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Assett Allocation Target Changes
Old 09-24-2008, 01:21 PM   #1
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Assett Allocation Target Changes

Assett Allocation Target Changes

There are target funds that will change your target assett allocation over time.
But if you are like me, and doing it yourself, how do you know when its time to change your TARGET?

When i started investing at 18 i was investing in 100% stocks.
In my 20's i adjusted to 80% stocks / 20% bonds.
I am now in my late 30's and planning an early retirement (hopefully between 45 & 50), so I'm now 70% stocks / 30% bonds.

I guess my question is for those who have either already retired or getting ready to retire.
What is/was your planned assett allocation when you retired.
--and is that your final target...or will you change again later?
Sometimes the more books/articles i read the more confused i get.
Thanks for the info...

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Old 09-29-2008, 09:03 AM   #2
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When I started my AA model in my late 30s, I was 75/25 in equities. When I hit 40 I dropped it to 70/30. I currently plan to cut my equity allocation by 5% every five years -- i.e. to 65/35 at age 45, 60/40 at age 50, and so on until I hit 50/50 at age 60, which is about where I'll probably keep it set for life (unless life circumstances change and dictate that a different allocation is prudent).

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 09-29-2008, 09:20 AM   #3
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There's no hard rule on when your asset allocations should change. Keep reading those books for the general "feel" of it, learn the level of volatilityu that you can expect with various mixes, and make your best estimate. The main thing is to not be varying your alocation based on short-term circumstances in the markets ("Ahhhh!! Stocks are crashing!! I need to sell some stocks and get to the safety of bonds!! 6 months later ""Wow!! Stocks are taking off and I've got al theis money in bonds! I need to sell some bonds and get back into stocks!! This is a sure way to reduce your long-term returns significantly)

Sorry, no firm answer. I think it's fair to say that most folks getting set for a very long retirement feel uncomfortable with less than 50% stocks (across all asset categories, including foreign). Right now your mix is about where most folks would probably be. Things that could cause a variance: a COLA'd pension (would possibly permit a higher exposure to stocks) or a very high balance relative to expenses (which could argue for a higher exposure to fixed income or bonds, as the risk/reward ratio of a higher stock alocaton is not warranted in this case).
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