No. of Recommendations: 0
I've been considering whether to add Vanguard's Emerging Markets Stock Index Fund to my 401(k), Roth IRA, and taxable fund accounts. Would adding emerging markets give my accounts a boost, so to speak?

My 401(k) and Roth IRA have the same allocations. The "old allocation" was recommended to me by a financial planner a few years ago. The "current allocation" is what I have changed them to on my own, since I thought it made no sense for a 30-year-old to have short-term treasuries in retirement accounts.


Old Allocation for 401(k) and Roth:

8% Vanguard Value Index
17% Vanguard REIT Index
14% Vanguard Small Cap Value Index
16% Vanguard Short-Term Treasury
25% Vanguard Total International Stock Market Index
20% Vanguard Total Stock Market Index



Current Allocation for 401(k) and Roth:

10% Vanguard Value Index
26% Vanguard REIT Index
16% Vanguard Small Cap Value Index
26% Vanguard Total International Stock Market Index
22% Vanguard Total Stock Market Index


If adding emerging markets would be beneficial, what percentage would be adequate? And which fund holdings in the "old allocation" should be reduced to accommodate it?
Print the post Back To Top
No. of Recommendations: 4
>> Current Allocation for 401(k) and Roth:

10% Vanguard Value Index
26% Vanguard REIT Index
16% Vanguard Small Cap Value Index
26% Vanguard Total International Stock Market Index
22% Vanguard Total Stock Market Index

If adding emerging markets would be beneficial, what percentage would be adequate? And which fund holdings in the "old allocation" should be reduced to accommodate it?
<<

I think 10% in emerging markets would be a reasonable allocation in your situation. I'd take it all out of the REIT bucket since I think 26% allocation to REITs is at least 16% too much.

#29
Print the post Back To Top
No. of Recommendations: 0
I don't know anything about your previous advisor, when they made their recommendation, or when you made the changes but having some bonds in a retirement account is not necessarily a bad thing.

In this situation, if your advisor made that recommendation at or prior to the market downtown (or really any time since then), that position likely made you some money. The 5 yr number on it is 3.8% with a tiny tiny beta.

The 5 yr number on the REIT is 3.3% with a whole lot more volatility.

Keep your eye on the housing market if you keep it at 26%. There is concern that another slowdown is coming and the last housing crash cost this fund 67% of its value ($100,000 would have been worth $33,000)
Print the post Back To Top
No. of Recommendations: 1
I am not a believer in any kind of asset allocation. While it is not advisable to put all your money in one category, there is no point in just buying something because it is something you are supposed to have.

Buy whatever you want, providing it has good prospects of going up, and sell if it appears to have exhausted its potential, or if it goes down without.
Print the post Back To Top
No. of Recommendations: 0
I am not a believer in any kind of asset allocation.

I am sorry if I gave that impression but I did not state anything about asset allocation. I simply stated that there is nothing wrong someone that is 30 to have bonds in their retirement account. A lot of very wise people got out of stock (or reduced their holdings) in 2007 and put that money in bonds. You are a believer in tactical and strategic moves, just like those that made that change in 2007.

To better illustrate that point, as well as yours, Someone would have been better off over the last five years if everthing was invested in AGG (Bond Index) vs everything invested in the Vanguard REIT Index.

The OP decided to avoid bonds based on their age. I say bonds may or may not have a place regardless of your age.
Print the post Back To Top
No. of Recommendations: 0
I agree with the others that your real estate alloation is currently too high. According to morninginstar the small value fund is 15% reit and the value fund 5%. so your total reit concentration is 30% in your potfolio.  Ralph Block, the expert on the Reit board, thinks 30% is right, but most financial authorities approved by those who follow Bogle recommend 10 to 20 %. 

Instead of shifting the entire 10% to Emerging Markets, I would put 5 to that and 5 to the vanguard international small market index fund.
Print the post Back To Top
No. of Recommendations: 1
This is probably not what you're looking for, but since others have mentioned asset allocation......

Its a good paper. Shows how different asset classes behave. Can smooth out returns. I doubt it would fit into your 401k plan but it can give you some ideas.

http://www.siliconvalleyaaii.org/images/20081108_Zmyslowski....

Guessing at your available choices...

10% emerging market
20% international
20% total stock market
25% REIT
25% total bond

JLC
Print the post Back To Top
Advertisement