What is your asset allocation for this year?

[segfault]

My targets are:
70% stocks
19% bonds
11% cash

My 30th birthday occurs this year, and six months later, my targets will be:
69% stocks
20% bonds
11% cash

I'm following the "100 minus age in stocks" guideline, and figure that beyond the six month mark, you're closer to your next birthday than you were to your previous one.

 

[Bankerwithabrain]

59% cash
5% fixed income
30% small cap equity
5% large cap equity

I'm still pretty wary about a market pull back. I definitely missed out on this last rally, but I still think by 2014 I will have a better opportunity to buy. No need to chase.

 

[EvrClrx311]

Vanguard 401K Contribution Allocation

100% stock ( 70-US, 30-International)

30% Small-Cap Growth Index (US Stock)
20% Total International Stock Index (International)
20% Total Stock Market Index (US Stock)
10% Emerging Markets Stock Index (International)
10% Energy Fund Investor (Industry: Energy)
10% Health Care Fund Investor (Industry: Healthcare)

I'm still young (29) and want to remain aggressive with my retirement account (even ER is 20+ years out for me)... but if anyone thinks there is a better mix of Vanguard funds to suit my needs please let me know - I'd love to hear advice and tips on what others would do in my situation.

I often wonder if I'm wasting my time with the Energy/Heath care funds (chasing previous returns)... I'm trying to get as close as I can to that 10-13% historical average seen from Small-Caps over almost every 30+ year period we've seen the last 100 years.

 

[alexbalex]

I think the rationale for a young investor not to be in bonds is fairly straightforward. In addition to the bond market bubble and Warren Buffet's advice against bonds, there's the fact that over the long-run, bonds almost never outperform equities.

My asset allocation:
78% Stocks (S&P, small cap, international)
15% Bonds (emerging market + domestic)
5% REITS
2% Cash

 

[Risingsunbob]

My TSP is:
60 Common
30 Small
10 International

My non retirement funds are spread out across the 9 boxes.

I have no bonds at all, I've had a couple of people tell me that you don't need bonds if you have guaranteed income like a pension. You can afford to be a little bit more aggressive since you have that income.

 

[ronocnikral]

I think the rationale for a young investor not to be in bonds is fairly straightforward. In addition to the bond market bubble and Warren Buffet's advice against bonds, there's the fact that over the long-run, bonds almost never outperform equities.

I don't actually think it is straight forward. It of course varies with your investing philosophy, but I have found having bonds and equities work together is much better than the equities' roller coaster. There are arguments to both sides, but it certainly isn't "straightforward."

 

[alexbalex]

I don't actually think it is straight forward. It of course varies with your investing philosophy, but I have found having bonds and equities work together is much better than the equities' roller coaster. There are arguments to both sides, but it certainly isn't "straightforward."

well if you don't plan on selling any investments for at least 10 years (as the OP seems to be figuring) and bonds have almost never out-performed stocks over any 10-year period in history, what's to be gained by having bonds as part of your portfolio? Are you planning on selling the bonds during market downturns and using the proceeds to buy stocks?

 

[ronocnikral]

well if you don't plan on selling any investments for at least 10 years (as the OP seems to be figuring) and bonds have almost never out-performed stocks over any 10-year period in history, what's to be gained by having bonds as part of your portfolio? Are you planning on selling the bonds during market downturns and using the proceeds to buy stocks?

Yes, I like to refer to it as "rebalancing."

And I'm sure someone could dig up a 10 yr period since 2000 where a total bond fund out performed a total stock market fund.

I'm not saying one way is better than the other, just that it isn't straightforward.

 

[Alan]

Yes, I like to refer to it as "rebalancing."

And I'm sure someone could dig up a 10 yr period since 2000 where a total bond fund out performed a total stock market fund.

I'm not saying one way is better than the other, just that it isn't straightforward.

Last 10 year avg return of some VG funds:

VG Total Stock market Indx 4.49%
VG Total Bond Indx 5.60%
Wellesley Income (65% bonds) 6.75%

 

[alexbalex]

Yes, I like to refer to it as "rebalancing."

And I'm sure someone could dig up a 10 yr period since 2000 where a total bond fund out performed a total stock market fund.

I'm not saying one way is better than the other, just that it isn't straightforward.

Well that's true but also owes a lot to the historically unique financial crisis and historically atypical bond market of late.

Me personally, I have 15% bonds in my portfolio, but I can't fault someone taking on more equities if they have a long run horizon.

 

[Alan]

Well that's true but also owes a lot to the historically unique financial crisis and historically atypical bond market of late.

Me personally, I have 15% bonds in my portfolio, but I can't fault someone taking on more equities if they have a long run horizon.

I also had mostly stocks when I was a long way from retirement and slowly cut back until I'm now at 35% in retirement.

I think every financial crisis can described as "historically unique", and guessing what the nature of the next crisis will be keeps a lot of talking heads employed.

This bond market may be atypical but it has apparently outperformed stocks for 30 years according to this. When it will reverse is anyone's guess.

Despite a reputation for being a slow-growing alternative to stocks for the risk-averse, bonds just passed stocks' long-term performance over the past 30 years.
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What's more surprising, though, since it contradicts the widespread belief that stocks beat bonds, is that the Ibbotson Associates SBBI bond index has returned 11.03% a year on average over the past 30 years, edging out the 10.98% return of stocks.

 

[alexbalex]

worth noting though: This is the first 30 year period in which that has been the case since the Civil War.

Supposedly, its largely due to historically high bond rates in the 70's and 80's giving way to lower interest rates (which in turn leads to higher bond prices) such that it is mathematically impossible to see a repeat performance over the next 30 years.

 

[ronocnikral]

to me it's not about which will do better, it is about equities and bonds working together (through rebalancing) to alleviate some risk. regardless of what has done better in the past (and we can all go through and hand pick our own periods to prove our point).

https://advisors.vanguard.com/iam/pdf/ICRPR.pdf?cbdForceDomain=false

It is important to recognize that the goal of portfolio
rebalancing is to minimize risk (tracking error) relative
to a target asset allocation, rather than to maximize
returns. If an investor’s portfolio can potentially hold
either stocks or bonds, and the sole objective is to
maximize return regardless of risk, then the investor
should select a 100% equity portfolio.5 This is not
the case for most investors, however. Typically, an
investor is more concerned with downside risk (or
the risk that the portfolio will drop in value) than with
the potential to earn an additional 0.50 percentage
point to 0.75 percentage point for each 10% increase
in equity allocation, as shown in Figure 4’s marketrisk
data for various hypothetical asset allocations.

 

[Alan]

worth noting though: This is the first 30 year period in which that has been the case since the Civil War.

Supposedly, its largely due to historically high bond rates in the 70's and 80's giving way to lower interest rates (which in turn leads to higher bond prices) such that it is mathematically impossible to see a repeat performance over the next 30 years.

I certainly don't expect the great bond bull to keep charging for much longer, and I certainly never expected it to keep going for as long as it has.

However, I don't plan on making any changes to my AA of 35/55/10

 

[alexbalex]

I certainly don't expect the great bond bull to keep charging for much longer, and I certainly never expected it to keep going for as long as it has.

However, I don't plan on making any changes to my AA of 35/55/10

Well you're 56, retired and living off your portfolio income, so the high bond quotient of your assets makes more sense (though it's higher than Ive seen some experts reccomend, for whatever those opinions are worth)

I think its a different situation for the original poster though, who's still apparently a long way off from being retired.

 

[Alan]

Well you're 56, retired and living off your portfolio income, so the high bond quotient of your assets makes more sense (though it's higher than Ive seen some experts reccomend, for whatever those opinions are worth)

I think its a different situation for the original poster though, who's still apparently a long way off from being retired.

Absolutely agree. At 40 I was 85% stocks, and would have been even if people had been predicting that we were in the middle of a 30 yr bond bull market.

 

[web_diva]

currently following the John Bogle "your age in in percentage of bonds". moving to the harry browne permanent portfolio allocation immediately