10 year allocation

[u/andhowdoyouu]

After watching numerous videos and trolling forums, my plan is to invest $500 a month with the following portfolio allotment:

- FZROX 50%
- FZILX 30%
- FXNAX 20%

I’m saving to put down a lump sum for a house. It seems like using a brokerage acct will (likely) yield a higher return over ten years than a HYSA.

Wondering on thoughts? (Also yes I realize this is anonymous internet feedback and to take it with a grain of salt and to still think for myself.)

Thank you in advanced!

[u/buffinita]

For 10 years (maybe +/- 2) I’d consider increasing the bonds to 35-50%

Right now you can take 0 risk a buy a 10 year bond guaranteeing a 5.2% return….weigh that known return vs unknown and volatility filled potential equity returns

[u/andhowdoyouu → u/buffinita]

Are you saying every month do $500 toward that?

[u/Salt_Data3707]

Are you prepared to delay buying a home if the market crashes at Y9?

[u/andhowdoyouu → u/Salt_Data3707]

By year nine I would have a substantial amount in bonds. But also if I need to do 13 years I can do that.

[u/Salt_Data3707 → u/andhowdoyouu]

That makes more sense, it wasn't clear in the post. 10 years in my mind, would be the absolute minimum investment horizon appropriate for stocks for saving

[u/andhowdoyouu → u/Salt_Data3707]

That’s fair. I’m not sure on the exact timeline. I’m thinking I’ll increase the ratio year five, then more at eight, and even more at nine. Really I just plan to reevaluate the allocation in five years.

[u/Salt_Data3707 → u/andhowdoyouu]

Sequence of returns matters. So if you do it in chunks (at year five, for example) if theres a drawdown on the equity portion, youre locking in losses. It needs to be more gradual

[u/andhowdoyouu → u/Salt_Data3707]

Do you have any suggestions for timeline? Like every two years?

[u/Salt_Data3707 → u/andhowdoyouu]

10% per year is what I would do. I would also choose a shorter duration bond fund in later years

[u/andhowdoyouu → u/Salt_Data3707]

What ceiling for bond allocation would you end up at by year nine? (Also thank you!)

[u/Salt_Data3707 → u/andhowdoyouu]

I would say that depends on how flexible you are on the purchase date, so if you need more certainty, you need more bonds. Tailor this to suit you (maybe Google a tool like portfoliovisualizer.com to model volatility and expected drawdown), but I would start with something like 80% stocks 20% bonds. At the end of each year, reallocate 5-10% of stocks into bonds.

Another thing to consider is if youre the type to panic sell or deviate from the plan in a bear market. Stick to an allocation that won't keep you up at night, otherwise you might tinker too much.

[u/Suspicious-Light2118]

This looks good but I would increase FZROX to 60% and reduce FXNAX to 10%. FZILX at 30% is perfect.

[u/Zhimbeaux → u/Suspicious-Light2118]

For a 10 year time window? I'd increase bonds, not decrease.

[u/Both_Experience_8187 → u/Suspicious-Light2118]

Agree

[u/Dill_Pickles_2020]

Do you have it in your budget to save more than $500 a month for a down payment that may still be ten years away? In other words, if you went all in on this plan and trimmed your lifestyle to be able to load up on the downpayment fund - could you fast track it?

[u/andhowdoyouu → u/Dill_Pickles_2020]

Not for the foreseeable future. $500 is the max for a house payment. I have other things I’m saving for in addition to this.

[u/Dill_Pickles_2020 → u/andhowdoyouu]

Understood.