Author Topic: Thoughts on my (Mostly) Passive Investment Allocaiton Plan?  (Read 2700 times)

maxpower

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Thoughts on my (Mostly) Passive Investment Allocaiton Plan?
« on: August 31, 2015, 09:09:34 AM »
Hey all,
I've just gotten into managing my own portfolio over this last year. I'm 36 years old. The house is paid off, and my wife and I are on the verge of dumping a significantly higher percentage of our income into our stash (just need to save up another 4 grand to pay off some student loans that will be coming due next July). I figured it was therefore high time that I took a stab at constructing an investment allocation plan that I can re-balance when things get 5% or more out of whack.

I've read Benjamin Graham's sacred text and I'm doing what I can not be overly speculative, but it does seem that a bit of re-balancing between stocks and bonds, depending on cyclical market changes, is not wholly unwise. In light of that, how does the following strike you seasoned investors?

During the early stages of a Bull Market and the mid to latter stages of a Bear Market:
100% Equities
     25% International (VEU)
     75% Domestic (30% VBR, 22.5% VUG, 22.5% VTI)

During the latter stages of a Bull Market and the early stages of a Bear Market:
25% Bonds (BSV, BND)
75% Equities
     19% International (VEU)
     56% Domestic (29% VBR, 13.5% VBR, 13.5% VTI)

seattlecyclone

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Re: Thoughts on my (Mostly) Passive Investment Allocaiton Plan?
« Reply #1 on: August 31, 2015, 09:20:34 AM »
I would suggest that if you have some reliable way of predicting when bull and bear markets will end, you'll do a lot better by trading options, switching from puts to calls based on what you expect to happen in the market. Since I personally have no idea when the next bear market will happen (Are we in one already? Were the past couple of weeks just a minor blip? I have no idea!), I just have one asset allocation that I try to keep in balance all the time.

starguru

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Re: Thoughts on my (Mostly) Passive Investment Allocaiton Plan?
« Reply #2 on: August 31, 2015, 09:22:53 AM »
Your plan is essentially market timing.  You don't know when bull markets are ending or beginning. 

How about just do the 75/25 stock bonds plan? 

Also, since it appears your funds are at vanguard, why not just use their total stock market index for the US equities component?

Tremeroy

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Re: Thoughts on my (Mostly) Passive Investment Allocaiton Plan?
« Reply #3 on: August 31, 2015, 09:38:42 AM »
I agree with the two comments above. Instead of using "bull" & "bear" as indicators, if you want to implement such an approach, you need to use objective metrics. Things like exchange rates, 52-week highs, etc. aren't great predictors of future performance, but at least they would offer you some way of implementing your approach without relying on gut feelings (most dangerously, greed & fear).

maxpower

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Re: Thoughts on my (Mostly) Passive Investment Allocaiton Plan?
« Reply #4 on: August 31, 2015, 11:53:11 AM »
Thanks all,
Let's set to one side, for the moment, the whole market timing issue. Worst case scenario there is that I simply sit with a 25/75% bond/equity allocation forever (I'm not about to sell equities, then get second guess myself because the market keeps going up and buy back in at a higher price).

How do the other asset classes strike you? I'm shooting for a fairly aggressive small cap value weighted portfolio that I can keep building up over the next 15 years or so. That why, to answer starguru's question, I'm not just sticking all the domestic equities in VTI.

When I look back at the historical returns of VBR and VUG, it seems like one would really want to be long on those positions vs. VTI. Yes no?

My Own Advisor

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Re: Thoughts on my (Mostly) Passive Investment Allocaiton Plan?
« Reply #5 on: September 02, 2015, 04:42:18 AM »
Looks good...I like VTI and VXUS personally.

Keep some domestic bonds in a low-cost short-term bond index and sleep easy.

Kaspian

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Re: Thoughts on my (Mostly) Passive Investment Allocaiton Plan?
« Reply #6 on: September 03, 2015, 12:12:39 PM »
...but it does seem that a bit of re-balancing between stocks and bonds, depending on cyclical market changes...?

No.

How about just do the 75/25 stock bonds plan? 

Yes.

Your financial plans gives you way too much leeway to screw around whenever you want.  Put it on a schedule (e.g., last day of July, last day of December), and forget about it. 

One of the primary purposes of bonds is to reduce volatility.  They serve that purpose in a bull market just as well as a bear market.