Personal Investments • New member - first questions!

What category would investment real estate fall in? Do we exclude it from a 60/40 portfolio?

Real Estate Investment Trusts (REITs) behave like stocks and have a correlation of 0.76 on a scale from -1 (negative correlation) to +1 (positive correlation), where 0 is uncorrelated. Subsequently RE is classified as a stock and is included in the X=stock % of an X/Y asset allocation.

Individual properties are more complicated, but generally present higher risk similar to holding individual stocks.

Same for Annuities, should I include those in the bond category? (I may eventually move this to include in the Bogle 60/40 portfolio funds)

You can calculate the Net Present Value (NPV) of an annuity and assume that gets added to your bond portion, but I prefer to simply reduce the expenses that the portfolio needs cover. If I have $100K/yr expenses and a retirement annuity of $50K/yr and SocSec of $30K/yr, then the portfolio only needs to produce $20K/yr... I would set the AA for the portfolio based on 90% portfolio survival for a $20K/yr initial draw (if that's possible; drawing more than 4% on a 30-year retirement span is unlikely to succeed).

Where would ROTH IRA funds go if you don't plan to touch them for over 10 years to maximize growth? (When I had my ROTH in the AUM account, they had it split between 60/40 stocks and bonds, I didn't think that was a good strategy for the ROTH. I always thought I would benefit from the ROTH in S&P or all US stock fund but that's not how they did it)

They might have put bonds in your Roth if they did not have access to a tax-deferred account like a Trad 401K/457b/403c/IRA (preferred placement for bonds). If you have access to a tax-deferred account and can put your entire bond allocation in those types of accounts, then yes your Roth should hold only stocks.

Any recommendation on which low cost funds to use for US Stocks, Bonds, International stocks?

If you want ETFs then VTI, BND, and VXUS which can be traded and held at any brokerage.

If you want Mutual Funds, then use the three funds listed in the Wiki topic on the 3-Fund Portfolio for your specific brokerage (e.g., at Vanguard that would be VTSAX, VBTLX, and VTIAX, but at Schwab that would be SWTSX, SWAGX, and SWISX).

Statistics: Posted by bonesly — Sat Mar 30, 2024 11:01 pm — Replies 5 — Views 516

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