Asset allocation is a tricky subject, or so people would like us to think. Which people, the financial advisors that make a lot of money selling us stocks. Still it does not have to be. The things to determine are
What is our risk tolerance?
Will we be able to ride out a stock market crash that will eventually recur or will we freak out and sell low. This is a personal question and will determine some of your asset allocation (Stocks vs bonds). For us we invest 80% in stocks and take the 20% left over to pay down debts (student loans and mortgage for now). For others, they pay down that school debt aggressively and then just dump all their money in stocks.
Where to invest the money?
What stocks should we buy? First and foremost, I recommend buying a low cost index fund. Vangaurd has plenty and if your 401K does not allow Vanguard, then take a look at what they have and what the expense ratios are. We invest in VTSAX (Vangaurd Total Index Fund) with 100% of our IRAs. Our 401K is through Fidelity and so we invest in a similar total market index fund with them (along with a small allocation to REITs and International Stocks). Why did we choose this arrangement. Well I could go into my reasons why, but I assume it would be better for each reader to make up their own minds….
So here are the bloggers I read to determine our asset allocation. No point in rehashing what has already been done so well by others. Take a look and let me know what you think.
- Mr. Money Mustache – How to Make money in the stock market
- White Coat Investor- Designing your portfolio- A 7 part series
- jlcollinsnh – Stock series
- Physician on Fire- He has read over 250 investing books…
- Financial Samurai- The best asset allocation of stocks and bonds by age
So there you go. These are some of my favorite financial blogs to read and they have information regarding asset allocation. Take a look, form some opinions, and then share them with me.