Announcement

Collapse
No announcement yet.

Thoughts on changing AA/IPS now that I've been through 1st bear market and own a home

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • GasFIRE
    replied
    In the first decade of attending status, changes in net worth tend to be more affected by savings rate rather than investment returns, i.e. you can fill the investment bucket fast enough that the portfolio returns don't move the needle as much as the contribution does. I would leave your AA alone for now. Reassess in a few years when NW is several multiples of your salary.

    Leave a comment:


  • Kennyt7
    replied
    AGE IN BONDS-John Bogle, one bright mind

    Leave a comment:


  • Shant
    replied
    You don't need to increase your emergency fund for the house. You have ample liquid resources available if something major happens. You do need to budget for annual maintenance though. Depending on the age of the house you should expect to spend between 1 and 4% of the value of your home (not the land) each year.

    I personally don't see the point in bonds. It is true though that holding firm through three years of declines while people start to despair that this time really is different is different than holding firm for three months. I suspect you will manage it fine in your financial position and outlook.

    Leave a comment:


  • Tim
    replied
    What is cool part of investing is that it teaches you about yourself. $1m NW in 3 years is great.
    Was it the result of skill or luck? Or was it 90/10 or the market? That accumulation seems to be $333k per year AND you must have had hefty taxes too.
    The caution regarding AA is intended for an overconfidence. That income seems to give you a financial advantage.
    My thought is AA had very little to do with your growth in NW and not sure what you learned about your risk profile.
    Seems like that mortgage will be gone soon if you keep growing NW at $333k per year.
    My point isn’t a criticism, not enough info to understand $1m in 3 yrs or where you are going.
    AA is based on you.
    The changes you mentioned were a house and the market. None of those changes AA.
    Just saying, not sure what the last 8 months has changed a 30-60 year plan.

    Leave a comment:


  • Peds
    replied
    i would have put more thought into putting 20% down and a 15 yr than changing your AA.

    Leave a comment:


  • Brains428
    replied
    pierre I guess we're technically out of bear territory, but still very much in a recession. I don't think COVID19 is done with us yet from an economic standpoint, so there is likely to be a ton of volatility. I don't think 08 was a single dip (I was an MS1, so my memories of real world happenings are hazy).

    In regards to 100% equities-- if you're a set it and forget it type and can stomach the headlines, then I'd say ok. Even if you're a total market investor, I think the swings can be pretty large since we are in never ending QE and low interest rates.

    Maybe look into real estate? It seems to be that it's one of the areas that the government likes to protect at all times from an ownership and investment standpoint.

    Leave a comment:


  • jhwkr542
    replied
    I wouldn't change AA. Really, going 90/10 to 100/0 isn't going to change much. You'll still get some diversification with bonds at 90/10. For the efund, I'd still keep it at 6 months. Presumably, with a house, that 6 months' expense will be higher as your mortgage payment will be higher than the rent. At that interest rate, I'd just go taxable.

    Leave a comment:


  • pierre
    replied
    Originally posted by JK View Post
    Been through first bear market (coronabear)
    I'm not speaking from experience since I only had like $10k invested in '08. But I suspect the feeling of living through a bear market is different when it only lasts a couple months vs years.

    I don't know the history, but if others do it would be interesting to know when the most selloff happens during a bear? How long have the prior bears lasted?

    Leave a comment:


  • Thoughts on changing AA/IPS now that I've been through 1st bear market and own a home

    Background: Early/mid 30's. No student debt. Specialty. Student loans paid off. ~1mil NW and above average salary so doing well there. Into year 3 as attending at the same job right out of training. Family life stable with wife and 2 kids (no more planned). No plans to move again in the future as near family, etc...

    Previous Asset Allocation (been that way for years since making IPS): 90/10 stocks to bonds (60 US/30 international with slight tilt to SCV and REIT). Have stuck to that plan for about 4 years through end of residency and early attending life. Had never been through a bear market though with long run up of stock market. Also traditionally kept 3-6 months of living expenses in Efund (Ally bank), usually closer to 6 months.

    What changed:
    -Been through first bear market (coronabear) and didn't have any panic selling despite loss of income during the period. Actually shifted more from bonds to stocks at the low point to maintain allocation.
    -Bought the "forever" house in July as timing was right with job/life despite bear market. House is fantastic (walk to work in suburbs), neighborhood is great, and cost was fantastic as well (mortgage < 1x/income in MCOL area). Got a mortgage putting 20% down with great rate and no points: 15 year fixed at 2.625% (the 15 year fixed rather than 30 won't stretch our budget so we went that route to be debt free sooner).

    Question/thoughts: WCI always says to be more conservative until going through first bear market. Now that I've done that and have our house purchased, I was considering a few things and wanted to get opinions from people smarter than I.
    -AA: was considering making AA 100/0 stocks to bonds. I realize 100/0 and 90/10 doesn't change a whole lot in the grand scheme of things but with low expected bond rates it seems silly to invest there now that I have a mortgage which I elected to pay off sooner (15yr vs 30 yr fixed). Or does it still make sense to keep bonds in one's portfolio.
    -Efund: now that we're homeowner's, the EFund surely will have to get increased for unexpected items that break in the home. For those who transitioned from renter's, how much did they increase their E-funds after buying. For instance, if you previously kept 6 months living expenses, did you now have 9 months...or did you add an extra % amount to what your possibility monthly spend would be. There will naturally be a higher monthly outflow for us as 15yr mortgage in nicer home > previous rent we were paying but it's the unexpected costs that are now variable since we're the new landlords essentially.
    -Mortgage: along the lines of the potential AA change and removing bonds, would you throw more money at the loan to payoff even sooner? For reference, we're comparing taxable account investing vs additional mortgage payoff as I already max out all other tax advantaged space and have no other debts.

    Appreciate the advice.

Working...
X