The stock market crashed last week. I continued with overbalancing although I slowed down the pace from my original plan because it’s hard to keep up with the speed the market was dropping. Both the U.S. and international broad market indexes crossed the 40%-off mark. My target stocks/bonds ratio is 70/30, up from 65/35 when the stock market entered the bear territory in July, and from 60/40 a year ago. 70/30 is still not too aggressive for my age. I’m planning to retire in about 20 years. The big 3 mutual fund companies all have at least 70% in stocks in their target date fund for people who plan to retire between 2025 and 2030.
|Vanguard Target Retirement 2025 Fund||78%||22%|
|Fidelity Freedom 2025 Fund||70%||30%|
|T. Rowe Price Retirement 2025 Fund||79%||21%|
|Vanguard Target Retirement 2030 Fund||85%||15%|
|Fidelity Freedom 2030 Fund||80%||20%|
|T. Rowe Price Retirement 2030 Fund||84%||16%|
How does it feel when I buy into something and then see the purchase amount completely disappear the very next day? Not good. Warren Buffett said I’m supposed to prefer sinking prices, but it still takes a lot of nerve to see what the sinking prices do to my portfolio.
I’m not recommending that you make the same overbalancing moves. I’m coming from a conservative allocation, going to an allocation below what experts at big 3 mutual fund companies recommend for my age. One can argue I should’ve stayed at 70/30 or higher all along from a year ago. If the market stays low for a long time, I’m OK with staying 70/30 with it. I’m also using very conservative accounting when I calculate my stocks/bonds ratio. For example I discount the value of my 401k and IRA (mostly bonds and bond funds) by 1/3 before comparing to stock funds in my taxable account. If I count the full value of my 401k and IRA, I have less than 60% in stocks right now.
Say No To Management Fees
If an advisor is charging you a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice: Find Advice-Only.