What percentage of net worth allocated to stocks ?

[braumeister]

42% and likely to stay about that for a while.

[haha]

I think OP may have a restrictive definition of portfolio. I really don't know what my net worth is, it is basically my invested assets (= portfolio) plus my condo + any other RE owned. If I owned contractual assets like annuities I am not sure how I would handle it.

But once a month I get a picture of my invested assets, which the way I look at it is identical with saying "my portfolio", and includes bank accounts, CDs, treasury securities and Savings Bonds, any other fixed income, plus stocks, royalty trusts, MLPs or any other tradeable assets that I own for income or to be sold (hopefully!) at a profit.

On this basis, straight up (cash zero maturity) is 20% of invested assets, and I have another 14% which is fixed income securities funds of duration <= 1 year.

Ha

[Alan]

40% of net worth is allocated to stocks. (We rent, and don't own any property)

[ERD50]

Quote:

Originally Posted by Steven So my question is not what percentage of your "portfolio" is in stocks, but rather, what the percentage of your "net worth" is invested in stocks or stock funds ?

I assume your distinction between 'portfolio' and 'net worth' would be other non-portfolio assets (home equity being #1 for most). But then, maybe you should include the 'phantom' net worth of pensions, SS, etc? Non-COLA will be worth ~ 1/2 that of a COLA pension/SS.

Quote:

Some of us are risk averse and keep money in CD's or money markets and are not entirely invested in the market. Am I in the minority on this ?

As I've said before, I don't think that keeping a large % of money in CD's or money markets is 'risk averse' at all. In fact, it has historically been just the opposite. Do some FIRECALC runs with 90% fixed and some with 25% fixed, and see how much higher the risk is that you FAIL with a high % of fixed.

How can increased failures be seen as less risky? Less volatile, yes, but less risky? Not historically.

So I will turn it around and say, yes, I think you are in the minority. Most of us choose not to expose ourselves to the level of risk you are taking on.

-ERD50

[Steven]

I guess I need to get some courage.
I'm only 3.5% stocks and 4% bonds.

[haha]

Quote:

Originally Posted by ERD50 How can increased failures be seen as less risky? Less volatile, yes, but less risky? Not historically. -ERD50

In the context of portfolio risk and return, volatility is risk. Your definition of risk includes return, plus some soft factors. "I am risk averse" essentially means I do not want to see my portfolio values jumping around very much from day to day or even year to year, and we all will know what is being said.

I think this definition works well, and the broader definition you advocate would lead nowhere except to arguments. For example, some firmly believe that we are locked in deflation, and therefore that it is worth no cost to build in inflation protection, if that is even possible to do. Even though as investors this broader definition may in many contexts, but not others, be more important to our success.

Ha

[NW-Bound]

Quote:

Originally Posted by ERD50 As I've said before, I don't think that keeping a large % of money in CD's or money markets is 'risk averse' at all. In fact, it has historically been just the opposite. Do some FIRECALC runs with 90% fixed and some with 25% fixed, and see how much higher the risk is that you FAIL with a high % of fixed. How can increased failures be seen as less risky? Less volatile, yes, but less risky? Not historically. So I will turn it around and say, yes, I think you are in the minority. Most of us choose not to expose ourselves to the level of risk you are taking on. -ERD50

What helps the "risk averse" people is that inflation effect tends to build up slowly, and hopefully gives them time to recognize that gradual loss and to make corrections. In my view, it is still better than jumping into a highly volatile asset class without understanding it, and losing it all in a matter of a few months. Or they could get in at the wrong moment, then bail out in the next minor correction.

[Major Tom]

I don't own any property, so nearly all my net worth is in my investment portfolio. Of that, about 60% is in equity funds.

[brewer12345]

Leaving aside home equity (which I track but do not include in portfolio percentages), I am ~60% equity, ~35% cash and fixed income (including junk bonds), and 5% other (merger arbitrage).

[ERD50]

Quote:

Originally Posted by haha Quote: Originally Posted by ERD50 How can increased failures be seen as less risky? Less volatile, yes, but less risky? Not historically. -ERD50 In the context of portfolio risk and return, volatility is risk. Your definition of risk includes return, plus some soft factors. "I am risk averse" essentially means I do not want to see my portfolio values jumping around very much from day to day or even year to year, and we all will know what is being said. I think this definition works well, and the broader definition you advocate would lead nowhere except to arguments. For example, some firmly believe that we are locked in deflation, and therefore that it is worth no cost to build in inflation protection, if that is even possible to do. Even though as investors this broader definition may in many contexts, but not others, be more important to our success. Ha

Well, there are lots of ways to look at it. But it seems to me there is no getting around the fact that FIRECALC shows that a portfolio with a high % of fixed income resulted in a much higher % of failures, historically.

Now there is a psychological component - if one is going to bail on stocks at their low, that volatility danger is magnified. But for me, that is a separate issue from the 'pure' results. But if one feels they need a low-volatility investment to prevent them from bailing, I think they are well served by recognizing what that has meant historically. They will need to start with a much larger portfolio to get to a high success rate, compared to the default 75% equity portfolio that FIRECALC uses.

The 'funny' thing is - once you start with a such a large portfolio, the volatility from stocks also gets buffered such that the lows are not as low (in absolute terms). It all seems rather moot. A rising tide lifts all boats.

All based on history of course, but what else can we do? I'm guessing that the worst of the future will at least 'rhyme' with the worst of the past.

-ERD50

[haha]

Quote:

Originally Posted by ERD50 Well, there are lots of ways to look at it. But it seems to me there is no getting around the fact that FIRECALC shows that a portfolio with a high % of fixed income resulted in a much higher % of failures, historically.

You'll get no argument from me. It's just that I don't believe that FIRECAL runs have anything to do with the term risk aversion, as this term is used, and which is pretty well defined in every introductory investments class for at least the last 50 years as volatility. Redefine it as success rate on FIRECALC runs and I would guess that few would go along with you.

You know this as well as I do.
Ha

[ERD50]

Quote:

Originally Posted by haha You'll get not argumant from me. It's just that I don't believe that FIRECAL runs have anything to do with the term risk aversion, which is pretty well defined in every introductory investments class for at least the last 50 years as volatilty. Redefine it as success rate on FIRECALC runs and I would guess that few would go along with you. You know this as well as I do, so I'll sign off here. Ha

OK, so maybe I'm not using the traditional financial definition of 'risk'.

But to me, in the context of FIRE, the 'risk' of running out of money is the 'risk' that is important to me (and I would think any FIRED person). A low volatility path that historically leads to failure does not look more attractive to me than a higher volatility one that succeeds.

But that is enough - take care.

-ERD50

[samclem]

Equities: 80+% of portfolio. I-Bonds and ST Corp bonds: 10%. Cash: 10%. I'm nearing full (early) retirement, but have a long time horizon and a pension that meets our "no-kidding" baseline spending needs.

[mathjak107]

equites 3% right now, cash 10% and various bond and income generating funds 87%, some of which act more like conservativeo stock funds.

we do have a partnership in a family real estate business which is about 600-700k our share in value but i dont count that in the totals above. we get a yearly income from it.

[Animorph]

Equities are currently about 75% of our net worth.

[W2R]

I am 64 and completely retired, and so my planned asset allocation now includes only 45% equities. (It was 100% equities during the first part of the accumulation phase, and that was gradually reduced as I got older and especially when I put my retirement AA in place).

If I include house, car, and pension in my net worth, then the percentage equities is roughly 30%.

I'm puzzled as to what possible use a number like this could have. For example, I plan to stay in my modest home here in the South. If I lived in some gawdawful expensive location where a similar home would cost 10 times as much, my risk tolerance would remain the same. Therefore my portfolio asset allocation would remain 45% even if I planned to live in that home forever. Yet my percent net worth devoted to equities would shift from 30% to 16%.

[Shawn]

Age 53, plan to ER this year.

70% of net worth is in equities, when net worth is defined as the investment portfolio (with cash and cash equivalents making up a significant fraction of the fixed 30%).

60% of net worth is in equities, when net worth is defined as the investment portfolio plus home equity.

40% of net worth is in equities, when net worth is defined as the investment portfolio, home equity, pending pension, expected SS, and misc (since the pension is an annuity, the 60% it has in equities is not counted as part of my equity allocation).

[mickeyd]

I don't track my NW but my guess is that if my home was included in my AA I would probably sit at around 50/50.

[tdv2]

46% of my net worth is in stocks (global allocation). That would be 54% of my portfolio less real estate.

[sheehs1]

24% net worth not in the market sitting in cash or CD's (4 % to 5%). Thought we were going to buy a 2nd home but we have not done that yet.

31% net worth in the market (at a broker). Of this 31% is in equities, 51% Bond funds and 17% cash. (waiting for the market to come down :-)

14% in House

28% Family Business that yearly generates approximately 6% of current net worth in K1 income (income generating and not stagnant).