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How to figure out how much of your portfolio to keep in equities

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  • How to figure out how much of your portfolio to keep in equities

    A former bond manager gives a logical argument refuting the rule of thumb that bond ownership should increase along with age. I would love to hear thoughts from the bond believers after you've read these 2 articles.

    Why Your Portfolio Needs Plenty of Stocks, Whatever Your Age

    My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
    Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients

  • #2
    I anticipate my glidepath in retirement will have me decreasing my bond exposure with time.  Why?

    My plan is to have a certain number of years worth of expenses in bonds.  My IPS calls for 10 years worth, which I could use to cover expenses if the stock market sees a major dip and takes a long time to recover.  The rest of my portfolio will be in equities. Retiring with about 50 years in expenses gives my portfolio an excellent chance of growing, even when the paychecks stop.  So the bond portion will remain at 10x with rebalancing, and the stock portion will most likely grow.

    Could I get by without bonds?  Sure. But I like the idea of the safety net.  It's a personal decision.


    • #3
      I read both articles when they were published in the NYT a couple weeks ago. They did nothing to influence my commitment to a fixed income allocation. It's a personal decision.

      When I was younger and had less, I was committed to an all-equity allocation. Today, the utility of additional wealth influences me far less than the fear of suffering a great loss, as I approach an early retirement from medicine. Greed vs. fear.

      As I stated in a previous thread, I saw far too many colleagues with their all equity portfolios have their retirement plans thwarted in 2000-2002 and again in 2008.


      • #4
        WCICON24 EarlyBird
        Since I am not part of the early retirement crowd, luck and health willing, I hope to pass on much of my portfolio/estate to my kids, and as such I view my investing timeline as extending beyond my death, and thus feel more comfortable with an equity heavy portfolio extending into retirement.

        I will probably transition from 85/15 to 70/30 by age 65 for 401k/tIRA and remain 70/30 tIRA until death.  I will keep Roth at 100% equity, and probably be a bit more muni bond heavy in my taxable account.  As I hope to accomplish large Roth conversions at a low effective tax rate, it is possible my bond allocation may go down in retirement if my portfolio is growing.

        I'm not married to bonds as my fixed income component, and would be very open to a combination of bonds, peer-peer lending, CDs, or whatever the future brings.