Investment allocations

[Anonymous]

Review my allocations and tell me if any adjustments are needed. This is for both of us, mid 30s, two kids under 3.

529: 13K, $400 a month
Roth 401K: 220K, 10% a PP
Roth TSP: 380K, 8% a PP
5% CDs: 100K
Savings: 50K
Brokerage: 80k in IVV or similar.
Crypto: 20K

[Anonymous]

Looks good. Well done, OP!

[Anonymous]

This looks very good but what is your HHI?

[Anonymous]

Anonymous wrote:This looks very good but what is your HHI?

420k

[Anonymous]

Are you maxing out your tsp and 401k? At 420k i would definitely recommend maxing traditional 401k and tsp ($18k or whatever it is this year) and then doing a back door Roth and probably 10k in ibonds too.

Also seems odd to have more in crypto than a 529. Crypto to me is essentially gambling — feel free to do it and you can make a lot of money but I’d only do it after everything else is provided for.

[Anonymous]

I would consider moving $20k of savings to ibonds before the end of April for tax deferral and inflation protection (decent chance the rate will drop some for bonds bought in May— you’d be locking up the money for a year but between the other savings and CDs that should be a problem).

[Anonymous]

Anonymous wrote:Are you maxing out your tsp and 401k? At 420k i would definitely recommend maxing traditional 401k and tsp ($18k or whatever it is this year) and then doing a back door Roth and probably 10k in ibonds too.

Also seems odd to have more in crypto than a 529. Crypto to me is essentially gambling — feel free to do it and you can make a lot of money but I’d only do it after everything else is provided for.

Yes the retirement is currently maxed. We contributed less for a few years when we were saving for a home down payment and before married when we didn’t make much.

The crypto is primarily from my eth mining/trading days. It’s a long term hold now.

Im not familiar with a back door Roth, I’ll have to research that.

[Anonymous]

Anonymous wrote:Review my allocations and tell me if any adjustments are needed. This is for both of us, mid 30s, two kids under 3.

529: 13K, $400 a month
Roth 401K: 220K, 10% a PP
Roth TSP: 380K, 8% a PP
5% CDs: 100K
Savings: 50K
Brokerage: 80k in IVV or similar.
Crypto: 20K

no tail hedge or no convexity in the portfolio. you basically have about 150k in cash, 150k in bonds and 450k in index funds.
in any scenario such as the stagflationary 70s, both stocks and bonds will lose value in real terms.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Review my allocations and tell me if any adjustments are needed. This is for both of us, mid 30s, two kids under 3.

529: 13K, $400 a month
Roth 401K: 220K, 10% a PP
Roth TSP: 380K, 8% a PP
5% CDs: 100K
Savings: 50K
Brokerage: 80k in IVV or similar.
Crypto: 20K

no tail hedge or no convexity in the portfolio. you basically have about 150k in cash, 150k in bonds and 450k in index funds.
in any scenario such as the stagflationary 70s, both stocks and bonds will lose value in real terms.

Explain that to me like I’m 10.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Review my allocations and tell me if any adjustments are needed. This is for both of us, mid 30s, two kids under 3.

529: 13K, $400 a month
Roth 401K: 220K, 10% a PP
Roth TSP: 380K, 8% a PP
5% CDs: 100K
Savings: 50K
Brokerage: 80k in IVV or similar.
Crypto: 20K

no tail hedge or no convexity in the portfolio. you basically have about 150k in cash, 150k in bonds and 450k in index funds.
in any scenario such as the stagflationary 70s, both stocks and bonds will lose value in real terms.

Explain that to me like I’m 10.

NP. yes, would love to understand this as well.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Review my allocations and tell me if any adjustments are needed. This is for both of us, mid 30s, two kids under 3.

529: 13K, $400 a month
Roth 401K: 220K, 10% a PP
Roth TSP: 380K, 8% a PP
5% CDs: 100K
Savings: 50K
Brokerage: 80k in IVV or similar.
Crypto: 20K

no tail hedge or no convexity in the portfolio. you basically have about 150k in cash, 150k in bonds and 450k in index funds.
in any scenario such as the stagflationary 70s, both stocks and bonds will lose value in real terms.

Explain that to me like I’m 10.

think of the stock market like a alligator dentist toy, it lulls you into a sense of security before shutting down its jaw onto your portfolio, destroying your retirement forever. If you are not paranoid, you don't understand market history.

The market has been and is always a series of fractal traps

Lets take the case of someone in the 1920s who is 35, he/she is someone who has seen/heard only the relentless progress from the industrial revolution, there were a few financial panics along the way, but most end up stabilizing, you have seen people move from horses to automobiles and there is this new fangled airplane, there was massive progress in petroleum, fertilizers, mechanization, the rise of movies and electronics, the future seemed one of unrelenting progress. Then BAM, the trap slams shut and you experience nothing but volatility and market crashes for the next 20 years and will not breakeven before your retirement. Now think about someone who was 35 in 1955, your parents told you nonstop about the harsh conditions during the great depression, the rationing during WWII, the stock market is trading at 3x P/E, but everyone older than 40 distrusts it and prefers to own government bonds, you however, are not warren buffet, you follow the accepted reality of the time and miss out on the great bull market of the 50-60s. Someone who became 35 in the early 1970 would be super bullish on stocks having witnessed the 20+ year bullrun and be wiped out by the staglationary period of the 70-80s. Someone who was 35 in the 90s and has seen bullish markets for 20 years would have been wipesawed by dot com and the GFC and only broken even after ~20+ years.

You, like most people, have been sold through the passive racket of "stocks for the long run" and that if you just weathered volatility, you could see 8.5% returns in the long run. That is far from the truth. Most people's realistic investment time horizon is 30 years, and there are plenty of scenarios in time in which you could be in the volatile periods which means you could be wiping out most of your savings.

Additionally, that 8.5% return is anchored to the current mark to market price of the large stock indexes, which have been on a bull run for close to 15 years. Stock market capitalization as a % of GDP is 200% while the historical average is ~100%. If say stocks were to correct 50%, the long term return of stocks would fall from that 8.5% number to be closer to 4.3%.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Review my allocations and tell me if any adjustments are needed. This is for both of us, mid 30s, two kids under 3.

529: 13K, $400 a month
Roth 401K: 220K, 10% a PP
Roth TSP: 380K, 8% a PP
5% CDs: 100K
Savings: 50K
Brokerage: 80k in IVV or similar.
Crypto: 20K

no tail hedge or no convexity in the portfolio. you basically have about 150k in cash, 150k in bonds and 450k in index funds.
in any scenario such as the stagflationary 70s, both stocks and bonds will lose value in real terms.

Explain that to me like I’m 10.

think of the stock market like a alligator dentist toy, it lulls you into a sense of security before shutting down its jaw onto your portfolio, destroying your retirement forever. If you are not paranoid, you don't understand market history.

The market has been and is always a series of fractal traps

Lets take the case of someone in the 1920s who is 35, he/she is someone who has seen/heard only the relentless progress from the industrial revolution, there were a few financial panics along the way, but most end up stabilizing, you have seen people move from horses to automobiles and there is this new fangled airplane, there was massive progress in petroleum, fertilizers, mechanization, the rise of movies and electronics, the future seemed one of unrelenting progress. Then BAM, the trap slams shut and you experience nothing but volatility and market crashes for the next 20 years and will not breakeven before your retirement. Now think about someone who was 35 in 1955, your parents told you nonstop about the harsh conditions during the great depression, the rationing during WWII, the stock market is trading at 3x P/E, but everyone older than 40 distrusts it and prefers to own government bonds, you however, are not warren buffet, you follow the accepted reality of the time and miss out on the great bull market of the 50-60s. Someone who became 35 in the early 1970 would be super bullish on stocks having witnessed the 20+ year bullrun and be wiped out by the staglationary period of the 70-80s. Someone who was 35 in the 90s and has seen bullish markets for 20 years would have been wipesawed by dot com and the GFC and only broken even after ~20+ years.

You, like most people, have been sold through the passive racket of "stocks for the long run" and that if you just weathered volatility, you could see 8.5% returns in the long run. That is far from the truth. Most people's realistic investment time horizon is 30 years, and there are plenty of scenarios in time in which you could be in the volatile periods which means you could be wiping out most of your savings.

Additionally, that 8.5% return is anchored to the current mark to market price of the large stock indexes, which have been on a bull run for close to 15 years. Stock market capitalization as a % of GDP is 200% while the historical average is ~100%. If say stocks were to correct 50%, the long term return of stocks would fall from that 8.5% number to be closer to 4.3%.

Ok, so what adjustments should I make?