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re: Stock vs Bond allocation in portfolio?
Posted on 2/9/20 at 7:19 pm to buckeye_vol
Posted on 2/9/20 at 7:19 pm to buckeye_vol
quote:
In addition, given your age the “safety” that bonds may provide, at the expense of gains, doesn’t (personally) seem worth it looking at a time horizon of decades.
I guess my thinking was that if I had 20% in bonds during the next market crash I could use those funds to scoop up cheap stocks. I appreciate everyone’s input
2
Posted on 2/9/20 at 7:38 pm to ykevin25
You may want to take a look at the mix in the Thrift Savings Plan (401(k) style plan for federal employees) Lifecycle funds. You can look at them at tsp.gov.
They will have a fund for the year in which you will need your money, say Lifecycle 2050, and “experts” have allocated contributions among gov bonds, corporate bonds, index stock fund, small caps, and international.
I look to see how they would mix it for someone my age, then compare to my own mix. If my mix is way out of wack with theirs, then maybe adjustment is in order.
They will have a fund for the year in which you will need your money, say Lifecycle 2050, and “experts” have allocated contributions among gov bonds, corporate bonds, index stock fund, small caps, and international.
I look to see how they would mix it for someone my age, then compare to my own mix. If my mix is way out of wack with theirs, then maybe adjustment is in order.
Posted on 2/9/20 at 8:09 pm to ykevin25
quote:And until then, you’re losing out on the gains of stocks for the portion that is allocated to bonds. So the longer it takes to get to a crash, the greater the gains you’ll miss out on before the crash, and there is a good chance that you’ll end up missing out on more gains even after a crash.
I guess my thinking was that if I had 20% in bonds during the next market crash I could use those funds to scoop up cheap stocks.
You’re strategy is basically an attempt to time the market, which usually doesn’t work out that well without some luck. And in your case, it doesn’t seem like your strategy has a timeline to it in the first place.
There is nothing wrong with an 80/20 risk preference with the understanding that the long-term gains are likely to be greater the closer it gets to 100/0 based on the long-term TREND and a horizon for that TREND. But trying to adjust the risk allocation based on potential cyclical attributes, if not outright random error, provides its own issues of risk, and potentially greater and more unknowable risks at that.
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