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Greetings, Pete, and welcome. You asked:

How should one modify their retirement asset allocation
when they buy a home? How do they interact?

For example, before buying a house, suppose that
somebody has $100,000 invested in the following mix:

$75,000 stock
$15,000 bonds
$10,000 cash

If this person now invests $25,000 in a house, how
should they modify their asset allocation? Should they apply the same percentages (75% stock, 15% bonds, 10% cash) to the remaining $75,000 they have? Or should they consider that real-estate is another diversification away from stocks, which bonds also are, and so should the relative portion invested in bonds decrease?


IMHO the purchase of a home has no bearing on your investment allocations. While a large expenditure, it's really not part of your portfolio. Instead, it's more like a personal asset on a par with cars, jewelry, furniture, etc. In short, for investment purposes I believe you should ignore it.

Regards….Pixy
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