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Overthinking Asset Allocations ratios?
Old 02-28-2021, 02:45 PM   #1
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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?
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Old 02-28-2021, 02:56 PM   #2
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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
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Old 02-28-2021, 07:38 PM   #3
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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.
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Old 02-28-2021, 10:52 PM   #4
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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
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Old 03-01-2021, 06:32 AM   #5
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Originally Posted by Jpblondh View Post
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.
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Old 03-01-2021, 06:43 AM   #6
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Originally Posted by Jpblondh View Post
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.
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Old 03-01-2021, 06:43 AM   #7
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Sorry I am new to this. I have only posted twice.
I am sorry
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Old 03-01-2021, 06:53 AM   #8
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Originally Posted by Stillwater007 View Post
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.
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Old 03-01-2021, 06:57 AM   #9
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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.
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Old 03-01-2021, 07:08 AM   #10
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Most of what a newcomer needs to know is in this forum:
https://www.early-retirement.org/forums/f32/
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Old 03-01-2021, 10:10 AM   #11
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Originally Posted by Stillwater007 View Post
... 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. )
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Old 03-02-2021, 01:21 PM   #12
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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.
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Old 03-02-2021, 04:51 PM   #13
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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.
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