Asset Allocation Update
My strategic asset allocation is a bit of of mishmash of models provided by Burton Malkiel in the last edition of A Random Walk Down Wall Street and Jeremy Siegel in The Future for Investors, and some independent "efficient frontier" analysis, along with considerations forced by my own personal circumstances.
As we head into another market week, with oil prices backing off a bit, and some relief over Rita's relative mildness (vs. Katrina) abutting a dour and unsettled national mood (and with reads on the real estate market coming Monday and Tuesday), I'm happy to put forward for scrutiny where I am and where I want to be in my personal investments:
9/25/05 target US Stocks 40.41% 38.00% reits 9.67% 10.00% int'l 25.12% 26.00% prv stock 3.53% 3.00% bonds 17.86% 22.00% cash 3.41% 1.00%
Perhaps this pre-formatted text won't please all browsers, but you get the idea, and maybe that will do until I decide to produce some nice pie-charts for the next update.
So what about it? The private stock is an accident of my employment. My 401k is my largest pot, and it's actively managed with a home-country bias (a tiny 10% allocation of the stock portfolio dedicated to international equities), and less of a regard for the diversification and income benefits of REITs than my strategy indicates. So in my IRAs, I'm buying chiefly international stocks (split amongst EAFE regions and emerging markets) and REITs. Note that when possible, my various asset pots are invested in low-cost indexed mutual funds or ETFs.
My bond portfolio gets really chump-changy, but its composition pleases me greatly in this environment when open-market bonds are poised to lose value as interest rates rise: more than a third of my bond portfolio is in US Savings Bonds, split between old-style floating EE bonds and the newer inflation-indexed I bonds. The I bonds, in particular, are paying very well these days. And the principal of these savings bonds, though it may succumb to other threats, is not subject to the whims of the bond market.
I'll unveil another asset allocation strategy, from the portfolio of a relative with a less complex circumstance, hence a more versatile strategy, later.