Help me determine my asset allocation

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ryanbohle
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Help me determine my asset allocation

Post by ryanbohle »

What if you were the same age but had double or triple your current net worth. Would your investment strategy or asset allocation be any different? If yes, what and why?

Same question, but what if you had one half or one third your current net worth?

I currently mulling over my goals and my own asset allocation and risk tolerance. Im looking to spark conversation. Help me think of things I haven’t thought of, consider variables I didn’t know even mattered.
Marseille07
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Re: Help me determine my asset allocation

Post by Marseille07 »

Not really. 95/5 is already aggressive enough for me. If my AA is smaller then I'd increase fixed income, perhaps 90/10.
Doctor Rhythm
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Re: Help me determine my asset allocation

Post by Doctor Rhythm »

A much larger piggy bank probably wouldn’t change thing much - maybe be more a bit more aggressive. However, I would likely be more conservative if the bank were substantially smaller (less ability to take risk).

Keep in mind that this is just me - based on my portfolio and attitude towards risk. I would imagine a lot of people here would do the exact opposite, which is fine. The answers you receive may not be helpful if you don’t know the posters’ financial status.
Last edited by Doctor Rhythm on Wed Jun 16, 2021 7:11 pm, edited 1 time in total.
Topic Author
ryanbohle
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Re: Help me determine my asset allocation

Post by ryanbohle »

Doctor Rhythm wrote: Wed Jun 16, 2021 7:07 pm A much larger piggy bank probably wouldn’t change thing much - maybe be more a bit more aggressive. However, I would likely be more conservative if the bank were substantially smaller (less ability to take risk).
Makes sense. If you have more more willing to take risk. What would you say to someone that said, I don’t have much so I have to be aggressive so it will grow. Or someone saying I have plenty, so I don’t feel the need to be as aggressive?
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RickBoglehead
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Re: Help me determine my asset allocation

Post by RickBoglehead »

ryanbohle wrote: Wed Jun 16, 2021 6:37 pm What if you were the same age but had double or triple your current net worth. Would your investment strategy or asset allocation be any different? If yes, what and why?

Same question, but what if you had one half or one third your current net worth?

I currently mulling over my goals and my own asset allocation and risk tolerance. Im looking to spark conversation. Help me think of things I haven’t thought of, consider variables I didn’t know even mattered.
Net worth is irrelevant. What percentage of the assets you need to retire is the measure that matters.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
Doctor Rhythm
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Re: Help me determine my asset allocation

Post by Doctor Rhythm »

ryanbohle wrote: Wed Jun 16, 2021 7:10 pm
Doctor Rhythm wrote: Wed Jun 16, 2021 7:07 pm A much larger piggy bank probably wouldn’t change thing much - maybe be more a bit more aggressive. However, I would likely be more conservative if the bank were substantially smaller (less ability to take risk).
Makes sense. If you have more more willing to take risk. What would you say to someone that said, I don’t have much so I have to be aggressive so it will grow. Or someone saying I have plenty, so I don’t feel the need to be as aggressive?
I added to my post a bit, saying that you need to know the baseline situation to understand the motivations. Many people de-risk when they have enough (“stop playing after you’ve won the game”). Other see financial security and independence as an opportunity to take more risk.

The reason it matters for your hypothetical is that a doubling or tripling of their portfolio will put a lot of people into the “won the game” camp. At that point they have both no need to take risk but also greater ability to do so. So it all comes down to their willingness / personality as the dominant variable.

A huge loss to one’s portfolio that you describe may take away their financial security. If they are now “back in the game” as a result of the loss, they will need to determine how much risk is needed to grow back their savings as well as how much risk they are capable of taking. And again, personality will affect the decision but less so than in the winning scenario.
Last edited by Doctor Rhythm on Wed Jun 16, 2021 8:19 pm, edited 2 times in total.
Robot Monster
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Re: Help me determine my asset allocation

Post by Robot Monster »

ryanbohle wrote: Wed Jun 16, 2021 7:10 pm ...I have plenty, so I don’t feel the need to be as aggressive?
I'm one of those people who would say that. I am a very conservative investor, and my tendency is to only take as much risk as I need to meet my financial goals. I was actually chastised a bit for this point of view by someone who, in my position, would be much more aggressive, for the sole reason of wanting more.
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
Fallible
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Re: Help me determine my asset allocation

Post by Fallible »

Doctor Rhythm wrote: Wed Jun 16, 2021 7:15 pm
ryanbohle wrote: Wed Jun 16, 2021 7:10 pm
Doctor Rhythm wrote: Wed Jun 16, 2021 7:07 pm A much larger piggy bank probably wouldn’t change thing much - maybe be more a bit more aggressive. However, I would likely be more conservative if the bank were substantially smaller (less ability to take risk).
Makes sense. If you have more more willing to take risk. What would you say to someone that said, I don’t have much so I have to be aggressive so it will grow. Or someone saying I have plenty, so I don’t feel the need to be as aggressive?
I added to my post a bit, saying that you need to know the baseline situation to understand the motivations. Many people de-risk when they have enough (“stop playing after you’ve won the game”). Other see financial security and independence as an opportunity to take more risk.
And I think these examples show that what matters is an individual’s unique needs and interests, how each determines what is important and responds to it.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
averagedude
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Re: Help me determine my asset allocation

Post by averagedude »

If my net worth tripled today, I would buy more bonds to cover several more years of expenses, but my asset allocation would be more equity heavy than yesterday.
alex_686
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Re: Help me determine my asset allocation

Post by alex_686 »

A increase in wealth means a increased ability to take risks. Willingness is a different matter. For some it increases l, for other it decrease. No right answer. For myself it increases it, but that is me.

A decrease in wealth means lower ability. Willingness is, once again, a different matter. Technically it is still independent. However there has been a fair amount of behavior research here. For most it means a decrease in willingness. Protecting what you currently have dominants the mind.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Thesaints
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Re: Help me determine my asset allocation

Post by Thesaints »

Strategy and allocation is a lot more dependent on wealth and income than on one's age. As such, even if you were not the same age, your allocation might likely change.
Johnathon Livingston
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Re: Help me determine my asset allocation

Post by Johnathon Livingston »

ryanbohle wrote: Wed Jun 16, 2021 6:37 pm What if you were the same age but had double or triple your current net worth. Would your investment strategy or asset allocation be any different? If yes, what and why?

Same question, but what if you had one half or one third your current net worth?

I currently mulling over my goals and my own asset allocation and risk tolerance. Im looking to spark conversation. Help me think of things I haven’t thought of, consider variables I didn’t know even mattered.
2-3x current net worth: I’d have “enough” so I’d be conservative overall since I wouldn’t need to take risk but then I’d break off a portion and have fun with it In the market because I enjoy investing and think conservative portfolios are boring. Edit: and “conservative” might be 50/50 stocks/bonds.

1/2 current net worth: I wouldn’t have “enough” so I would be aggressive, like all stock. You have to take risk to get returns.
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