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Nothing like being specific...

Our retirement & college portfolios for our three children are 100% in equities. This is balanced to a slight degree by about three to four months of gross income in cash equivalents. We intend to keep 100% in equities until about seven years before FIRE, then start laddering in bonds. This laddering plan assumes interest rates stay at what we consider unusually low rates. If ten year treasury bonds moved from their current 3.8% to 6-7+%, we would have already put 5-10% of the portfolio into bonds. Anyway, our retirement portfolio is...

U.S. stock index funds, mostly d/c/a VTSMX - 28%
International index funds, mostly d/c/a VGTSX - 8%
Berkshire stock (BRK.Bs) - 22%
Employer stock (minimized) - 11%
Mechanical stock screens (RS26/PEG) - 11%
LTBH stocks (JNJ, MRK, GE, INTC, CX) - 19%
Cash to invest - 1%

When I wrote d/c/a, I meant we dollar cost average into those positions. We have used d/c/a consistently since beginning to invest. We rebalance the portfolio twice a year in April and September. We try not to track more than one stock between those periods. FWIW, we added more JNJ this year and the LTBH stocks are listed in order from our largest position to our smallest. If Cemex (CX) falls below $21/share, we might add to that position. CX is the stock we are watching between rebalance positions.

We do not like REITs right now. Cap rates seem artificially low, driven by a flight of relatively dumb money out of traditional fixed income investments in a search for yield. One can argue aparment REITS are suffering from a huge loss of customers because houses became so much more affordable with lower interest rates. These things may change in time, and we looked at some REITs for a time in Sep.03 but chose to pass on this form of investment.

We do not do rental real estate because we do not want to spend that much of our free time being landlords, fix-it people, etc. This can be an awesome investment if it fits your personality, it just is not for our family. We own our home, have for nine years, and this asset is now worth about 26% of our net worth.

In terms of bonds, I would personally recommend avoiding anything other than I-bonds. A portion of our E-fund has been in I-bonds for a couple of years. We are thinking about adding to this. With interest rates and inflation at unusually low points, in our opinion, the risk of principal loss on any long-term bond you have to cash in prior to maturity is scary right now. Grant's interest rate observer, which I respect but cannot afford to subscrbe to, has argued bonds offered a negative margin of safety in recent months.

We believe that keeping our retirement portfolio 100% in equities with good risk management and discipline will allow us to average 6%+ annual returns after inflation in the future. Our general rules are to keep all individual stock holdings under 10% of the portfolio, with two exceptions. First, we feel very confident of Berkshire and will allow this to average just over 20%. Second, are ability to limit exposure to my employer's stock is limited though we do all we can to limit this. LTBH positions must be over a minimum of 2.5% of the portfolio or are not worth messing with. We generally place bets a little below 5% of the portfolio. We want very long holding periods. We have held GE since graduating from college in 1987, our ideal result.


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