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Resources on learning how to build a retirement portfolio? (programming.dev)

submitted 1 year ago by epchris@programming.dev to c/personalfinance@lemmy.ml

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About a year ago I hired a financial planner to manage assets in my retirement accounts but am starting to think about doing it myself.

I don't disagree with the general approach they're taking, but it seems like it should be simple enough for me to do myself every 6 months or whatever.

The gist of the strategy is a balance across large/mid/small cap and sectors at certain percents along with some % of bond funds and some real estate funds.

I think my main questions are how do I identify and compare various funds that fall into these broad categories to try and pick the ones I want to actually invest in.

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[–] sugar_in_your_tea@sh.itjust.works 3 points 1 year ago (2 children)

I'll go with the others and say use a simple three fund portfolio.

The general idea is, if you are comparing your performance against an index, why not just buy the index? Most investors fail to beat the S&P 500, so if you buy an S&P 500 fund, you'll be doing better than most over the long term.

Here's my personal target portfolio:

US stocks - 70%
International stocks 30%
cash and bonds - 0%

Instead of going for an index like the S&P 500 that targets the top 500 companies, I want to buy all the companies at market weight. So here's my ideal portfolio with US Vanguard funds:

VTSAX - 70%
VTIAX - 30%
BND - 0%

My actual portfolio is a bit messier because of fund availability, but it's pretty close to the above. For example, my workplace doesn't have a cheap total US market fund, so I split between an S&P 500 fund and a small cap fund in an 85/15 split.

I'm considering adding bonds now that yields are more interesting and I'm almost close enough to retirement to start ramping in to them, but for now I only own a handful of short term treasuries as part of my efund. But if I did own bonds as part of my retirement portfolio, I'd either own or approximate BND.

[–] epchris@programming.dev 3 points 1 year ago (1 children)

Just out of curiosity, since I'm also considering bonds, what is "close to retirement" enough to consider non insignificant bod allocation?

[–] sugar_in_your_tea@sh.itjust.works 3 points 1 year ago

That's totally up to you. My personal number is about 5-10 years from retirement, though I'm pretty risk tolerant.

My plan is a rising equity glidepath. Basically, I'm going to load up on bonds (20-40% bond tent) a few years before retirement, and then ramp back down to no bonds in the first 10-20 years of retirement. I'm planning to retire early, and this plan seems to have a higher chance of success vs a consistent bond portfolio given a >30 year retirement.

The same strategy works for a shorter retirement, and you can keep your bond allocation constant as well. This strategy makes sense if you have a high risk tolerance, but recognize the need for portfolio stability in retirement. If you have a lower risk tolerance, do the "normal" strategy that target date funds use: 10% starting out, and increase as you get older.