Urchina
Full time employment: Posting here.
Hi, all. Midlife is officially upon us and we are re-evaluating our aa. I'd love some outside opinions.
DH and I are now both in our early 40s with about 20 years until retirement. We have a very high risk tolerance and have had no trouble staying the course over the past decade. We anticipate relatively high expenses in early retirement due to the combo of kids in college and parents possibly needing assistance. We are indexers and would like a fairly simple aa. Our proposed aa looks like this:
50% large cap index (black rock s&p 500 index)
20% intl index (mdiix and veu)
5% small cap index (vb)
5% REIT (vnq)
20% total us bond index (bnd)
All currently held in tax-advantaged accounts.
The black rock funds are what is available in DH's 401k. If we had things our way, we would invest 55% in a vanguard total stock market index instead. The small cap index is in this proposed aa to help make up for that.
Particular questions I'd appreciate input on:
1. Does anyone see any advantage to reducing our fixed-income exposure?
We would probably be perfectly happy going 90% equities for the next decade or so, but I am not convinced that doing so would appreciably boost our returns, or at least not enough to make up for the additional risk. It's possible that at 80% we are already out of the risk-return sweet spot. Thoughts?
2. Does 5% in the small cap index do enough? I had a hard time figuring out what percent of the total market index was small cap. Anyone have info they could point me to, there?
3. The REIT. I like the exposure to commercial real estate it gives us. DH doesn't seem to care much one way or the other and would be happy putting that money into the large or small cap index funds. Does 5% of a portfolio give us reasonable diversification into this sector?
I should also mention that this aa is for our investable assets. We also have residential real estate (primary residence plus a rental condo), a solid and growing cash emergency fund, a new 529 plan, and stock in a privately-held company in the tech sector.
Thanks for any and all ideas and comments!
DH and I are now both in our early 40s with about 20 years until retirement. We have a very high risk tolerance and have had no trouble staying the course over the past decade. We anticipate relatively high expenses in early retirement due to the combo of kids in college and parents possibly needing assistance. We are indexers and would like a fairly simple aa. Our proposed aa looks like this:
50% large cap index (black rock s&p 500 index)
20% intl index (mdiix and veu)
5% small cap index (vb)
5% REIT (vnq)
20% total us bond index (bnd)
All currently held in tax-advantaged accounts.
The black rock funds are what is available in DH's 401k. If we had things our way, we would invest 55% in a vanguard total stock market index instead. The small cap index is in this proposed aa to help make up for that.
Particular questions I'd appreciate input on:
1. Does anyone see any advantage to reducing our fixed-income exposure?
We would probably be perfectly happy going 90% equities for the next decade or so, but I am not convinced that doing so would appreciably boost our returns, or at least not enough to make up for the additional risk. It's possible that at 80% we are already out of the risk-return sweet spot. Thoughts?
2. Does 5% in the small cap index do enough? I had a hard time figuring out what percent of the total market index was small cap. Anyone have info they could point me to, there?
3. The REIT. I like the exposure to commercial real estate it gives us. DH doesn't seem to care much one way or the other and would be happy putting that money into the large or small cap index funds. Does 5% of a portfolio give us reasonable diversification into this sector?
I should also mention that this aa is for our investable assets. We also have residential real estate (primary residence plus a rental condo), a solid and growing cash emergency fund, a new 529 plan, and stock in a privately-held company in the tech sector.
Thanks for any and all ideas and comments!