Goal: - 3% average annual total return until retirement in 2030 - Little risk in market downturn Idea: - 80% Total Bond - 20% Dividend Aristocrats Stocks Schwab: - SWAGX 80% of portfolio 0.06% expense ratio - SCHD 20% of portfolio 0.06% expense ratio Vanguard: - VBTIX 80% 0.025% expense ratio - VIG 20% of portfolio 0.06% expense ratio
max out those 7% gov bonds too
3%??? Are you retiring tomorrow? You can't even retire on that return unless you have a crazy high net worth.
That’s way too conservative. Unless you’re expecting the Great Depression you’re still looking at 8 years to go. Not to mention retirement isn’t the end of your investments and suddenly you pull all that money or something. Depending on your age you might need that money to last for 20-40 years. Even in retirement that mix is way too fucking conservative IMO.
Exactly. The general rule I've heard is you can withdraw 4% of your portfolio annually if you have average market returns (8-10%) and you'll never run out of money and your allowance with grow with inflation.
I’d still VOO and chill for a while. Safe and chance that your retirement is frickin awesome
You lost me at 3% annual return. This is 1/6th inflation. Why bonds?
I recommend reading about the All Weather Portfolio. This is structured to perform under different conditions- inflation included.
Does it actually work? I’ve read in some forums that it’s bot that great. I might be mistaken though.
Yes, look at the last 50 year track record - averages around 6.5% return. The worst year was just -5%. Compared to s&p 500 it has lower returns but also less volatility so very few drawdowns and when they happens they are small
Fixed income assets in a inflationary economy are not a good investment.
What do you call fixed income? Bonds?
Yes. Bonds pay a fixed amount each month hence are called fixed income.
Why would you consciously create a portfolio that you know is not even going to keep up with inflation? It makes no sense. Just stash cash under your mattress while you're at it.
This asset allocation sounds good if you are in your 80s, are at like a 1% withdrawal rate and very risk averse, or for a foundation you are running For an individual not yet at retirement though, it doesn't make sense. You will actually be taking on more risk (in some sense) in the long run, because you will be more likely to run out of funds. Especially if you are looking at a 30+ year timeframe (you didn't give us your age), to have such a high bond allocation you will need way way more assets to start to make up for the lack of expected appreciation Check out bigERN's work at earlyretirementnow.com about asset allocation before and during retirement (geared towards early retirement, like 60 years of time)
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Dividend aristocrats may perform poorly
Perform poorly from: - Market Downtown? - Low dividend return? - Low Capital Gains return?
Negative stock price growth