Are some of you at the minimum asset allocation and are you at comfortable with that?

[scrabbler1]

To me AA is useless unless it is the context of real dollars to meet your objectives. Personally I have enough fixed income (no matter how you define that) to meet all my wants and a big chunk of equities. Whether that amount is 30% or 90% is irrelevant.

I do have a desired AA for my tIRA, something I won't be tapping into for at least 3 more years. And that AA has been gradually shifting towards bonds (the bond fund in there) over the years. With my taxable account, like you, I don't have a targeted AA because its function is to generate enough income to cover my expenses. If I have to shift money between the stock side and bond side from time to time to generate the income, then I do it. The AA is little more than a footnote.

 

[NW-Bound]

Yeah, I still have no idea what that means. There's no minimum, just a preferred AA, the way I'm thinking about it. Although I guess 0% equities would be a minimum!

Is 0% equities the lowest one could go? I beg to differ.

A person may short stocks, such that his stock AA is negative. Whereas a person holding only bonds will have an AA of 0/100, this stock-shorting person can have an AA of -100/200.

I think he can go even lower than -100%, but I need to check the margin requirement.

PS. Now, would anyone be comfortable with the -100/200 AA? I would not.

 

[RetireBy90]

I understand a counter-argument, that if you have a really big stash that far exceeds your projected needs, why risk much equities? Sort of the Suze Orman situation. Maybe I'm not thinking right, but I'd still stick with a significant equities position anyway!

I would think if you have a really big pile that far exceeds your projected needs that your stash will be left to family or charities. If so, why would you not include a reasonable equity position in your AA ? Mom had a small pile of investments and didn’t spend any of it as her spending was more than covered with SS and pension. I managed her finances last 8 years or so, and had about 75% in equities as the target was her estate not her expenses. Yes, lots of details to consider but she never needed any of it and even was able to gift $14K to each child (and spouse) without touching it.

Of course each situarion is unique and should be tailored to risk tolerance, term for your investments and lots of things.

 

[harley]

A lot of people would call 40% stocks minimum.

Well, there are approximately 200M adults in the US, and about 50% of them own equities. So that would be 100M. So there would be millions, or even 10s of millions that own a particular percentage. So you are right, a lot of people would call 40% minimum.

Of course, since there are also about 100M adults that don't own stocks, the number that would define minimum as zero is even larger.

Personally, I try to stay around 60% as a minimum. Me and probably 10+ million other people.

 

[CardsFan]

My strategy is 52% equities, 48% bonds, one house and one spouse[emoji857]

Bold by me:

Probably one of the most significant numbers to get to FIRE.

Not a requirement, but makes it easier.

 

[BeachOrCity]

The question sounds incoherent to me.

 

[Offgrid Organic Farmer]

I do not own any stocks.

I own my farm, I own rental real estate, and I have a military pension.

I am very comfortable this way, I will soon be enjoying the 19th anniversary of my retirement.

 

[24601NoMore]

I decided to take a more income-replacement based approach with a heavy focus on dividends from FI, so have been at ~25% equities for quite a while now. (I'll admit that I "missed out" on a lot of gains in 2019, but ce la vie - I slept a heck of a lot better at night, and the plan supported our ability to ER regardless of how big the pile will get, so all is good)..

That said, everyone needs to invest according to his/her own willingness (and need) to take risk.

I mostly follow Rick Ferri's advice in his Feb 2015 Forbes article on 30-35% being the "center of gravity" for early retirees. He advises that "There is no economic reason for a person to take more investment risk than necessary once they’ve accumulated enough money for retirement. The focus should be on the minimum amount of risk needed to achieve an income required in retirement." and that resonates very strongly with me..

Of course, if you're investing for other reasons like leaving a big pile of legacy $$ to heirs or charity (we're not), then YMMV..