|
Overthinking Asset Allocations ratios?
02-28-2021, 01:45 PM
|
#1
|
Recycles dryer sheets
Join Date: Dec 2020
Posts: 68
|
Overthinking Asset Allocations ratios?
I see much info on the topic of Asset Allocations that it can be overwhelming at times trying to pick the right funds that are personal for us.
I came across this article https://www.advisorperspectives.com/...ement-planning
Viewing some of the percentile ranges is interesting. While it shows that 100% stocks on a down year can be significant compared to a conservative portfolio which we all know. However, ultimately that price/value of the Portfolio is the SAME for both aggressive and conservative. On a year that is advantageous, it shows that they are NOT the same. It shows that the more aggressive the Portfolio, the more value/profit.
Would having a more Aggressive Portfolio be the way to go and in order to protect one self in down years, would have money tucked away in something like Ginnie May that would cover a couple years of expenses?
I feel like I may be missing something here as it just doesn't sound this easy. Would having several years of expenses tucked away, even in something like Ginnie May be taking away from some of that money being invested?
Or is this a classic example of The Barbell Strategy?
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
02-28-2021, 01:56 PM
|
#2
|
Thinks s/he gets paid by the post
Join Date: Jun 2006
Posts: 1,703
|
There is no right answer, so yeah, it's easy to overthink it.
Really it comes down to 1) being able to sleep at night and 2) not worrying about keeping up with the bitcoin kiddies Joneses when their allocation outperforms yours.
This is a good back-test comparison, specific to ER:
https://retireearlyhomepage.com/reallife19.html
|
|
|
02-28-2021, 06:38 PM
|
#3
|
Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,366
|
You can experiment with FIRECalc and find that basic AA's from about 40/60 and almost to 100/0 will give you pretty much the same probability of success. The one clear differentiator is the value of your portfolio at the end of 30 years. The more stocks you hold, the higher the "average" final portfolio value. So I tried to stick to the high stock side. But within that large range of AA's you're free to choose what makes you feel good.
I like all stocks, but handling my DM's portfolio (she wanted all stocks!) weened me off of that. I'm at 75/25, with bonds that should weather a recession without a big drop. I use the bond allocation dynamically (like cash) to boost gains during bear markets, which has a shot at matching an all-stock AA I hope. I think I went to 90/10 during the last recession. I won't exceed 25% bonds.
Anyway, the bonds give you plenty of years of not selling stocks, or buying more. And in the long run they should have a slightly better return than straight cash.
|
|
|
02-28-2021, 09:52 PM
|
#4
|
Dryer sheet wannabe
Join Date: Jan 2015
Location: Nottingham
Posts: 12
|
A little off the topic but can anyone please assist my with my dilemma of being talked into a Fidelity manager account. I hate paying money to someone who has lost me money in the last few weeks.
Thanks
|
|
|
03-01-2021, 05:32 AM
|
#5
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,184
|
Quote:
Originally Posted by Jpblondh
A little off the topic but can anyone please assist my with my dilemma of being talked into a Fidelity manager account. I hate paying money to someone who has lost me money in the last few weeks.
Thanks
|
That's totally off topic. Don't threadjack. Open your own thread.
|
|
|
03-01-2021, 05:43 AM
|
#6
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,669
|
Quote:
Originally Posted by Jpblondh
A little off the topic but can anyone please assist my with my dilemma of being talked into a Fidelity manager account. I hate paying money to someone who has lost me money in the last few weeks.
Thanks
|
The original post is in reference to asset allocation (AA) which is an important building block of investing. You definitely need to find your AA.
But it would be best to start a new topic, so the responses are tuned to your needs.
|
|
|
03-01-2021, 05:43 AM
|
#7
|
Dryer sheet wannabe
Join Date: Jan 2015
Location: Nottingham
Posts: 12
|
Sorry I am new to this. I have only posted twice.
I am sorry
|
|
|
03-01-2021, 05:53 AM
|
#8
|
Thinks s/he gets paid by the post
Join Date: Oct 2013
Posts: 1,174
|
Quote:
Originally Posted by Stillwater007
Would having a more Aggressive Portfolio be the way to go and in order to protect one self in down years, would have money tucked away in something like Ginnie May that would cover a couple years of expenses?
|
This is what I do, except I don't use Ginnie Maes for the safe money. I've been able to buy a few nice toys over the last several years with the capital gains from a stock heavy portfolio. However, if you are the kind that wants to bail out of the market like more than a few did on this site did last March during the downturn, then maybe that strategy may not be the best one for you. If you can get good sleep at night during a market pullback, go for it.
|
|
|
03-01-2021, 05:57 AM
|
#9
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,669
|
Quote:
Originally Posted by Jpblondh
Sorry I am new to this. I have only posted twice.
I am sorry
|
You can start a thread and introduce yourself. Ask a question or two. It tends to work well.
|
|
|
03-01-2021, 06:08 AM
|
#10
|
Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,155
|
Most of what a newcomer needs to know is in this forum:
https://www.early-retirement.org/forums/f32/
__________________
I thought growing old would take longer.
|
|
|
03-01-2021, 09:10 AM
|
#11
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,308
|
Quote:
Originally Posted by Stillwater007
... Would having a more Aggressive Portfolio be the way to go and in order to protect one self in down years, would have money tucked away in something like Ginnie May that would cover a couple years of expenses?
I feel like I may be missing something here as it just doesn't sound this easy. Would having several years of expenses tucked away, even in something like Ginnie May be taking away from some of that money being invested? ...
|
@Stillwater007, you make me smile. You have cracked the code. Heavy equities with a few years of spending held in fixed income is exactly what many of us do and what many experts recommend.
The reason you're worried about this being too easy is that for years we have all been bombarded by industry propaganda devoted to making us believe that investing is complicated and that we must hire (at great expense) their priests and witches to do it for us. It's not true.
Here is a good little book, an easy read, that will make you much more comfortable with your conclusion: "The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/ Bill has a sequel, recently published, that you may want to read if you like his first book. (The first book includes a recipe for pumpkin pie, but don't try to make it until you read the sequel, where he admits to an error in the recipe. )
__________________
Ignoramus et ignorabimus
|
|
|
03-02-2021, 12:21 PM
|
#12
|
Thinks s/he gets paid by the post
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 2,704
|
When you went through the asset allocation quiz on the Vanguard website, what did you learn about your tolerance ratio?
There used to be an old adage: 100 - age = amount in stocks
Then it was: 110 - age = amount in stocks
But your pension with COLA covers your expenses (need + wants?) with how much left over? I've got an extra 1k a month so I just do 90% core (total stock market ETF) + 5% Individual stocks + 5% bond / cash not counting an extra year in my bank savings account. But that's me, everyone is different.
|
|
|
03-02-2021, 03:51 PM
|
#13
|
Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,975
|
You AA is probably the most important consideration. More important than the current thread on what cash vs fixed income vs whatever or how you categorize it. Don't over think it.
Personally I own a bunch of equities, not to exceed a secret 7 figure sum. As well a bunch of fixed income cash, CD's, ETF's, MF's and a touch of CEF's to provide income and withdrawals to last the rest of my life.
Break it down any way you want just be sure it fills your needs.
__________________
Took SS at 62 and hope I live long enough to regret the decision.
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|