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This is a great plan! One change I'd make is to reduce VBTLX to below 5% when you're under 40 and gradually increase the bond holdings by 2/3% a year after that
by andrewjl 9y ago
This is a great plan! One change I'd make is to reduce VBTLX to below 5% when you're under 40 and gradually increase the bond holdings by 2/3% a year after that. More stock exposure means more returns.
Another thing to do if you want to get fancy is to shift some bond holdings to riskier or junk bond funds when you're younger, such as Vanguard's VWEHX, that will generate FAR higher returns than a typical basket of bond holdings.
This is all assuming the target retirement age is 65 or later.
- ianai 9y agoYou’re both assuming this year is a stable point or low point for valuations for people under 40. I don’t see it. There are clear high values on stocks across the board. There are international pressures just coming into play that will have large, probably negative effects.
- andrewjl 9y agoDefinitely agree there, although 15+ years is enough to time for us to get through the cycle of highs and lows. Also market timing is hard and subject to many factors (such as those you pointed out) that one doesn't have knowledge and awareness of. It's better to just buy, and hold. When the market goes down, buy some more, but don't expect to access that money for many years.
- jnordwick 9y ago> if you want to get fancy is to shift some bond holdings to riskier or junk bond funds Don't worry. The federal government is working on doing that for you.
- andrewjl 9y agoIf you're referring to US federal government debt, it's basically got a zero risk of default. You'll always get your principal and interest back in full. Why? The debt is denominated in USD and who can print any amount of USD at will? The Fed. Edit: I think I get your larger point though, runaway deficit spending of the kind we've had in recent years does destabilize the riskiness of holding US assets / currency.