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Since you don't have a plan and definitely don't intend to stick with one, investing wisdom says you will get burned a lot more in future years.
Do post what change you intend to make in your Asset Allocation after this thread. Also, please post back next year how that worked out. We may all learn from your experience.
Yes, I would love to have a lifetime 8% but if the average gain is 23% and I have 8% then it means that I screwed up big. I think I am looking to reduce my EM exposure to about 30%.
Your thinking is completely backwards. Have you ever been caught in a traffic jam on the freeway and switched from one lane to another hoping you'd get there faster....only to find out the lane you just switched to ended up slowing down as soon as you switched into it? That is what it's like when you keep switching from one asset class to another from year to year based on one year's performance. 90% of the time, this type of behavior results in underperformance over long periods of time, which is the ultimate way to get burned.
Basically, if you don't have anything in your portfolio that you hate, you probably don't have a balanced portfolio.
As I and others have said, I think 45% in Emerging Markets stocks is way too high, so your potfolio isn't balanced. But as this year is proving so far, there has been a pullback in the U.S. stocks while the pullback has been smaller in emerging markets.
I'll give you an example of what my retirement portfolio looks like. It went up just over 18% last year, so it trailed the U.S. stock market. But a balanced portfolio WILL trail the market in great years like 2013. That's normal. It's more important to have downside protection in bad years. After all, you need a 100% gain to make up for a 50% loss.
--Parnassus Equity Income 45%--Did Great...beat the S&P by a percentage point or two.
--Templeton Global Bond (Insurance share class) 25%- Only returned just over 2%. But in the top 10% for the global bond category. Relatively speaking, this fund did great, so no complaints.
--Oppenheimer Developing Markets (Inst. Shares) 10%--Only got 8.68%. It was in the top 15% compared to other Developing Markets funds, so no complaints. Also, developing markets are generally cheaper than the U.S. stock market on a valuation basis, so I actually think the long term outlook is better for these funds...But make no mistake...this is a volatile category.
--ING Clarion Real Estate (Inst. Shares)--10% This fund also returned just over 2%. But real estate funds didn't do that well in 2013, and this one did better than the average fund (top 33%). This asset class has solid long term returns, so I'm not worried.
--Perkins Small Cap Value--10% This is really the only fund in my plan I'm not happy with, even though it was up almost 30% in 2013...It did lousy compared to other small cap funds...in the 94th percentile. But this fund typically does not do that well when the market is on fire. It did great in 2008, when the market crashed...so I'm hanging on.
You should set your asset allocation, and if possible, have the computer automatically rebalance your portfolio once a year. I know not all plans have this feature. I'm lucky that mine does. But I think every plan should have this feature. It is a lot less stressful and will most likely get you better performance in the long run.
So basically, 45% of my plan didn't do all that well in 2013. That's normal. That's how you know you have a balanced portfolio.
Reading the OP's messages I get the in my head ... "You can lead a horse to water but can't make it drink."
SO MANY investors fall for the same tired chasing waves thing. The market did 26% last year, so that means it's safe now AMIRITE?!?!?!?!?
WRONG. WRONG WRONG WRONG WRONG WRONG. Do not go past go. Do not collect $200.
The best strategy is what I and pretty much everyone else here is saying. Find a % in a diverse portfolio of domestic, foreign, bonds, and cash maybe if you're getting up there. Then STICK WITH IT FOREVER (or until you age and thus need to get more conservative).
That means rebalancing occassionally. I recommend quarterly or if one of your assets is 2% beyond the norm (depending how much $ you have int he market, could be 0.5%, could be 10%). At most.
So, OP, throw out your convictions and throw out your emotions, pick up a book or two that are NOT "This is how you get rich" BS, and read read read read. Then invest.
Or if you're just lazy, invest in a S&P500 fund and DO NOTHING other than throw in some bonds too. Because it's obvious you don't care about our advice.
I am discussing this over with my wife and we are thinking about putting 80% 401K money into a 2040 low cost Fund and forget about it. 10% will be in Emerging Market fund and 10% would be in EU fund. My experience with tinkering with the portfolio has been a disaster. I don't think it is worth the stress anyway.
I am discussing this over with my wife and we are thinking about putting 80% 401K money into a 2040 low cost Fund and forget about it. 10% will be in Emerging Market fund and 10% would be in EU fund. My experience with tinkering with the portfolio has been a disaster. I don't think it is worth the stress anyway.
I am discussing this over with my wife and we are thinking about putting 80% 401K money into a 2040 low cost Fund and forget about it. 10% will be in Emerging Market fund and 10% would be in EU fund. My experience with tinkering with the portfolio has been a disaster. I don't think it is worth the stress anyway.
To be 100% dead serious honest ...
That is almost EXACTLY what I do. In my Roth I play around a little bit more but I still have never more than ~5 funds, and even then it is too much sometimes.
Only when I have spare money to play with I look at alternate investments.
And let's be honest: you sound like a professional like me. Like other professionals, we're really busy with our own jobs, our wives, children, home maintenance (I just spent a cool 10G's on upgrades and repairs oy oy oy oy!), cars, and trying to stay ahead of our peers at work, training, etc.
So who has time to microscopically inspect every minutae detail of a company or even a few? I sure don't. I admire those who do (wait no I don't, I'd want them to be a better worker if I was their boss).
Anyway, good choice. It's a wise decision.
Word of wisdom: even if foreign funds skyrocket this year, DO NOT JUMP BACK IN! If you have 10, 20, 30 years left (per your horizon fund choice) then you have TIME on our side. Even a mistake can be ironed out with a stable, consistent strategy.
I am discussing this over with my wife and we are thinking about putting 80% 401K money into a 2040 low cost Fund and forget about it. 10% will be in Emerging Market fund and 10% would be in EU fund. My experience with tinkering with the portfolio has been a disaster. I don't think it is worth the stress anyway.
That sounds great. Set that up and forget about it. Only revisit it once you have read enough and have an Asset Allocation plan. If you do feel the need to tinker at all, do so with a very small amount, not your entire retirement savings.
This is the course that 90% of people should take. They would be much, much better off if they did. However, I suggest you get the fund that matches your life expectancy rather than your retirement date.
Quote:
Originally Posted by MattNguyen
I am discussing this over with my wife and we are thinking about putting 80% 401K money into a 2040 low cost Fund and forget about it. 10% will be in Emerging Market fund and 10% would be in EU fund. My experience with tinkering with the portfolio has been a disaster. I don't think it is worth the stress anyway.
The most diversified funds are funds that index the ENTIRE market. You won't beat out the market average over your life time. An example is Vanguard Total US Stock ETF. The stock market is somewhere around 8% emerging industries, so that fund uses 8% small-cap "emerging" stocks. Just an example.
Invest with the broadest possible mutual fund for the most consistent positive growth, and stay the course.
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