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Simple allocation with high risk tolerance
Old 10-08-2008, 11:17 PM   #1
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Simple allocation with high risk tolerance

VG 500 Index: 35.8%
VG Small-Cap Index: 17.9%
VG Value Index: 17.9%
ING CD: 11%
Bonds: waiting until November
Emergency fund: 16%

I'm in a small tax bracket (12%), and will be making no taxable income for at least a 4-5 year period. I have a very high tolerance for risk. I selected to have all capital gains and dividends reinvested. I plan on buying I Bonds after seeing what the rate changes to in November. By the end of the year I plan on adding an international fund to my horde, and adding at least $100 each month, cycled between each fund or adding more bonds.

Then I would like to see my assets maintained like this:

US Index Funds: 64%
International Index Funds: 21%
Bonds: 10%
Cash: 5%

What say ye, the seasoned?
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Old 10-09-2008, 03:43 AM   #2
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You are a bit short on information for much of an opinion from me.

Are you getting a pension or still w*rking? Any other cash coming in? Are you pulling money out of your investments for living expenses? How close to retirement are you if not already retired? Is your emergency fund in cash?

Saying you have a high risk tolerance after the last few weeks clearly confirms you really do have a high risk tolerance.

I noticed the "retired" part of your name so I'm going to assume you are retired. The key to whether you are looking at being too aggressive depends on your other income. If you're one of the people with near 100% of their living costs covered with a COLAd pension, your portfolio looks good. If you need stability for withdrawls to live on, you need more fixed income.
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Old 10-09-2008, 06:09 AM   #3
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Originally Posted by RetiredGypsy View Post
What say ye, the seasoned?
After this month all us survivors investors will be seasoned... again. And this time we really mean it because it's really really different. Again.

There are many different roads to ER, and there are at least 2x more asset allocations than investors-- the ones they have and the ones they wish they had. Almost all of those will also work for ER. So your AA is at least as good as most of them.

But if you want to tinker with AAs, I'd highly recommend a paid three-month subscription to FinancialEngines.com. You can tweak your portfolio, add details of your spending and your taxes, and look at longevity or dates of starting SS. Then you can x-ray your portfolio several different ways and see how volatile it is compared to the broad market indices. FE's Monte-Carlo simulator, despite all of MC's inherent deficiencies, will give you a conservative SWR that you can use as a check on FIRECalc.

And after plugging the data into FE you'll feel confident that you've worked through all your investor anxiety...

Another great place to have AAs ripped apart thoroughly critiqued is Raddr's board. Better do some advance thinking on REITs & commodities, though.
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Old 10-09-2008, 10:30 AM   #4
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Quote:
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Are you getting a pension or still w*rking? Any other cash coming in? Are you pulling money out of your investments for living expenses? How close to retirement are you if not already retired? Is your emergency fund in cash?
I will be getting a small but comfortable disability pension, and will be have a small but also comfortable stipend while going back to college. I'll be able to take 4-5 (maybe stretched to 6) years off of work now and then plan on finding occasional part time work in areas that interest me. My emergency fund covers 6 months of basic living expenses and is in cash. I won't be pulling any money out for living expenses, I just want it all to grow.

Quote:
Originally Posted by 2B View Post
I noticed the "retired" part of your name so I'm going to assume you are retired. The key to whether you are looking at being too aggressive depends on your other income. If you're one of the people with near 100% of their living costs covered with a COLAd pension, your portfolio looks good. If you need stability for withdrawls to live on, you need more fixed income.
I was supposed to have been retired, but administrative hassles keep putting my separation date in limbo. Thank you for the advice!
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Old 10-10-2008, 01:31 AM   #5
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I have a very high tolerance for risk.

Prior to the last few months I would have used those words to describe my own investment style.

My new definition of high tolerance for risk is this. You watched your investments drop 10-20% the last few weeks, the total paper loss was greater than 100K, and the first thing you look at in the morning paper/internet/TV news how your favorite sport team. Today after the 700 point decline, if somebody asked you how you are doing, you said GREAT, next year the Cubs will win the series.

If this pretty much describes your reaction during the last few weeks, 5% cash is fine. Otherwise, perhaps a bit higher would prudent.
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