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09-02-2007, 05:44 PM
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#21
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2006
Location: west coast, hi there!
Posts: 8,797
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Recently we've had a small repeat of a flight-to-quality in the markets. This brings up how much one can stomach of even a modest dose of risk -- everyone probably has a different view of this. Most of us are probably not aware how we'd react if presented with a very-very bad extended market as in 1929 (deflation) and 1973 (inflation). Then there is the possibility of a recession brought on by rising real interest rates -- bad for TIPS (at least temporarily). If you're still working, how safe is your job? How solidly is the house secured?
So when setting your AA don't forget about the fixed income (FI) component. If going the route of REITS, SV, EM then I would think one should pick a reasonable slice of FI. Then keep that FI in really safe assets like short/intermediate term treasuries, TIPS, Ibonds. Larry Swedroe has some good advice in this area.
Just my 2-cents.
Les
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09-03-2007, 12:31 AM
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#22
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 2,852
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Quote:
Originally Posted by lsbcal
If you're still working, how safe is your job? How solidly is the house secured?
So when setting your AA don't forget about the fixed income (FI) component. If going the route of REITS, SV, EM then I would think one should pick a reasonable slice of FI. Then keep that FI in really safe assets like short/intermediate term treasuries, TIPS, Ibonds. Larry Swedroe has some good advice in this area.
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Thanks for bringing this up. My tolerance for risk is higher than normal and for the time being, I'm comfortable being 100% allocated in equities. And personally, I would love a great market drop - who doesn't like a sale?
We are currently saving around 30-40k per year and are both early 30's. I suspect around 40 we'll start adding FI and gradually increase the FI allocation as we get closer to retirement and have - hopefully - a bigger nest egg.
As for the work side, we can live off of my income or mostly off of my wife's, so there's little worry there. In addition, I'm paying extra on our mortgage (7-year arm at 4.75% with 3 years to go) and by conservative estimates, we'll have that paid off by 2015. For reference, rent in this area is about 40-50% more than our base mortgage payment. Plus, we have emergency cash to get us through about 6 months. In the end, the investment side is what we need to get us to FI and it's not necessary for day to day living.
LOL, I've also been reading the diehards forums occasionally and it has been useful. Today I downloaded Simba's worksheet (link to thread below), which beats the socks off of what I was using. I wish I found it a couple of days ago. I put in my AA, along with other AA, and I'm happy with what I have so far. What really surprised me is how little this portfolio needed to be rebalanced. Based on the spreadsheet, from 1972-2006 the total rebalanced was 1.066 million and the unrebalanced was 1.085 million. Lost money through rebalancing! I need to go back and figure out why...
I think it's time to call it done for now and get back to living.
Btw, I did add Intl Value to the mix. I wanted a bit more international and that fit in nicely. What I have now is:
15% - S&P500
15% - Large Value
10% - Small Cap
10% - Small Cap Value
10% - Vanguard International Value
10% - Europe
10% - Pacific
10% - Emerging Markets
10% - REITS
Thanks!
http://www.early-retirement.org/foru...ata-27664.html
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09-03-2007, 06:18 AM
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#23
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Full time employment: Posting here.
Join Date: Dec 2004
Posts: 699
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Here's split of DODFX - love this fund - looks like they have well over 50% Europe (adding in UK). I'm suprised Europe is that high.
REGION DIVERS I F ICATION Fund
Europe (excluding United Kingdom) 35.2%
Japan 19.6
United Kingdom 16.0
Latin America 7.1
Pacific (excluding Japan) 6.6
United States 5.4
Africa 2.8
Canada 1.1
Middle East 0.8
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09-03-2007, 09:34 AM
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#24
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Recycles dryer sheets
Join Date: Jun 2006
Posts: 82
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If anyone's interested you can find market cap data for individual exchanges/countries at http://www.world-exchanges.org/WFE/h...cument&menu=10
__________________
We come in the spirit of hostility and menace
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09-03-2007, 12:54 PM
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#25
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Full time employment: Posting here.
Join Date: Oct 2003
Posts: 961
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Quote:
Originally Posted by fluffy
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Thanks fluffy. For general composition of the world markets, I use Vanguard's Key Benchmark Statistics
- Alec
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09-03-2007, 01:14 PM
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#26
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Thinks s/he gets paid by the post
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,455
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Quote:
And personally, I would love a great market drop - who doesn't like a sale?
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Only when you have no equity (or significant) holdings.
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09-03-2007, 04:59 PM
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#27
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2006
Location: west coast, hi there!
Posts: 8,797
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Quote:
Originally Posted by kiki
Thanks for bringing this up. My tolerance for risk is higher than normal and for the time being, I'm comfortable being 100% allocated in equities. And personally, I would love a great market drop - who doesn't like a sale?
We are currently saving around 30-40k per year and are both early 30's. I suspect around 40 we'll start adding FI and gradually increase the FI allocation as we get closer to retirement and have - hopefully - a bigger nest egg.
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At your age I didn't have much in FI either. The current market doesn't seem widely overpriced but I'm not really very good at identifying toppy areas. Leaving a little in FI gives one the ammunition to really take advantage of major market declines. On the other hand, we've just had a modest decline so it's clearly not the top of a bull market. Good luck.
Les
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09-03-2007, 09:24 PM
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#28
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 2,852
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Quote:
Originally Posted by Spanky
Only when you have no equity (or significant) holdings.
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That's part of it, but I believe the other factor is if you're still accumlating or not. We're currently in 200k range and going down to 150k or so doesn't bother me much. In the end, it's money we don't need now and I'm sure within our time frame it will come back (25-30 years).
Quote:
Originally Posted by lsbcal
At your age I didn't have much in FI either. The current market doesn't seem widely overpriced but I'm not really very good at identifying toppy areas. Leaving a little in FI gives one the ammunition to really take advantage of major market declines. On the other hand, we've just had a modest decline so it's clearly not the top of a bull market. Good luck.
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I also took a look at adding a total bond fund at 10% and based on Simba's worksheet looking at past data, it really doesn't change the outcome by much. For those that are curious, adding the bond fund decreases CAGR by about .3% and standard deviation by 1.3%. If equity returns in the future are less than in the past, as many suspect, then the difference should be even less. It'll take awhile before I get this allocation in place, because I'm overweight in the 401k, but I think I might plan on adding the total bond fund as I start allocating to other classes.
Thanks again for all the help.
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09-03-2007, 09:34 PM
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#29
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 2,852
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Quote:
Originally Posted by Delawaredave5
Here's split of DODFX - love this fund - looks like they have well over 50% Europe (adding in UK). I'm suprised Europe is that high.
REGION DIVERS I F ICATION
Fund
Europe (excluding United Kingdom)
35.2%
Japan 19.6
United Kingdom 16.0
Latin America 7.1
Pacific (excluding Japan) 6.6
United States 5.4
Africa 2.8
Canada 1.1
Middle East 0.8
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The numbers are higher on morningstars x-ray for dodfx:
U.S. & Canada 6.86 Europe53.56 Japan20.70 Latin America 7.46 Asia & Australia 6.78 Other4.64
I'm a bit skeptical using morningstar sometimes. In this case, I have more faith in your numbers, since they come from the dodge and cox website.
I decided that I'd probably end up going with the ishares eafe value (efv) instead of the vanguard fund. According to morningstar, it has a significantly higher tilt towards value, even though I'd like to know the region breakdown - morningstar is showing 50% not classified. I've seen that with some of the Vanguard ETF's, but unlike Vanguard, I couldn't find the region breakdown for efv on the ishares site.
- kiki
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09-03-2007, 10:25 PM
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#30
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Thinks s/he gets paid by the post
Join Date: Jun 2006
Posts: 1,703
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If you're going to base your allocation on a backtesting spreadsheet, then you should definitely be 100% emerging markets.
__________________
Emancipated from wage-slavery since 2002
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09-03-2007, 10:39 PM
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#31
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 2,852
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Heh, that would be an interesting ride. Hang on tight!
I just punched a 100% EM into the spreadsheet, and it's actually not that bad on a year to year basis. The swings are definitely greater, but the bad years aren't much worse than the slice-and-dice portfolio I have above, excluding 97, 98, and 2000. And from 72-06, a few bad year difference isn't that bad.
But it's definitely not an investment option that I'd choose...
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