When I look at my investable portfolio, my asset allocation is:Folks,
It turns out there is no such consistent view on what is an aggressive asset allocation. And, what does aggressive actually mean?
1) Person A is 100% stock with zero emergency fund. But, all retirement expense is funded by pension and social security. So, is person A aggressive in asset allocation? Person A is not taking any risk or impact to his lifestyle even if the portfolio goes to zero.
2) Person B is 100% stock with zero emergency fund. The retirement expense is to be 100% funded by the portfolio. But, the portfolio is 100X aka 100 years of expense. Is person B having an aggressive asset allocation? Not exactly. The person's portfolio is so big that even if the stock market drops 50% and more, it won't impact the lifestyle.
3) Person C is 100% stock with zero emergency fund. But, the person's real estate portfolio is 2X the stock portfolio and his retirement is funded by rental income. Is person C having an aggressive asset allocation?
It seems to me that without the total context/financial picture of the person and how the expenses are funded, it is very hard to say every X% stock portfolio is aggressive or not.
What do you mean by an aggressive portfolio?
KlangFool
72% equities/22% fixed income /6% cash
This AA is generally what I think about when I invest, and I think it's fairly aggressive for a 65-year-old. When I say aggressive, I consider that my bond/fixed income allocation is higher than the rule-of-thumb for bonds which recommends having the same percentage of bonds as your age. (I don't necessarily consider this a hard-and-fast rule, though.)
However, at age 65, I rely on my investable portfolio for roughly 50% of my annual living expenses. My longest projected lifespan is 85, so that's what I use for planning purposes. (I won't get into my health here, but this is based on a serious discussion with my doctor.)
When I calculate the net present value of my pension and Social Security (estimated for 20 years), and add those two amounts into my portfolio spreadsheet into the fixed income total, this is the AA:
38% equities/59% fixed income /3% cash.
I think it's an interesting data point that doesn't feel aggressive at all.
I do have legacy concerns, and this approach seems to work, since my pension and Social Security will stop at the time of my death. My heirs are in their late 20s/early 30s.
Statistics: Posted by LilyFleur — Sat Jan 11, 2025 5:21 pm — Replies 38 — Views 1940