Asset Allocation for Young Adults

[rawraw]

@Greenman72

Depending on how you look at it, I have a ton of bond exposure. I owe $250k on my house at 4.4%, a ton of student loans at 6.8%, and a home-improvement loan at 9.9%. Does this count toward my allocation?

We are talking long exposure I’m pretty sure.

[Sweep_the_Leg]

@Greenman72

Depending on how you look at it, I have a ton of bond exposure. I owe $250k on my house at 4.4%, a ton of student loans at 6.8%, and a home-improvement loan at 9.9%. Does this count toward my allocation?

Are any of them variable rate loans?

[Greenman72]

No, they are all fixed rate.

And does it matter if you’re talking long or short exposure? It’s still fixed income exposure that contributes to your overall wealth. What’s the difference between having a paid-for house (which currently costs me about $24k per year), and having a $1.3 million dollar bond portfolio which spins off $32k per year in interest payments? (Because 32k per year after tax equals $24k, after taxes.)

[rawraw]

@Greenman72

No, they are all fixed rate.

And does it matter if you’re talking long or short exposure? It’s still fixed income exposure that contributes to your overall wealth. What’s the difference between having a paid-for house (which currently costs me about $24k per year), and having a $1.3 million dollar bond portfolio which spins off $32k per year in interest payments? (Because 32k per year after tax equals $24k, after taxes.)

The economic value of your short positions change as rates change. THe nominal values just impact networth.

[Matt_Likes_Analysis]

@Greenman72

Depending on how you look at it, I have a ton of bond exposure. I owe $250k on my house at 4.4%, a ton of student loans at 6.8%, and a home-improvement loan at 9.9%. Does this count toward my allocation?

yes, your net equity in your house would be considered fixed income. you consider this portion income b/c the payout on this amount is what you save in mortgage interest by having this amount deposited in a house. if you have negative equity in your house, that is equivalent to being short fixed income and you’d need to acquire fixed income elsewhere to offset.

but then what do you call your human capital? high yield debt? convertible bonds? blue-chip equity? your human capital will likely tower over these assets.

i think the article basically hints that younger people should consider their human capital as being closer to equity and thus should offset this risk with a higher allocation to fixed income those middle aged folks that are more secure in their jobs should consider their human capital fixed income or fixed income like (HY, Convertible bonds) and can hold more equity to offset this risk.

[Palantir]

@rawraw

@Palantir

401(k) - 100% Small Cap Index for me.

What’s the expense ratio?

0.24% high for a index fund

[rawraw]

@Matt_Likes_Analysis

why would i be in this business if i didn’t think i could do better than people who know nothing about markets? for every nincompoop who blows up his retirement fund, there has to be a professional who captures that gain.

You think peope who know nothing are any measurable percentage of volume transacted? They probably are when not dollar weighted. I don’t think beating the market is beating people who know nothing. But I do think you can beat a lot of that stuff, because you don’t have to answer to investors every month or quarter (and every down or not as up as the index).