Our Current Asset Allocation

May 12 2008

Posted by NCN as Investing, Retirement |

Inspired by a recent article by Nickel, over at Five Cent Nickel, about his current asset allocation, I thought it might be a good time to take a look at our current asset allocation.

Between us, my wife and I have five retirement accounts - two Roth IRAs, my 403(b), a SEP-IRA, and my wife’s pension. The calculations in this article are based on four of those accounts - and exclude my wife’s pension.

Our current asset allocation:

100% stocks, broken into the following -

Total US	25.98%
Mid-Cap	6.51%
S&P 500	25.75%
REIT	11.91%
Small-Cap	11.12%
International	18.74%

Our allocation will shift over the coming months, as we continue to make contributions to my wife’s Roth IRA and my 403(b). Current plans are for future contributions to the 403(b) to be invested in an S&P 500 Index Fund and future contributions to my wife’s Roth IRA to be invested in a Total US Stock Market mutual fund.

Like my buddy, FMF, over at Free Money Finance, I prefer investing in Index Funds. I’m still working to refine my investing strategy, and it feels good to have a snap-shot of my current situation. Just like Nickel suggested, I have decided to treat all of my investments as ‘one big pot of money’ - and I’ll make adjustments to our allocation using my SEP-IRA contributions throughout 2008.

Edit: After reading a comment left by Nickel, I wanted to make a note about the aggressive nature of our investments. Instead of bonds or a bond fund, we have my wife’s pension, which grows at a guaranteed rate. If we did not have her pension, we would change our asset allocation.

Share and Enjoy:

4 Responses

nickel

May 12th, 2008 at 8:11 pm
1

You’re one aggressive dude.

In my view, being 100% invested in stocks is essentially performance chasing. A small amount of bond exposure can reduce your volatility dramatically with minimal impact on total return.

But to each their own. That’s why they call it *personal* finance.
nickel

May 12th, 2008 at 9:57 pm
2

Ah, I didn’t think of the pension. Good point. That should help settle things down.
tracy ho

May 13th, 2008 at 2:24 am
3

Good allocation , hope more gain from each of your porfolio ,

Tracy Ho
wisdomgettingloaded
Kirk

May 14th, 2008 at 5:38 pm
4

I admire you putting your allocation out there for all to see. It takes guts as you will get many naysayers or critics. So my post is in the spirit of discussion and not judgement.

I would look at the S&P 500 and Total stock market funds to see which offers a lower cost because they have a very high correlation. In other words, not much diversification benefit there so look to cut costs. Granted, the total stock includes more mid and small, but that is only 6% or so of the total fund.

You may want to explore adding a tilt to value for large and small cap. While it has a higher standard deviation than broad based funds, it does offer the long term investor extra return over the long haul.

I don’t see any commodities in the portfolio. While many argue commodities are in a bubble, and they might be, commodities are a great diversifier to a portfolio due to their negative correlation with US stocks and bonds.

I love to see the REITs in your portfolio. So many investors neglect them as an asset class, but they are great diversifiers and offer nice returns.

For international, do you have emerging and small cap in the 18% allocation. These asset classes have lower correlations with US based investments, especially small cap, so they are a nice addition to a portfolio.

Overall, you are doing a great job. You will be well rewarded when it comes time to enjoy the wealth.