I apologize if this is better in a different thread, but was thinking could be some retirement allocation discussion for those of us with employer retirement accounts where individual stocks aren’t an option.

In my case I’m 30 years from retirement and had planned to just stick with a vanguard 2050 or 2060 target date fund. I had a fee-based financial advisor meeting about another issue and as an aside he recommended at this point being 30 years out that he thinks I should have 0% bonds and a higher exposure to international markets than the target date fund, so recommended some other funds offered in my plan as opposed to the target date fund. He has nothing to gain from that, so made me wonder if was worth considering.

Curious what most folks here philosophy is towards 30+ year away retirement investing and what sort of allocations you use.

I'm in a similar boat and allocate 100% to equities. I overweight Nasdaq because I believe in tech in the long run and dont mind the volatility. Basically if you're diversifying with a few broad index ETFs you should be good in the long run.

How much international do you do?

Looks like vanguard is around 37% for 2060 target date fund with 10% bonds and rest sp500.

you are young. have some fun with it and develop your ideas on things. The saying is its hard to beat the market, but the converse is true...its really hard to do a lot worse than the market. you have to work at it.

For the most part how and what we invest in is personal entertainment.

Not sure the product you are looking at as Im canadian...but if you have any intentions of mobilizing capital and taking on debt to fund those activities then tieing up money could be fairly constricting.

I had a pension from my company it paid 4%...which is pretty good guaranteed money.. but I opted out and have made 25% a year since. snp is running 16 since then so.

most portfolio alocations are low beta...but at you age you want the beta. self manage run it up if your smart and if thats beyond your abilities then park it in a retirement fund. if you are bad with money its definately a good idea to park it every month

According to this article the Vanguard 2050 fund does have international exposure to both stocks and bonds.

Vanguard 2050 Fund

Quote:

Code:

Fund.                                                             Percentage

Vanguard Total Stock Market Index Fund.          53.9%

Vanguard Total International Stock Index Fund.   36.1%

Vanguard Total Bond Market II Index Fund.        7.1%

Vanguard Total International Bond Index Fund.    2.9%

I'd be shocked if the 2060 Fund had an asset allocation that was a lot different.

I'm 28 with no dependents and have 100% of my portfolio in equities. I wouldn't be surprised if it's optimal to keep 10-15% in long term treasuries but I like the gamble. Short term bonds (which are included in target date funds) seem stupid for young people, especially now that money market rates are high.

I dunno what to tell you about international. Bogle and Buffet say to go 100% US, but lots of other smart people say to go 60/40 US/intl.

US is still the engine of the world. More importantly, it will lead the tech revolution which is the source of most future growth. Nothing wrong with 100% US equities. US equities have a large amount of foreign income so they're already international. 60/40 US/international is really 40/60 US/International, which is not what you want.

If you're a pussy then take 20% international which gives about 40% exposure to international.

Yeah its very similar. They were suggesting something more like this with 0 bonds and total is 50% international.

Vanguard Institutional Index 15%
Vanguard Value Index 10%
Vanguard Mid-Cap Index 10%
Vanguard Small-Cap Index 15%
EuroPacific Growth 35%
Vanguard Emerging Markets 15%

To me seems like it would be better to shift things so the percent in the sp500 fund at the top to be higher

What's to say this isn't already baked into current market prices? Looks like some stats indicate US equities are already much more expensive than international equities

Historically it has been cyclical so I would go for both US and international. Vanguard's official recommendation is 20-40% international (their target date funds are 40% international). But I don't think going 100% US is a huge mistake either.

The Vanguard 2050 mix seems pretty reasonable. Any tweaking of that is going to be pretty marginal. I'd just stay with the Vanguard and not worry about it. Your risk of screwing up far outweighs any marginal benefit of tweaking it, imo.

It's not really worth thinking about it this hard. I'm all equities because I'm a gambler, f it. But 10-20% bonds is fine too. Hell if you think you're not likely to handle downswings well 40% bonds is fine. You'll have less on average on retirement but your 10th percentile and worse outcomes will be higher with the 40% bonds.

As far as foreign, I'm at like 35-40% on my various tax advantage retirement accounts, which is probably a bit higher than I would do otherwise because foreign returns have lagged US returns in the past decade. Seems like foreign stocks are due. I also throw in some REITs in my tax advantaged accounts. For my US stocks I do half total Vanguard stock market index and half vanguard's small-cap value fund. Then my taxable accounts is all US (no foreign or REIT) due to US equities having almost all qualified dividends. And if I were to add some bonds I'd put them in my tax advantaged accounts, as you'd have to treat the interest as regular income.

But you'd be fine sticking with the 2060 target fund or the Vanguard LifeStrategy 80/20 fund. It really doesn't matter that much, the important thing is consistent saving.

there's an entertaining site where they go through hundreds or maybe even thousands of long-term model portfolios of different commentators. it's actually very well done and interesting. i can't remember site right now and i realize portfolios aren't one size fits all.

but anyway,

a couple of the portfolios suggested are 70/30 S&P 500/long bond and 100% S&P 500... at first blush, alot of people laugh but i think when most people think more, they think "hey, why not?"

a few things i would underline with historical simulations is that the future won't be like the past for most assets. but the one asset in particular where this is true is long bonds. they've been in a 35 year mega-bull market that mathematically can't go much further. and of course, this great bond market was highly supportive of the equity markets.

not sure what you are permitted, but i wouldn't be shy about doing alot of US equities but using either leveraged ETF or tech/bio tech ETF/funds. i.e. no reason you have to do the S&P 500. just don't go completely overboard unless you are committed to monitoring and make adjustments.

I'm all for tax optimization, so bonds and reits in the roth ira make a lot of sense.

Most people can do f' all with 3% a year built slowly over time, barely edging out inflation. Encounter a bond scare/panic (2008) and people do strange things, like sell their entire bond portfolio and throw everything into a money market account to wait out the waves.

However, roth dollars are worth more (compared to taxable/traditional ira/401k) if you're willing to take on some risk. I'm at 60% index funds, 40% individual stocks. Small biotech with a binary event coming up in a few months? Sign me up. Bounce-back play for an out-of-favor sector? Yes please (its tougher than it sounds to time it right.)

Amount saved almost always trumps return in retirement accounts in the accumulation phase, and then you'll eventually reach a point when you're not contributing because returns will dictate your future.

fun one is 80% small cap value/20% long government bonds

I think I’m probably just going to stick with the 2060 vanguard fund for my main employer account, seems hard to confidently say anything else is clearly more optimal enough to make change. We get a supplemental 401k also that I plan to contribute to as well, so may try something little more aggressive with that.

international investing has become perilous, so equities are rightfully discounted. With growing nationalism I dont expect it to change...international businesses are going to have pressure for quite a while. now as to wether its "priced in" well...if you belive its temporary then its priced in, if you think it will be 20 years before conditions improve then get the hell out of dodge. I dont see the international landscape improving in the next 10 years. and it could get ugly. stick to usa

And if you don't know if it's priced in or not put 0-40% of your equities in foreign and call it a day. It's really not that important.

Charlie Munger was on record yesterday as saying that China has a lot of opportunities for the future, more than the US at current prices. He meant individual spots of course but perhaps that also translates into a general bullishness on the Chinese economy.

Just throwing it out for the guys considering international equities.

Thanks for the perspective, curious what annual rate of return do you all estimate for retirement planning when considering a 25+ year timeline?

Let’s assume it was 100% equities with something like 20-35% international. I hear numbers all the way from 5% to 10% which obviously means it’s impossible to predict. But curious what sort of baseline estimate you all use in your planning.

long term a whole world market 100% equities portfolio has returned about 7% annually in inflation-adjusted dollars. In any given 25 year period you could easily see 4% real return (or perhaps a bit worse) or a 10% real return (probably not much better). That's where bonds are so useful, particularly long treasuries. You want bonds to even out the ups and downs of the market, and they do that because many bonds are anti-correlated to the equities markets. Long treasuries are the most anti-correlated to the stock market, more than medium and short term. In terms of correlations with the broad US stock market it probably goes

long treasuries
medium treasuries
gold (???, could be higher or lower, dunno)
short term gov't bonds
cash (neutral)
high quality corporate debt
junk bonds
REITS
Foreign equities
SPY

So while long treasuries are the most risky government bond to hold that is actually a feature rather than a bug when held with equities. When equities tank the long government bond tends to spike, and it will spike more dramatically than shorter term government bonds, exactly because they are more sensitive to interest rate changes. And it avoids the problem with total bond market funds -- something like a third of BND is corporate debt, which will crash right along with equities, just not as hard. Look at the performance in 2008 and 2009 of BND vs TLT and tell me which you'd rather have as 20% of your portfolio. Then look at a corporate investment grade ETF over the same period and wonder why the hell you'd want to include that in your portfolio as a hedge against equities crashing.

So the question really is, does it make sense to use the median or average case to plan for your retirement? I would submit that it does not. You should plan for your retirement based off the tenth or twentieth percentile outcomes. And you can do that a couple of ways -- either go 100% equities and just plan on gamble, saving as much as you can and working as long as you have to. That would tend to minimize the average number of years you have to work, but there would be outcomes that would force you to work much longer than you might like. That's what I'm doing (and writing this I'm beginning to reconsider). Or you can buy 20-40% bonds and reduce both the median rate of return and increase the 10th percentile rate of return, which is probably the more important metric. For your planning you should be much more concerned with your 10th percentile rate of return than your median. But for each 10% of bonds you add to your portfolio you're probably sacrificing half a percent return and increasing the 10th percentile rate by a half percent.

Here's a great resource for gaming all this out:

https://www.portfoliovisualizer.com/

Did your fee-only advisor consider some factors you did not mention here such as your job security and satisfaction, salary growth, insurance, social security, any nonqualified investments, tolerance for short term losses, tolerance for tracking error or 'frame of reference' bias and future needs? Did they mention how they would approach adjusting your allocation in the future or how difficult they thought it might be for you to rebalance in a prolonged bear market?

If yes, I think the 100% equity recommendation is defensible but based on the current allocation of a 2050 target date fund, it's pretty small potatoes. Assuming no other investment accounts, I would be inclined to stick with your current fund choice and re-evaluate in a few years.

Twoplustwo being a poker forum at heart, I expect this crowd to skew on the aggressive side. Bonds can outperform equities for long periods, and international can beat the US for long periods. I like diversity, and I sleep better owning both.

(The 'lost decade' https://bucks.blogs.nytimes.com/2011...for-investors/)

I’m 50% VTSAX and 50% in Vanguard 2045 fund. Is this bad?
I max my IRA contribution and contribute to an individual account which is 100% VTI.

That's totally fine.

Hard to go wrong with passive indexing