How do you know your Asset Allocation?

[Retire Soon]

I use Vanguard Portfolio Watch and believe it to be accurate.

[bbbamI]

Heh eh...I keep up with my AA, but for the past couple of years, I haven't been sure what to do about it when it gets off kilter.

But hey, at least I know what it is!

[kyounge1956]

I like the Instant Xray. Last time I checked my AA was when I bought shares of TIP in my Roth IRA, which I need to do manually until I get an automatic purchase set up. I was pleasantly surprised—I'm closer to the target than I thought I would be.

[LOL!]

For those using your own spreadsheet how do you divvy up a fund into large, mid, small, US, domestic, stocks, bonds, whatever? For example, if you have Wellington, Wellesley, Dodge&Cox balanced, do you break it down into its components? If so, how do you decide what its components are? Do you look that up on Morningstar?

[donheff]

I use an X-Ray like deal at Vanguard. It has a spot for listing outside holdings. For TSP and a Fidelity index that Vanguard can't find by ticker I just substitute a similar fund.

[freebird5825]

Quote:

Originally Posted by donheff I use an X-Ray like deal at Vanguard. It has a spot for listing outside holdings. For TSP and a Fidelity index that Vanguard can't find by ticker I just substitute a similar fund.

I believe there is a way to link to your TSP data through the VG site. I no longer have a TSP account, so I cannot do a trial run.
Maybe another current TSP account holder here can chime in if they were successful.

[audreyh1]

Quote:

Originally Posted by LOL! For those using your own spreadsheet how do you divvy up a fund into large, mid, small, US, domestic, stocks, bonds, whatever? For example, if you have Wellington, Wellesley, Dodge&Cox balanced, do you break it down into its components? If so, how do you decide what its components are? Do you look that up on Morningstar?

I just assign each fund to a category as I originally bought it to fit a given asset class. An equity or bond fund may hold some cash, but I don't worry about it. I figure it's "close enough". The thing is, that when you find out what a fund actually holds - it's usually 6 months after the fact, so if you tweak according to a fund's internal holdings you are always way late and requires too much tweaking anyway.

And I don't include balanced/mixed funds as part of my asset allocation calculation because I don't rebalance those.

Audrey

[rhbrown1]

There are lots of ways to track asset allocation. But, no matter which way you do it, you still need some good old-fashioned smarts to oversee the mechanized systems.

Morningstar always has a few errors in it. A well known Managed Futures fund that invests in commodities continues to be labeled a "long-short fund." Index names don't always capture the true essence of what underlies the fund: an energy index could be anything from Large Cap Value to Small Cap growth. Even a fund that has Small Cap in the name is often overly weighted to Mid Cap. And, fixed income funds are often all over the map -- short term, intermediate term, high yield and who knows what else based on their derivative exposures.

So, you have to look deeper into the fund holdings to really see what you own.

[Bikerdude]

I just use a spreadsheet. I separate the balanced funds into equities and fixed percentages. I don't get very granular as to amount of foreign stocks or bonds held in a balanced fund. The other funds I just list as to what they are, global stock or bond, small cap, etc. Close enough for me.

[Dreamer]

Quote:

Originally Posted by rhbrown1 There are lots of ways to track asset allocation. But, no matter which way you do it, you still need some good old-fashioned smarts to oversee the mechanized systems.

Now I know what my problems is! I really should get serious about trying to learn more about all of this. I use the Target funds at Vanguard for the IRAs and the Lifecycle fund at TSP (might have the names reversed) and use Financial Engines and what they suggest for my DH's 401K. Maybe I will try one of the sites listed to input everything to see what it says. I will admit to a couple of other things that will probably get me kicked off of this board. I have never run FIRECALC and I have never read The Four Pillars of Investing, even though I have owned the book for over 5 years. (Okay, I just removed it from the bookshelf and have it laying on my desk. I am going to commit to reading a few pages per day. Please don't kick me off of this site.

[FUEGO]

Quote:

Originally Posted by LOL! For those using your own spreadsheet how do you divvy up a fund into large, mid, small, US, domestic, stocks, bonds, whatever? For example, if you have Wellington, Wellesley, Dodge&Cox balanced, do you break it down into its components? If so, how do you decide what its components are? Do you look that up on Morningstar?

The only fund I break down into it's component parts is the total international fund at vanguard. I have separate percentage allocations for European, Pacific, and Emerging Mkts, so I go to vanguard's page and figure out what percent of each regional fund is in the Total International fund. And there's a little block in my spreadsheet for entering this data to feed into the asset allocation summary.

I do have about 1% of my total portfolio in an actively managed fund that was given to me by my father when I was a kid. I still hold it and don't include it in my asset allocation at all. Otherwise, I'd probably lump it in 100% large blend or large value (not sure what it is exactly).

[W2R]

Quote:

Originally Posted by Bikerdude I just use a spreadsheet. I separate the balanced funds into equities and fixed percentages. I don't get very granular as to amount of foreign stocks or bonds held in a balanced fund. The other funds I just list as to what they are, global stock or bond, small cap, etc. Close enough for me.

Me too. I am not a slice-and-dicer.

[jIMOh]

Quote:

Originally Posted by LOL! For those using your own spreadsheet how do you divvy up a fund into large, mid, small, US, domestic, stocks, bonds, whatever? For example, if you have Wellington, Wellesley, Dodge&Cox balanced, do you break it down into its components? If so, how do you decide what its components are? Do you look that up on Morningstar?

You need to do an xray.

I am in the minority here in that I use managed funds. I use inexpensive managed funds, but they all have a manager.

I need to check my components because few funds are ever pure, and what one tool says is a mid cap another might call a small cap. So checking components once every 1-2 years for me on xray is important.

What I do:
Check each portfolio with xray to make sure my allocation is met in following ways:

90% stocks 10% bonds (Roths are 100% stocks)
then
75% domestics stocks and 25% foreign stocks
then check detailed allocation
35% large cap (45% in Roths)
15% mid cap
15% small cap
15% foreign large
10% foreign small and emerging markets

More than likely the detailed allocation (by fund selection) is off my targets by small fraction. My small cap funds own mid caps, my mid cap funds own small caps (fund managers do not have to sell them if they move out of market cap range). And what a fund manager considers mid cap and what morning star consider mid cap might not match... as long as 30% of portfolio is not large cap, the objective was met IMO.

[Gotadimple]

Quote:

Originally Posted by Dreamer Now I know what my problems is! I really should get serious about trying to learn more about all of this. I use the Target funds at Vanguard for the IRAs and the Lifecycle fund at TSP (might have the names reversed) and use Financial Engines and what they suggest for my DH's 401K. Maybe I will try one of the sites listed to input everything to see what it says. I will admit to a couple of other things that will probably get me kicked off of this board. I have never run FIRECALC and I have never read The Four Pillars of Investing, even though I have owned the book for over 5 years. (Okay, I just removed it from the bookshelf and have it laying on my desk. I am going to commit to reading a few pages per day. Please don't kick me off of this site.

I haven't read it either, but I've read plenty of other books (I think you'll be OK on this site).

-- Rita

[yakers]

Quote:

Originally Posted by Dreamer I will admit to a couple of other things that will probably get me kicked off of this board. I have never run FIRECALC and I have never read The Four Pillars of Investing, even though I have owned the book for over 5 years. Please don't kick me off of this site.

I might be expelled with you although I have read the Four Pillars and can think of at least two of them. But...

My name is Yakers and I am a RE addict who has never run FIRECALC.

There, I feel better. Not like I couldn't have shoe horned my data into it somewhere but I just look at DWs & my pensions which cover basic expenses and then remove <.4% of our assets each year (09 was our first full year of us both being retired) and go on from there. We have a paid off house , no debt and could live on peanut butter and in a tent if we had to.



I tell DW in a good year we go to Tahiti and a bad year Tijuana but I'm not going back to work.

[bbbamI]

Quote:

Originally Posted by yakers I might be expelled with you although I have read the Four Pillars and can think of at least two of them. But... My name is Yakers and I am a RE addict who has never run FIRECALC. There, I feel better. Not like I couldn't have shoe horned my data into it somewhere but I just look at DWs & my pensions which cover basic expenses and then remove <.4% of our assets each year (09 was our first full year of us both being retired) and go on from there. We have a paid off house , no debt and could live on peanut butter and in a tent if we had to. I tell DW in a good year we go to Tahiti and a bad year Tijuana but I'm not going back to work.

Perfect!

[W2R]

Quote:

Originally Posted by Dreamer I will admit to a couple of other things that will probably get me kicked off of this board. I have never run FIRECALC

Well, I have run FIRECalc, but I have to admit that it gives me a lot more to spend that I would feel comfortable spending. So, I run it for 100% probability of success, roll my eyes at the amount it says I can spend, and otherwise ignore it.

[WilliamG]

Quote:

Originally Posted by Bikerdude I just use a spreadsheet. I separate the balanced funds into equities and fixed percentages. I don't get very granular as to amount of foreign stocks or bonds held in a balanced fund. The other funds I just list as to what they are, global stock or bond, small cap, etc. Close enough for me.

Very similar. Allocation targets are at a relatively high level:

8% Total International Index
32% Stock in balanced funds (Bal Index, Wellington, Wellesley)
40% Bonds in balanced funds plus GNMA fund
20% Reserve (money markets, CDs, Treasuries, IBonds)

[freebird5825]

Quote:

Originally Posted by yakers I might be expelled with you although I have read the Four Pillars and can think of at least two of them. But... My name is Yakers and I am a RE addict who has never run FIRECALC. There, I feel better.

TY for standing up before I had to.

My name is Freebird and I tried running FIRECalc once, got totally lost, and gave up.
I do have a Calendar reminder set to try again, but I always find a way to put it off (laundry, taxes, gardening, boating...)
It involves too much higher level thinking, something I am trying to wean myself off of in FIRE.

[FinanceDude]

I rely on my Magic 8 Ball and Pet Rock...........