My Asset Allocation History (past 9 years)

[Midpack]

I thought I "converted" about 5-6 years earlier, but my records show I was 100% equities until age 51. I never held bonds/bond funds of any kind until then, though I don't recommend same (youngish & stupid?). My current target is 50/40/10. Nothing earthshaking, some members here are undoubtedly more aggressive, some less. Just sharing FWIW...

 

[Brett_Cameron]

Nice graph!

 

[Free To Canoe]

I find it interesting since I am going through the same process, though not as far along as you.

Maybe you didn't do anything between 07 and 08 but the equities shrunk and therefore, the bonds percentage grew?

 

[Midpack]

Maybe you didn't do anything between 07 and 08 but the equities shrunk and therefore, the bonds percentage grew?

Somewhat true. I was already reducing my equity exposure as you can see in 04-07, the meltdown certainly accelerated the change for me. But from 2008 through 2011 I was still accumulating $ like mad, and deploying to maintain a more conservative AA. And then made another stepwise change in AA when I actually retired.

 

[Lsbcal]

I thought I "converted" about 5-6 years earlier, but my records show I was 100% equities until age 51. I never held bonds/bond funds of any kind until then, though I don't recommend same (youngish & stupid?). My current target is 50/40/10. Nothing earthshaking, some members here are undoubtedly more aggressive, some less. Just sharing FWIW...

Nice graph Midpack. You also get the "graph colorist" award for the week.

I looked back and it seems that I had nearly 100% in equities up to age 51 too. Then I went to roughly 60/40. That was after the 2002 recession and miserable stock market. In 2006 we went to 55/45.

Still got beat up in 2008 and equities went down to 45%. Did not rebalance until July 2009. Now at 65/33/2 stocks/bonds/cash. I'm willing to dump equities though based on historical data, but have not had to do this since setting things up that way in 2009. I don't buy equities if they decline but do sell if they rise above 65% (then I sell 1%). Not recommending this approach to anyone but me.

 

[pb4uski]

I was all equities (except for my emergency fund) until I was in my late 40s and then I started investing new money into fixed income.

Our target AA are similar. I try to hold 1-2 years in cash or short term fixed income and the remainder 60/40, so it equates to ~58/38/4 compared to your 50/40/10. If I included SS and pensions as fixed income equivalents (which I don't) then it would be a lot more conservative.

 

[W2R]

I had 100% equities until 2004 (5 years before retirement), and then cut back sharply for the next three years in preparation for retirement.

I established my planned retirement AA early because I wanted to see how it "felt" for a while before retiring. And what good fortune! 2008-2009 gave me a great trial run to see how it felt during a market crash.

 

[mathjak107]

i was 80-100 equities until 5 years ago....

 

[RobLJ]

Allocation change

I thought I "converted" about 5-6 years earlier, but my records show I was 100% equities until age 51. I never held bonds/bond funds of any kind until then, though I don't recommend same (youngish & stupid?). My current target is 50/40/10. Nothing earthshaking, some members here are undoubtedly more aggressive, some less. Just sharing FWIW...

We're probably similar in age, but at 48, I started to allocate to bonds & cash, luckily in 2006, partly out of age, partly because I expected a banking/housing blowup and then in '07 got increasingly worried. I shifted a lot of gains in '06 and '07 to bonds, every couple months.
I went to 55-25-20 allocation, which is now 51-25-24. I've tried to increase the equities allocation over the last three years, by allocating by re-upping equity allocations monthly and putting some of the cash to work but the gains on the bond side last year (and equity losses) put me back to where I started from in late 2010. I have shortened durations in bond funds and moved more to foreign/emerging bonds.
The allocation mix issue is an interesting one. I'm still at least a few years off and would like to put more of the cash to work in MLP/REIT (don't like REITs right now, however), foreign bond, and dividend stocks, slowly. I don't make any change very quickly, other than in 2006. Got lucky on timing there.

 

[mathjak107]

our allocations are now based on meeting goal with as little risk as we can.

right now we are 100% various bond funds. some like fidelity new market income and fidelity capital income act as less volatile stock proxies.

that gives us a 3-4% yield plus capital gains.

that works for us right now and the low volatility is a blessing sometime.

i own USO as a hedge against open ended energy prices and earn about a 120.00 bucks for every 1% oil rises. if it falls then the rest of my expenses fall to offest the drop in price in uso.

if equity prices fall some of that bond money may get shifted to a fund like wellesley or fidelity strategic income and dividend.

no question our equities and volatility are a far cry from the 80-100% they were at 5 years ago.

 

[pb4uski]

.....right now we are 100% various bond funds.....

How will you fare if at some time in the future interest rates increase to historical norms? Sounds like you would have a boatload of interest rate risk with a 100% bond fund portfolio. That is what scares me about bonds these days.

 

[Brett_Cameron]

I was about 80% equities until spring 2011 and then switched to 60/40 in a triad of target date funds.

 

[mathjak107]

How will you fare if at some time in the future interest rates increase to historical norms? Sounds like you would have a boatload of interest rate risk with a 100% bond fund portfolio. That is what scares me about bonds these days.

this is a dynamic portfolio that will change as the big picture changes.

for now it should be fine in the short term.

as things change the bonds may shift to nothing to aggressive .

perhaps growth and income funds with tips funds,reits, commodity and floating rate funds . fidelity strategic real return looks interesting instead of bonds.

 

[Lsbcal]

this is a dynamic portfolio that will change as the big picture changes.

for now it should be fine in the short term.

as things change the bonds may shift to nothing to aggressive .

perhaps growth and income funds with tips funds,reits, commodity and floating rate funds . fidelity strategic real return looks interesting instead of bonds.

You don't have to answer this question, but I'm curious what your strategy is?

 

[mathjak107]

my strategy the last 25 years has been using the fidelity insight newsletter and following the model that best fit my goals at that time.


not that the fund picks are great but its the fact the models work well together as a whole and they keep me well disciplined and not 2nd guessing myself all the time.

they kept me in the game when left to my own devices i may have bailed and ran too even though i know better.

as far as the exact holdings ,that i can really say to much about since thats how they earn their living.

the models do change every so ofton depending on the big picture outlook but even if they are wrong you really wont get hurt much..

 

[Lsbcal]

I sort of have the picture now. Some risk in emerging mkt bonds and high yield bonds. Not clear how it stacks up over time versus a pure equity/bond mix like I use -- but then neither of us will likely choose the other's portfolio.

Thanks, reminds me there are many ways to invest.

 

[RobLJ]

this is a dynamic portfolio that will change as the big picture changes.

for now it should be fine in the short term.

as things change the bonds may shift to nothing to aggressive .

perhaps growth and income funds with tips funds,reits, commodity and floating rate funds . fidelity strategic real return looks interesting instead of bonds.

Similar strategy here.
I started slowly moving some bond and stock gains into Fidelity Floating Rate, Fidelity Capital and Income (high yield), Fidelity Strategic Return, Fidelity Floating Rate, and Fidelity New markets, largely to hedge against interest rate risk. Traditional bond funds still make up most of the 25% bond allocation, however. I also plan to dollar cost average some of the cash into these higher yield. I thought Euro shenanigans would bring the market down sometime over the last three months, but was wrong on that one. I was going to use that to shift some of the cash since most of these will move down along with stocks. Fidelity GNMA and TIPS were scorchers, but I'm planning on selling gains for them, particularly the GNMA, since I suspect they will be affected by accelerated refis. This is strategically an attempt to slowly increase income/yield without taking on too much duration.

 

[mathjak107]

I sort of have the picture now. Some risk in emerging mkt bonds and high yield bonds. Not clear how it stacks up over time versus a pure equity/bond mix like I use -- but then neither of us will likely choose the other's portfolio.

Thanks, reminds me there are many ways to invest.

over time it will lag a typical 60/40 or 40/60 mix. but by the same token the beta on the bond portfolio is .29 and a typical growth and income mix is around .70 so there is quite a big difference in risk as well.

 

[mathjak107]

Similar strategy here.
I started slowly moving some bond and stock gains into Fidelity Floating Rate, Fidelity Capital and Income (high yield), Fidelity Strategic Return, Fidelity Floating Rate, and Fidelity New markets, largely to hedge against interest rate risk. Traditional bond funds still make up most of the 25% bond allocation, however. I also plan to dollar cost average some of the cash into these higher yield. I thought Euro shenanigans would bring the market down sometime over the last three months, but was wrong on that one. I was going to use that to shift some of the cash since most of these will move down along with stocks. Fidelity GNMA and TIPS were scorchers, but I'm planning on selling gains for them, particularly the GNMA, since I suspect they will be affected by accelerated refis. This is strategically an attempt to slowly increase income/yield without taking on too much duration.

all very good choices.. not far off the total mix we use. the gnma funds i think have seen the bulk of the refi's so i wouldnt count them out just yet. i would just move my expectaions of what they may do closer to a cd alternative .

 

[mathjak107]

I sort of have the picture now. Some risk in emerging mkt bonds and high yield bonds. Not clear how it stacks up over time versus a pure equity/bond mix like I use -- but then neither of us will likely choose the other's portfolio.

Thanks, reminds me there are many ways to invest.

ill tell you i hate the big up days when i get left behind but with yesterdays 2% drop i was flat on the day.

overall still up over 9% this year with the bond fund mix so i cant complain.

my benchmark really is a cd now. if i beat what a risk free cd would have returned then running a portfolio is worth it.

 

[obgyn65]

0% in equities for me. I have never changed my AA, except a few months ago when I started to buy deferred annuities.

i was 80-100 equities until 5 years ago....

 

[mathjak107]

well i wont stay at zero equities forever though. if valuations improve we might go 20-25% equity funds or so.

the types of income and bond funds we hold will also change if inflation picks up.

thats the problem with target date funds in my opinion . they look only at age and not at whats happening in the world.

mark my words ,when rates rise and these retirees in target funds that are almost all bonds drop in value they will freak.

most of us have never been in a bear market in bonds since bonds have had a bull run now for over 30 years.

if rates rise a point and they lose 5-8% of their value on their statement, look out.....

we have been really enjoying the income spinning off from this model now and hopefully rates and inflation will let us run it a bit longer but eventually things will reverse and rates will rise and changes will be made in the model..

 

[obgyn65]

Agree. One of my objectives when I finally FIRE is to learn about equities. I need to start from scratch. Not much time now. I also realize there may be others like me - there is hope

well i wont stay at zero equities forever though. if valuations improve we might go 20-25% equity funds or so.

the types of income and bond funds we hold will also change if inflation picks up.

thats the problem with target date funds in my opinion . they look only at age and not at whats happening in the world.

mark my words ,when rates rise and these retirees in target funds that are almost all bonds drop in value they will freak.

most of us have never been in a bear market in bonds since bonds have had a bull run now for over 30 years.

if rates rise a point and they lose 5-8% of their value on their statement, look out.....

we have been really enjoying the income spinning off from this model now and hopefully rates and inflation will let us run it a bit longer but eventually things will reverse and rates will rise and changes will be made in the model..

 

[mathjak107]

i have been an investor for 25 years and of course now have become much more goal allocated then getting richer allocated.

my quest is to take the smallest risks that let me meet the income i will need.
going forward that may even mean using some insurance products incorporated into the plan to help meet that goal.

i could be comfortable up to about 35-40% equities but if i dont need that allocation i rather not be that high.

i still have 2 years to go before i retire so i have time to refine the plan.

thanks to dr wade pfau and the likes of moishe milevsky and micahel kitces there is much research going on in finding more refined ways to meet our income needs.

 

[foxfirev5]

Today I'm running at 44% equities. After letting it creep up to 60% in 2000 it dropped to below 50% by '02. I then put all my new money in equities and got it up over 50%. After recovering from '08 - '09 I've settled into the 45-50% range. If my stake drops to 41% I'll rebalance back up to 44-45% but that's all.
At this point all I'm looking for with the equities is inflation protection so mybe 45% is a tad high. I notice that if I drop the allocation down to about 30% it does not adversely affect by success rate on Firecalc.