Jon wrote:
- quote -

Instead of, or in addition to, making your categories by size of the
company, consider some categories by sector of the economy such as
energy, tech, home building, medical, etc. The sectors vary more than
than the various sizes of companies, so they are most in need of
rebalancing.

--
Ron

- quote -

How much do you need to save/invest to spin off the income required to pay a
mortgage? Answer: More than to have just paid the mortgage in the first
place. My mortgage was paid up several years ago and I have been enjoying
the benefits ever since. How much more discretionary income would you have
if you didn't have a mortgage?

My comment was not just about paying off the mortgage. My comment was that
the amount you need for retirement depends on your expenses. My comment was
about my wanting my discretionary income to be the same in retirement as it
is during working years. In addition to saving investing, one must address
expenses. For most people, a mortgage is their largest expense, so if that
expense is eliminated, the income needed has been reduced.

I also comment on your statement regarding the state wanting my home equity
before I can depend on them for long term care. Quite simply, I do not
expect my neighbors to pay for my long-term care. I have an LTC policy,
which has quite reasonable costs ($2000 annually which buys $320,000
benefits, with annual compound increases) and I expect it to cover my needs.
As you rightly point out, I also have the equity in my home. While my
husband and I each have 2 children, and they might expect to inherit, we see
no obligation to leave behind any wealth. We had to do it on our own, and
I'm sure they will also make their own way.

Elizabeth Richardson

Elizabeth,

There are multiple ways to pay for a retirement. One is to reduce the
expenses to a small number. The other is to produce a lot of passive
income even if you have higher expenses.

Why focus on having a paid off mortgage? The emotional value of not
owing a lender might be high. You still can not live off the equity and
largely are implying that when you die the equity is still there. If
you enter into long term care the state will expect the equity from the
home to be used to off set the costs of care before the state will
provide coverage. You do have possible appreciation if you own the home
in retirement.

At the other end of the spectrum you might find that you can safely
invest money during retirement at an interest rate significantly higher
than the cost of funds for a mortgage. You would have the more liquid
assets and be generating income that exceeds the cost of the debt
service (before or after taxes). Definitely slightly more complex than
a free and clear home. Lower emotional value to many people. Again, you
have possible appreciation.

The middle ground might be a reverse mortgage that provides a lump sum
which does not have to be paid back until you have died or otherwise
sold the home. You lose much of the possible future appreciation while
having more access to your capital with limited strings and no monthly
payments.

I am mostly trying to understand the investment logic of driving down
the expenses if it means tying up larger sums of capital. I am not
saying it is good to have expenses. Just that some solutions take more
capital than others. When you get near the extremes the costs rise in a
disproportionate way. Having a F&C home for 30+ years could likely be
much more limiting to your retirement lifestyle than having less equity
and more investment income.

John Corey

FranksPlace2, do you mind dropping some names of any quality
newsletters? And thank you all for your input. As always I pick up
something new each time I check this group...

"FranksPlace2" <FranksPlace2[at]gmail.com> wrote in message
news:1142612126.469240.102640[at]v46g2000cwv.googlegroups.com...

- quote -

My goal is to have as much discretionary income in retirement as I have
during my working years. One way to do this is to minimize reitrement-years
expenses, such as having a paid-up house (no mortgage). By doing this, I
don't have to save/invest enough to pay mortage interest during retirement
(which in reality is someone else's retirement).

- quote -

I plan to live in retirement 30-35 years, recognizing a possibility of 40
years.

Elizabeth Richardson

Here are my three rules:
1) Decide your retirement goals
2) Confirm you can deal with the risk to achieve item 1.
3) Don't have money in equities that you need in five years.

My goal is to have as much take-home income after I retire as before.
After all I will have more time to spend it.

This means I put everything I can in growth mutual funds. I subscribe
to two newsletters to help me pick the best opportunities. 20% of my
portfolio is agressive growth which I monitor twice a month. My equity
portfolio is above market risk.

I have enough money to live on for 5 years in non-equities.

I don't think age is important to my rules. I plan to live 25 years
after I retire so I will maintain the same rules.

Frank




Jon wrote:
- quote -

The 'ideal' mix is subjective and dependent on a number of things such
as age, objectives, views on risk, target retirement age, etc. All
things others have largely touched on.

What I do not see is any discussion of an ideal mix that some factors
in the asset classes note listed in your mix. At some level the present
mix assumes only exchange traded or over the counter assets that are
promoted by wall street institutions. If I remember correctly there are
something like 17 asset classes covered in some academic papers on the
ideal mix.

One obvious one that most people already have is real estate (not as an
REIT or fund). Others include commodities, art, private equity
offerings or VC investments, etc.

So, how far does one want to take 'ideal'? If ideal is to be the mix
that is best optimized then there are more thing asset classes to
consider and a lot of factors related to age, risk, etc.

Two factors that is implied by your list is liquidity and hands-off
investing. Some asset classes require more work and are not liquid over
short to mid-term horizons. It is for that reason that some of those
classes will greatly outperform over reasonable time horizons (time
horizons that are in balance with the asset class).

John

"Jon" <jonworth[at]yahoo.com> wrote in message
news:1142346598.005614.315190[at]j33g2000cwa.googlegroups.com...
- quote -

Check here for various model portfolios:

http://www.geocities.com/finplan825/...lios-Data.html

You don't say how much risk you're willing to assume, so what's ideal for
you may not be ideal for another 40 year old. Also, you don't say when
you're planning to retire. One 40 year old may want to retire young at 55,
another at 67. "Ideal" is pretty subjective.

If you look at the various economies throughout the world you will find most
have growth rates exceeding that of the US. Add to that the trend of the
declining US dollar vs other currencies and it is evident that one should
consider investment in non-US equities. The best instruments are unhedged
ETF's and mutual funds. I have more invested outside the US than I have in
US investments. I have had fantastic returns over the last few years and
expect them to continue in the future. The US is in decline but no one will
admit it. Just adjust the Dow and NASDAC with the dollar adjusted against a
basket of currencies and you will see that US equities have gone down hill
over time.



"Jon" <jonworth[at]yahoo.com> wrote in message
news:1142346598.005614.315190[at]j33g2000cwa.googlegroups.com...
- quote -

jIM - Excellent handling! You lay out allocation theory very clearly.
And you get into the depth of it, too.

To the OP - Picking up exactly on what Elle posted, what you referred
to contains some marketing push, and allocation is generally taken as
dependent on age and risk tolerance - keep that in mind. Part of your
decision depends on your 'earned income' scene, as that will influence
your 'risk / reward' mix. The rule of thumb is that the younger you
are, the more time you have for the average expected returns to play
out. In conjunction with that, one's 'peak earnings years' are usually
taken to be 40-60, 45-65, or for Buffett fans, 60-80

Run a spreadsheet or two with expected returns for the various asset
classes, as you laid out, and include your expected savings additions.
Depending on your analytical skills, it may not be an easy spreadsheet
to set up, but it may well prove very valuable to you over the years as
you keep it updated.

plenty of thoughts.

This is general, I know I am an exception to this, and many others here
would be exceptions, and all of us would be different.

If you want more income, increase the real estate and bonds portion
if you want more growth, increase real estate, reduce bonds, and
increase mid cap and small cap
if you want less "volatility" (change of principle), increase bonds and
reduce stocks, but have more types of stocks (like small cap
international or income funds or something similar).

The comments of this person are not bad but at best a
general guideline, and one of many on the subject of
portfolio allocation. I sense you know this from your
putting "ideal" in quotation marks in the subject line. :-)

You will find the allocation you posted to be similar to
that of the many free online allocation tools at
http://home.earthlink.net/~elle_navorski/id4.html , which
base their output on things like age and risk tolerance. The
point is to understand that allocation is not an exact
science (unless one has the proverbial crystal ball).
Proposed allocations are based on past performance, and as
you may be aware, the standard disclaimer for any reputable
financial planner is 'past performance is no guarantee of
future performance... '

Keep lurking here to continue refining your thoughts on
this. Remember the only stupid question (assuming one has
attempted one's homework--via google, say--a little first)
is an unasked one. Otherwise, you're off to a good start.

Hey folks,

This has probably been hammered to death already, but somebody I know
saw a report somewhere on the (so-called) "ideal mix" for a portfolio
for a 40-year-old saving for retirement. It says that if the
percentages are kept constant and each group of stocks are divided
between value and growth, an investor is ready for any market cycle.
The example of the ideal mix they gave was:

40% in large-cap index funds
20% in international funds
20% in bonds
7.5% in mid-cap funds
7.5% in small-cap funds
5% in real estate investment trusts

Any thoughts out there?

Jon