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Asset Allocation

April 18th, 2008 at 01:12 am

Spud told me how to fix up the asset allocation in Quicken by manually entering the percentages. I figured them out the best I could from the morningstar datasheets, then looked at the result for our total portfolio:

Bonds: 5.5%
Large Cap: 29.6%
Small cap: 5.2%
International: 36.7%
Other: 3.5%
Cash 16.5%
No Asset Class: 2.7%

The international seemed low to me, so I gave in and typed all the fund names and balances into Morningstar's instant x-ray:
Cash 18.73
U.S. Stocks 30.78
Foreign Stocks 44.07
Bonds 5.73
Other 0.70
Not Classified 0.00

I guess it's not too much different, but it doesn't give me a warm fuzzy feeling, and I wouldn't want to be rebalancing based on the Quicken stats. I didn't realize until now that x-ray didn't give a breakdown between large and small caps.

Part of the cash position is our emergency fund. I'm considering increasing our bond position to 10%, based on what I learned from The Intelligent Asset Allocator. Given the size of our portfolio and the fact that we're still 20+ years away from retirement I don't feel the need to have any more than that in bonds. I'm also thinking about investing maybe 5-10% in a REIT after the banking mess is well and truly sorted out.

3 Responses to “Asset Allocation”

  1. scfr Says:

    The Morningstar X-Ray should give you a "Stock Style Diversification" grid to the right of Asset Allocation pie chart. The vertical axis (is that the correct word?) shows Large, Mid, and Small Caps, and the horizontal axis shows Value, Core, and Growth Stocks.

  2. Broken Arrow Says:

    Yikes... perhaps you have higher tolerance than I have, but I feel like the international is actually... too high!

    Everybody is going international... and well, yes, that's understandable.... However, what exactly is international anyway? Is fund diversification really going to spread out the risk enough for us to simply invest in it and feel safe?

    Take a look at how our entire financial sector is hurting because of subprime.... Which is taking high-risk loans and pooling them into CDOs that are spread so far and wide that SURELY they must be safe. Instead, they did the opposite and ended up poisoning everybody.

    Bottom line: Diversification alone isn't enough to ensure safety. Proper asset allocation is also critical.

    From what I've read, you are savvy investor, so please forgive me if I seem a bit more critical in this instance. And of course, I could also be wrong and preventing you from making lots of money, so, please take it for what it's worth. Big Grin

  3. luxlivingfrugalis Says:

    I like International myself right now and wish we had more in that sector. Going to have to go check our percentages again. We have Hubster's 401-K thru American. Now what fund in the International sector I'd like to be investing in? That's where I've got more research needed.

    And yes, scfr, I do believe axis is the correct term.

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