My 401Ks and IRAs are 100% in equities now. Roughly 25% BRK, 50% large cap value stocks, 25% ETFs (correlate closely with SPY.)
Whether I am an idiot or not is a separate discussion
Where would you recommend to go from here? I will continue adding money to these for the next 20 years or so.
I am allergic to expense ratios above 0.5% unless it is absolutely necessary.
Transaction costs for buying with new money or for rebalancing are zero to negligible for any stocks, ETFs, mutual funds or treasuries. I do not want to own real estate in them.
Is that sarcasm or a real question? (Sorry, it’s hard to understand the tone of an Internet post.)
The current asset allocation is a happenstance, I am not married to having 100% stocks or anything like that. I started with a few bonds and cash but saw (or thought I saw) opportunities in stocks and bought them.
The question boils down to, starting in Nov 2014 given the price levels of stocks, bonds, commodities; what asset allocation would make the most money in 20 years given a specific risk tolerance?
Specific risk tolerance (the second question you asked) for me is: high =
ability high (I am counting on Social Security and some taxable real estate) +
willingness high (after 2008-2009 I am not bothered by anything :-)) Bought in Sep 2011 and Oct 2014 when things dipped.
Your ability to take risk is high. Your willingness to take risk is high. You have no impending liquidity requirements for the next 20 years at least. You (quite rightly) have an aversion to paying high management fees. The correct answer here would appear to be 100% allocation to cheap equity ETFs.
Personally I would forget about trying to be too clever with this account. Will large cap value outperform the general market over 20 years? Who knows. I don’t see any particular reason to risk underperforming. Similarly, why take on company specific risk with 25% of your portfolio even if that company happens to be itself highly diversified?
The other comment I would make is that you should aim to find a global equity ETF. No need to be overweight the US market. It accounts for 50% of the MSCI World All Country Index anyway. Again, its hard to call what regions will outperform in the long run, so why take the risk?
If you are 100% in US equities (you didn’t say country) I’d probably diversify that. Say 40% US equities, 30% China, Philippines, Japan equities, 30% fixed income.
