I know some people take the same view as you've asserted here. I prefer to look at income from other sources than the investment portfolio as reducing the amount that the portfolio needs to provide during retirement. Subsequently, you might meet your goals (total income from all sources >= total expenses including taxes) while investing less aggressively. A more volatile portfolio has the potential for higher upside, but also the potential for lower downside outcomes. Why take that extra risk when you don't need to because you have a pension?I consider my state pension to be part of my conservative/stable bucket of my overall portfolio. I feel this allows me to invest a little more aggressively with the remainder.
This isn't a lot of information to go on regarding opportunities for improvement. On the plus side if your overall expense ratio is 0.08%, that's great! On the potential downside, you have some sector bets and overlap that could be eliminated and offer a simpler portfolio structure that would be easier to track and rebalance (and have less sector bets/tilts!). Also, you're holding a LOT of cash, but maybe this is you counting your pension as part of your portfolio, which again I think is sub-optimal when determining if your portfolio will meet your future needs (it confounds the Monte Carlo projections estimating if you have sufficient funds to not "run out early" at whatever withdrawal rate you're planning on, including changes over time of both the withdrawal rate and the asset allocation).Our overall portfolio expense ratio is .08 and it is made up of 33% cash 58% US equities 8% foreign/international and bonds are represented by 1%.
The sectors are a combination of funds and mainly ETF's.
Cash is 33%
Total stock market is 14%
Funds represented in the S&P 500 are at 16%.
Tech is represented by 8%
Small caps are 7%
International 8% that totals 86.
The remaining funds are diversified across other ETFs in different sectors.
If you own Total Stock Market (TSM) at 14% and another set of different funds that are S&P-500 at 16%, that's some pretty significant overlap; you could just pick one or the other, but you haven't said anything about if the S&P-500 funds are in taxable and the TSM funds is tax-advantaged, which would explain that choice as avoiding wash sales. If that's not the justification, then the overlap doesn't add diversification, so could be eliminated.
TSM and S&P-500 already include tech stocks, so holding another 8% in different funds specifically focused on tech is a sector bet that's not likely to pay off over the coming decades (assuming your financial plan includes longevity to age 95 for the younger of you or your spouse). This could be re-directed to TSM for simplification (or S&P-500 if the account placement for TSM would create potential wash sales).
Same comment for small caps, although this sector bet is at least supported by finance research by Fama & French's 3-factor capital asset pricing model, which identified small and value as factors that are statistically above the noise of market returns. Still it seems hard to realize in practice and may take decades to pay off. This also could be simplified into TSM unless you really think the research can be applied in practice.
8% international across the entire portfolio is 12% of stock holdings. The typical recommendation is 0% -OR- 20-40% of stock holdings in int'l; less than 20% just doesn't provide adequate diversification outside the US to "move the needle," so either increase to at least 20% or don't bother with international at all.
Statistics: Posted by bonesly — Sat Feb 24, 2024 2:01 pm — Replies 6 — Views 483