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-   -   Critique my Asset Allocation? (http://www.early-retirement.org/forums/f28/critique-my-asset-allocation-33407.html)

Midpack 02-16-2008 06:36 AM

Critique my Asset Allocation?
I'm 54, we're DINKs and essentially FI, but I intend to keep working until I can't stand it anymore probably 4-7 more years. I have always been somewhat aggressive/comfortable with risk, 100% in equities well into my 40's but sold the last of my individual equities 4-5 years ago, all funds now. The Four Pillars of Investing has been the most dominant influence on me since it was written. Thought I'd put my actual asset allocation % out there to see what comments it might generate. Hopefully I am providing enough info. It's highly unlikely I am going to radically alter my holdings but I am about to do some tweaking (too much in cash) so thought provoking comments would be welcome/interesting. TIA.

11.5% Van Tot Stk Mkt (Lg Blend - taxable account)
6.4% Van Tax Mgd Cap Appr (Lg Blend - taxable)
6.1% Van Gro & Inc (Lg Blend - taxable
7.0% Dodge & Cox Stk (Lg Val - taxable)
8.7% Van Tax Mgd Small Cap (Sm Blend -taxable)
5.0% Van Small Cap Val (Sm Val -sheltered)
15.1% Van Tax Mgd Intl (Foreign - taxable)
2.3% Van Tot Intl (Foreign - taxable)
23.3% Prudential Core Bond Indx (401k, only choice I have - sheltered)
2.9% Van REIT (sheltered)
2.7% Van Energy Fund (Sector, Commodity - sheltered)
9.0% Money Market (mostly taxable)

Probably not a factor but to the 100% above, we also have another 20%+ in tangible assets, mostly our home which we own outright.

LOL! 02-16-2008 07:42 AM

So if you plug in all those numbers into a Morningstar X-ray analysis, what does it tell you (and us)? % bonds? % cash? %stocks? %foreign? %large, mid, cap, growth, blend, value?

I personally would not have 9% mostly in a taxable money market. But you wrote that you had too much cash. Although one sees that small cap value should be in a tax-advantaged account, it ain't that bad in a taxable account. See, for example,
Bogleheads :: View topic - Tax-efficiency of value funds - update
So if you needed room in tax-advantaged for bonds or cash, that 5% allocation to small cap value could be used and SCV put in taxable.

I unloaded Vg Tax Managed Int'l at loss when I did tax-loss-harvesting. The Diehards seem to suggest that Vg FTSE world exUS may be better for a taxable account. It has emerging markets and no 1% fee for selling before 5 years. The Vg Tot Int'l does not have emerging markets and is a fund of funds, so one apparently cannot take the foreign tax credit with it.

RockOn 02-16-2008 08:08 AM

Midpack, if you don't mind me asking, can you tell me what your CAGR and maximum drawdown was on your portfolio going back as far as you have it? It doesn't have to be exact. I'd really appreciate knowing that.

Midpack 02-16-2008 08:26 AM

LOL: I wish I could shelter more, but I've maxed out those opportunities to the best of my ability. As for what Morningstar or other AA analysis tools say, some say I'm overweighted small cap, others that I'm underweighted growth, others say Sector and even REIT's are 'too risky' and of course all say too much cash (as I know, but I'm about to deploy the cash). None of them agree (surprise, surprise) -again, right or wrong, The Four Pillars is the foundation of my allocation, with my own personal tweaks (ie, Bernstein would probably not agree with VGENX).

RockOn: I'm not drawing any funds yet, another 4-7 years. And CAGR isn't going to tell you much as my holdings and allocation have changed radically over the years. I was once 100% equities with about 30 individual stocks and have transitioned to what you see above.

LOL! 02-16-2008 08:51 AM

I guess I didn't really care to see the 'analysis', but just the numbers because with the numbers, I could offer my own analysis. :)

Also I'm a big fan of small cap int'l which is distinctly missing from your portfolio, but it hasn't done so well in the last 9 months either.

Midpack 02-16-2008 09:18 AM

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Originally Posted by LOL! (Post 616584)
I guess I didn't really care to see the 'analysis', but just the numbers because with the numbers, I could offer my own analysis. :)

Also I'm a big fan of small cap int'l which is distinctly missing from your portfolio, but it hasn't done so well in the last 9 months either.

Fair question, my mistake. Thanks for your consideration...

LOL! 02-16-2008 09:53 AM

Here's a link with some asset allocation numbers that I will use to compare your numbers to:

A total domestic market weighted equity allocation is about 72% large cap and 28% mid/small cap. But a Fama&French (also Bernstein) asset allocation is about 50% large cap and 50% mid/smal. So your equities are just fine.

I'm not sure how you got 0% growth (M* would not present it that way), but a total domestic market would be 33% value, 33% blend and 33% growth. A F&F asset allocation would have up to 50% in the value category and just 20% in the growth. So you appear to be somewhere in the middle and just fine.

Yes, I also think REITs are essential. I'm not sold on commodities yet, but will add them myself in a market timing move later. Furthermore, some of your equity holdings undoubtedly already hold REITs. Here is a link with some numbers: Bogleheads :: View topic - Small-Cap Value Funds and REITs.

Some folks go overhoard I think in the diversification of the fixed income side of things. We are often limited to what's available in our tax-advantaged accounts like a 401(k). Since you hold a benchmark, that is just fine as well.

So my bottom line is that you have a fine portfolio and asset allocation. You could probably reduce the expense ratios by getting rid of the actively managed funds and also take advantage of the foreign tax credit by switching funds. But your taxes to switch may overwhelm any advantages of doing so.

[Edit] I see your M* figure now. Your expense ratio is outstanding. The rest of my comments above can remain unchanged.

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