Kiaser
Senior Member
Cash: $ 43.05
Posts: 209
Joined: 12 Apr 2006
|
| Investment Allocation |
 |
|
I have about $2,700 a month coming up extra (after all living expenses) to put towards investments. I currently fund my IRA to the maximum allowed and I will soon have an investment property that I will be living in but the three roommates will foot the total cost of the morgage (including insurances and taxes). The $2,700 is total cold hard cash beyond the IRA and investment property.
I'm 25 years old, I have a very stable source of income, I have a 12 month reserve of emergency funds in a money market account, and I have absolutely zero financial obligations (no debts, no kids, no wife). I have money, I have lots of time, and I can afford to take risks. What I'm looking for is a ten year plan for investing, one which starts out on year one concentrating on high yield/high risk and slowly tapering off until by year ten it's mostly just slow safer investing.
Where would you be puting the money in with that in mind? What should my investment allocation percentages be at to start with and then change to over the course of ten years?
First year?
% in US
% in Foreign
% in Real Estate
% in Commodities
% in Bonds
% in Other
And by the tenth year?
% in US
% in Foreign
% in Real Estate
% in Commodities
% in Bonds
% in Other
|
Tue Jul 11, 2006 12:54 am |
|
|
Kiaser
Senior Member
Cash: $ 43.05
Posts: 209
Joined: 12 Apr 2006
|
|
|
|
quote:
Originally posted by coaster
Boy, I wish I was in your place, at your age!! An admirable plan of action. Except I'm wondering why the 10-year limit? You'll only be 35. Why not stay aggressive until 10 years before retirement?
If I was in your place, I'd probably do this:
30% in US
20% in Foreign
20% in Real Estate
20% in Commodities (learn how to trade futures and/or forex)
0% in Bonds
10% in Other (precious metals; bullion & equities)
For the futures trading slice of the pie, don't actually start trading until you've got $30,000 in that slice. Just let it build in a money-market fund.
Well, to tell the truth, I hadn't really thought of when to actually stop being aggressive. I guess I always considered since I have so much time I can take risks up front for the chance of big gains, but since I have so much time ahead I don't have to worry much about getting ahead out of risks (but more of through time and compounding, since when investing smart all you need to do to make money is more time). But I see your point.
So you'd keep those percentages pretty much through my entire investment run until I decide to go not-so-agressive, or should i gradually change them to more stable? What about them would you change when it comes to that time?
Also, I was thinking about total money percentages vs. the percentages of money contributed each month. Say if I had a set allocation such as you mentioned:
30% in US
20% in Foreign
20% in Real Estate
20% in Commodities (learn how to trade futures and/or forex)
0% in Bonds
10% in Other (precious metals; bullion & equities)
If you go by money contributed each month ($2,700 in this case), that would equal:
$810 in US
$540 in Foreign
$540 in Real Estate
$540 in Commodities
$270 in Other
Over time each group of funds grow at different rates and some gain more than others. Would it be wise to move money from one group of funds that performed well and my now a larger amount of my total invested money is in one grouping? Basically, should I also try to keep each section directly proportionate to the others according to their respective target percentage allocation:
If I had $100,000 invested:
$30,000 in US
$20,000 in Foreign
$20,000 in Real Estate
$20,000 in Commodities
$10,000 in Other
But then the US group has a good run and gains $10,000, the US group would now have a large percentage than my target 30% (a little higher than 36%). Should I disperse the 6% evenly throughout all the groups? So in that scenario I wouldn't just be balancing my money contributed each month according to a set allocation percentage, but also the total balance of all accounts and gains it receives as well.
|
|
Tue Jul 11, 2006 3:34 am |
|
|
Blue Eyed Cat
Contributing Member
Cash: $ 2.90
Posts: 29
Joined: 12 Jul 2006
Location: Central Florida
|
|
|
|
I have a different view of investing. You need to learn about what you are investing in and just doing an allocation doesn't take that into consideration. I am extremely leery of investment advice as the traders want you to trade and trade often to make them commissions.
Real estate is always good, particuarly your own home. Since you have that down well with the roommates, you might consider an additional house that you rent out. I would look for a house in your current neighborhood so you can take care of both properties easily.
Mutual funds are a good way to invest while you are learning as there are many following different investment ideas. Unless you have done a lot of learning, you want a mutual fund for foreign investing and bonds. Do your work and check them out.
Also I would never invest everything aggressively. You are so far ahead that you don't need to make a ton of money quickly. Put some of your investment into more conservative things.
Last piece of advice is don't get greedy. Slower and steady beats overly risky any day.
|
|
Wed Jul 12, 2006 9:23 pm |
|
|
Kiaser
Senior Member
Cash: $ 43.05
Posts: 209
Joined: 12 Apr 2006
|
[quote="Blue Eyed Cat"]I have a different view of investing. You need to learn about what you are investing in and just doing an allocation doesn't take that into consideration. I am extremely leery of investment advice as the traders want you to trade and trade often to make them commissions.
quote]
Well, I've always wanted to gain a little in real estate and all (which means spending time learning and such) but as far as spending too much time learning, keeping up with, and overseeing other investments such as mutual funds kinda defeats my whole purpose of investing. Investing for me is more of a place to put money to make it work for me, instead of working for that extra money. Following funds, market performance, and trends, etc is really against the whole point for me. Of course, I know I'd be in a safer place and make more money by being personally involved with every aspect of my investments, but that would defeat the majority reason for me to invest in the first place.
|
|
Thu Jul 13, 2006 3:13 am |
|
|
|
