Wow! The BH risk tolerance wiki does a great job of clarifying AA.This is the correct first step (having the cash parked in 3m T-Bills is fine until you decide on an AA).the first step in deciding where to put that money to work is to choose an AA (for which a main factor is risk tolerance). This is where I am stuck.
To help you get moving on deciding an AA, I'll reiterate that you should read the Wiki topic on Assessing Risk Tolerance, take the Vanguard Investor Questionnaire, then tailor the AA the quiz recommends based on your self-understanding of your own personal risk-tolerance (from having read the Wiki topic and done some soul-searching).
Another approach is to answer: "How much of a total drop in portfolio value can I handle without panic?" Is it -10%, -20%, -50%? Then you can cut that max drop in half to get standard deviation and look up the AA associated on the X-axis of the Risk/Reward chart (below). That AA should fit your risk-tolerance from the perspective of that single question. I think the quiz is a better tool because its result is based on multiple questions, but in a pinch the "max drop I can handle" approach is at least quick and should still get you in the ballpark of an appropriate AA.
The Vanguard risk assessment test put me at 70/30 (stocks/bonds).
So I went online to check what I have and MS reports that in my non-retirement accounts, I have exactly a 70/30 AA (having recently cleaned up and bought 3 month treasuries).
In the retirement accounts, I am 53/43 and 4% cash (again have recently cleaned a lot of poop out and bought 3 month treasuries).
The 53% in stocks includes Berkshire-A (11% of total portfolio), total-market and S&P ETFs (37% of total portfolio), and misc stocks and mutual funds (5%)
The 43% in fixed-income includes 3-month treasuries (34% of total portfolio), mix of bond holding mutual funds (11%).
So, am I light in stocks in the retirement accounts?
Anything stand out as a recommendation for what to do now, or in a couple of months when the 3-month treasuries mature?
Thank you!
Statistics: Posted by josephny — Mon Jun 10, 2024 4:14 am — Replies 38 — Views 3087