Portfolio Allocation feedback requested


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Feb 14, 2007
We will ER in 4+ years. I am rebalancing and targeting a 60/40 allocation slice and dice approach in general. There is more to my overall approach, but this is a general target for the overall portfolio @ 55. I will probably get a little more conservative as we age...

I am currently at 70/30 and intend to use additional funds that are added (via wages), gains/divs thrown off in that taxable account to help rebalance, The rest will be moved in tax deferred accounts to bonds. The bonds are in mutual funds. Mostly in intermediate term. A small amount in tips and LTB.

However, my equity alloc looks like it could be tuned. Here are my current holdings. Most all are low fee funds.

S&P 500 Index 50% (1/3 of this is actually an individual Blue Chip that cannot be sold till DW retires)
Mid Cap 400 Index 7.3%
Small Cap Growth Index 3.3%
Foreign (mix of funds) 8.7%
REIT 1.4%

I have looked at the coffee house allocation. It seems to be a a little aggressive in the Small cap and REIT allocations.... But maybe it is the right way to go.

As I move toward my overall target... what would you recommend in terms of target equity allocations for the 60% of the total portfolio?
My 2 or 3 cents for you:
Many of the slice & dice stuff that I have read suggests a slight value tilt, a 30% to 50% foreign allocation, and as many small caps as large caps. Your AA is not consistent with any of these. Some places to read up on all this are at www.fundadvice.com and Bernstein's The Four Pillars of Investing.

You can get exquisite help on AA at www.diehards.org where folks will practically manage your portfolio for you for free.

Specific suggestions: Increase foreign to at least 30% of equities, use the new Vanguard all-World, ex-US fund or ETF VEU. Use small cap blend index, not the growth index and increase it to at least 20% of equities (remember the international will have small caps as well).

I like the Coffeehouse portfolio too and shared some of your misgivings about the REIT portion. What I have done for the past two years is add Natural Resource and Gold to the "Specialty" portion of my portfolio. I have REITs (6%), Natural Resources (6%), and Gold (3%). Each of these can be volatile if looked at individually, but together have a tendency of smoothing out the volatility of the entire portfolio. Over the past two years I have had my own portfolio and my wife's in this strategy and we have both been pleased with the results.

Like you we are in a 70/30% mix with 3-5 years to go until retirement. I use almost an entirely EFT index and rebalance once a year when I make my Roth IRA contribution.

I also would switch the Small cap growth to small cap value, to get the value premium. Also, I think someone has done a study and said anything less than 5% has a negligible difference on your portfolio, so I would bump the small cap up to at least 5% and add more intl (but that is just me, as much of the world is outpacing the US right now).

In general you are not far off from most people, I can't imagine.
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