I simply don't.If 'could' and 'potential' don't factor into your asset allocation setting than what exactly do you base your future returns for different asset classes above the risk-free rate on?A couple of key words in your post are "could" and "Potential", those words don't factor into the setting of my AA. I suppose if those words were replaced with "did" downsize and "have" cash out. Then I would obviously need to rebalance my AA.When calculating AA how does one compute the potential liquid cash value of home equity.
Lets say you could downsize your non mortgaged primary residence and cash out 500K of home equity and use the remaining home equity to purchase a downsized primary residence.
Should this 500K be included in your Non-Stock side of the AA formula?
When Bogleheads state their AA ... lets say 60% stocks / 40% Bonds+Cash+MM, does anyone include a portion of the potential liquid Home Equity in the formula also?
I personally compute two AA formulas.. one with and one without HE but just curious how others calculate.
I rebalance when needed and since I'm spending down my fixed income. Since being retired I've rebalanced from stocks to FI a couple of times to maintain my 50/50 AA, my 50% in fixed income is 15x. I can't count on what the "above the risk-free" portion of the portfolio could potentially provide and I certainly can't spend that now.
A person with a plan that requires something stock and real estate could potentially provide may be in for disappointment (or not). I prefer a plan that leaves little doubt.
Statistics: Posted by retireIn2020 — Sat Sep 28, 2024 9:18 pm