I assume you mean a handful of individual stocks. 5-10%. And then count that towards your percentage in the market as a whole.

BTHOtrolls said:

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Percent Equity = 100 - Age

Then add 5% to that number for each million in net worth you accumulate.

I would also suggest rebalancing the equity portfolio, so that it starts off heavy in the Russel 2000 index, S&P 500 (less volatile) in middle age, and dividend focused nearing / post retirement.

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In the stimulus era of low yield/low rate, this must be adjusted. The only place to find yield and protect from inflation is risky assets aka the stock market.

I'd go 100 - (Age/1.5)

I'm 44. I've got 18 years of high earning work left. If I put less than 50% of my savings into equities for those 18 years, I'm sitting at least two growth cycles out.

FAT SEXY said:

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Percentage wise, how much capital is a reasonable amount to have invested/engaged in the markets?... Curious to see how people on here gauge risk when looking at an overall investment strategy.

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A little confusing between your title and post but depends on your risk profile and retirement horizon.

I'm 47. From a purely capital perspective, we are 84% equities, 10% bonds, and 6% cash. Our cash amount is temporarily high because of some life event scenarios we are currently playing out. That number will drop to 2-3% over the next 12 to 18 months assuming things play out like we want.

If you factor overall net worth this allocation changes because I'm not including home equity or any other asset equity (cars, jewelry, other stuff).

I don't know what's "responsible", but I can tell you that my wife and I are at 72.5% investments (very heavy in Vanguard funds), 24% real estate, and 3.5% cash. Does not include personal property.

I'm 40 and she's 37, currently.

Buffet says 90% S&P Index, 10% short term municipal bonds. I'm at 57% net worth as equity in my home, 38% S&P Index Fund, 3% cash, 2% more aggressive investments. Within about 3 years that real estate equity and Index Fund breakdown should be reversed. Not an exact swap, but I did mortgage pay down rather than bonds, about 60% of the real estate equity is from appreciation.

BTHOtrolls said:

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Percent Equity = 100 - Age

Then add 5% to that number for each million in net worth you accumulate.

I would also suggest rebalancing the equity portfolio, so that it starts off heavy in the Russel 2000 index, S&P 500 (less volatile) in middle age, and dividend focused nearing / post retirement.

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I've never heard of this formula. If I'm understanding this correctly, this is very conservative. Never seen this conservative an estimate from any professional.

To me in retirement you need to have your annual income needs covered by non-equity investments and the bulk of the rest should be invested in higher risk/higher reward investments like stocks or real estate. Rebalance as needed . It's all situation dependent but it seems to work out to 55-65 % engaged in markets from the numbers I have played with in my situation. I see a lot of risk in not taking risk.

I don't include residence value as equity invested $.

YouBet said:

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BTHOtrolls said:

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Percent Equity = 100 - Age

Then add 5% to that number for each million in net worth you accumulate.

I would also suggest rebalancing the equity portfolio, so that it starts off heavy in the Russel 2000 index, S&P 500 (less volatile) in middle age, and dividend focused nearing / post retirement.

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I've never heard of this formula. If I'm understanding this correctly, this is very conservative. Never seen this conservative an estimate from any professional.

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The leveraged returns on a personal residence will weigh heavily into most people's net worth as they age. This may be why the percent equity based on this formula seems conservative to you. A 6 months cash emergency fund will also comprise a material portion of net worth for middle class households

Once you back out home equity and the emergency fund then the percentage of ones "invested portfolio" may be in line with what you believe is appropriate for stock allocation.

The non-equity percentage of an invested portfolio doesn't have to all be in low yield bonds: REIT, bullion, crypto, peer to peer lending, are all reasonable to include a small percentage of net worth outside equities.

BTHOtrolls said:

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YouBet said:

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BTHOtrolls said:

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Percent Equity = 100 - Age

Then add 5% to that number for each million in net worth you accumulate.

I would also suggest rebalancing the equity portfolio, so that it starts off heavy in the Russel 2000 index, S&P 500 (less volatile) in middle age, and dividend focused nearing / post retirement.

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I've never heard of this formula. If I'm understanding this correctly, this is very conservative. Never seen this conservative an estimate from any professional.

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The leveraged returns on a personal residence will weigh heavily into most people's net worth as they age. This may be why the percent equity based on this formula seems conservative to you. A 6 months cash emergency fund will also comprise a material portion of net worth for middle class households

Once you back out home equity and the emergency fund then the percentage of ones "invested portfolio" may be in line with what you believe is appropriate for stock allocation.

The non-equity percentage of an invested portfolio doesn't have to all be in low yield bonds: REIT, bullion, crypto, peer to peer lending, are all reasonable to include a small percentage of net worth outside equities.

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So after factoring cash and home equity I'm looking at:

Equities - 77%
HE - 9%
Bonds - 8%
Cash - 6%

I'm still quite aggressive using your formula. Still seems conservative to me to use that but to each his own.

Equities to the moon! Best of luck.

It really depends.. if your net worth is less than 3 months of living expenses you should have 0% in the market outside of employer match and start building up your emergency fund.

Generally speaking I would say out side your cash reserves 15-30% should be home equity and/ real estate. The other 70-85% should be stock/bond mix and I would be pretty agressive in stocks (85-95%) until you are about 15 years from retirement then glide down to a 70/30 or 60/40 stock/bond mix as you approach retirement.

YouBet said:

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BTHOtrolls said:

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Percent Equity = 100 - Age

Then add 5% to that number for each million in net worth you accumulate.

I would also suggest rebalancing the equity portfolio, so that it starts off heavy in the Russel 2000 index, S&P 500 (less volatile) in middle age, and dividend focused nearing / post retirement.

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I've never heard of this formula. If I'm understanding this correctly, this is very conservative. Never seen this conservative an estimate from any professional.

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Jack Bogle ran with something very similar (he said whatever your age is should be your percent bonds). I think it's terrible advice because the right answer is really all relative to what you have, what you need, and what you can tolerate.

A 65 year old with $200k net worth vs the same with $2,000,000. Both need $25k per year. The $200k guy is screwed regardless, but only benefit of fixed income for him is it removes uncertainty of when he will run out of money.

The guy with $2,000,000 has legacy concerns to focus on.. he'd be fine 100% stocks even with a 50% correction, so just a matter of what he can tolerate.

cjsag94 said:

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YouBet said:

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BTHOtrolls said:

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Percent Equity = 100 - Age

Then add 5% to that number for each million in net worth you accumulate.

I would also suggest rebalancing the equity portfolio, so that it starts off heavy in the Russel 2000 index, S&P 500 (less volatile) in middle age, and dividend focused nearing / post retirement.

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I've never heard of this formula. If I'm understanding this correctly, this is very conservative. Never seen this conservative an estimate from any professional.

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Jack Bogle ran with something very similar (he said whatever your age is should be your percent bonds). I think it's terrible advice because the right answer is really all relative to what you have, what you need, and what you can tolerate.

A 65 year old with $200k net worth vs the same with $2,000,000. Both need $25k per year. The $200k guy is screwed regardless, but only benefit of fixed income for him is it removes uncertainty of when he will run out of money.

The guy with $2,000,000 has legacy concerns to focus on.. he'd be fine 100% stocks even with a 50% correction, so just a matter of what he can tolerate.

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Did he only have one investment profile because he must have been assuming a perfect use case where individuals had invested a certain way since day 1 of first job and gotten good luck along the way.

He said it many times without differentiating profiles, which is why it is terrible advice to give a rule of thumb like that.

Many people followed his sage advice. Made a lot of sense with the interest rates in the 80s when he likely developed that philosophy.

I have 92% of my NW in the market.

50% is in a brokerage account, and roughly half of that is in the S&P 500.

Being that it's probably the safest investment and the liquidity is fairly high, I don't consider it too much of a risk.

My biggest concern is just the tax hit I'd take in the event of needing to sell it all.

However between my cash savings, credit cards, and very low expenses, I'm not worried.

Ragoo said:

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Every retirement account dollar should DCA into VOO, SPY, or similar S&P 500 low cost index. Set it and forget.

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I view it the exact opposite. I want my individual brokerage to be as conservative as possible so I don't have to incur short term capital gains. I trade like a madman in my IRA.

See people do this, but just seems a reckless move to avoid taxes. I'm more interested in all but guaranteeing a comfortable retirement than trying to live it large 25-30 years from now. You make good bets in a Roth it's stuck there, you do it in a brokerage account you can do anything with it. If you make a bad bet you can offset taxes on a good bet, in a Roth you're just hamstringing your growth potential.

It may avoid taxes, but it seems inarguably a riskier move. Only way it makes sense to me is if you've already pretty much secured a comfortable retirement not considering the amount in your Roth.

deadbq03 said:

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Ragoo said:

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Every retirement account dollar should DCA into VOO, SPY, or similar S&P 500 low cost index. Set it and forget.

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I view it the exact opposite. I want my individual brokerage to be as conservative as possible so I don't have to incur short term capital gains. I trade like a madman in my IRA.

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I guess it helps you avoid normal income taxes on your trades, but every financial advisor I've ever worked with has encouraged investors with balanced portfolios to hold lower yielding fixed income investments in their tax deferred vehicles (IRA and 401K), while holding equity in taxable accounts (since dividend cap gains tax rates can be much lower than normal income rates).

Doesn't work for everyone though, I'm sure.

But as an aside, I'm pretty surprised at how aggressive most of the posters on this board are with their allocations. I wish that I would have had your guts when I was younger!

100%

northeastag said:

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deadbq03 said:

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Ragoo said:

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Every retirement account dollar should DCA into VOO, SPY, or similar S&P 500 low cost index. Set it and forget.

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I view it the exact opposite. I want my individual brokerage to be as conservative as possible so I don't have to incur short term capital gains. I trade like a madman in my IRA.

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I guess it helps you avoid normal income taxes on your trades, but every financial advisor I've ever worked with has encouraged investors with balanced portfolios to hold lower yielding fixed income investments in their tax deferred vehicles (IRA and 401K), while holding equity in taxable accounts (since dividend cap gains tax rates can be much lower than normal income rates).

Doesn't work for everyone though, I'm sure.

But as an aside, I'm pretty surprised at how aggressive most of the posters on this board are with their allocations. I wish that I would have had your guts when I was younger!

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Yeah, I guess I've never known anything different (being risky) and have always more or less followed profiles appropriate for our age and amounts. I'm slowly moving us towards being more conservative as I approach 50 as we follow recommendations from our profile and FA.

Hell, my 80 yr old parent's are still 50% in equities but that's admittedly because they live 100% off RE income and have never touched their investments. My mom is slowly moving them out of equities though, finally. Lol.

Historical data says equities beat other asset classes, it's just most humans cannot bear the volatility. And there is also a large variance among individual equities and market sectors.

You can optimize returns vs volatility by being strategic with market sector allocation.

To me If they don't need the invested funds for income over the coming 5-10 yrs why move out of asset classes that have proven over time to yield better returns? If they do need some of it for income or perhaps for something they want to buy then by all means reallocate but if not , why?



Totally understand the discomfort with volatility but when equity markets correct they have always historically recovered.

halfastros81 said:

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To me If they don't need the invested funds for income over the coming 5-10 yrs why move out of asset classes that have proven over time to yield better returns? If they do need some of it for income or perhaps for something they want to buy then by all means reallocate but if not , why?



Totally understand the discomfort with volatility but when equity markets correct they have always historically recovered.

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Well that's why they never got out in the first place. They've managed to add an extra million in the past year or two simply because they stayed in equities.

They aren't getting out. I think she's just starting to preserve a little more principal.

Either play the casino or eat dog food

90%

85% of my net worth is in "stocks" and bonds, including partnerships. 15% in crypto, commodities, and cash.

Understood. Taking profits when the market seems bubbly , that's smart

46 years old...ex-house and bank accounts, currently 82.5% stocks/stock funds, 3.3% convertibles, 14.2% cash