Trying to establish my asset allocation

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ryanbohle
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Trying to establish my asset allocation

Post by ryanbohle »

I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
sailaway
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Re: Trying to establish my asset allocation

Post by sailaway »

We choose asset allocation based on distance to FI. That is, we were quite aggressive (95/5) until we approached our minimal FI number. At that point, we switched to 70/30, where we will likely stay. We are quite comfortable here for the long term.

Asset allocation is a function of your assets, your goals and your own risk tolerance. When you have years and years left of accumulation, you realize that a downturn can actually work in your favor (as long as you can maintain an income, which is a big if in a lot of industries). As you approach the decision to leave the work force, you may become more conservative because you are considering the withdrawals, not just the growth.

It also isn't something that you can dial in perfectly. Over the long term, there just isn't that much of a difference between 60/40 and 70/30, for example.

What may be more important in your case is what investments you choose and where you place them. With your tax bracket, it seems likely that you will run out of bond space in your tax sheltered accounts, unless you choose a very low bond allocation, so you may be interested in munis in your taxable account, for example.
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Taylor Larimore
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Re: Trying to establish my asset allocation

Post by Taylor Larimore »

ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
ryanbohle:

Vanguard's Investor Questionnaire will help answer your question:

Investor Questionnaire.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Choose a balance of stocks and bonds according to your unique circumstances--your investment objective, your time horizon, your level of comfort with risk, and your financial resources."
"Simplicity is the master key to financial success." -- Jack Bogle
Marseille07
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Re: Trying to establish my asset allocation

Post by Marseille07 »

I've taken the questionnaire and it said 70/30 iirc...I'm answering some questions incorrectly because I know my risk tolerance is 150/0.
retiredjg
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Re: Trying to establish my asset allocation

Post by retiredjg »

I suggest you consider 80% stocks and 20% bonds because I think that is a good allocation for an aggressive portfolio. You can get a little more return by going to 90% stocks, but there is less bang for the buck (return for risk taken) as you go farther out on the stock percentage.
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ryanbohle
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Re: Trying to establish my asset allocation

Post by ryanbohle »

Taylor Larimore wrote: Sun Jun 13, 2021 11:54 am
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
ryanbohle:

Vanguard's Investor Questionnaire will help answer your question:

Investor Questionnaire.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Choose a balance of stocks and bonds according to your unique circumstances--your investment objective, your time horizon, your level of comfort with risk, and your financial resources."
yeah i tried that, but its not as helpful as you might think, in order to answer the questions you pretty much need to know what percentage of your portfolio you want in stock. and if you know that already, the results of the questionnaire are essentially moot. Its circular reasoning.
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ryanbohle
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Re: Trying to establish my asset allocation

Post by ryanbohle »

retiredjg wrote: Sun Jun 13, 2021 12:02 pm I suggest you consider 80% stocks and 20% bonds because I think that is a good allocation for an aggressive portfolio. You can get a little more return by going to 90% stocks, but there is less bang for the buck (return for risk taken) as you go farther out on the stock percentage.
thanks!
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ApeAttack
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Re: Trying to establish my asset allocation

Post by ApeAttack »

retiredjg wrote: Sun Jun 13, 2021 12:02 pm I suggest you consider 80% stocks and 20% bonds because I think that is a good allocation for an aggressive portfolio. You can get a little more return by going to 90% stocks, but there is less bang for the buck (return for risk taken) as you go farther out on the stock percentage.
80:20 is a fine starting point if OP has many years of work ahead and can afford a prolonged market downturn. OP can stay at that AA for a while and notice how the ups and downs of the market impact him/her mentally (e.g., any urge to panic sell?) to determine which AA matches his/her personality and financial situation.

From 80:20, OP can turn up (more stocks) or turn down (more bonds) the aggression level as desired.
Just another lazy index investor who recently found out about I-Bonds (https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm).
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ApeAttack
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Re: Trying to establish my asset allocation

Post by ApeAttack »

ryanbohle wrote: Sun Jun 13, 2021 12:05 pm
Taylor Larimore wrote: Sun Jun 13, 2021 11:54 am
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
ryanbohle:

Vanguard's Investor Questionnaire will help answer your question:

Investor Questionnaire.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Choose a balance of stocks and bonds according to your unique circumstances--your investment objective, your time horizon, your level of comfort with risk, and your financial resources."
yeah i tried that, but its not as helpful as you might think, in order to answer the questions you pretty much need to know what percentage of your portfolio you want in stock. and if you know that already, the results of the questionnaire are essentially moot. Its circular reasoning.
When taking the quiz, I found myself thinking of what answers would allow me to justify my current AA.

I think the quiz can be a good starting point for someone who has never thought about AA before, but probably not useful to a typical BH who has thought about their AA for a long time.
Just another lazy index investor who recently found out about I-Bonds (https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm).
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Re: Trying to establish my asset allocation

Post by sixtyforty »

I believe Bogle's philosophy was 70/30 for max risk and 30/70 for min risk. Any allocation between those two brackets would be based on your age and risk tolerance. For risk tolerance, you can ask yourself would you be okay if and when your portfolio, experiences a 50% drop in the market ?
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci
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Re: Trying to establish my asset allocation

Post by BolderBoy »

ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What did you think was going to happen in March 2020 when the market dropped precipitously? Be honest.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
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ryanbohle
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Re: Trying to establish my asset allocation

Post by ryanbohle »

BolderBoy wrote: Sun Jun 13, 2021 8:02 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What did you think was going to happen in March 2020 when the market dropped precipitously? Be honest.
I had mixed emotions, it was hard to watch my balance fall. But, never once did I consider selling. I viewed it as an opportunity to prove to myself that I had the fortitude and discipline to ride it out. Not only did I not sell a cent of stock, I actually liquidated a decent amount of my bond holdings. I "dollar cost averaged" the cash into VTI through the dip, ended up making a killing. Admittedly it was easier to not sell because I was 35 and had decades to recoup my losses, I imagine the more zeros attached to market dip, the harder it is to stomach.

Ryan
mikejuss
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Re: Trying to establish my asset allocation

Post by mikejuss »

ryanbohle wrote: Mon Jun 14, 2021 12:57 pm
BolderBoy wrote: Sun Jun 13, 2021 8:02 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What did you think was going to happen in March 2020 when the market dropped precipitously? Be honest.
I had mixed emotions, it was hard to watch my balance fall. But, never once did I consider selling. I viewed it as an opportunity to prove to myself that I had the fortitude and discipline to ride it out. Not only did I not sell a cent of stock, I actually liquidated a decent amount of my bond holdings. I "dollar cost averaged" the cash into VTI through the dip, ended up making a killing. Admittedly it was easier to not sell because I was 35 and had decades to recoup my losses, I imagine the more zeros attached to market dip, the harder it is to stomach.

Ryan
Very good. If I were you, I'd start at 80/20.
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ryanbohle
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Re: Trying to establish my asset allocation

Post by ryanbohle »

mikejuss wrote: Mon Jun 14, 2021 1:22 pm
ryanbohle wrote: Mon Jun 14, 2021 12:57 pm
BolderBoy wrote: Sun Jun 13, 2021 8:02 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What did you think was going to happen in March 2020 when the market dropped precipitously? Be honest.
I had mixed emotions, it was hard to watch my balance fall. But, never once did I consider selling. I viewed it as an opportunity to prove to myself that I had the fortitude and discipline to ride it out. Not only did I not sell a cent of stock, I actually liquidated a decent amount of my bond holdings. I "dollar cost averaged" the cash into VTI through the dip, ended up making a killing. Admittedly it was easier to not sell because I was 35 and had decades to recoup my losses, I imagine the more zeros attached to market dip, the harder it is to stomach.

Ryan
Very good. If I were you, I'd start at 80/20.
Im only a about 6 or 7% bonds right now. I just am having a hard time putting dollars into bonds when I can buy VTI and VXUS. Maybe when I get a little onlder, 45 or 50 i'll start upping my bond allocation. im think 90/10 for the foreseeable future.
Fallible
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Re: Trying to establish my asset allocation

Post by Fallible »

ryanbohle wrote: Mon Jun 14, 2021 12:57 pm
BolderBoy wrote: Sun Jun 13, 2021 8:02 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What did you think was going to happen in March 2020 when the market dropped precipitously? Be honest.
I had mixed emotions, it was hard to watch my balance fall. But, never once did I consider selling. I viewed it as an opportunity to prove to myself that I had the fortitude and discipline to ride it out. Not only did I not sell a cent of stock, I actually liquidated a decent amount of my bond holdings. I "dollar cost averaged" the cash into VTI through the dip, ended up making a killing. Admittedly it was easier to not sell because I was 35 and had decades to recoup my losses, I imagine the more zeros attached to market dip, the harder it is to stomach.
Ryan
Here's another question for you: While I agree that your age/time horizon was a huge factor in your holding, the crash was relatively short-lived; so if it had gone on for months or a year, can you say you would still have had the fortitude to stay the course?

I think an honest answer is that you think you would stayed the course, but you can't really be certain you wouldn't have made some moves (e.g., lowering equities). I say that because I stayed the course as a new investor during the 1987 Black Monday crash owing largely to time horizon; but I'm still not certain I could have held if it hadn't been relatively brief. Also, the '08 market crash began a relatively quick recovery, but for those who stayed the course, I think there will always be a question how long they could've held if it had begun much later. One lesson to learn from these crashes, btw, is how different market crashes are, meaning that holding through one might not assure holding through the next.
Last edited by Fallible on Tue Jun 15, 2021 10:18 am, edited 1 time in total.
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Re: Trying to establish my asset allocation

Post by BolderBoy »

ryanbohle wrote: Mon Jun 14, 2021 3:15 pm
mikejuss wrote: Mon Jun 14, 2021 1:22 pm
ryanbohle wrote: Mon Jun 14, 2021 12:57 pm Very good. If I were you, I'd start at 80/20.
Im only a about 6 or 7% bonds right now. I just am having a hard time putting dollars into bonds when I can buy VTI and VXUS. Maybe when I get a little onlder, 45 or 50 i'll start upping my bond allocation. im think 90/10 for the foreseeable future.
80/20 sounds good to me, too. You want to have enough bonds (fixed income) that you can correct your AA promptly when the market tanks again. Folks who were 100/0 in March 2020 had to use fresh $$$ to buy more stocks and may not have been able to buy as much as they wanted. I suppose 90/10 might work for you, too, though I'm not personally fond of that AA.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
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Re: Trying to establish my asset allocation

Post by ApeAttack »

ryanbohle wrote: Mon Jun 14, 2021 3:15 pm
mikejuss wrote: Mon Jun 14, 2021 1:22 pm
ryanbohle wrote: Mon Jun 14, 2021 12:57 pm
BolderBoy wrote: Sun Jun 13, 2021 8:02 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What did you think was going to happen in March 2020 when the market dropped precipitously? Be honest.
I had mixed emotions, it was hard to watch my balance fall. But, never once did I consider selling. I viewed it as an opportunity to prove to myself that I had the fortitude and discipline to ride it out. Not only did I not sell a cent of stock, I actually liquidated a decent amount of my bond holdings. I "dollar cost averaged" the cash into VTI through the dip, ended up making a killing. Admittedly it was easier to not sell because I was 35 and had decades to recoup my losses, I imagine the more zeros attached to market dip, the harder it is to stomach.

Ryan
Very good. If I were you, I'd start at 80/20.
Im only a about 6 or 7% bonds right now. I just am having a hard time putting dollars into bonds when I can buy VTI and VXUS. Maybe when I get a little onlder, 45 or 50 i'll start upping my bond allocation. im think 90/10 for the foreseeable future.
My wife and I are 90:10 at age 40, but we also have very stable govt jobs and good pensions to look foward to. If we didn't have that backstop, I probably would favor something like 80:20.
Just another lazy index investor who recently found out about I-Bonds (https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm).
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Re: Trying to establish my asset allocation

Post by Beensabu »

ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What percentage of your current after tax annual income are you currently saving?

What percentage of your current after tax annual income do you anticipate needing yearly once you stop working?

How many years of "stopped working" income do you currently have saved?

How many more years do you anticipate working at your current or higher income?
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."
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Re: Trying to establish my asset allocation

Post by soccerbogle »

I am 35. Currently at 72/28, but a chunk of that is for my next car (next 1-2 years). If you take out the car fund, I am 80/20.

If the market just goes up and up, I don't mind if my allocation drifts up as I have 20+ years until retirement. Basically, I have a "floor" amount of non-stock money that I want access to without having to sell stocks. Once I have that floor, the rest of my money goes into stocks. This creates my asset allocation.
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ryanbohle
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Re: Trying to establish my asset allocation

Post by ryanbohle »

Beensabu wrote: Mon Jun 14, 2021 9:25 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What percentage of your current after tax annual income are you currently saving?
I save 20-22% of my gross income, maxing out a 403b, 457b, 2 backdoor Roths and contributions to a taxable account

What percentage of your current after tax annual income do you anticipate needing yearly once you stop working?
too early to even guess what my expenses will be at that time

How many years of "stopped working" income do you currently have saved?
define saved, I have a 30K emergency fund, my investible assets are about 750K

How many more years do you anticipate working at your current or higher income? 25-30
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ryanbohle
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Re: Trying to establish my asset allocation

Post by ryanbohle »

soccerbogle wrote: Mon Jun 14, 2021 10:36 pm I am 35. Currently at 72/28, but a chunk of that is for my next car (next 1-2 years). If you take out the car fund, I am 80/20.

If the market just goes up and up, I don't mind if my allocation drifts up as I have 20+ years until retirement. Basically, I have a "floor" amount of non-stock money that I want access to without having to sell stocks. Once I have that floor, the rest of my money goes into stocks. This creates my asset allocation.
Interesting way to think about things. Food for thought :)
LeslieSmiley
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Re: Trying to establish my asset allocation

Post by LeslieSmiley »

ryanbohle wrote: Tue Jun 15, 2021 7:29 am
soccerbogle wrote: Mon Jun 14, 2021 10:36 pm I am 35. Currently at 72/28, but a chunk of that is for my next car (next 1-2 years). If you take out the car fund, I am 80/20.

If the market just goes up and up, I don't mind if my allocation drifts up as I have 20+ years until retirement. Basically, I have a "floor" amount of non-stock money that I want access to without having to sell stocks. Once I have that floor, the rest of my money goes into stocks. This creates my asset allocation.
Interesting way to think about things. Food for thought :)
That’s similar to the concept of looking at the dollar amount of the safe assets instead of %, that is, how much money do you want to keep in safe asset to pay for expenses while you ride through a stock market downturn (1 year? 2 years? 5 years? 10 years? - personal choice) and put the rest into the stock market.
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Re: Trying to establish my asset allocation

Post by namajones »

ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
There are rules of thumb based upon age or other factors. And then come you and your emotions. The latter are the most important and are factors that only you can assess--and often the assessment can come only when you've been through the fire. In other words, it's a process. What you think you know about yourself and your risk tolerance now could have nothing to do with what you will discover about yourself on the other side of a protracted bear market. And how well you come through a bear market when you're 45 could have nothing to do with how you weather it when you're 65 and looking at no more contributions to your nest egg.
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Re: Trying to establish my asset allocation

Post by Beensabu »

ryanbohle wrote: Tue Jun 15, 2021 7:28 am
Beensabu wrote: Mon Jun 14, 2021 9:25 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What percentage of your current after tax annual income are you currently saving?
I save 20-22% of my gross income, maxing out a 403b, 457b, 2 backdoor Roths and contributions to a taxable account

What percentage of your current after tax annual income do you anticipate needing yearly once you stop working?
too early to even guess what my expenses will be at that time

How many years of "stopped working" income do you currently have saved?
define saved, I have a 30K emergency fund, my investible assets are about 750K

How many more years do you anticipate working at your current or higher income? 25-30
So answering the second question that you're not even trying to guess yet is what will help you figure out your AA.

You make a lot, and you've saved a lot.

But it seems like you just might spend a lot too.

How much you think you're going to spend later will help you figure out how much you need to maintain your desired lifestyle. Once you know what number you're trying to get to, then you figure out the AA with the best extrapolated risk adjusted return to get you there.

We know that you spend 80% of your gross income, and that includes paying taxes. So just start with that as the yearly future spend and bump it up a bit to a reasonable number if you want to be more conservative in your planning. Multiply that by 30 (or 40 or 50 if you're one of those people) and there's your goal. Then figure out your best potential way to get there.
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Re: Trying to establish my asset allocation

Post by retired@50 »

Beensabu wrote: Tue Jun 15, 2021 7:34 pm
ryanbohle wrote: Tue Jun 15, 2021 7:28 am
Beensabu wrote: Mon Jun 14, 2021 9:25 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What percentage of your current after tax annual income are you currently saving?
I save 20-22% of my gross income, maxing out a 403b, 457b, 2 backdoor Roths and contributions to a taxable account

What percentage of your current after tax annual income do you anticipate needing yearly once you stop working?
too early to even guess what my expenses will be at that time

How many years of "stopped working" income do you currently have saved?
define saved, I have a 30K emergency fund, my investible assets are about 750K

How many more years do you anticipate working at your current or higher income? 25-30
So answering the second question that you're not even trying to guess yet is what will help you figure out your AA.

You make a lot, and you've saved a lot.

But it seems like you just might spend a lot too.

How much you think you're going to spend later will help you figure out how much you need to maintain your desired lifestyle. Once you know what number you're trying to get to, then you figure out the AA with the best extrapolated risk adjusted return to get you there.

We know that you spend 80% of your gross income, and that includes paying taxes. So just start with that as the yearly future spend and bump it up a bit to a reasonable number if you want to be more conservative in your planning. Multiply that by 30 (or 40 or 50 if you're one of those people) and there's your goal. Then figure out your best potential way to get there.
Beensabu raises an important point.

If you think retirement will be driving cars like this: https://www.astonmartin.com/en-us/model ... perleggera
and taking a helicopter to avoid traffic to get to your weekend cottage house that looks like this: https://cdn.onekindesign.com/wp-content ... design.jpg

You might need more money...???

Regards,
This is one person's opinion. Nothing more.
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Re: Trying to establish my asset allocation

Post by arcticpineapplecorp. »

ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
if you didn't sell a single stock holding last year between Feb and March, I'm inclined to believe you have risk tolerance. Many people think there risk tolerance is high when we're in a bull market, but they find out what their tolerance really is in a bear market.

what's the most in percentage terms you'd be alright with losing? Answer that question and you have your answer (taken from losses in 73-74 bear market):

Image

But don't forget to convert that loss into dollars...

Paul Merriman talked about a client he used to work with who after much questioning determined he thought he'd be ok losing 20% of his portfolio. Then when Paul said, "So you have a million dollars to invest, you'd be ok with losing $200,000?" the client said "My God No!! That's far too much!" (see the problem?)
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events.
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Re: Trying to establish my asset allocation

Post by bluexray »

Beensabu wrote: Mon Jun 14, 2021 9:25 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What percentage of your current after tax annual income are you currently saving?

What percentage of your current after tax annual income do you anticipate needing yearly once you stop working?

How many years of "stopped working" income do you currently have saved?

How many more years do you anticipate working at your current or higher income?
I’m about same age as OP and would also appreciate advice. I’m currently about 65/10/25 (stock/bonds/cash).

Save 20% gross.

50% (due to mortgage). 25% once mortgage paid off.

4 years of stop working money saved (includes continuing to pay mortgage). After mortgage paid off (16 more years…early 50s)…8 years of stop working money.

25 more years of work anticipated.

Thanks
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Beensabu
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Re: Trying to establish my asset allocation

Post by Beensabu »

bluexray wrote: Tue Jun 15, 2021 11:56 pm
Beensabu wrote: Mon Jun 14, 2021 9:25 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What percentage of your current after tax annual income are you currently saving?

What percentage of your current after tax annual income do you anticipate needing yearly once you stop working?

How many years of "stopped working" income do you currently have saved?

How many more years do you anticipate working at your current or higher income?
I’m about same age as OP and would also appreciate advice.
Oh gosh.
I’m currently about 65/10/25 (stock/bonds/cash).

Save 20% gross.

50% (due to mortgage). 25% once mortgage paid off.

4 years of stop working money saved (includes continuing to pay mortgage). After mortgage paid off (16 more years…early 50s)…8 years of stop working money.

25 more years of work anticipated.

Thanks
Based on what you've indicated, going off the bold, you'd be good even with gloomy returns forever forward as long as inflation is stable (i.e. 4% stock, 1% bond, 0% cash nominal and 2% inflation). You do need at least 20 more years of that consistent work/savings amount if returns suck that bad for the rest of your investment lifetime though. Also assuming you don't care about leaving anything behind.

Does that help?
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Re: Trying to establish my asset allocation

Post by Thesaints »

ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
It depends on your objective, your capital, and your future contributions. Depending on associated risk, you might end up modifying objective and/or contributions.
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Re: Trying to establish my asset allocation

Post by ryanbohle »

Beensabu wrote: Tue Jun 15, 2021 7:34 pm
ryanbohle wrote: Tue Jun 15, 2021 7:28 am
Beensabu wrote: Mon Jun 14, 2021 9:25 pm
ryanbohle wrote: Sun Jun 13, 2021 11:20 am I am 36, my marginal tax rate is 35%, I am a disciplined investor with patience and risk tolerance. What percentage of my portfolio should be in bonds?
What percentage of your current after tax annual income are you currently saving?
I save 20-22% of my gross income, maxing out a 403b, 457b, 2 backdoor Roths and contributions to a taxable account

What percentage of your current after tax annual income do you anticipate needing yearly once you stop working?
too early to even guess what my expenses will be at that time

How many years of "stopped working" income do you currently have saved?
define saved, I have a 30K emergency fund, my investible assets are about 750K

How many more years do you anticipate working at your current or higher income? 25-30
So answering the second question that you're not even trying to guess yet is what will help you figure out your AA.

You make a lot, and you've saved a lot.

But it seems like you just might spend a lot too.

How much you think you're going to spend later will help you figure out how much you need to maintain your desired lifestyle. Once you know what number you're trying to get to, then you figure out the AA with the best extrapolated risk adjusted return to get you there.

We know that you spend 80% of your gross income, and that includes paying taxes. So just start with that as the yearly future spend and bump it up a bit to a reasonable number if you want to be more conservative in your planning. Multiply that by 30 (or 40 or 50 if you're one of those people) and there's your goal. Then figure out your best potential way to get there.
“Seems like you might spend a lot too”

Maybe, but I also put $20,000 a year into 529 accounts and I put another 1,500 a month into short to moderate term
Savings to cash flow cars, health expenses, house upgrades (saving for a new deck). I save a significant amount of my income outside of my retirement savings. It’s called living within your means.
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