Monday, June 4, 2007

Asset Allocation I

There are many different views and beliefs on the ideal asset allocation. What I’m going to attempt to do is simply state what I believe is the best asset allocation for my unique situation. Your personal allocation may be the same however, it will probably be different based on your own unique investment objectives, time frame and risk tolerance.

I’m going to deal with 2 elements of asset allocation:

1. Allocation amongst the asset classes
2. Allocation amongst countries (currencies)

I’ll begin with asset allocation amongst the classes. The most common rule of thumb is that ideally you should subtract your age from 100 and that is the maximum percent of your portfolio that should be in equities, with the remainder of your portfolio being in some form of fixed income (basically your age is the percent of your portfolio that should be in fixed income). So according to this rule I should be 27% invested in fixed income. For some this may be true, however in my personal situation I would ideally like to have between 95% and 100% of my portfolio invested in equities. I believe that over time equities will continue to outperform bonds. I am comfortable in an all stock portfolio due to my long investment horizon and the fact that I am willing to take the additional risks and portfolio volatility that come along with a 100% equities portfolio. Additionally, I am pursuing a dividend growth strategy to fund my future retirement so a large temporary decrease in my portfolio value will not affect my retirement income as long as the dividends payments are not reduced. I am aware that companies do occasionally reduce or cut their dividends and it is for that reason that I believe that portfolios should contain between 15 and 25 high quality dividend paying securities.

Tomorrow I’ll talk about my beliefs of assets allocation amongst countries.

(Disclaimer: I’m not your boss or your spouse so do you own research and make your opinions on when to buy or sell. Nothing I say should be bastardized or construed in any way to be advice)

15 comments:

Anonymous said...

Good post - funny thing is that I'm doing a whole series on AA for my portfolio this week.

It's always interesting to see what other investors choose for their allocations.

Anonymous said...

cool. I'll be sure to check it out.

Unknown said...

Nice; All my retirement portfolio is 100% equities. With a long way to go equities will outperform every other asset class. I follow book by Prof. Jeremy Siegel - http://www.jeremysiegel.com

MG (moneygardener) said...

I've always thought that 'age' rule was bogus.

You could view your mortgage as your fixed income investment anyways vs. a renter.

Anonymous said...

Cheap and trendy deisgner clothing from youngnchic.com where we sell: A Peace Treaty, Thatcher by Alisse Thatcher, Wedges, Markus Lupfer, Left on Houston, Clutch, ROSEGOLD, Shrugs and Wraps, La Mer Collections, Tart, Twenty8Twelve by S. Miller, £50 - £100, http://www.youngnchic.com/pc-445-255-alice-olivia-distressed-skinny-cargo-pants.aspx, Beny & Hizzin, Janique, Textile Junkie, Loeffler Randall, Lauren Merkin Handbags, Madewell, Bop Bijoux, Messenger, Free People, Melissa Odabash, Joseph, Evening Dresses, Phoebe Couture, Dave & Johnny, GAR-DE, Jil Sander, Jackets, Twenty8Twelve by S. Miller, Ever, Calvin Klein Underwear, Long Sleeve, Tank, Jerome Dreyfuss, Denimocracy, Young Fabulous and Broke, Harrison Morgan, Jewelry, Kite and Butterfly, Pencey, Accessories, Torn by Ronny Kobo for The Mountain, Blouse, Laundry by Shelli Segal, Minnetonka, Hanii Y, Ambre Babzoe, Bop Basics, Hoodies, Archive 1887, Vitamin A Gold/Prints, Sonia Rykiel, Dogeared Jewelry, Alyce Designs Prom, O*T*R Denim, Sundresses, Miguel Ases - all available from our online designer clothing store at 50% off sale! Check out http://arts.harvard.edu - harvard university arts and fashion.
We admire work of Harvard University Arts and Fashion - best school of arts where great designers learn
how to create great looking designer clothing!

Anonymous said...

I'm guessing you will not mind me visiting and thanking you for your article - it really helped

My blog :: Toe Ring History
Also see my site: copper toe rings

Anonymous said...

Howdy! I'm at work browsing your blog from my new iphone 3gs! Just wanted to say I love reading through your blog and look forward to all your posts! Keep up the great work!

Take a look at my webpage pasha corporate housing san diego
Also see my site: luxury corporate housing nyc

Anonymous said...

Hmm it appears like your site ate my first comment (it was extremely long)
so I guess I'll just sum it up what I submitted and say, I'm
thoroughly enjoying your blog. I as well am an
aspiring blog writer but I'm still new to the whole thing. Do you have any suggestions for first-time blog writers? I'd certainly appreciate it.


my weblog - rheem furnace troubleshooting
My webpage :: furnace parts

Anonymous said...

I'm guessing you do not mind me visiting and thanking you for your post - it truly helped

my web blog :: http://wiki.deinegeschichte.de/index.php?title=Benutzer:BernieceV

Anonymous said...

Εxcellеnt poѕt. ӏ used to be checkіng constаntly this
blog and I'm impressed! Extremely useful info specifically the final section :) I care for such info much. I used to be seeking this particular info for a long time. Thanks and good luck.

Feel free to visit my site - vitamin e for acne

Anonymous said...

Everyone loves what you guys are up too. This sort of clever work and reporting!

Keep up the superb works guys I've incorporated you guys to blogroll.

Here is my homepage air conditioning associates tucson az

QUALITY STOCKS UNDER 5 DOLLARS said...

Excellent advise on asset allocation.

Anonymous said...

This page really has all οf the infoгmation anԁ facts I wanted аbout this subject and didn't know who to ask.

Check out my blog :: chatroulette series

Anonymous said...

I сonѕtantly ѕpent mу hаlf
an hour to reаd thiѕ blog's content every day along with a mug of coffee.

Also visit my webpage - side effect on premature ejaculation pills

Anonymous said...

What i do not realize is actually how you are now not actually a lot more neatly-preferred than
you may be now. You're so intelligent. You know thus significantly in the case of this subject, made me in my opinion imagine it from numerous various angles. Its like men and women don't
seem to be fascinated except it is one thing to do with Lady gaga!
Your own stuffs great. Always deal with it up!

Feel free to visit my web page :: http://ledlightingsaves.com