 2014, 10:56:26 AM »
The thing you should be concerned about is understanding all the risks with a particular asset allocation. Then, understanding yourself enough to know how you would respond to different scenarios that could happen in the future. What if the US has a 20+ year bear market like Japan is currently experiencing, or like what happened in the US during the 30s-40s and late 60s to early 80s? How then would your 100% US equity allocation look? What if you decide to go 50/50 stocks and bonds and the bull market continues for 10+ years? How will you respond?

To me, you have to become a good risk manager FIRST, before you can become a good investor. It's ok to be 100% invested in US stocks as long as you understand the risk you are taking, and are ok with it. If you aren't, then it may be time to reconsider your asset allocation.

foobar

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Re: Suggested Asset Allocation
« Reply #3 on: March 11, 2014, 11:16:05 AM »
Who cares about crashes. They come and they go.  No one can tell you if the market is dropping 25% starting tomorrow or if it is going to go up 200% before dropping 30%.   Given the number of people worried about crashes and the like, I am voting for it going up a lot more before the next crash. The suckers need a lot more time to buy back in after sell in early 2009.


Hi All,

I'm currently 27 years of age and about 4.5 years away from FI. I'm currently 100% in VTSAX and am thinking about transferring some of that into bonds but I'm not sure how much. I'm fine being very aggressive but I am also a bit concerned that another stock market crash will happen in the next 4.5 years.

Thoughts?

soccerluvof4

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Re: Suggested Asset Allocation
« Reply #4 on: March 11, 2014, 01:32:50 PM »
Its like guessing everyday will be the day you die! Eventually you will be right !!!! in the meantime how many days will you give up worrying all the time about it.