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Asset Allocation Question For the Masses

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Asset Allocation Question For the Masses

Old 08-25-2017, 06:48 AM
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Default Asset Allocation Question For the Masses

I'm just curious as to how some of you view asset allocation. Here's the question:

If you knew you had more than enough put away to support your lifestyle for the rest of your/spouses life if your investment return was -0-, how would you allocate your investments and why? There are a couple of obvious reasons "why", and many different ways to view the issue.

I deal with this issue frequently in my practice, and have clients who approach the subject very differently. I'll share what I've seen later.
Old 08-25-2017, 06:50 AM
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So in other words you would never run out of money, correct?
Old 08-25-2017, 07:03 AM
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Originally Posted by fishknut View Post
So in other words you would never run out of money, correct?
Correct. Even taking into account inflation, you could keep it all in a Treasury-only money market account and have a comfortable cushion for you and your wife.
Old 08-25-2017, 07:05 AM
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I've left out other details that may come into play just to "test" everyone. But those are very individual.
Old 08-25-2017, 07:13 AM
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How do you account for unexpected major medical issue? (Which could cost millions of dollars)
Old 08-25-2017, 07:27 AM
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Originally Posted by Onewolf View Post
How do you account for unexpected major medical issue? (Which could cost millions of dollars)
Health insurance/Medicare. Assume you have enough to cover it.
Old 08-25-2017, 07:29 AM
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Originally Posted by Onewolf View Post
What about unexpected major medical issue?
I would assume that this clientele has a net worth that would cause even a major medical issue to seem like a drop in the bucket $ wise.

I think the obvious and easy answer would be to park the money in a low risk environment if the client is ok with that and thats what they desire. If thats not what they are looking for I know a lot of wealthy people who find more enjoyment investing a portion in areas that they enjoy even if has a higher risk or failure rate.

For example I know someone who enjoys exotic cars so they purchased a piece of land with a large warehouse and other shops. They leased out the storefronts and used the warehouse as an exotic car service center. They hired a few accomplished mechanics and ran with it.. Was the service center a money maker? No. But he had fun with it and had some passive income coming from the tenants in other buildings..

Even setting up a foundation to give money away can be beneficial to people with a high net worth because they typically enjoy helping others and its a tax break.

The possibilities are endless. Bottom line is what are the clients looking for? Are the looking to be hands on or hands off? Looking to make money or retain their existing money? Lots of variables and avenues..
Old 08-25-2017, 07:31 AM
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This isn't an issue I need help with because it is a very individual topic. I'm just curious as to how some of the members here will approach it. The issue really isn't the specific allocation, but why.
Old 08-25-2017, 07:40 AM
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Originally Posted by Sprockets View Post
I'm just curious as to how some of you view asset allocation. Here's the question:

If you knew you had more than enough put away to support your lifestyle for the rest of your/spouses life if your investment return was -0-, how would you allocate your investments and why? There are a couple of obvious reasons "why", and many different ways to view the issue.

I deal with this issue frequently in my practice, and have clients who approach the subject very differently. I'll share what I've seen later.
I would keep it in cash then... you don't need a return

Most of my extremely well healed friends are overweight real estate and bonds btw ..
Old 08-25-2017, 07:49 AM
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Originally Posted by Sprockets View Post
I'm just curious as to how some of you view asset allocation. Here's the question:

If you knew you had more than enough put away to support your lifestyle for the rest of your/spouses life if your investment return was -0-, how would you allocate your investments and why? There are a couple of obvious reasons "why", and many different ways to view the issue.

I deal with this issue frequently in my practice, and have clients who approach the subject very differently. I'll share what I've seen later.
I really have no idea (that's why I pay someone to manage my money ) but I'd have to ask myself what else is important in my life. I'm not a 'whomever has the most toys at the end wins' guy but family, giving back to my community, and philanthropy are all noble imho.

Shooting from the hip...

30% Cash and Gold
50% Stocks
10% Bonds
10% Real Estate
Old 08-25-2017, 07:51 AM
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Ok. Here's what I was really looking for, and it really comes down to goals of HNW families.

Some might respond by saying "I want to provide my kids with as large an inheritance as possible, why not?" They might want an allocation that provides some level of growth.

Others might respond by saying "I'm leaving xxx to my kids, with the balance going to charity. I want to maximize the benefit to the charity." They might want an allocation that provides some level of growth, and they may have a legal duty to do so if they have a charitable beneficiary.

And other might say "F" everyone. Keep it in a Treasury-only money market fund.

What's interesting is I have some of each in my practice.

I was really looking to see what opinions would crop up here.
Old 08-25-2017, 07:51 AM
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I'd be hedged out for sure no matter what I did as I didn't "need" the money.
Old 08-25-2017, 07:58 AM
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Originally Posted by Sprockets View Post

And other might say "F" everyone. .
bingo .....

I put all the kids thru college and provided a good education ,,, I will also help them purchase their first home..

They all know not to expect a dime from me at the end ....

But if I don't spend all my money - then they can split whatever is left ...
Old 08-25-2017, 08:15 AM
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25%gold/silver, 25% income producing properties like rentals, etc., 25% general stocks/funds, 10% treasuries/bonds and 15% resource stocks and the like
Old 08-25-2017, 08:24 AM
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Originally Posted by triplenet View Post
bingo .....

I put all the kids thru college and provided a good education ,,, I will also help them purchase their first home..

They all know not to expect a dime from me at the end ....

But if I don't spend all my money - then they can split whatever is left ...
This is what I was really looking for.

My largest client wants their kids to have the biggest pile of cash possible. This causes them to take more risk (ie. larger allocation to stocks) than they need.

My second largest client is in the "F" them all camp.

Another large client who is very receptive to planning, has allocated a portion of their portfolio to each possibility. One account to be left to charitable beneficiaries, one to the kids and one they live off.

It's more a question of philosophy than anything, and there is no right or wrong answer.
Old 08-25-2017, 08:28 AM
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I have been blessed with two great kids, If I knew money would not be a problem for me and my wife ever, I would chose to give my kids all the monetary help that would make their lives even more enjoyable then they already are. I would be convinced they would spend it wisely. And by wisely I even mean a nice boat, or motorhome, or a nicer home, what ever they deem wisely.
Old 08-25-2017, 08:33 AM
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Originally Posted by Sprockets View Post

It's more a question of philosophy than anything, and there is no right or wrong answer.
I have a lot of friends who frantically save their money to give to the kids ....

I am not in that camp.... One life to live - and I plan on living it my way with my money

but between us - I hope there will be a nice chunk left for the kids at the end ...

but if not - C'est la vie
Old 08-25-2017, 08:39 AM
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If the money isn't really needed to grow then I would think keeping pace with inflation, preservation of capital and reducing tax exposure would be paramount. Federal securities, municipal bonds and some portion of large cap equities should accomplish those goals.
Old 08-25-2017, 09:45 AM
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When I get to the point your speaking of, my asset allocation will then be (in no particular order) a Freeman 42, Prowler 42 or Compmillenia 42 (assuming the companies are still in business by that time), then maybe a new Corvette or Ferrari....unless the wife wants a 2nd vacation home. We don't have kids and as long as she's taken care of after I pass, that's all I care about and you already said that was taken care of, so we are going to enjoy the hell out of any extra that needs allocating.
Old 08-25-2017, 09:51 AM
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I would be about 25% in equities, rest in treasurys and tips and about 10% in pms.

Would still want some growth because even though you may think you know you have absolutely enough you really can't know for sure. Also the extra growth would be used to help other family members if the need arose, and do some charitable gifts.

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