IRA asset allocation in 2018


As 2017 winds to a close, I am two full years into early retirement.  My balances are where I need them to be, with record gains outstripping my withdrawal rate.  Those ‘record gains’ are no making me nervous.  Logically it feels like almost everything is over-valued.

 

There’s a handful of folks saying it will all come crashing down soon, while the majority of pundits say 2018 will be like 2017, only ‘milder’.  I am betting on the former.  While adding another 20% to our portfolio value in 2018 is tempting, we don’t really need it.  I think there’s a very real possibility that sometime in the next eighteen months Mr. Market is going to correct downward by as much as a third.  That would sting.  

 

Specifically, I’m halving my position in DLS,which has been a strong gainer (28% in 2017) and was also my most expensive fund at 0.58%. I’m also throttling back on the US stocks, more sharply on the ‘Growth’ side and giving a little edge to ‘Value’; this is an attempt to put a little distance between high PE ratios and my portfolio.  I’m adding a healthy slug of cash. The cash will do two things for me, give me a ready reserve of living expenses so I’m not forced to sell in a down market as well as give me some ‘dry powder’ to take advantage of any downturns for bargain shopping.  I’m also adding a small position in Gold as a hedge.  I used to trade Gold prior to 2014, I got out because I was heavy in Oil and other commodities elsewhere in my portfolio.  We know how that panned out.

 

Since I’m using Schwab as a brokerage, I am primarily using their ETFs.  These funds are low expense, and as a bonus they trade for free in the Schwab universe.

 

Here is what I’m considering:

 

 

Category

FundName

Ticker

Percent

Expense Ratio

US Equities 43%

US Large Cap Growth Stocks

Schwab U.S. Large-Cap Growth ETF (SCHG)

SCHG

8.00%

0.07%

US Large Cap Value Stocks

Schwab U.S. Large-Cap Value ETF (SCHV)

SCHV

9.00%

0.07%

US Small Cap Growth

SPDR S&P 600 Small Cap Growth ETF

SLYG

8.00%

0.28%

US Small Cap Value

SPDR S&P 600 Small Cap Value ETF

SLYV

9.00%

0.30%

ETF – REIT

Vanguard REIT

VNQ

9.00%

0.10%

Bonds 15%

Short Term Treasuries

Schwab Short-Term U.S. Treasury ETF

SCHO

6.00%

0.08%

Intermediate Term Treasuries

Schwab Intermediate-Term U.S. Trsy ETF

SCHR

5.00%

0.10%

TIPS

Schwab U.S. TIPS ETF

SCHP

4.00%

0.07%

International Equities 28%

Intl Equity

Schwab International Equity ETF

SCHF

7.00%

0.09%

Intl Large Cap Value

SPDR S&P International Dividend

DWX

7.00%

0.45%

ETF - Int'l Small Cap

WisdomTree International SmallCap Div

DLS

7.00%

0.58%

Intl Diversified Emerging Markets

Schwab Emerging Markets Equity ETF

SCHE

7.00%

0.15%

Gold, Cash 14%

Gold

ETFS Physical Swiss Gold Shares

SGOL

4.00%

0.39%

Cash

 

$$$

10.00%

0

100.00%

0.19%

 

 

 

 

 

 

The result is very low expense with decent diversification and mostly free trades.  I hung on to the Vanguard REIT in lieu of Schwab’s SCHH, as the Vanguard just seems to perform much better, at least on a trailing basis. 

 

Wish me luck!


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Send e-mail to: Todd <todd@thepeaches.com>