Author Topic: Asset allocation?  (Read 5499 times)

llane1969

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Asset allocation?
« on: October 01, 2018, 08:12:32 AM »
So I tend to over analyze everything when it comes to investing. here's my current allocation.

6% emerging markets
7% international
51% large US
8% mid cap
20% small cap
Reti 5%
3% misc

Within the allocations are a breakdown of about 60/40 growth/value

I'm in all index etf funds.

As compared to the S and P, I've been lagging the market between 2-5% a year which is becoming a big deal. It's also very frustrating since I've been scaling out of value and international over the last couple years as they've been getting killed. i don't feel I'm being rewarded for the risk I'm taking.

After listening to JL Collins, I'm considering pulling the plug and just going to the total stock market index fund. This is my long term money I wont be touching for about 12  years.

I also have about 3 years of expenses in cash (to cover the average bear market) earning around 3%+

Any feedback would be most welcomed!






prognastat

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Re: Asset allocation?
« Reply #1 on: October 01, 2018, 08:54:34 AM »
If you are going with index funds trying to match the market performance rather than beat it going with a 4% SWR I would probably hold less cash and instead adjust withdrawals/spending down during a bear market to improve the chances of your portfolio surviving rather than holding that much cash which would be a drag on your portfolio's performance if the market does perform well.

As for my allocation it's pretty close to JL Collins'. It's heavy on US stock market funds. Light on foreign markets and no REITs. I'm also pretty light on bonds with a 95/5 split though I plan on adjusting this down some once I near the end of my accumulation phase.
« Last Edit: October 01, 2018, 08:57:33 AM by prognastat »

gocurrycracker

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Re: Asset allocation?
« Reply #2 on: October 01, 2018, 08:33:59 PM »
As compared to the S and P, I've been lagging the market between 2-5% a year which is becoming a big deal. It's also very frustrating since I've been scaling out of value and international over the last couple years as they've been getting killed. i don't feel I'm being rewarded for the risk I'm taking.

This is how it is supposed to work.

You own multiple different asset types with the expectation that they will be inversely correlated. When US stocks go high, emerging markets might go low. When bonds go high, stocks go low.

Then you rebalance once in awhile... selling some stuff that is UP and buying some stuff that is DOWN. It sounds like you are planning the opposite?



Jim

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Re: Asset allocation?
« Reply #3 on: October 02, 2018, 07:33:43 PM »
llane1969 - Maybe I'm thinking of this wrong, but I've always viewed an asset allocation as trying to "smooth" out the ride in the market.  With your current AA you are in almost all equities with exposure to more growth opportunities. If you believe in the long run growth potential of your emerging markets/small cap/mid cap, then you should re-balance annually so you can pick up more of those shares with the proceeds of the items which went up, but otherwise you are exposing yourself to more volatility and currently lagging the S&P.

If you are looking for a "smoother" ride, then you need to either add some bonds (which could be risky in a rising interest rate environment) or shift more funds to CD ladders or cash equivalents.
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