Fellow MMMers,
I am starting to get a little older with a little more money at my disposal. Looking to actually sit down and comtemplate what an asset allocation might look like (right now, we are 20k/year in I-Bonds and 100% equities past that).
So, my questions are these:
1. What do you consider important for Asset allocations?
2. Is there a comprehensive guide or blog for this?
3. I know this is extremely variable based on the person's situation, but any good rules of thumb? (Bond % = x type heuristics)
Any information here would be amazing, even (or especially) just pointing me in the right direction to start. :)
One blog that gives considerable information and analysis on the topic is Early Retirement Now (ERN), hosted by the eponymous Big ERN.
From past reading and modest personal analysis:
1. Historically, allocations with 40% to 80% stock have performed well in the long term.
2. Using bonds as the main counterweight to stock has been great for most of the last 40 years, but with rising inflation, it's possible that is changing. Alternatives to bonds are numerous and various sources disagree widely on whether and how to use such alternatives (real estate / REITs, gold, other stuff). There's an interesting thread called "Idiots and Gurus" that gave some interesting analysis implying, in my view, some advantages for a more diversified portfolio.
3. Whether you are comfortable during market dips makes a big difference. If yes, high stock % may be ok; otherwise maybe err low.
4. Annual rebalancing helps a little, and has the advantage of a clear procedure to follow.
PS. My questions are "What are my goals?" and "What asset allocation will meet them?" I used 70/30 stock/bonds for a long time, including 7 years of FIRE, while owning a real estate property that represented a large portion of equity and income. In January this year, I sold the property for personal reasons and went with a more diversified financial portfolio, still majority stock but more diverse in the non-stock portion. The diversification helped significantly so far this year.