Stock/Bond Allocation

[rutgers07]

I'm trying to get a better understanding of how to allocate my funds. I've set it up so I'm ~28% bonds and the rest split between international and US total stock funds (Boglehead 3 fund portfolio). I'm just beginning my investing career with about 16k split between my 401k and Roth. Does it make sense to reduce my bond allocation so I can take advantage of potential gains since I'm a little late to the game? I know I stand to lose more, but I'm okay with that now as the trade-off might be a bigger portfolio. Maybe drop that to 20% bonds for some time?

[autoxer]

You have a pretty solid plan, but you don't mention your age, so it's tough to say if more or less risk is appropriate. How many more years do you expect to work?

If you are in the accumulation phase, your savings rate is going to have a much bigger impact than your asset allocation on how quickly your portfolio grows.

[feh]

You have a pretty solid plan, but you don't mention your age, so it's tough to say if more or less risk is appropriate. How many more years do you expect to work?

If you are in the accumulation phase, your savings rate is going to have a much bigger impact than your asset allocation on how quickly your portfolio grows.

+1 We don't have enough information to offer advice.

[rutgers07]

Sorry about that! I'm 29 and will be 30 in October. I'm sure I'll be working for another 35 years or so. I'm saving about 20% of my income right now, although I'll probably decrease that to 15% for the foreseeable future because of some other goals.

[autoxer]

So you do have quite a few years until you are going to access this money, so you can probably weather a more riskier portfolio.

I'm 35yo, and looking at the Target 2045 funds, they are invested about 10% bonds and 90% equities. I'm comfortable with that knowing that I won't be accessing this money for 30 years. I will likely shift that closer to 50% equities, 50% bonds as I get closer to retirement, but for now I prefer the riskier allocation.

[feh]

Sorry about that! I'm 29 and will be 30 in October. I'm sure I'll be working for another 35 years or so. I'm saving about 20% of my income right now, although I'll probably decrease that to 15% for the foreseeable future because of some other goals.

Rules of thumb would put you at 70-90% equities.

However, only you know your risk tolerance. You need to ask yourself, "if my portfolio value dropped 40%, would I freak out and sell, or would I rebalance and buy more equities?".

[snafu]

Like Feh said, you need to be able to sleep at night without nightmares about your savings. I believe bonds are riskier than equities just now as interest rates are artificially low. The rule is when interest rates rise, the value of bonds drops. You have a great many years to watch the roller coaster bond and equity shenanigans. Everyone talks about 35 years to retirement yadda yadda but on retirement day you don't just cash out! As you near that point you make arrangements to make regular withdraws somewhat mimicking your income schedule when you were working. Those equities continue to work for you as 'Retired to Win' notes.

I agree you need to adjust your allocation over time. While Vanguard is an excellent operation now, they may make changes you don't like sometime in the future. If their Board starts wrecking don't feel obligated to sink with the ship.

[rutgers07]

Thanks for the help. I wouldn't say I'm comfortable if the market drops 40% but rationally I know it's not a big deal really and I'll manage. I've gotten much better about not checking them daily, and only every 2 weeks to make sure my transaction goes through sometimes less then that. I think I'll stick with 15% bonds for now. Thanks!

[jIM_Ohio]

Sorry about that! I'm 29 and will be 30 in October. I'm sure I'll be working for another 35 years or so. I'm saving about 20% of my income right now, although I'll probably decrease that to 15% for the foreseeable future because of some other goals.

If you were serious about investing 20% of gross pay, success is a given, and I'd stick with a 60-40 or 40-60 portfolio. The significance of such a high savings rate suggests taking excessive risk is not a good idea.

The idea of saving 15% is better than most, just realize if you take more risks (because of a lower savings rate) you are putting the whole plan at risk... I would stick with a 60-40 porfolio to reduce chance of failure, and realize savings rate matters more than the investment returns.

[rutgers07]

Reviving this old thread! DW now has access to a 403b through Fidelity with pretty poor investment options. I think we're going to have a 40/40/20 split with US/International/Bonds. I have a 401k and a Roth going and we will get her started on her Roth soon also. I'm trying to better understand how to split up the investments since her international choices are better. Is it okay to look at our retirement savings as a collective or individual? Meaning, should each account have a desired split or can I maintain a split as a collective which would mean her 403b may have none going into international, but mine can be as high as 80 (just throwing out a random number). I have a spreadsheet that I check ever 6 months or so and rebalance allocations as needed.

[corn18]

Treat all of your accounts as one for asset allocation. Do you have any taxable retirement accounts? Need to watch out for taxes in those.

[rutgers07]

Treat all of your accounts as one for asset allocation. Do you have any taxable retirement accounts? Need to watch out for taxes in those.

Thank you for that answer.

As for taxable accounts, what type of accounts are you referring to?

[feh]

Treat all of your accounts as one for asset allocation.

+1

Do you have any taxable retirement accounts? Need to watch out for taxes in those.

OP - he is referring to asset location. You want your investments that throw off dividends to be in tax-deferred accounts. This usually means equities in taxable accounts and fixed income in tax-deferred accounts.

Read this page: https://www.bogleheads.org/wiki/Bogl...g_start-up_kit

[snafu]

Since wife's 403b is new, I suggest she begin with Index or best Fidelity option available to her. This is likely a long term project and open to changes, re-allocation, even different provider 35 years in the future. Depending on risk tolerance, sums available for retirement savings, total annual allowable, what's chosen for ROTH you might watch an ETF/MF European product since it's so beaten down.