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Thread: Asset Allocation and DCA

  1. #1

    Asset Allocation and DCA

    My asset allocation is 60/40. As I am 57, a common recommendation is to have 57% of one's portfolio (or for simplicity, 40/60) in lower risk assets. With all the chatter of overvalued markets and my recent FIRE, I am considering making this portfolio change. My question concerns my pension which I will be recieving as a 5 year monthly annuity. Since I have 60 months of COLA'd payments coming in, this money is basically inflation protected fixed income. One could argue that since the pension is about 65% of my total portfolio my present AA is actually 20/80.

    Should I be investing these monthly checks in equities to bring up my 20% to 40%? Or do I rebalance now and invest the pension as it comes in as 40/60?

  2. #2
    The main focus should be to maintain your balance. Once you figure out what your balance needs to be for the next several years, stick to it. Deciding to change that balance because you feel the market is overvalued is also called market timing. That usually does not end well. If 40/60 is truly what you want and is not your reaction to the current market, move to that allocation and stay the course. In the long run anything between 60/40 and 40/60 will serve you well. Just rebalance periodically. A lot of folks here rebalance once a year. Moving it all at once or a more DCA approach is probably not a major driver in the longer run either. Whichever makes you feel better. Have you run FireCalc to verify your numbers?

  3. #3
    I don't think most here do age in bonds. Some do age in bonds-10%.

    Most consider 60/40 to be reasonable for someone in their 50s. If you want a lower equity exposure sometime in the future - say 50/50, then you can gradually work to that over several years.

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