good stock/bond mix?

schwza · #1 08-23-2007, 01:18 PM

i know this is a complicated question but i'm looking for a very simple answer. what kind of mix should i have in terms of stocks vs bonds?

here is my approximate current stock/bond breakdown:

- 40k in retirement funds (all international stock index funds)
- 100k in regular stock funds (mostly US index)
- 60k in massachusetts tax-exempt bonds

so total is around 70/30 right now.

i'm 27 now and i'm probably going to be using a chunk to buy a house at some point (maybe 4 years or so?).

IdealFugacity · #2 08-23-2007, 01:29 PM

27 years old, 70/30, that is definitely not an incorrect allocation.

Others may provide more specific comments, but if you're looking for a very simple answer, it would be "That looks great for your age group."

Now, to get less simple, I'm going to try this: if you are planning on buying a house within 4 years, an amount equal to at least the down payment must be set aside in safe investments; by this I am pretty sure I mean CDs, high-yield savings, a money market fund, or other such vehicles. NOT anything with a real risk of loss. I *believe* that bonds do not qualify here.

Is the above mix (200k) your total net worth? Or do you also have significant amounts in bank accounts, etc? If it is your total net worth, you will likely need to adjust your saving a bit, as you will be taking money away from your contributions to the above and into safe harbors for the home purchase.

I make this post with the hopes of learning from the criticism towards it. I would appreciate more responses on the topic of his home-purchase, especially if they address what I just said.

TheMetetron · #3 08-23-2007, 02:45 PM

I would count bonds as safe for a home purchase, especially if they are treasury bonds of short- and mid- term. Corporate bonds probably too, but those obviously are more volatile and have a higher correlation to the stock market.

CrushinFelt · #4 08-23-2007, 05:14 PM

I hope to have 200k in 4 years, only a couple hundred precent to go ;p

I like your allocation. The Mass. munis are good but once you're 30 and use that cash for down payment, be sure to replace it so you're not 90/10. And when you replace it I'd take on some actual risk with your bond allocation (i.e. corporates or a high yielding bond fund).

I don't think Metetron means to put your house-money into corporates, that's probably not a good idea right now.

PRE · #5 08-23-2007, 05:40 PM

100% stocks

Edit: Sorry didn't see that you were taking some of this out 4 years from now.

Jeff W · #6 08-23-2007, 05:46 PM

If at all possible, you should switch 40k in munis to 40k in taxable bonds(held in retirement account). Move 40k in international funds to taxable and you'll have the same equity/bond split.

adios · #7 08-23-2007, 06:41 PM

It depends on your utility function to be honest. A very wealthy individual is most likely much more risk averse than someone such as yourself. I will say on the portion you're allocating for your house, given a 4 year time frame, I wouldn't go near stocks. Why tax expemt bonds out of curiosity?