Why is asset allocation so hard...

MaxiRobriguez

Asset allocation in retirement is well know as being very tricky. There are elements that younger people do not need to consider (as much) like:
1) Risk tolerance. Young people can go 100% equities and just ride it out, time is on there side.
2) Duration of portfolio. You don't know how long you'll live so if any planned drawdown (rather than preservation) could leave you with loads when you die or nothing whilst you're living.
3) Earnings opportunity dwindles. If young people get their asset allocation wrong, they can always just try and earn more. Older you get/deeper into retirement you get, harder than becomes.

Thrugelmir

MaxiRobriguez said:

1) Risk tolerance. Young people can go 100% equities and just ride it out, time is on there side.

Get the mix of equities wrong and such a gung ho approach will underperform a more diversified portfolio. 

bostonerimus

MaxiRobriguez said:

Asset allocation in retirement is well know as being very tricky. There are elements that younger people do not need to consider (as much) like:
1) Risk tolerance. Young people can go 100% equities and just ride it out, time is on there side.
2) Duration of portfolio. You don't know how long you'll live so if any planned drawdown (rather than preservation) could leave you with loads when you die or nothing whilst you're living.
3) Earnings opportunity dwindles. If young people get their asset allocation wrong, they can always just try and earn more. Older you get/deeper into retirement you get, harder than becomes.

I think the OP has things covered quite well. They have rental properties which can provide income and a 12% cash allocation and both of those will help to ride out stock crashes. And you can always take dividends and spend those rather than selling into a down market.

MaxiRobriguez

Thrugelmir said:

MaxiRobriguez said:

1) Risk tolerance. Young people can go 100% equities and just ride it out, time is on there side.

Get the mix of equities wrong and such a gung ho approach will underperform a more diversified portfolio. 

Obviously - but young people can take the risk and have time on their side to recover from it if it doesn't pay off.