Difference between revisions of "Asset Allocation Recommendations"

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## Warren Buffet - 2015 Chairman\'s Letter
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===Warren Buffet - 2015 Chairman\'s Letter===
  
**2017 letter, pg 11:**
+
'''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.
 
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.
Line 11: Line 11:
 
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.
 
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:**
+
'''2013 letter, pg 20:'''
  
 
90% in S&P 500 index fund (VFIAX)
 
90% in S&P 500 index fund (VFIAX)
10% in short-term US Treasury bond fund (VSBSX)
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<br />10% in short-term US Treasury bond fund (VSBSX)
  
## Schwab Funds
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===Schwab Funds===
  
Using Vanguard Recommended Allocation:  Total Bond Market II Index Fund, Total International Bond Index Fund, Short-Term Inflation-Protected Securities Index Fund
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: 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:
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: Schwab Bond Funds:
  Total bond market index mutual fund: SWAGX (.04%)
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:: Total bond market index mutual fund: SWAGX (.04%)
  No international bond funds from Schwab, 3rd parties all have high fees (1% or higher)
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:: No international bond funds from Schwab, 3rd parties all have high fees (1% or higher)
  TIPS Index mutual fund: SWRSX (.05%)
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:: TIPS Index mutual fund: SWRSX (.05%)
  
Schwab stock funds:
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:Schwab stock funds:
  S&P 500 Fund: SWPPX (.03%)
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:: S&P 500 Fund: SWPPX (.03%)
  Small-Cap Index Fund: SWSSX (.05%)
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:: Small-Cap Index Fund: SWSSX (.05%)
  International Index Fund: SWISX (.06%)
+
:: International Index Fund: SWISX (.06%)
  
Age 54-58
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:Age 54-58
  35.8 Bonds 25.1, 10.7, 0
+
:: 35.8 Bonds 25.1, 10.7, 0
  64.2 Stocks
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:: 64.2 Stocks
Age 59-63
+
:Age 59-63
  44.4 Bonds: 28.6, 12.2, 3.6
+
:: 44.4 Bonds: 28.6, 12.2, 3.6
  55.6 Stocks
+
:: 55.6 Stocks
Age 64-68
+
:Age 64-68
  56.3 Bonds: 31.9, 13.6, 10.8
+
:: 56.3 Bonds: 31.9, 13.6, 10.8
  43.7 Stocks
+
:: 43.7 Stocks
  
Vanguard Recommendation
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===Vanguard Recommendation===
  Recommendation:  Total Bond Market II Index Fund, Total International Bond Index Fund, Short-Term Inflation-Protected Securities Index Fund
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: Recommendation:  Total Bond Market II Index Fund, Total International Bond Index Fund, Short-Term Inflation-Protected Securities Index Fund
  Bond Funds:
+
: Bond Funds:
    Total Bond Market II Index Fund: VBTLX (.05%)
+
:: Total Bond Market II Index Fund: VBTLX (.05%)
    Total International Bond Index Fund: VTABX (.12%)
+
:: Total International Bond Index Fund: VTABX (.12%)
    Short-Term Inflation-Protected Securities Index Fund: VTAPX (.07%)
+
:: Short-Term Inflation-Protected Securities Index Fund: VTAPX (.07%)
  Stock Funds:
+
: Stock Funds:
    500 Index Fund: VFIAX (04%)
+
:: 500 Index Fund: VFIAX (04%)
    Small Cap Growth: VSGAX (.07%)
+
:: Small Cap Growth: VSGAX (.07%)
    Total International: VTIAX (.11%) (Foreign Large Blend, developed and emerging)
+
:: Total International: VTIAX (.11%) (Foreign Large Blend, developed and emerging)
  Age 54-58
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: Age 54-58
    35.8 Bonds 25.1, 10.7, 0
+
:: 35.8 Bonds 25.1, 10.7, 0
    64.2 Stocks
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:: 64.2 Stocks
  Age 59-63
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: Age 59-63
    44.4 Bonds: 28.6, 12.2, 3.6
+
:: 44.4 Bonds: 28.6, 12.2, 3.6
    55.6 Stocks
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:: 55.6 Stocks
  Age 64-68
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: Age 64-68
    56.3 Bonds: 31.9, 13.6, 10.8
+
:: 56.3 Bonds: 31.9, 13.6, 10.8
    43.7 Stocks
+
:: 43.7 Stocks
  
Financial Samurai Recommendation
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===Financial Samurai Recommendation===
  Bond Funds: Total Bond Market II Index Fund, Total International Bond Index Fund, Short-Term Inflation-Protected Securities Index Fund
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: Bond Funds: Total Bond Market II Index Fund, Total International Bond Index Fund, Short-Term Inflation-Protected Securities Index Fund
  Age 50-65
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: Age 50-65
    30% Bonds 20, 10, 0
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:: 30% Bonds 20, 10, 0
    70% Stocks
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:: 70% Stocks
  Age 65-75
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: Age 65-75
    40% Bonds: 26, 11, 3
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::  40% Bonds: 26, 11, 3
    60% Stocks
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::  60% Stocks
  Age 75+
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: Age 75+
    50% Bonds 26, 17, 7
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:: 50% Bonds 26, 17, 7
    50% Stocks
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:: 50% Stocks
  
Fidelity Retirement Funds Asset Allocation
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===Fidelity Retirement Funds Asset Allocation===
  Bond Funds: Inflation Protected Bond Fund, Total Bond Market Fund, High Yield & Emerging Market Bond Fund
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: Bond Funds: Inflation Protected Bond Fund, Total Bond Market Fund, High Yield & Emerging Market Bond Fund
  Age 55-59
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: Age 55-59
    42% Bonds 15.3%, 22.7%, 3.6%
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:: 42% Bonds 15.3%, 22.7%, 3.6%
    58% Stocks
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:: 58% Stocks
    $2m: 306K, 454K, 72K - reallocation to Bond funds in IBM 401K account
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:: $2m: 306K, 454K, 72K - reallocation to Bond funds in IBM 401K account
  Age 60-64
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: Age 60-64
    54% Bonds 22.3%, 27.4%, 4.2%
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:: 54% Bonds 22.3%, 27.4%, 4.2%
    46% Stock
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:: 46% Stock
  Age 65-69
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: Age 65-69
    66% Bonds 39.8%, 31.9%, 5.6%
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:: 66% Bonds 39.8%, 31.9%, 5.6%
    34% Stocks
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:: 34% Stocks
  Age 70+
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: Age 70+
    75% Bonds  - 35%, 35%, 5%
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:: 75% Bonds  - 35%, 35%, 5%
    25% Stocks
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:: 25% Stocks
 +
 
 +
[[Category:Investing]]

Latest revision as of 20:35, 31 December 2019

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