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Our asset allocation

March 12th, 2007 at 07:07 am

I plugged in all our mutual fund and stock info into Morningstar's x-ray program to get an idea of what kind of asset allocation we currently have. In all I had to make 26 entries -- no wonder I'm having trouble getting this straight in my head! There are actually only 10 unique funds and 4 unique stocks because many funds are in both the taxable and the retirement accounts, but it's still a lot to get my head around.

Cash 12%
US stocks 41%
Foreign stocks 42%
Bonds 5%

The large amount in foreign stocks seems a little worrisome at first glance.

For "stock style diversification":
type value core growth
large..32....27....24.....(83%)
med.....4.....4.....5.....(13%)
small...1.....1.....2.....( 4%)

In other words, mostly large cap, some medium cap, a little bit of small cap, equally divided between strategy -- seems reasonable, although I don't really know enough to judge.

For "stock sector" the breakdown was
information 23%
service 39%
manufacturing 37%

Here's where I really have no idea whatsoever of which sectors are good to be in.

The "stock type" area wasn't useful as 49% was unclassified.

Unfortunately the book I started reading on asset allocation was due back at the library. They wouldn't just check it back out to me because I'd already renewed it once, and insisted on sending it back to its "home" library before routing it back to me again even though nobody else had placed a hold on it. So I'm still waiting to get it back.

We have a meeting with my full service broker later today to do an annual review. It will be interesting to see what he has to say.

Questions I want to ask:
* Why am I in each fund?
* Would you recommend moving any money and why?
* If there is a recession coming, should we move to a strategy that focuses on dividends rather than growth, and how would we accomplish this?
* Where should I put the $10k in cash in the IRA? Should I move it all at once or dollar-cost average it?
* I want to sell $4,000 of something taxable and put it in the ROTH -- which would you recommend?
* Is my son's 529 plan (a gift from my father) enough to cover a public university? How much more do we need to add as a lump sum to cover a private university?

2 Responses to “Our asset allocation”

  1. Fern Says:

    Yeah, i would comment that it seems like a lot of $$ in foreign. Especially as the last few bumps, or corrections, have seemed to show that foreign makrets don't actually operate independently of the US stock market, which is what you'd like to see so as to mute any fluctuations in US market. It's made me begin to question whether the higher fees in many international funds is really worth it, as the recent Chinese dip simply made the rest of the world's markets also dip.

    As far as your stock breakdown, you seem to be overwieghted in large caps with not enough in small caps. Large caps are generally considered more conservative and stable than small caps, which are riskier, but you are still young and might want to consider upping your small cap allocation to match your mid cap.

    Just my thoughts.

  2. jIM_Ohio Says:

    42% foreign is not that alarming... I have read much recently on people being 50% foregin. I am 25% myself.

    The large cap overweighting is more alarming to me.

    Here's a comment or two:

    why are you using a broker?
    sell something which has a loss on it (this will save you on taxes).
    Do not sell your biggest winner (this will be biggest tax sale)

    If you sell 2k of a winner and 2k of a loser, the losses can offset the gains from a tax standpoint.

    For sectors, here's an idea.

    Xray VFINX and compare yourself to that. Post the comparison results.
    The XRay the total market index fund. Post those comparison results.

    This will give you a risk profile relative to the market (are you overweight in something relative to the market as a whole?).

    I would want more tech exposure (10-20%?)
    I always like consumer staples and financials as 10-20% exposure. Healthcare, Energy, Service would be others I'd look at.

    Large Cap tends to lead way into a Bull, and tech tends to lead way top high bulls. Financials and Consumer durables are "defensive" issues when market goes down.

    Have you done some of the online quizzes which suggest allocation?

    here's one at Vanguard https://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnair...
    here's one at T Rowe Price
    http://www.troweprice.com/common/indexHtml3/0,0,htmlid=904,0...

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