Can You Comment on My Asset Allocation

[clifp]

80% equities is high, even at a young age, and half that in US large cap is a pretty high concentration in one asset class.

1/5 of equities allocated to international is low. I would say at least 1/3, and at least half that to emerging markets.

Agree with Brewer about the int'l fund diversification value and the funds he named. GIM is a closed end fund and a bit more volatile. Part of the int'l bond could be in emerging market - for example, Fidelity (FNMIX0 and PIMCO (PELBX).

Lots of AA can work if you can sleep at night. I've been retired 12+ years. My AA has fluctuated from a low of 65% equities in 2000 to high of 85% earlier this year to 80% today. My large cap allocation is very similarly to the OPs 43% and my international is down to 10%. Since you aren't retired and fixed income is generating a negative real return right now (especially after taxes) I won't be in any hurry to shift out of equities if you are ok with the volatility. To be honest I am curious to see how people who are heavily into fixed income handle the volatility of higher interests. Although I have officially stop speculating when they will occur other than my lifetime (I hope)


I am looking at shifting into some international bonds and was debating between GIM and the M* recommend CEF MSD which at 10+% discount to NAV.

 

[nun]

I use T. Rowe Price Advisory Planning Services for my retirement asset allocation. I am 41, I hope to retire anywhere within the next 4 to 9 years if possible. The recommended asset allocation plan is premised on me working until 65, but I was told that even if I want to retire early, the asset allocation would not change too much, because the early retirement would mean I would need my investments to last for a longer period of time, and I would need to take on more risk (stocks) to help make my retirement assets last as long as I do.

Without knowing your income requirements, retirement capital and other sources of income (like penions and SS) I don't see how an advisor can make a recommendation. You might be frugal and have a few million invested so that you could live well on the returns from a bond heavy portfolio for 40 years. You might not need the growth and risk potential of equities.

Most financial advisers will assume you want to have 80% of your pre retirement income but many on this forum use far smaller percentages because they don't have the big costs of mortgages and having to save for retirement. I wouldn't go into ER if I needed the growth and risk of an equity heavy portfolio, I'd wait until I could succeed with a Bogle type portfolio where the percentage in good quality intermediate bonds is my age. So could you ER with between 40 or 50% bonds?

 

[prototype]

Does this seem like a reasonable AA to you knowledgable folks out there?

ER'ed at 55 early this year (now 56). Here is a summary of my ~750K AA as of yesterday (I skip the details to keep the post short). 50% bonds (various, mostly intermediate, some older I Bonds), 34% stock funds (mix of large, mid, foriegn...), 7% Gold Bullion (coins in sd box), 9% cash (yeah, I know a litlle high). Does this seem reasonable? For now most of my living expenses are covered by a non-inflation adjusted pension,,,which drops by abot 15% when I turn 62 (as well as the inflation eater). It just doesn't seem like I have had a huge return YTD (a few percent), of course August was a killer. (BTW, I don't use a financial adviser or wanna become a day trader)

Thanks

 

[panacea]

Does this seem like a reasonable AA to you knowledgable folks out there?

ER'ed at 55 early this year (now 56). Here is a summary of my ~750K AA as of yesterday (I skip the details to keep the post short). 50% bonds (various, mostly intermediate, some older I Bonds), 34% stock funds (mix of large, mid, foriegn...), 7% Gold Bullion (coins in sd box), 9% cash (yeah, I know a litlle high). Does this seem reasonable? For now most of my living expenses are covered by a non-inflation adjusted pension,,,which drops by abot 15% when I turn 62 (as well as the inflation eater). It just doesn't seem like I have had a huge return YTD (a few percent), of course August was a killer. (BTW, I don't use a financial adviser or wanna become a day trader)

Thanks

Seems reasonable to me as far as diversification goes. You may want to consider some REITs in there somewhere (maybe 5%??). You could also consider some short or ultra-short term bonds in lieu of some of the cash for a bit better yield. How much do you expect to draw from this portfolio though? Under 4%?

 

[nun]

Does this seem like a reasonable AA to you knowledgable folks out there?

ER'ed at 55 early this year (now 56). Here is a summary of my ~750K AA as of yesterday (I skip the details to keep the post short). 50% bonds (various, mostly intermediate, some older I Bonds), 34% stock funds (mix of large, mid, foriegn...), 7% Gold Bullion (coins in sd box), 9% cash (yeah, I know a litlle high). Does this seem reasonable? For now most of my living expenses are covered by a non-inflation adjusted pension,,,which drops by abot 15% when I turn 62 (as well as the inflation eater). It just doesn't seem like I have had a huge return YTD (a few percent), of course August was a killer. (BTW, I don't use a financial adviser or wanna become a day trader)

Thanks

Your situation is very similar to mine. Most of my expenses will be covered by a combo of pensions, SS and rental income so I don't need to take much form my retirement savings. So you can argue for AA across the risk spectrum. Either you don't need the income so go with a bond heavy AA to minimize risk, or you don't need the income so go with a riskier stock heavy AA as you can weather losses in the portfolio.

IMHO a 50/50 portfolio with a couple of years in cash and short term bonds and a total return approach is the best way to go in our situation.

 

[prototype]

Thanks nun and panacea for the feedback and good suggestions . As far as returns go, I tend to go conservative using firecalc, orp, ect., and assume use overall return rates and inflation rates that are about the same. Of course I play around with the numbers like everyone else does I'm sure and use return rates somewhat lower than CPI just to see where things will head. The only killer for me would be a long term high inflation period (10% or so), don't have the specifics hand because I',m not at my home computer right now. Will definitively check into the REITs.http://www.early-retirement.org/forums/members/panacea-21802.html