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3 fund retirement strategy (self.personalfinance)

submitted 2 weeks ago by root to c/[email protected]

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For someone in their 30s, does the following allocations make sense? The goal is to have a fair amount of diversity and to more or less “set it and forget it”

55% VG INST 500 IDX 35% VG INTL STOCK IDX 10% VG TOT BD MKT IDX

I’m wondering if maybe there should be less in International and more in one of the other two, etc

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[–] jumperalex 7 points 2 weeks ago* (last edited 2 weeks ago) (1 children)

how much international stock to have vs domestic stock is almost a religious war at this point. Pick whichever you like (I like 0% international personally), and then stick with it. The most important variable will really just be the Equities vs Bond ratio; and even that is nibbling around the edges unless you're making 1000basis point changes (shifting from 10% to 20% in your case). And stick with that too unless YOU have a reason to change it, not because you think the market has a reason for you to change it, such as becoming more risk averse due to age, life circumstance, etc.

ETA: FWIW at 30yo, even 10% bonds might be unnecessary. But that depend on you and your risk tolerance and when you expect to need that money.

[–] [email protected] 3 points 2 weeks ago (1 children)

I couldn't agree more. The money I've put into international stock and bonds have been wasted compared to domestic stock every time I've tried. This is purely anecdotal however

[–] [email protected] 1 points 2 weeks ago

There's also the argument that markets are cyclical, so if one segment has under-performed for a while, it is more likely to overperform going forward, and the inverse argument is valid too. The US has been on an absolute tear for 15 years or so, so it's high time for the US market to correct downward and international markets to correct upward. That said, it could happen in 5 years, 15 years, or 50 years.

So yeah, it's up to you. I try to maintain a market weight portfolio with a tilt toward US and small value, because I have my doubts that the international out-performance will happen soon, but I don't want to miss out either. My portfolio is currently 70/30 US/international, with a 10% tilt toward small value, and I'm considering doubling the tilt.