Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 09-02-2007, 06:44 PM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,686
Recently we've had a small repeat of a flight-to-quality in the markets. This brings up how much one can stomach of even a modest dose of risk -- everyone probably has a different view of this. Most of us are probably not aware how we'd react if presented with a very-very bad extended market as in 1929 (deflation) and 1973 (inflation). Then there is the possibility of a recession brought on by rising real interest rates -- bad for TIPS (at least temporarily). If you're still working, how safe is your job? How solidly is the house secured?

So when setting your AA don't forget about the fixed income (FI) component. If going the route of REITS, SV, EM then I would think one should pick a reasonable slice of FI. Then keep that FI in really safe assets like short/intermediate term treasuries, TIPS, Ibonds. Larry Swedroe has some good advice in this area.

Just my 2-cents.

Les
__________________

__________________
Lsbcal is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-03-2007, 01:31 AM   #22
Full time employment: Posting here.
 
Join Date: Aug 2007
Posts: 892
Quote:
Originally Posted by lsbcal View Post
If you're still working, how safe is your job? How solidly is the house secured?

So when setting your AA don't forget about the fixed income (FI) component. If going the route of REITS, SV, EM then I would think one should pick a reasonable slice of FI. Then keep that FI in really safe assets like short/intermediate term treasuries, TIPS, Ibonds. Larry Swedroe has some good advice in this area.
Thanks for bringing this up. My tolerance for risk is higher than normal and for the time being, I'm comfortable being 100% allocated in equities. And personally, I would love a great market drop - who doesn't like a sale?

We are currently saving around 30-40k per year and are both early 30's. I suspect around 40 we'll start adding FI and gradually increase the FI allocation as we get closer to retirement and have - hopefully - a bigger nest egg.

As for the work side, we can live off of my income or mostly off of my wife's, so there's little worry there. In addition, I'm paying extra on our mortgage (7-year arm at 4.75% with 3 years to go) and by conservative estimates, we'll have that paid off by 2015. For reference, rent in this area is about 40-50% more than our base mortgage payment. Plus, we have emergency cash to get us through about 6 months. In the end, the investment side is what we need to get us to FI and it's not necessary for day to day living.

LOL, I've also been reading the diehards forums occasionally and it has been useful. Today I downloaded Simba's worksheet (link to thread below), which beats the socks off of what I was using. I wish I found it a couple of days ago. I put in my AA, along with other AA, and I'm happy with what I have so far. What really surprised me is how little this portfolio needed to be rebalanced. Based on the spreadsheet, from 1972-2006 the total rebalanced was 1.066 million and the unrebalanced was 1.085 million. Lost money through rebalancing! I need to go back and figure out why...

I think it's time to call it done for now and get back to living.

Btw, I did add Intl Value to the mix. I wanted a bit more international and that fit in nicely. What I have now is:

15% - S&P500
15% - Large Value
10% - Small Cap
10% - Small Cap Value
10% - Vanguard International Value
10% - Europe
10% - Pacific
10% - Emerging Markets
10% - REITS

Thanks!

Asset Allocation spreadsheet w/ 35 years data...
__________________

__________________
tulak is offline   Reply With Quote
Old 09-03-2007, 07:18 AM   #23
Full time employment: Posting here.
Delawaredave5's Avatar
 
Join Date: Dec 2004
Posts: 606
Here's split of DODFX - love this fund - looks like they have well over 50% Europe (adding in UK). I'm suprised Europe is that high.

REGION DIVERS I F ICATION
Fund

Europe (excluding United Kingdom)
35.2%
Japan
19.6
United Kingdom
16.0
Latin America
7.1
Pacific (excluding Japan)
6.6
United States
5.4
Africa
2.8
Canada
1.1

Middle East
0.8
__________________
Delawaredave5 is offline   Reply With Quote
Old 09-03-2007, 10:34 AM   #24
Recycles dryer sheets
fluffy's Avatar
 
Join Date: Jun 2006
Posts: 82
If anyone's interested you can find market cap data for individual exchanges/countries at http://www.world-exchanges.org/WFE/h...cument&menu=10
__________________
We come in the spirit of hostility and menace
fluffy is offline   Reply With Quote
Old 09-03-2007, 01:54 PM   #25
Full time employment: Posting here.
 
Join Date: Oct 2003
Posts: 961
Quote:
Originally Posted by fluffy View Post
If anyone's interested you can find market cap data for individual exchanges/countries at http://www.world-exchanges.org/WFE/h...cument&menu=10
Thanks fluffy. For general composition of the world markets, I use Vanguard's Key Benchmark Statistics

- Alec
__________________
ats5g is offline   Reply With Quote
Old 09-03-2007, 02:14 PM   #26
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,046
Quote:
And personally, I would love a great market drop - who doesn't like a sale?
Only when you have no equity (or significant) holdings.
__________________
Spanky is offline   Reply With Quote
Old 09-03-2007, 05:59 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,686
Quote:
Originally Posted by kiki View Post
Thanks for bringing this up. My tolerance for risk is higher than normal and for the time being, I'm comfortable being 100% allocated in equities. And personally, I would love a great market drop - who doesn't like a sale?

We are currently saving around 30-40k per year and are both early 30's. I suspect around 40 we'll start adding FI and gradually increase the FI allocation as we get closer to retirement and have - hopefully - a bigger nest egg.
At your age I didn't have much in FI either. The current market doesn't seem widely overpriced but I'm not really very good at identifying toppy areas. Leaving a little in FI gives one the ammunition to really take advantage of major market declines. On the other hand, we've just had a modest decline so it's clearly not the top of a bull market. Good luck.

Les
__________________
Lsbcal is offline   Reply With Quote
Old 09-03-2007, 10:24 PM   #28
Full time employment: Posting here.
 
Join Date: Aug 2007
Posts: 892
Quote:
Originally Posted by Spanky View Post
Only when you have no equity (or significant) holdings.
That's part of it, but I believe the other factor is if you're still accumlating or not. We're currently in 200k range and going down to 150k or so doesn't bother me much. In the end, it's money we don't need now and I'm sure within our time frame it will come back (25-30 years).

Quote:
Originally Posted by lsbcal View Post
At your age I didn't have much in FI either. The current market doesn't seem widely overpriced but I'm not really very good at identifying toppy areas. Leaving a little in FI gives one the ammunition to really take advantage of major market declines. On the other hand, we've just had a modest decline so it's clearly not the top of a bull market. Good luck.
I also took a look at adding a total bond fund at 10% and based on Simba's worksheet looking at past data, it really doesn't change the outcome by much. For those that are curious, adding the bond fund decreases CAGR by about .3% and standard deviation by 1.3%. If equity returns in the future are less than in the past, as many suspect, then the difference should be even less. It'll take awhile before I get this allocation in place, because I'm overweight in the 401k, but I think I might plan on adding the total bond fund as I start allocating to other classes.

Thanks again for all the help.
__________________
tulak is offline   Reply With Quote
Old 09-03-2007, 10:34 PM   #29
Full time employment: Posting here.
 
Join Date: Aug 2007
Posts: 892
Quote:
Originally Posted by Delawaredave5 View Post
Here's split of DODFX - love this fund - looks like they have well over 50% Europe (adding in UK). I'm suprised Europe is that high.


REGION DIVERS I F ICATION



Fund

Europe (excluding United Kingdom)



35.2%



Japan 19.6
United Kingdom 16.0
Latin America 7.1
Pacific (excluding Japan) 6.6
United States 5.4
Africa 2.8
Canada 1.1

Middle East 0.8



The numbers are higher on morningstars x-ray for dodfx:

U.S. & Canada 6.86Europe53.56Japan20.70Latin America 7.46Asia & Australia 6.78Other4.64


I'm a bit skeptical using morningstar sometimes. In this case, I have more faith in your numbers, since they come from the dodge and cox website.

I decided that I'd probably end up going with the ishares eafe value (efv) instead of the vanguard fund. According to morningstar, it has a significantly higher tilt towards value, even though I'd like to know the region breakdown - morningstar is showing 50% not classified. I've seen that with some of the Vanguard ETF's, but unlike Vanguard, I couldn't find the region breakdown for efv on the ishares site.

- kiki


__________________
tulak is offline   Reply With Quote
Old 09-03-2007, 11:25 PM   #30
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
If you're going to base your allocation on a backtesting spreadsheet, then you should definitely be 100% emerging markets.
__________________
twaddle is offline   Reply With Quote
Old 09-03-2007, 11:39 PM   #31
Full time employment: Posting here.
 
Join Date: Aug 2007
Posts: 892
Quote:
Originally Posted by twaddle View Post
If you're going to base your allocation on a backtesting spreadsheet, then you should definitely be 100% emerging markets.
Heh, that would be an interesting ride. Hang on tight!

I just punched a 100% EM into the spreadsheet, and it's actually not that bad on a year to year basis. The swings are definitely greater, but the bad years aren't much worse than the slice-and-dice portfolio I have above, excluding 97, 98, and 2000. And from 72-06, a few bad year difference isn't that bad.

But it's definitely not an investment option that I'd choose...
__________________

__________________
tulak is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
International Allocation AlmostDone FIRE and Money 21 01-08-2007 02:17 PM
Pacific versus Europe Rich_by_the_Bay FIRE and Money 4 12-13-2006 12:49 PM
Tweaking International Allocation WilliamG FIRE and Money 1 08-02-2005 12:26 PM
International Equity Allocation Telly FIRE and Money 14 07-14-2005 09:46 AM
International equities allocation LRAO FIRE and Money 1 04-21-2005 11:00 AM

 

 
All times are GMT -6. The time now is 05:34 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.