Asset Allocation

[apcc10]

Hi, I have reading the forum for a long time. Thanks for the great advice you all provide.

I'm currently 54 and would like to switch part time or completely retire @62.

My calculations are based on an inflation rate of 2.3% inflation and return rate of 5.9 %.

Below is my current allocation and I'm thinking about scaling down the international stock. Any suggestions or feedback on the allocation


Equity 74
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Vanguard S P Small-Cap 600 Index Fund Institutional 8
Vanguard Total International Stock Index Fund Institutional 18
Vanguard Total Stock Market Index Fund Institutional 41
Vanguard Emerging Markets Stock Index Fund Institutional 4
Vanguard Real Estate Index Institutional 3

Bonds 26
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Vanguard Total Bond Market Index Fund Institutional 23
Vanguard Inflation Protected Securities Fund Admiral 3

Thanks again for this great site!

 

[OldShooter]

Answer is: No one knows. Our allocation is also about 75/25, but almost all of the equity is in VTWAX.

Here is Kenneth French on home country bias: French on International: https://famafrench.dimensional.com/videos/home-bias.aspx
and here is Vanguard on the subject: https://www.vanguard.com/pdf/ISGGEB.pdf

Personally, I don't try to pick sectors but if I were to do it I would not screw around with allocations less than 5 or 10% of my equity tranche. Tiny allocations will not have useful effect on the total IMO.

Our fixed income portion is around 90% TIPS. I think that is a "Go big or go home." investment. A tiny TIPS allocation provides no meaningful inflation to a portfolio, so why bother?

 

[cooch96]

OP,
Looks like your portfolio is well within the range of 'normal' for a diversified index investor. I wouldn't tinker with it if you are sleeping well at night. And if you aren't sleeping well, I'd try to get more sunshine and exercise during the day before advising portfolio tinkering.

Well done, and be well!

 

[apcc10]

Thank You @OldShooter and @cooch96

 

[VanWinkle]

At your age, 56, I would consolidate some of the under 5% funds into the Total US fund, and I would leave the International portion as is. You have 6 years to retirement and international could be important to those returns. I would also reduce my equity exposure 3% a year to get to 60/40 at age 62(I may be more conservative than you).

Best to you,

VW

 

[pb4uski]

Answer is: No one knows. Our allocation is also about 75/25 ...

OP,
Looks like your portfolio is well within the range of 'normal' for a diversified index investor. ...

OP, the other thing to know is that within a broad range of AA... about 45/55 to 90/10... success rate (the probability of NOT running out of money) is about the same.... what is different is that terminal values are higher with higher equity allocations.

 

[Toocold]

Your portfolio looks reasonable to me.

I'm a bit younger than you (but RE) so my portfolio is a bit more conservative (60/40) without the tilt toward emerging and more weighted with cash.

 

[apcc10]

Thank you very helpful !