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Author: rookieJoe Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76238  
Subject: New passive investor looking 4 strategy critique Date: 2/4/2004 10:30 PM
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First off, THANKS for the great boards! And THANKS to The Motley Fool for teaching me enough to feel comfortable going Broker Free!

I'm sorry for this being long, but the shorter posts asking big questions tend to get a lot of requests for more info. I'll try to concisely answer most of the questions you've asked others. I'm still relatively new (< 3 years) to investing, and my strategy has been evolving...

I'd really like to hear what those of you with more experience think about what I'm doing!

Basics...
24 years old, married (5 great years), single income, two kids ( newborn twins :) ), own a very modest house. I started investing around 3 years ago, and I have been increasing the rate of investments (now ~20k/year). I'm not sure if we'll be able to keep up the rate of contributions indefinitely.

Background...
Grew up working in a small family business - I am very comfortable taking on risk when there is a reasonable expectation of long term payoffs.

Financial Liabilities...
Student loans, No credit card balance, Home mortgage, 1 car loan.

Investment Horizon...
~35 years till retirement - maybe less if things go well :)

Investment Strategy...
Try to stay close to a predefined asset class allocation - rebalancing once a year if necessary to create a buy low/sell high effect. For the near future, I expect to be able to rebalance without selling anything by directing future contributions.

Investment Allocations...
As much as possible (given 401k options) I put equity that I hold in passively managed index funds, ETFs, etc. I'm trying to avoid uncompensated risk (individual stocks/sectors). But due to my age, I'm trying to find and emphasize compensated risk (diversified small cap/emerging markets, etc). I'm trying to use funds with no weighting to any one sector.

Account types...
401k & ROTH. Leftovers in Ameritrade brokerage account. (Hoping for LSAs & RSAs next year!)

Goal...
To have a substantial portion of my investments in moderate to high risk, high return, low correlation investments. I hope that by holding multiple fairly volatile low correlation assets types, I can increase the buy low/sell high effect of rebalancing to a predefined allocation annually.

Target Allocation Percentages...
I do not hold separate funds for each of these asset classes. I've just made estimates from allocation data on morningstar.com for the funds I have, to determine how much of each of the funds I hold, I need to get to this allocation.
25% Domestic Large
30% Domestic Small
5% Bonds/Money market
10% Foreign Large
20% Foreign Small
10% Emerging Markets

I didn't give the breakdown, but I have a little more value stocks than growth. I thought about explaining why I've chosen each asset type, but this post is way too long already.

I think this is a risky allocation, so anyone who doesn't know what you're doing: Please don't take this as advice.

Any feedback or recommendations would be greatly appreciated!
Joe
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