Un-slice and un-dice

[teejayevans]

Don't large "domestic" companies have about 30% of their sales in foreign markets these days? If you go 40% international, you may be more exposed to non-US markets than meets, the eye, no?

The opposite can be said, no?
TJ

 

[WilliamG]

The only thing to me unappealing about TSM is our recent 2000-2002 bubble experience. Hopefully there is a long time gap between large cap bubbles. Otherwise, your thoughts sound good depending on the other 50% allocation. You mentioned they are "bucketized". If you cheat a little here on pure bond allocation (e.g., Wellesley for large value exposure, and maybe even some REIT), I like your thoughts even better.

 

[teejayevans]

I'm little afraid to ask, but what is this bucketizing thing?
TJ

 

[Rich_by_the_Bay]

The only thing to me unappealing about TSM is our recent 2000-2002 bubble experience. Hopefully there is a long time gap between large cap bubbles. Otherwise, your thoughts sound good depending on the other 50% allocation. You mentioned they are "bucketized". If you cheat a little here on pure bond allocation (e.g., Wellesley for large value exposure, and maybe even some REIT), I like your thoughts even better.

Matter of fact, Wellesly is the cornerstone of my B2 (with a dollop of TIPs) and I have a small allocation of REIT in my B3.

 

[Rich_by_the_Bay]

I'm little afraid to ask, but what is this bucketizing thing?

Not going there .

It's a framework for categorizing your portfolio, popularized by Ray Lucia. I'll split this off it it starts to spin out of control (it has that tendency like annuities, paying off the mortgage, etc.).

(Bucket 3 is stocks, Bucket 2 is stuff that behaves like total bonds or blends, and Bucket 1 is cash which you self-annuitize to meet annual expenses. Typically you burn through B1, then refill it from bucket 2 for a grand total of, say 15 years. By then, your B3 replenishes B1 and B2. You do some light rebalancing between B3 and B2 from time to time. The duration of each bucket is designed to smooth their historic volatility. It possesses no magical qualities but provides a convenient way to manage your retirement portfolio with some built-in discipline.)

 

[lazyday]

Don't large "domestic" companies have about 30% of their sales in foreign markets these days? If you go 40% international, you may be more exposed to non-US markets than meets, the eye, no?

Yes, but maybe not much. U.S. stock prices and their foreign sales are probably correlated, but not perfectly. It's possible for foreign stock markets to do much better than U.S. largecaps, in spite of good foreign sales. Not sure it's a fair example, but some people talk about this from point of view of Japan's domestic stock market in the 90's.

I'm not arguing for people to increase their foreign holdings today, after the dollar has dropped. Just thinking that reducing foreign below 20% of portfolio might not improve one's risk.

 

[lazyday]

Now there's my problem. Real estate is real high - but we've got plenty of it. The stock market is so high I hesitate to buy heavily.

Lots of smart people are having a hard time, believing that every investment is priced high today. I believe stocks are still priced to strongly outperform bonds over the next 50 years, so stay invested in them, but wouldn't be surprised by a 30% drop starting tommorrow.

6% on cash/CDs sounds good, but if one overdoes it, there's always reinvestment risk.

I guess there's something to be said for not betting the farm when you aren't a poker player, right?

Makes sense to me.