Stock vs Bond allocation in portfolio?

Depends on how much $ you have and when you want to retire, doesn’t it?

quote:

---

At your age 100% equities 0 bonds, international maybe 10% of holdings

---

This. Maybe do more international if you’re feeling frisky

quote:

---

At your age 100% equities 0 bonds, international maybe 10% of holdings.

---

Nothing in bonds? Really?

quote:

---

Nothing in bonds? Really?

---

Bond yields are so low right now it’s pointless.

120 minus age is what I use

quote:

---

Nothing in bonds? Really?

---

I mean it’s obviously your preference, but bond yields are quite low.


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.

Furthermore, if you’re looking for some sort of income/yields, you’re going to get as good if not better yields in many dividend stocks, which also tend to have greater capital appreciation.

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.

quote:

---

I like to add SCHF and SCHE to get a bit more international exposure. I also use SCHA and SCHM to get small and mid cap exposure.

---

I’m actually curious about other’s opinions and justifications for their international exposure, and am curious if I’m way off base on my aversion (to actually investing in any international funds in general and my justifications for that aversion, which are as follows:

1. Whether a fund is broad international, developed markets only, and/or emerging market only, going back decades, the gains are much lower (e.g., generally between 5% and 7%) and much more volatile (17%+ SD ) than US stocks (10%+ gains; ~15% SD). So the risk-adjusted returns of international funds invariably are much worse.

2. As you mentioned above, there is a fair amount of global exposure in US stocks (particularly large caps), so the correlation between international stocks and US stocks has increased significantly over the recent years. So not only do international stocks continue to have a negative alpha (S&P 500 as the benchmark), their beta is now either the same and/or higher, whereas it was lower in the more distant past.

3. The correlation of international stocks and US stocks, appears to increase when there are drawdowns (e.g., 0.93 during 2007 to 2009 crash; 0.86 in the 10+ year bull market that has followed, despite more globalization). So when we would want another asset to be less correlated, or at the very least maintain the correlation, the exact opposite occurs and the correlation increases instead.

Overall, these really call into question, IMO, the Modern Portfolio Theory justification for additional and separate international exposure (broadly at least).

quote:

---

I’m actually curious about other’s opinions and justifications for their international exposure

---

I've always done it out of habit. I've never made any money with them. I'm down to 10%. Next year, probably drop to 5% or 0%. I still keep some small cap, but I never make any money there, compared to S&P 500 index or equivalents.

You're probably right to stay away from explicit international exposure and just live with what is baked in the S&P.

Age in bonds minus 10 is a good rule of thumb. 80-20 is reasonable. Yes bond yields are low, but the 100% stock crowd is suffering from recency bias IMO. When you are going through a true market meltdown, those government bonds look like the only thing worth having.