AA Modeling Question

[Yipper]

I'd like to model a 50/30/20 portfolio in FIRECalc with 50 being total market (think VTI), fixed income being total market (think BND) and 20 being mostly in ultra short-term bond fund (think ICSH).

What's the closest I can use to approximate something like that? Would using "Total Market" or "Fixed Portfolio" work best? And how might I model that in the best option?

 

[Yipper]

I'd like to model a 50/30/20 portfolio in FIRECalc with 50 being total market (think VTI), fixed income being total market (think BND) and 20 being mostly in ultra short-term bond fund (think ICSH).

What's the closest I can use to approximate something like that? Would using "Total Market" or "Fixed Portfolio" work best? And how might I model that in the best option?

Does this look about right?

50 = S&P 500
30 = LT Treasury 15% -and- LT Corporate Bond 15%
20 = 1 Month Treasury

 

[rodi]

Does this look about right?

50 = S&P 500
30 = LT Treasury 15% -and- LT Corporate Bond 15%
20 = 1 Month Treasury

That seems like it would produce similar historic returns to what you are trying to match.

 

[BlueberryPie]

BND has an average maturity of 8.5 years and it 65% US Govt bonds (of various durations) but I agree it's good enough.

I was surprised at how different the graph looked between the "total market" option with 60% equity, vs "mixed portfolio" with:
60% SP500
20% LT Treasury
20%LT Corporate Bond

The former being a much more complex picture, shwing that the latter is a bit of an oversimplification.

But it's a good reminder that FC, as awesome as it is, is not a crystal ball. Your plan should be able to withstand somewhat minor variations in almost all parameters before you think yourself home-free.

Compare your AA simulation with "total market" option with 50% equity, maybe change fixed income to 5 years, as an alternate way to simulate your AA. Hope both meet your expectations!