When people discuss asset allocation, is this all of their money outside of 401k and emergency fund?
About to start investing with post-401k, post mortgage/ expenses extra money per month…do people put 100% of this into the market (index stock and mutual funds)?
That seems very high to me…maybe this means I have low risk tolerance? I was thinking 75% of this “post” money into the market. Even this seems high, but it seems to fit with the conventional WCI/bogleheads wisdom.July 27, 2019 at 8:01 pm MST #234205LordosisParticipantStatus: PhysicianPosts: 1863Joined: 02/11/2019
Asset allocation is across all your accounts for a particular purpose. If that purpose is retirement then it would include the retirement accounts.
Yes money I intend to save for retirement I put 100% into VTSAX.
If that is too aggressive then balance with bonds to where you are comfortable.
Make sure to keep your short term saving separate.
“Never let your sense of morals prevent you from doing what is right.”July 27, 2019 at 8:27 pm MST #234208EntrepreneurMDParticipantStatus: PhysicianPosts: 337Joined: 06/10/2019
Most here consider diversification of assets to be different investments, but essentially all within the markets.
For me, I have considered it far wider in breadth. I consider the funds I allocate to my business, commercial real estate, even equity parked in an appreciating primary residence to also be a part of my allocated investment assets.
I too have been leery of an oversized allocation of my investments in the stock market especially in this stage of the bull market. Many here disagree.
Your correct mix depends on your tolerance. Currently, only about 15% of my investments are in the markets, 20% in safe savings/CD’s and the rest in the other investments.July 27, 2019 at 9:18 pm MST #234213CordMcNallyParticipantStatus: PhysicianPosts: 2859Joined: 01/03/2017I was thinking 75% of this “post” money into the market. Even this seems high, but it seems to fit with the conventional WCI/bogleheads wisdom.Click to expand…
What would be your plan with the other 25%?
“But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
― Benjamin Graham, The Intelligent Investor
For the other 25%, my plan was to put it in an Ally savings account.July 28, 2019 at 6:33 am MST #234263PanscanParticipantStatus: ResidentPosts: 1092Joined: 03/18/2017
Depends how old you are and current financial status. Over time more equities has yielded more return but obviously with more risk. But if you’re 30 and buying a bunch of bonds you’re basically lighting future money on fire IMO unless you have a huge inheritance or are extremely risk averse.docnewsParticipantStatus: PhysicianPosts: 410Joined: 01/09/2016
Don’t invest more than you comfortable with because that will likely lead you to selling during the next drop.
I consider all funds part of my asset allocation (I don’t exclude an emergency fund). It’s ok to have a chunk just in savings. Just make a plan and stick to it. Try reading some boglehead.org wikis to get an idea about different theories of asset allocation. Of the common suggestions is 1/3 international stock index, 1/3 US stock index and 1/3 bonds. As the market has done so well since the ’08 dip people seem to forget 33% bond is reasonable.July 28, 2019 at 7:07 am MST #234270Vagabond MDParticipantStatus: PhysicianPosts: 3478Joined: 01/21/2016
I would not consider a 75:25 allocation to be “risk averse”. You will still experience a great deal of the stock market’s volatility. A 50% stock drawdown will be a nearly 37% stock drawdown for you.
Many of the people who are young and 100% in stocks have never experienced a Bear market. Additionally, the more money you have, the less you will want to part with it, even if it is a temporary parting.
I suggest that the 75:25 allocation is plenty aggressive for a relatively inexperienced investor. After your first bear market or two if you think that is not aggressive enough, then change your allocation.
If you could go to only one National Park ever again, which one would it be?
"Wealth is the slave of the wise man and the master of the fool.” -Seneca the YoungerZZZParticipantStatus: SpousePosts: 707Joined: 06/18/2018
“For the other 25%, my plan was to put it in an Ally savings account.” So, you’re going to put 25% of your assets into cash? Your call, but that’s uber conservative for someone who is presumably young. You know inflation is a thing, right? You know what happens when governments around the world starti printing money? That 25% in cash is going to earn 2.something percent, and it will be fully taxable, so you real yield will be 1.3-1.5%. If that’s your goal, to only slowly lose buying power, that’s your call.
“When people discuss asset allocation, is this all of their money outside of 401k and emergency fund?”
Quite simply, it’s how your assets are allocated (makes sense, right?). All your assets…cash, investment accounts, equity in businesses, real estate you own, all your crypto, etc.July 28, 2019 at 7:25 am MST #234281docnewsParticipantStatus: PhysicianPosts: 410Joined: 01/09/2016
Read this whole thing than make your plan and stick to it: https://www.bogleheads.org/wiki/Asset_allocationJuly 28, 2019 at 7:27 am MST #234282
Appreciate the comments.
Understand the “lighting money on fire” idea. But what is market doesn’t go up, or down in the long term?
Anything less conservative than CDs/savings accounts but more conservative than bonds?
Any thoughts on bonds in taxable account? Vanguard total bond index seems like would be bad in taxable account?
As for national parks, loved Alaska/Denali.July 28, 2019 at 12:45 pm MST #234416ZZZParticipantStatus: SpousePosts: 707Joined: 06/18/2018
Understand the “lighting money on fire” idea. But what is market doesn’t go up, or down in the long term? Then break out your crystal ball and invest in what you think will yield the best total returns over time.
Anything less conservative than CDs/savings accounts but more conservative than bonds? Since many bonds actually yield less than savings acvounts these days, no.
Any thoughts on bonds in taxable account? Vanguard total bond index seems like would be bad in taxable account? If you’re in a high enough tax bracket, that’s what munis are for.July 28, 2019 at 12:59 pm MST #234419