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advice on asset allocation, please

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  • advice on asset allocation, please

    We are planning to fire our financial advisor and do this investing thing ourself.  I'd love some feedback on my tentative plan.  We are in our early 30s and also plan to add more rental properties to our assets (have one currently) for cash flow.  I don't want to get too much into asset classes; I think the savings we'll have on fees (about 2% now) negates the needs to try to tinker.  I like the simple bogleheads philosophy, I think, and agree with being more hands off and not trying to guess what the market will do.


    35%  vanguard total stock market fund

    35% vanguard total international

    10% REITs

    20% bonds (vanguard total bond market)


    My questions:

    1)   Do I really need 20% bonds?  I feel like we could tolerate more risk, but perhaps I should keep 20% for when the market goes down?  Would it be crazy to decrease to 10%?

    2)  Should I add a tilt with emerging international markets? or small value?

    3)  Would you favor US over international?  Maybe 40:30 or 45:25?


    Thanks for taking the time to help me!




  • #2

    • Have you been through a nasty bear market yet?  In your early 30s 10-20% bonds is ok.  My one concern would be how will you behave when the market really drops like 2008?  If you have not been through some type of significant drop then you might want to keep the 20%.

    • I have some Vanguard Small Cap Value.  This is actually the highest returning  portion of the market over time. I just have VTIAX for international exposure.  It some emerging in that.

    • I personally put new money into VTIAX because I am so underweight in international at 16% but would be happy with 20-30%

    I hope my thoughts help.



    • #3
      I recommend you read this 2-part series at PhysicianOnFire before making your final decision: Bonds-What are they Good For? The link is to part 2 but opens with a link to part 1. In addition to a counterpoint on bonds, I include the portfolio we use for all long-term investors.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


      • #4
        What you've proposed is totally reasonable.

        To answer your questions from my perspective:

        1) You would not be crazy to hold fewer bonds. I hold 10% at age 40.

        2) I tilt to both EM and SV. Will it make a big difference? Probably not. The expectation that we'll gain alpha with those tilts is a notion shared by many investors, which may wipe out any alpha that might have been there.

        3) I'm 3:1 US : international stocks. An acceptable ratio is anywhere from 100% US (Bogle rec.) to 50 / 50.

        Do what makes you comfortable. Like I said, what you've outlined is not a bad portfolio, but feel free to make some small changes. Once you've decided on an allocation, stick with it, and rebalance to it.

        Here is my portfolio.