Asset Allocation

Here’s data for one family that lives on its savings.  On the left is how we do things normally and on the right, the way we’re doing things at the moment.

Given the times, our advisors think equities are a bargain and therefore have moved cash and fixed income in that direction.  Inflation is a risk/opportunity so they have also moved some fixed income assets to commodities.

We do not make investment decisions, we pay the advisors to do that and we do what they tell us to do.  I consider this allocation to be sensible or “moderate”.  Morgan Stanley Smith Barney considers us to have a “high risk tolerance” – freaking lawyers operating in a world of victims and unrestricted ambulance chasers.

I offer these details and others like them from time to time because when I was contemplating retirement without a pension – other than Social Security – I didn’t have any personal experience to compare to the vast variety of “expert” advice.  When I was working, I made my own investment decisions and lost my share of money to both get rich, doomed ideas and leaving far too much money lying around in banks.

I eventually got a little smarter and moved all our assets to funds focused on growth.  This is a good scheme for 40 year olds but as we approach retirement, a less greedy asset allocation becomes key to surviving normal recessions like 2001 and critical to surviving disasters like 2008.

For what it’s worth …