Ask the Readers: Portfolio Allocation and Flatulation

shadowHi there, Mrs. 1500 today to recap last week’s answers, then I throw it over to Mr. 1500, who will ask you about portfolio allocation.

Last week, we asked you how you keep costs down during the holidays. As you may recall, we struggle with gift-giving at Christmastime. We don’t struggle with it, but we struggle with our families who give gifts. Then we look like cheapskates for not participating. Or we give small amounts of gifts to our children, and then they come home from school wondering why everyone else got an iPod, a tablet, a laptop and a Wii for Christmas.

Thias from It Pays Dividends has found a system called Want, Need, Wear, Read, where you give one gift a child wants, needs, can wear and can read. I love this idea, and am strongly suggesting it to the grandparents. We’ll see how it goes.

Reader Lynne has done away with store-bought gifts, and this year is making vanilla to give. (I like vanilla…) I enjoy homemade gifts. I like to see what sort of creative thing someone has come up with. My friend Rose made a bunch of baked goods one year instead of gift exchange, and that was my favorite gift that year.

Reader Dawn saves money and the environment by using fabric as gift wrap. She bought some festive fabric after Christmas a few years ago, and the whole family wraps all the gifts in the fabric. They’re on their 7th year of the same fabric wrapping.

Brain from Debt Discipline had a beautiful line: The holidays don’t need to be grand, they just need to be special.

Reader Jacq uses credit card rewards to purchase gifts with no cash. Reader CPP also uses credit card points for gifts.

Freedom40‘s family did a secret santa with a high limit – $250. Each person bought for one other person. I’ve seen lots of secret santa gift ideas, but never one with such a high limit. He got something he really wanted (no more Budweiser holiday steins!) and still managed to spend less on gifts.

Kate from Goodnight Debt has come up with a smart plan for receiving gifts. Whenever anyone asks what she wants, she gives them a specific item – she asked for makeup remover for her birthday. “People also tend to take me more seriously if I ask for a specific thing instead of “just don’t buy me anything.” For some reason, many people think “don’t buy me anything” is a trap.”

Norm from Ridinkulous also makes homemade gifts, like snack mixes and apple butter. This year looks like soaps are the choice. (I like soap…)

I’m turning the page over to Mr. 1500 now, so he can talk about portfolio allocation (and other things.)

Portfolio Allocation

There are some very difficult questions that we must ask each day including:

  • Why are we here?
  • Who farted?
  • To a group of four or more: What do you all want on your pizza?
  • Why do I continue to read this blog?

Perhaps one of the most difficult questions that I routinely get asked is this:

What should my investment portfolio look like?

On the surface, the answer isn’t difficult; low cost index funds are the smart choice for most people. Case closed!

Not so fast.

There are loads of different types of funds. Do you want to just own companies in the United States? Just small caps? Dividend growth? Health care? Technology? Foreign markets? Emerging markets? And I haven’t even mentioned bonds or REITs.

I started thinking about allocation last week when I mentioned the direction that I’m steering my portfolio in. I had stated that I was uncomfortable that so much of my portfolio was US based:

84% is just too much to have in the USA egg basket.

More than one reader stated that this was actually OK and that I should reconsider.

To resolve questions like this, I tend to find the smartest people who will give me their opinion and listen carefully to what they have to say. Warren Buffett mentions 90% S&P 500 and 10% bonds. Jack Bogle, the founder of Vanguard has also stated that investors should be biased in favor to the United States.

Is portfolio allocation this black and white?  Just like pizza, there isn’t one correct answer. There are probably some very wrong answers though; you’ll always have that crazy Uncle Larry that likes fish on pizza (nasty and an abomination) and buys nothing but gold because ‘the US is about to collapse into Martial Law.’ Keep digging your backyard bunker Uncle.

For the sake of simplicity and sanity, let’s eliminate the crazy outliers like Uncle Larry. I’m not sorry if I offended the fish-pizza or gold-bug crowd.

But now, what is the question? This is a broad and complex topic, so feel free to answer any or all of the following:

  • How is your portfolio allocated? Bonus: Tell me how it will evolve as you age.
  • Why on earth do you like fish on your pizza? This is unnatural.
  • Who farted? If it was you, just admit it. We all know it wasn’t the dog.
  • The big dogs like Warren Buffett and Jack Bogle shun foreign investments in favor of the US. Do you think they suffer from recency bias (20th century was incredible for US investors) or do you think the US will continue to dominate?

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82 Responses to Ask the Readers: Portfolio Allocation and Flatulation

  1. It’s a questions I just asked myself. What would anyone want fish on their pizza. Oh damn that’s questions #2.

    As far portfolio allocation, I have a mix of both U.S. and international stock, something I just covered in my net worth update and will be reviewing to make sure I have the right balance. I’m not sure what the answer is.

    If we blamed some of the farts I heard in our household on our 28 pound dog I think he might go airborne.

    To truly be diversified shouldn’t you have some international stocks?
    Brian @DebtDiscipline recently posted…Net Worth Update: October 2015My Profile

    • 1500 says:

      Wasn’t there a movie about airborne dogs? Air Bud? I don’t think he was propelled by gas, although I never saw it.

      I’m glad that you agree with my position on fish and pizza.

  2. I do agree that investments are best diversified internationally. There’s definitely a lot of good stuff going on in the U.S., but it strikes me as short-sighted (and perhaps a tiny bit xenophobic?) to dismiss what’s going on economically in the rest of the world. So, as a total non-expert and newbie investor, I will say that I agree with you: 84% in U.S. stocks is too much. I’m currently using Betterment until I can learn more about investing and perhaps try out some other options. I think my Betterment portfolio (with all due respect to Jack Bogle) is maybe closer to 50% U.S. and 50% international.
    Sarah Noelle @ The Yachtless recently posted…Spend it or Lose itMy Profile

    • 1500 says:

      You know, Betterment is a pretty great thing. Perhaps you will decide to leave all of your money there? I don’t have an account yet, but I’ll be opening one before the decade is out. The automatic rebalancing is neat and so is the tax loss harvesting.

      • Rich says:

        I just started moving some short-term savings (1-5 years) from CapitalOne 360 over to Betterment since I can keep them in separate goals & get better returns (even with the fees) than just sitting in an online savings account. I’m setting them to 50/50 stocks/bonds, which is slightly more aggressive than they recommended.

        Sadly, I won’t be using their Tax Loss Harvesting because I’m keeping lots of other funds (retirement, other) at Vanguard, and I would end up with lots of wash sales. That’s a headache I don’t want to have to deal with, and Betterment recommends against it.

        I think I’d have to move it all over to Betterment in order to really use their Tax Loss Harvesting… and then I don’t think it would be worth the fees compared to Vanguard.

        To answer your main question, almost all of our retirement savings are invested in VTSAX. I still have some AAPL, my 403b is over at Fidelity, and my wife still has an account at a past employer that we plan to roll over into her Vanguard rollover IRA and invest in VTSAX. We also have some rental properties, and my wife will have a pension (she’s in education). So I’m happy with our level of diversification.

  3. Jason says:

    I currently have 95% of my portfolio weighted toward stocks with about 78% in the U.S. and 17% in international. I think that should change a bit to more like 70 to 25. I don’t mind having that many stocks in my portfolio. However, for retired clients I LOVE Susan Kaplan’s advice (she runs a financial planning firm around Boston, has a money radio program, and has been rated one of the best advisers in the country) of 1/3, 1/3, 1/3. A third in growth, 1/3 in balanced funds, and 1/3 in bonds to take the edge off. That way you get growth, income, and you smooth out volatility. I think it is ideal for older people retired.
    Jason recently posted…Guest Post: Survey Information from College StudentsMy Profile

    • 1500 says:

      As you said, that Kaplan advice sounds great for those who are retired, but way too conservative for young folks. I like Jim Collins idea about not having anything in bonds until you’re done with work.

      If I had loads of money, I might be tempted to keep it all in stocks. The litmus test for me would be if I could still be retired if my portfolio sustained a 50% drop. I’m nowhere near that, so I have to be more creative…

      • Sippscoffee says:

        I’m a huge fan of Jim Collins but I just can’t do it. We were 100% stocks from our late 20s to our mid 40s but now sleep better in our early 50s with a 70/30 allocation, all indexed and including 20% international exposure. By the way, I heard a recent Vanguard podcast that said major U.S. corporations hedge away in the currency markets the exchange rate risks they face with their international earnings. Hmmm. That would mean that it isn’t true that buying an internationally-diversified U.S. stock index provides you real international diversification. You gotta buy the international index itself.

        • 1500 says:

          You have to be able to sleep at night!

          Having some in bonds means you can rebalance every year and there are advantages to that too.

  4. The majority of my portfolio is a mix of Vanguard’s U.S. & international stock market index funds. I think the split might be 60/40. Why?

    Honestly, when I opened up my Vanguard account, I looked to see what a target date fund allocated for my age and just replicated it myself. I’ve been meaning to add some bonds in there for a while. Maybe 10%?

    I didn’t know what I was doing then. And I’m admittedly still a novice investor. But the returns have been decent! 🙂
    Kate @ Cashville Skyline recently posted…October Monthly Budget ReviewMy Profile

  5. Tre says:

    I have a larger portion in US stocks, but I’m not betting only on the US.
    Tre recently posted…What A Week! 2015-31My Profile

  6. JC says:

    I’m about 18% bonds, 78% stocks (of which about 6% is international), the rest is REITs and cash. I’ve been retired for 8 years and am just turning 65 this month (the 11th). I’m waiting to take SS, but I’m not sure yet how long I’ll wait. Signed up for Medicare already. Sitting on a $1.5+M portfolio. Traveling the continent in our RV. Live is good. 8^)

  7. If you go US large cap, you are already pretty well diversified internationally as those companies tend to have half or more of revenue from overseas. A lot depends on how sensitive you want to be to currency risk.
    Financial Velociraptor recently posted…Update Third Point Reinsurance Ltd. (TPRE)My Profile

  8. Mostly VTSAX so mostly US stock. Well, that’s not exactly true. I also have a home with equity in there. Should I count that? I like my VTSAX and I don’t know how I’ll change as I get older. Maybe it’s because retirement is 10 years away? As it gets closer, I may move to a more conservative approach but I want to pay off the house so I could always live off of a Walmart greeter job if need be.
    Chris @ Flipping A Dollar recently posted…Vintage Dungeons and Dragons BooksMy Profile

    • 1500 says:

      Walmart greeter!!! That sounds like pure hell to me. Well, maybe not. It would be fun to screw around: sing to customers; break dance recite poetry! Hold up, I’m headed over to Walmart to apply…

  9. Eric says:

    Investing in US stocks doesn’t mean you’re only investing in the US. For example, Exxon is a US company but is all over the world. On the flip side, Toyota is an international company but has a ton of sales (and a few factories) in the US. Most of the energy stocks in the S&P 500 are international. Then you’ve got companies like Coca Cola, Intel, Monsanto, and a whole boatload of others with large international exposure.

    • 1500 says:

      Agreed. I think the way we see allocations are bit silly. It shouldn’t be by where the company is headquartered, but where they make their money.

  10. Eric says:

    I like how betterment breaks down my “Very Aggressive” portfolio. As a young investor I am comfortable with the risk and long term gains that come with it. I have just over 50% between Developed Markets (non-US) and Emerging Markets and the rest in the US.

    I also dont think it would be a bad idea to do 100% VTI (US total stock market) as that gives you big companies w/ international presence and small/Mid companies to help drive growth.

    • 1500 says:

      I’m intrigued by Betterment’s portfolio. Even the super aggressive setting isn’t aggressive enough for me though; it still has 10% bods, right?

      With that said, Betterment is a pretty great way to do and I’ll be opening an account before the decade is up.

      • Eric says:

        No, you can have 100% equities (and I do). Their slider is very over-simplified, but I think it works for the vast majority of investors and insulates me from my own desire to tinker.

  11. Hannah says:

    Excluding Real Estate for the time being:

    7% Bonds
    8% International
    60% US index funds (Heavy on S&P, Large Caps and Total Stock Market somewhat lighter on NASDAQ)
    20% US Mutual Funds (Sector Specific)
    5% “Other” (I’ve got money in a preferred stock and a REIT)

    Target Allocation
    10% Bonds
    25% International
    60% Index Funds (Heaviest on Total Stock Market)
    5% Other (REITS, Mutual Funds or stocks)

    At 40 we will probably increase bonds and decrease index funds.
    By 50 we will probably have 40/18/42 Bonds/Intl/Domestic mix.

    Portfolio management is important, but I’ve been lazy with it. I even write about it, and I’m lazy.

    • 1500 says:

      People who say they are lazy are often the hardest workers. Just like the people who deny the fart are indeed, the unleasher of the flatus.

  12. I really need to figure out my asset allocation. I have been buying low cost Vanguard funds and trying to just invest as much as possible.
    SavvyFinancialLatina recently posted…Shopping For InsuranceMy Profile

  13. Jeff says:

    I will give you some home-made vanilla. I’ll try and come to the meet up next week and bring some then.

    As for who farted, Im blaming my kid.
    Jeff recently posted…It’s Time We All Embrace the Spirit of DIYMy Profile

    • 1500 says:

      Jeff, blaming the baby? You’ve stooped to a new low!

      Can’t wait to try the vanilla! What did I do to deserve this?

  14. Mattattack says:

    According to personal capital, I am 69% Domestic stock, 25% Int’l Stock, and the rest is other (alts and cash etc). I’m not sure how it will evolve as I age, but over the next year or so, I am slowly reallocating my portfolio to lower cost index funds. It will probably be a similar allocation.

    I have a taxable account I have invested strictly in a bond fund that I use for short-intermediate needs/emergencies. I moved a large chunk of it out recently because I don’t know what’s gonna happened if the Fed finally (and hopefully) increases rates. I assume the price is gonna go down but the my monthly dividends are gonna up.

    I’ve tried pizza with anchovies once. It wasn’t too bad, but just way too saltly. Makes me think of Futurama.

    Who ever smelt’ it dealt it.

    I am not knowledgeable enough to answer the last question, but if I had to take a wild uneducated guess, I’d say China will continue to grow, US will still be number 1, Brazil will be alright, Europe will be up and down, Africa will be exciting, Iran will be a good opportunity for a select few if the nuclear deal holds up, Bitcoin will fizzle like myspace, and there will be another bubble – probably in something like pharma or health care.

    • 1500 says:

      Bitcoin will fizzle? So, you’re saying I wasn’t smart to put $100,000 yesterday? Just kidding, I’m not that crazy!

      You say you’re reallocating to lower cost index funds. Are you mostly in stocks now or higher cost funds?

      • Mattattack says:

        My 401K is through Fidelity and my work plan offers about 12 different stock funds. I was invested in like 9 of them. A lot of them were not necessarily redundant, but similar enough and the fees while not crazy, were much higher than the index funds (like 0.5% to 0.78% range vs the 0.05% to 0.12% for the index funds). So I changed my elections to fidelity’s version of the vanguard total market, a Fidelity S&P mid cap index, a Vanguard Intn’l index, and that S&P500 ETF I mentioned a few comments ago.

        So my future elections are now set, its now just a matter of consolidating the existing monies in the account, but I’m in no big rush.

        • 1500 says:

          Did you have the Contrafund? I used to have like $250,000 in that one. That one actually has done well against the indices (use Morningstar to chart it because it takes into account dividend reinvestment [thanks DGI for that tip]).

          I think you have the right idea though. Over the long term, it’s really really difficult to beat the indices.

  15. Amber tree says:

    What is wrong with anchovy on a pizza?

    As far as asset allocation goes, i have 2 breakdowns: One on a high level – investment strategy, and then one per investment strategy.

    For my index strategy, i do 70 pct iwda ( world developped markets), 20 pct cesl ( europe small cap) and 10 pct emerging. I gives me approx 45 pct us, 45 pct eu and australia, 10 pct emerging. Maybe a little low on us, lets call this my european bias. Then again, in my tracker there is royal dutch shell, unilever. Are these european companies?
    Amber tree recently posted…Amber index and Savings rate report November 2015My Profile

    • 1500 says:

      Anchovies! Arrrrgh!!!!

      Sounds like your allocation is healthy. The more I think about it, the more I think it doesn’t matter a whole lot though. Everything is so connected.

  16. Joseph Beckenbach says:

    In reverse order:

    I’m sticking with the US given I expect my household to retire here. I can easily get as much international exposure as I want with carefully-chosen stock investments, thanks to multinationals based here (eg Coca-Cola) and ADRs (American Depository Receipts, which are just wrapped foreign stock shares).

    Things smell okay right now, what you talkin’ ’bout? 🙂

    No fish on my pizza — but that’s easy, I’m vegetarian.

    Right now, my portfolio is about half municipal bonds held directly, a quarter in stock mutual funds in various retirement accounts, and two-fifths in stock mutual funds and balanced mutual funds in taxable accounts. The astute will say “that’s more than 100%”, which is right, about a sixth is borrowed against our otherwise paid-off house for a business I’m working on. As my household ages, the business will repay its loan and throw off cash to invest; the mutual funds will shift into dividend-paying stocks held directly as I learn to value more market opportunities; and the municipal bonds will slowly accumulate, though less quickly than I expect the stock holdings will grow and spew dividends. (I started with the bonds specifically to counter my wife’s phobias about investment. I figure that choice has cost me at least a decade of progress, and halving our retirement budget overall, but we’ll still live just fine. I’d rather have a somewhat-early retirement with her being relaxed, than an early retirement alone. What can I say? Personal finance is personal.)

    • 1500 says:

      “Things smell okay right now, what you talkin’ ’bout?”

      Someone is in denial!

      That’s too bad that your wife is scared of some investments. Even index funds? One thing I always say is that it’s true the the stock market has risk, but being too conservative also has risk, more if you ask me!

      To each, his own. Like you said, being able to sleep at night counts for a lot too.

  17. Nate says:

    Currently our stock market allocation is close to (haven’t rebalanced yet this year. All with Vanguard and TIAA/CREF, of course):
    50% S&P 500
    10% Emerging
    10% International
    10% Healthcare
    10% Tech
    10% cash
    My wife and I have investment properties, and in my mind their are equivalent to big bonds (bonus that they are leveraged!). A stable investment that’s usually not correlated to the stock market that puts off rental income and indexed to inflation, so that’s why we probably won’t own bonds.
    Over the past year, almost all new money that’s going into our 401k, Roths, 403b, etc. , is going into money market accounts, waiting for a market correction.

    • 1500 says:

      Looks like you have a healthy and diverse allocation. I like that you own real estate too. I’d love to myself, but market has been too hot in my neck of the woods. People pay $250,000 for properties that rent for $1400/month. No thanks to those numbers!

      • Nate says:

        Yeah, that’s not going to make financial sense. We were able to pick up a 4/1.5 single fam this summer at auction for 151k (appraised at 182k). We will fix it up a little and it appears we can get about $1700-1800 a month in rent because it’s in a real good school district. It took us 14 months of work to find this one deal. It’s a part-time job, but if we can score a couple more, we should have our rents pay for the properties and our annual cost of living. Fingers crossed!

  18. Danny says:

    Thank you so much for this post 1500’s! This is the first time I really looked into our allocation breakdown, and was semi-shocked. There is a reason why it looks this way, however. Our allocation breakdown can be shown in two ways:

    53% – Stocks (US & Int’l), 42% – Municipal Bonds, 5% – Other (Remaining Bonds, REIT, etc.)

    I know…talk about fish on pizza. Haha! Anyway, we are currently halfway through a 4 year plan to payoff the mortgage early. A key part of this plan, for us, is investing into municipal bonds instead of making extra monthly mortgage payments, hence why this allocation is greatly skewed. However, what I found even more interesting is when it comes to retirement accounts only, the allocation breakdown looks much different:
    92% – Stocks (US & Int’l), 4% – REIT, 4% – Bonds (US & Int’l)

    I suspect that once we pay off the mortgage our overall investment allocation will strongly reflect the second model.

    • 1500 says:

      Thanks Danny!

      My question for you is why you’re paying off the house early. Interest rates are so low, that I very much like the idea of not paying early and using the money for other stuff. I’m 2.5 years in a 15 year mortgage (3.25%) and I recently ran the numbers. I’ve paid about $10,000 in mortgage interest, but the money I’ve invested instead of paying cash for the house has appreciated over $40,000.

      With that said, it’s admirable that you’re eliminating all debt!

      • Danny says:

        Thanks so much Mr. 1500 for the comment and question! I have read your post on not paying off your mortgage early, and thought it was excellent. It really got me thinking about the other side of the debate.

        I remember Mrs. 1500 asking this question before, and she was very kind to use my words in this follow-up post as to my overall strategy. One of the reasons we’re going with this strategy is because, unfortunately, our mortgage is not as awesome as yours. It’s currently a 30 year, 5.375% which I got back in 2010 (which is pretty terrible in hindsight). I have looked into refinancing the past couple of years. Even today, we could probably get a 15 year mortgage at 3.625%, which is still pretty great! However, when I did the math of investing over a 10-15 year period (roughly our FI time table) with and without a mortgage, not having a mortgage beat it out in my situation as our savings rate increases and our expenses will drastically decrease overtime. Additionally, given that we’re 2 years (or less) from getting rid of it completely, from a psychological standpoint we just don’t see the benefit of holding onto it since we’re so close to the finish line.

  19. I only have 1 US stock and its the company i work for! My main question is:

    Why in the world have I not diversified in stocks? Im just so darn obsessed with real estate right now. I need to take baby steps into stocks maybe by opening up a vanguard account and starting there.

    Have you ever written an article for newbs on starting with basics like opening a vanguard account?
    Alexander @ Cash Flow Diaries recently posted…October 2015 Net Worth UpdateMy Profile

    • 1500 says:

      You are diversified in real estate though and that is a very worthy strategy too. When your properties really start to churn out the cash, open a solo 401k with Vanguard and stow all of that money away tax free!

  20. Danny says:

    I’ve been advised to allocate to international with ranges anywhere from 10% up to 50% so this question always tends to resurface. I was originally on the Jim Collins super easy allocation of 100% VTSAX. No math involved, just keep buying it when you get some spare change. Hard to argue with it, especially when Bogle backs you up. Jim also has a great read on bonds and how they aren’t necessary while you still make an income.

    With that said, I’m 100% invested in stocks and I’m currently at 15-16% International with a target of 20% through new purchases.

    I tend to side with those that say big companies give you international exposure, but it leaves something to be desired in terms of hard numbers for allocation. If you believe emerging markets can help your performance or want some international real estate exposure, it is hard to rely on that blanket statement. It would be nice to see some sort of proxy for when you are invested in a U.S. based company with a global reach.

    I had a similar issue with VTSAX. Financial advisors will lump the entire fund into U.S. Large Cap when it has much more in the fund. It needs to be dissected to get a better sense of your allocation.

    • 1500 says:

      Maybe we’re all looking at allocation the wrong way? Instead of caring where a company is headquartered, I think we should care about where they make their money.

  21. Tawcan says:

    We made tuna pizza with pineapples here and there, it tastes great. 🙂

    No I didn’t fart in the elevator, it was the other guy next to me.

    Our ideal portfolio allocation would be something like this:
    Financial: 20%
    REITs: 10%
    Energy: 15%
    Utilities: 5%
    Consumer staples: 20%
    Consumer discretionary: 20%
    Materials: 5%
    Industrial: 5%
    Health Care: 5%
    IT & Telecom: 5%

    All stocks until we’re 50 years old then slowly allocating more in bond.
    Tawcan recently posted…Dividend income – October 2015 updateMy Profile

    • 1500 says:

      Tuna and pineapples! Uggggh!!!!

      I like tuna. I like pineapples. I like pizza. I also like beer and Cool Whip, but I do not approve of any of these things together. Well, the Cool Whip and pineapples may be OK; none of that other stuff though.

  22. Why are we here? When you figure that out – please, please, please write an article about it! 🙂

    Who farted? Always blame the dog. Always. That will take the heat off you.

    To a group of four or more: What do you all want on your pizza? Decide for them: sausage, pepperoni, mushrooms, and black olives. Have them pick off what they don’t want!

    Why do I continue to read this blog? I enjoy the wit, your writing style, and the dinosaur pictures. Keep the articles coming.

    What should my investment portfolio look like?
    I am moving from position from 75% beanie babies to a more balanced approach of 25% gold, 25% Star Wars collector figurines, and 25% cash under the mattress. On a more serious note, we are staying the course: one-half in rental real estate and the other in a mix of 75/20 index (about 20% foreign) and bond funds with 5% cash.
    Bryan @ Just One More Year recently posted…The Secret to Happiness: Drink WineMy Profile

    • 1500 says:

      Yeah, your Beanie Baby allocation was way too high! I actually knew people who had that plan for retirement. We all know how that worked out.

      And I know it was you, not the dog.

  23. I love the blended post here you guys. The “Want, Need, Wear, Read” is brilliant! I’ll have to keep that in mind when shopping for our niece and nephew.

    As far as portfolio allocation, we’ll be investing heavily in the U.S. for the same reason a lot of others will probably mention, being that a lot of large companies are international anyways. Jim Collins had mentioned this in his Stock Series and I agree. So far, we’re thinking 90-100% stocks & 0-10% bonds, but this is only because we’re in our accumulation phase. As we get older, I think I might agree with Collins and do maybe more of a 50/50 or 80/20 stock/bond allocation. I’m sure it will change, but there’s definitely something to be said for simplicity.
    Seeking Saturdays recently posted…No Paychecks for the Rest of the YearMy Profile

  24. Norm says:

    My ideals are:
    Stocks: 75% (of that US is 75%, International is 25%)
    Bonds: 10% (of that US is 80%, International is 20%)
    Lending Club: 10%
    REITs: 5%

    The stocks and bonds are in the most broadly diversified mutual funds available. In retirement, it might be a bit more in bonds but probably not much.
    Norm recently posted…How To, And How Not To, Rent An Apartment From MeMy Profile

  25. Freedom 40 says:

    Currently my target allocation looks something like this.
    Bonds = 8% (3% Munis)
    Large Cap US = 30%
    Mid Cap US = 10%
    Small Cap US = 10%
    International Developed= 17%
    International Emerging = 15%
    REITs = 7%
    Speculative = 3%

    The munis are in a taxed brokerage account and while the growth potential there is low – I just love the idea of tax free money coming in every month!

    I think looking at the market beyond just the US is important, which is why 32% of my holdings are focused overseas. This is a mix of developed (Europe, Japan) countries and developing (China, India, Brazil, etc.)

    The US will continue to be a juggernaut, but I think a big part of economic growth will come down to simple demographics. Europe and the US have aging populaces and low population growth. Developing economies have huge populations who are just now earning money and of course want to buy everything from kitchenware to cars. This force will continue and I think be a huge unstoppable driver of economic growth for the next 50 years. Focusing solely on the US will mean less volatility, but less chance at exponential rewards.

    Finally – emerging market stocks are getting hammered right now, in large part due to China’s slow down. But over the long run, the growth will continue. Can you say buying opportunity!
    Freedom 40 recently posted…Analyzing our spending in order to save moreMy Profile

    • 1500 says:

      Hey Freedom 40! You make some really great comments. I especially like what you have to say about emerging markets. Thanks!

  26. Lou says:

    I’m gradually working towards (rebalancing with new money) an allocation of 60% stocks, 25 bonds, 15 cash (for the time being until the stash grows, because that’s 1 year’s expenses as an emergency ‘oops, got laid off’ pot in our single salaried household).

    The stocks will be 60% US large cap, 10 Mid, 15 small, and 25 international; about 1/3 of that is Emerging markets.

    I’ve roughly based this off the Callan Periodic Table of Investment Returns chart, because it seems to give me good opportunities of growth through rebalancing as the various sectors rise and fall. (Not sure if I can link to other sites here, so google it if interests.)

    • 1500 says:

      Whoah, I had never heard of the investment periodic table. I just had a look and wow, that thing is all over the place. If there is anything I get out of it, it’s that there are no patterns. I’ve amazing how many times emerging markets are either in first or last place.

      • Lou says:

        Fascinating, isn’t it? You’re right, the emerging markets are especially interesting. It’s good to be prepared ahead of time that they’re likely to either be ‘wheee, 30% up in the year!!’ or ‘what the HECK happened to my EM tracker and where’s half the money gone?!!’, and accept that it’s an opportunity either way for effective rebalancing.

  27. Wade says:


    Total US index, Total International (20% of stocks), Total US Bond.

    One deviation. In taxable I use Int-Term Tax-Exempt bond index instead of taxable bonds.

    Keep. It. Simple.

    Keep. It. Low. Cost.

  28. Alaska49 says:

    Blame it on the baby, that’s what the ladies do!

    I will have a pension so I view that like a bond fund or an annuity for life. Otherwise I am 100% equities. I buy mainly U.S. Stocks or from countries with favorible tax treaties. (I got burnt a few times on foreign dividend tax withholdings). As mentioned above, most large U.S. companies already have substantial overseas holdings: Mcd, yum, ibm, mmm, Apple, jci, etc. So bam, international exposure.

  29. Thanks for including me from last week’s question. As for portfolio allocation, I shoot for approximately the following: 65% US Stocks, 20% International, 10% REIT, 5% Bonds. I’m still young so I want to keep a small amount in bonds.

    As I get older, I’ll slowly move the bond portion up and spread out the US into a little more international. I never want bonds to make up a big portion of my portfolio because I know I will need the growth of equities over the long term. I’d rather keep a little bigger cash buffer fund.
    Thias @It Pays Dividends recently posted…Dividend Payout #16 – Extreme SavingsMy Profile

    • 1500 says:

      Yeah, agreed about bonds. They don’t sit well with me. Another reader a while back suggested that paying off my home is a better return than bonds. Since I don’t want to do that either, I’m staying away from bonds too.

  30. Leigh says:

    My portfolio is allocated ~30% to fixed income (I’m pretty risk-averse) and then 35% to international stocks and 35% to US stocks. I have a mix of CDs, bond index funds in my 401(k), and Series I Savings Bonds for the fixed income portion. I use a combination of Vanguard’s total stock market index fund and Fidelity’s for the US stocks and Vanguard’s total international stock market index fund and Fidelity’s Spartan Global ex-U.S. index fund for the international stocks. It’s really easy to track and keep in place!

    I had been increasing my fixed income allocation each year by a formula, but I’ve decided to leave it at 30% at least until I’m 35, so another 8 years.

    This ignores the cash I have on hand as an emergency fund and for short-term and medium-term goals.
    Leigh recently posted…Why Frugal Blogs Are Terrible For MeMy Profile

  31. 1500 says:

    Oh, you are too young for fixed income! Go nuts! Don’t you like to live dangerously!? Ha.

    Never mind. I’m projecting my own dangerous strategies…

    • Leigh says:

      Haha no I don’t really! I’ve even been paying down my 2.5% mortgage aggressively. My boyfriend has much less in fixed income, so it probably balances out to a reasonable amount between the two of us…

      I figure though that with having $600k saved in my late twenties, I simply don’t need to take as much risk. I mean, my net worth now at 27 is about what yours was in January 2013. And that’s ignoring my boyfriend’s net worth…
      Leigh recently posted…Why Frugal Blogs Are Terrible For MeMy Profile

      • 1500 says:

        “I figure though that with having $600k saved in my late twenties, I simply don’t need to take as much risk.”

        Of course you don’t need to, but I think the opposite of your situation. Because you have so much saved so early, you can afford to take huge risks. I mean, don’t buy penny stocks or even individual stocks at all, but certainly VTI or VGT if you’re feeling saucy.

        If memory serves, you have stated that you don’t wish to retire early. I’d only get conservative close to retirement.

        To each his own. You are clearly kicking big-time ass in life, so I’m not being critical.

        As you were!

        • Leigh says:

          That’s fair and also a valid way to look at it! That’s how my dad looks at it. He thinks I should keep all employer stock and the worst thing that happens since I have time on my side is that I have to work longer and the upside could be awesome.

          I probably will end up retiring early or at least taking lots of extended periods off work like I believe JLCollins did. But I don’t want to plan on not working for most of my life either!

          Oh gosh I just did the math on how much of my net worth is home equity (53%) vs cash (15%) vs bonds (7%) vs stock index funds (25%) and you’re probably right… I’ve only been looking at the “investments” category which represents my retirement and taxable accounts and not at the rest of it. Especially with the amount of home equity (I paid down my mortgage aggressively and its value has gone up by about 2x my 20% down payment…) and cash I have for short-term and medium-term goals, I probably don’t need much in the way of bonds in my retirement accounts.

          Something to think about as I start to think about my investment planning for 2016 – thank you!
          Leigh recently posted…Why Frugal Blogs Are Terrible For MeMy Profile

  32. I do agree that investments are best diversified internationally. There’s definitely a lot of good stuff going on in the U.S., but it strikes me as short-sighted (and perhaps a tiny bit xenophobic?) to dismiss what’s going on economically in the rest of the world. So, as a total non-expert and newbie investor, I will say that I agree with you: 84% in U.S. stocks is too much. I’m currently using Betterment until I can learn more about investing and perhaps try out some other options. I think my Betterment portfolio (with all due respect to Jack Bogle) is maybe closer to 50% U.S. and 50% international. 😀

    • 1500 says:

      Agreed! Every dog has it’s day and the dog is constantly changing. The US will be in the doghouse again some day while others take the spotlight.

      I think Betterment is a great option too. While I don’t have an account there yet, I look forward to opening one in the next year or two.

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