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    Portfolio Mix

    Hi, this is my first time posting in this forum. I am 35 with a 401k account and I have been investing for a long time. My strategy shifted about eight years ago. I had very little diversification in my portfolio which shifted to more diversity. I would like to retire at 55. What do you think of this allocation portfolio? Is this too much? Is it the right percentages? Any feedback would be appreciated!

    1. 15% bonds
    2. 18% asset allocation (2045)
    3. 12% S&P 500 Equity Index
    4. 28% Value yield equity and growth equity
    5. 10% international stock
    6. 6% US Small / Mid caps
    7. 6% Emerging Markets equity
    8. 5% Company stock

    #2
    The problem with figuring out your asset allocation, is that there is no right or wrong. I think your percentages are reasonable, not too heavy in any asset class and spread out well.

    You might have some over lap, if 2. 18% asset allocation (2045) is a target index fund, because that also contains us equities, bonds and international stocks. So your overall allocation might be closer to 17% bonds and 15% international stock, but that isn't necessarily a problem.

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      #3
      Thanks for the feedback. I was thinking it might haVe been off a little with the allocation fund.

      Comment


        #4
        Originally posted by Macheta View Post
        Hi, this is my first time posting in this forum. I am 35 with a 401k account and I have been investing for a long time. My strategy shifted about eight years ago. I had very little diversification in my portfolio which shifted to more diversity. I would like to retire at 55. What do you think of this allocation portfolio? Is this too much? Is it the right percentages? Any feedback would be appreciated!

        1. 15% bonds
        2. 18% asset allocation (2045)
        3. 12% S&P 500 Equity Index
        4. 28% Value yield equity and growth equity
        5. 10% international stock
        6. 6% US Small / Mid caps
        7. 6% Emerging Markets equity
        8. 5% Company stock
        If you pick the asset allocation fund, I would not pick the other 7.

        If you want the other 7, I would remove the allocation fund.

        Allocation is broken down by 3 levels of detail:

        a) % stocks and % bonds (you are 67%-15%). Not sure how the 2045 fund sways this.
        b) % foreign and % domestic (you are (66%-16%). I suggest you are too low international (25% min, 50% max)
        c) % large cap, % small cap, % foreign large, % foreign small, % emerging markets % US gov't bonds % corporate bonds % junk bonds % foreign govt bonds % foreign corp bonds % foreign junk bonds

        If you focus only on a), that is 80% of your performance right there, and if you do a) and b) that is about 85% of your performance.

        By time you get to c) you get great diversification, there could be comments about how much a foreign emerging markets fund is different or the same as a foreign small cap fund which is different than a domestic small cap fund... the large company in South Africa could be a micro cap here in the USA... so how much of portfolio should be weighted to small, emerging markets stocks when there are other small cap stocks already in portfolio... are the characteristics different?

        Comment


          #5
          Have you tried the portfolio tools on Morningstar? Look up your ticker symbols (if you don't already know them), then use this tool to see how your allocation breaks down:

          http://portfolio.morningstar.com/RtP...x?dt=0.7055475

          Comment


            #6
            Originally posted by Macheta View Post
            Hi, this is my first time posting in this forum. I am 35 with a 401k account and I have been investing for a long time. My strategy shifted about eight years ago. I had very little diversification in my portfolio which shifted to more diversity. I would like to retire at 55. What do you think of this allocation portfolio? Is this too much? Is it the right percentages? Any feedback would be appreciated!

            1. 15% bonds
            2. 18% asset allocation (2045)
            3. 12% S&P 500 Equity Index
            4. 28% Value yield equity and growth equity
            5. 10% international stock
            6. 6% US Small / Mid caps
            7. 6% Emerging Markets equity
            8. 5% Company stock
            Of the 28% that is Value and Growth equity, is it Large Cap, Mid Cap, or Small Cap?
            Is it domestic or non-us?

            Comment


              #7
              I don't think that asset allocation funds are intended to be mixed with any other funds. I would suggest getting rid of that one since you seem to be quite good at creating your own allocation mix.

              Comment


                #8
                Steve - What if I decided to go with only the target fund?

                I'm reading a book right now about retirement planning. I did learn that you should not be putting target funds into a taxable account because it could give you an unnecessary tax bill. But I'm not at the point about allocation. Do you have any additional information can provide to help me understand the risks?

                Comment


                  #9
                  Originally posted by Macheta View Post
                  Steve - What if I decided to go with only the target fund?

                  I'm reading a book right now about retirement planning. I did learn that you should not be putting target funds into a taxable account because it could give you an unnecessary tax bill. But I'm not at the point about allocation. Do you have any additional information can provide to help me understand the risks?
                  Don't let taxes force investment decisions.

                  The goal should be save for retirement
                  The next goal should be 20% of gross pay to retirement accounts. Some of those accounts should be pre-tax, some post tax, some taxable. It is OK to pay taxes on investments now to lower taxes paid later. It is OK to keep investments in taxable accounts because these have the highest liquidity.

                  Comment


                    #10
                    In my opinion Target Date funds are great for people who want a hands off approach, but not necessarily a good long term solution. The automatic asset allocation is a simple solution since someone can chose that one fund and let it adjust over time. They don't have to mess with asset allocation it happens automatically.

                    That being said, two major problems I have with target date funds are the higher fees and the glide path being totally out of your control. When I say glide path I mean the curve of the funds transition from stocks to bonds for example. People may like the fact that it's hands off but the glide paths are often way too conservative in my opinion. And the fees are much higher. Just compare a Vanguard Target Date funds fees to the S&P or Admiral shares funds. Of course the minimum required investment is much lower with the Target Date.

                    In general I think the target date fund is a great way to get started while learning more about how to take control of your retirement planning. But I don't think it's necessarily a good idea to stay in one long term.

                    As far as your tax question I don't really understand what you're saying about taxable accounts or how that would influence your decision to use a target date fund or not.
                    Last edited by SavingSteve; 12-15-2014, 05:24 PM.

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