Originally Posted by Coach
Hi RetireBy90, it does make sense to me to be pretty heavily invested in equities with your pension income. But there is something to think about -- something that became painfully clear to many of us in the last 18 months or so. If you'll be tapping investments regularly, you really want a portion of them in something that you can use when the market drops 40% and you don't want to sell equities at a loss. I fear that it could be a few years before I can sell equities without taking a beating.
To paraphrase what Coach says, a lot depends on what your costs will be when you retire. If you aren't going to need to draw down a lot from your equity portion on a regular basis, IMO you can be pretty much 100% in equities. But if it was me, I would keep it at about 80%, just to reduce the possibility of heart attack.
Any good index fund should pretty much never have anything but a 3 star rating. Index funds don't beat the market in the short term. For the small cap fund you might want to look at ishares S&P SmallCap 600.
Since you have the nice defined benefits packages, you could probably diversify a bit more within your equities. A 3-5% in a commercial REIT, maybe another 3-5% in a commodities fund. And I would definitely increase my international exposure. Maybe up to 40% of your total stocks, split between emerging markets and developed markets. Or if you want to keep it simple you could use the Vanguard FTSE All World ex-US fund.
My only suggestion on the 5% of hand-picked stocks is, don't listen to my advice!
Good luck. I'll be following your example soon...someday...maybe.