Tools for determining asset allocation

[El Gringo]

What tools do people recommend for determining appropriate asset allocation? I'm 30 years old, still have a long time to build up a stache and want to be as aggressive as possible, but not stupid. I'm always second guessing how much % I should be allocating to different assets (like, if small caps historically get better returns over the long run and I'm willing to put up with their volatility, why not weight myself heavier in those assets?). Right now I more or less follow Personal Capital's recommendations, though I'm heavier on international stocks than what they recommend (I'm 30% developed, 10% emerging whereas they recommend ~26% international), which puts me about 1% of historical risk to the right of their efficient frontier. But yeah, I have a hard time really deciding on an asset allocation and not second-guessing myself (though I do avoid actually constantly tinkering). So what tools do people recommend for determining your asset allocation?

[boarder42]

I am 30 and my AA varies based on when the money will be used. In 5 years I need my Roth bridge and taxable bridge so I keep that 100% vtsax for now. Our 401ks on the other hand have good small and mid caps options so I'm about 60 large 20/20 mid and small. Considering going higher. In fire I'll be 60/40 us to int maybe with 5-10% bonds.

In growth stages you can always work a couple extra months or years so go as aggressive as you please just know it may add a couple years to your time line.

[triangle]

A factor in international vs domestic allocation that I do not understand is how the big multinational companies are classified and affect the indexes. I think it is based on where they are incorporated and not based on percentage of sales per region. But with so many big multinationals and mergers between them, the lines are not clear cut.

[Radagast]

https://www.portfoliovisualizer.com/
https://portfoliocharts.com/calculators/

I guess these two are the most prominent. There are a gazillion things to toy around with between the two of them.

[Livingthedream55]

https://www.portfoliovisualizer.com/
https://portfoliocharts.com/calculators/

I guess these two are the most prominent. There are a gazillion things to toy around with between the two of them.

Thanks for these! Fun to play with various scenarios!  Really, really good feeling for me that I need not take a heck of a lot of risk at my stage of FIRE (less than 2 years out to leaving paid employment.)

[boarder42]

careful with the data on portfolio charts it doesnt go back as far as other data. i think its only from the 70s on

[Radagast]

Oh yeah I forgot cfiresim http://www.cfiresim.com/. It covers a longer history but has a lot fewer assets. It seems oriented more towards personal finance than portfolio theory.

[TomTX]

careful with the data on portfolio charts it doesnt go back as far as other data. i think its only from the 70s on

Yeah, the real "gotcha" is that it starts with the huge runup in gold when the dollar was unpegged from the gold standard. This anomaly artificially boosts the usefulness of gold in a portfolio.

[Tyler]

careful with the data on portfolio charts it doesnt go back as far as other data. i think its only from the 70s on

Yeah, the real "gotcha" is that it starts with the huge runup in gold when the dollar was unpegged from the gold standard. This anomaly artificially boosts the usefulness of gold in a portfolio.

To be fair, while the database at Portfolio Charts starts in 1970 the tools look at ALL investing timeframes within that database simultaneously.  So they also show portfolios with gold starting at the peak in 1980 before it lost 80% of its value, just like they show the best and worst times for every other asset and portfolio.  That timeframe-neutral perspective that stresses avoiding the temptation to cherry pick data is repeated over and over again, and to my knowledge is unique among investing websites. 

[boarder42]

Tyler I like your website alot I just wish more data existed for you to make it go back farther than 47 years.

[Tyler]

Tyler I like your website alot I just wish more data existed for you to make it go back farther than 47 years.

No worries.  So do I.  :) 

FWIW, if you're the self-modeling type you are free to download my Stock Index Calculator that has data back to 1927 for all sorts of US stock indices.  There are also lots of other data sources where you can string together your own series for study. 

[TomTX]

careful with the data on portfolio charts it doesnt go back as far as other data. i think its only from the 70s on

Yeah, the real "gotcha" is that it starts with the huge runup in gold when the dollar was unpegged from the gold standard. This anomaly artificially boosts the usefulness of gold in a portfolio.

To be fair, while the database at Portfolio Charts starts in 1970 the tools look at ALL investing timeframes within that database simultaneously.  So they also show portfolios with gold starting at the peak in 1980 before it lost 80% of its value, just like they show the best and worst times for every other asset and portfolio.  That timeframe-neutral perspective that stresses avoiding the temptation to cherry pick data is repeated over and over again, and to my knowledge is unique among investing websites.

The runup from depegging to the bottom after 1980 is still something like an 8x increase in value.

[Tyler]

The runup from depegging to the bottom after 1980 is still something like an 8x increase in value.

This has been thoughtfully discussed at length here:  https://forum.mrmoneymustache.com/investor-alley/gold-price-and-the-hazards-of-backtesting/