Asset Allocation Nerdiness

When you are laid up, you start focusing on the administrative aspects of your life... like investment diversity.  Disclosure: I am a massive personal finance geek and this is a topic that fascinates me.


I have been focusing on making sure my investment portfolio is diverse and tax efficient.  I am a firm believer in commission-free ETF investing and have moved my Roth and most of my personal trading accounts over to TDAmeritrade because they have over 100 commission-free ETFs.  My 401k is with T. Rowe Price but there isn't much I can do about that.  I still have some play-money in TradeKing so I can pretend I am Gordon Gekko with option trading and pure speculative stock buys (cheap commissions).  I even factored this into my asset allocation.  I also have money in Fidelity because that is where my credit card is managed but I will slowly transition most of this money to the TDAmeritrade personal account.

And yes... I have a shirt just like that.

Below is my target asset allocation (at a general level):

Category	Percentage
Stocks	65%
Bonds	30%
Cash	5%

Now, breaking that down to a more detailed level:

Category	Sub_cat	Allocation
Cash	Cash	100%
Stock	Intl Large Cap	20%
Stock	Intl Small Cap	10%
Stock	Emerging Markets	10%
Stock	Domestic Large	35%
Stock	Domestic Small/mid	20%
Stock	Play Investing	5%
Bonds	muni	10%
Bonds	TIPS	10%
Bonds	corp/domestic	25%
Bonds	Treasuries	5%
Bonds	Intl Emerging Markets	15%
Bonds	Intl	15%
Bonds	Junk	10%
Bonds	MBS	10%

My allocation is a bit more conservative than what a typical 30 year old may like but this fits my risk tolerance.  I am slowly moving my investments into this structure and it will take probably all of this year as I buy a little at a time.


Based on the funds/ETFs that I am using, the overall expense ratio of my portfolio is just 0.099% which is awesome.  I hope to keep my expenses low and stick to my allocation above through thick and thin in the market for at least a few years.


In addition, the portfolio is now very tax efficient.  In 2011, I got destroyed by taxes on my investments (God how I wish FairTax was in place...) so I needed to have an investment strategy that didn't result in me giving most of my gains to the government.   The things I focused on were putting higher dividend yielding holdings in tax free accounts and to do very little selling.  As these are ETFs, the tax consequence is based on selling the securities.  Because I am rebalancing the portfolio through new money, selling is a very rare event and as such, capital gains taxes will be greatly reduced...  except for my play money portfolio of course.


 I will monitor my performance and make sure I am in line with overall market metrics but having a plan makes me much more confident in investing as well as reducing the amount of stress involved with trying to beat the market with individual stocks.  As I like to say, don't try to beat the market.  Be the market...  over the long term :)