Asset Allocation Recommendations

Warren Buffet - 2015 Chairman\'s Letter

2017 letter, pg 11:

Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.

By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a long-term investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would have decreased the purchasing-power of the government bond that Protégé and I sold.

I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.

It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.

2013 letter, pg 20:

90% in S&P 500 index fund (VFIAX)
10% in short-term US Treasury bond fund (VSBSX)

Schwab Funds

Using Vanguard Recommended Allocation: Total Bond Market II Index Fund, Total International Bond Index Fund, Short-Term Inflation-Protected Securities Index Fund

Schwab Bond Funds:

Total bond market index mutual fund: SWAGX (.04%)

No international bond funds from Schwab, 3rd parties all have high fees (1% or higher)

TIPS Index mutual fund: SWRSX (.05%)

Schwab stock funds:

S&P 500 Fund: SWPPX (.03%)

Small-Cap Index Fund: SWSSX (.05%)

International Index Fund: SWISX (.06%)

Age 54-58

35.8 Bonds 25.1, 10.7, 0

64.2 Stocks

Age 59-63

44.4 Bonds: 28.6, 12.2, 3.6

55.6 Stocks

Age 64-68

56.3 Bonds: 31.9, 13.6, 10.8

43.7 Stocks

Vanguard Recommendation

Recommendation: Total Bond Market II Index Fund, Total International Bond Index Fund, Short-Term Inflation-Protected Securities Index Fund

Bond Funds:

Total Bond Market II Index Fund: VBTLX (.05%)

Total International Bond Index Fund: VTABX (.12%)

Short-Term Inflation-Protected Securities Index Fund: VTAPX (.07%)

Stock Funds:

500 Index Fund: VFIAX (04%)

Small Cap Growth: VSGAX (.07%)

Total International: VTIAX (.11%) (Foreign Large Blend, developed and emerging)

Age 54-58

35.8 Bonds 25.1, 10.7, 0

64.2 Stocks

Age 59-63

44.4 Bonds: 28.6, 12.2, 3.6

55.6 Stocks

Age 64-68

56.3 Bonds: 31.9, 13.6, 10.8

43.7 Stocks

Financial Samurai Recommendation

Bond Funds: Total Bond Market II Index Fund, Total International Bond Index Fund, Short-Term Inflation-Protected Securities Index Fund

Age 50-65

30% Bonds 20, 10, 0

70% Stocks

Age 65-75

40% Bonds: 26, 11, 3

60% Stocks

Age 75+

50% Bonds 26, 17, 7

50% Stocks

Fidelity Retirement Funds Asset Allocation

Bond Funds: Inflation Protected Bond Fund, Total Bond Market Fund, High Yield & Emerging Market Bond Fund

Age 55-59

42% Bonds 15.3%, 22.7%, 3.6%

58% Stocks

$2m: 306K, 454K, 72K - reallocation to Bond funds in IBM 401K account

Age 60-64

54% Bonds 22.3%, 27.4%, 4.2%

46% Stock

Age 65-69

66% Bonds 39.8%, 31.9%, 5.6%

34% Stocks

Age 70+

75% Bonds - 35%, 35%, 5%

25% Stocks