Last week I posted a poll to see what people were interested in seeing on this blog. 200 views, but only 5 votes. Not bad for my first poll.

So the question is: What is a balanced portfolio? The standard definition separates out Risk Tolerance, Financial Goals, and Timelines. What is balanced for someone in their 20s is much different than for someone in their 80s who can’t or doesn’t want to work anymore.

Some people see balance as diversification. While I feel the two are entwined, I’m not sure I would count VOO as balanced simply because it has 500 companies inside of it. A frequently touted form of balance is between Stocks and Bonds. The historical rule of thumb is that younger people should have more stocks and fewer bonds, and that you flip the ratio as you get older.

In the ‘Talk like an Investor‘ article I talk about my IPS (Investment Policy Statement). I keep a simple balance of 60% US, 30% International, and 10% Bonds. I re-balance every January. Now, this is what I consider balanced for me. I’m still in my 30s, I feel the market is strong and I even sometimes feel like 10% Bonds is too big of a drag on my portfolio. The more I educate myself, especially with growing this website, the more I might be making a change to that in the long run.

Staying on track, balance is individual. I think it’s wise to not keep all your eggs in one basket. I think 100% US growth stocks can be a powerful tool that might win every decade for the next 100 years, but are you willing to risk 100% of your portfolio on that? 100% of your retirement? If you are, then congratulations you’ve reached a balance you can live with.

For everyone else, I think there are many ways to balance your portfolio. Cash, CDs, Physical precious metals, real estate, stocks, and bonds, and crypto I guess. What I personally would avoid are collectables: art, rare cars, Pokemon cards, comics. I don’t think those are wise allocations for balance.

If you don’t like bonds, I think real estate is a solid hedge against the stock market. If I take my house, plus my emergency fund, and call it all part of my portfolio. My Balance would look a little different.

We’ll steal numbers from my January retirement account post and combine my wife’s IRAs with mine, and we’ll round my house up to $200,000 value for easy math. That puts us at $885,000 ish. I’m obviously rounding for whole numbers. True values are in the article linked above.

Category	Percentage	Value
Cash	2.25%	$20,000
House	22.6%	$200,000
US Stocks	51.98%	$460,000
International Stocks	17.5%	$155,000
Bonds	5.65%	$50,000
Total	99.98	$885,000

Calculator rounding kept that 0.02 percentage off, but it’s close enough for my purposes. This way of ‘balancing’ my portfolio is significantly off from my standard IPS. Bonds and International are half what they should be, and US stocks are down only 8%.

That makes sense because my wife’s retirement accounts sit in 100% US, until the IRA contributions I made last month started putting money into VXUS for her. But like many Americans, my House is a huge part of my portfolio. One that I almost never count because I don’t plan on moving or selling. I’m blessed enough to be mortgage free now, so when I look at a balanced way of managing my portfolio my house can be a major player.

I think the way most people should map out their balance is to plan for the future they want. The old path of moving more toward bonds over stocks might still work for many people. The key is to plan and re-evaluate annually. Don’t check daily, don’t stress over bumps in the market, but don’t ignore your accounts for 50 years either.

Minimize fees, diversify, re-balance annually.

P.S. For those who don’t want to read other articles. I use $VTI primarily, unless it’s not an option (see HSA options) S&P 500 match if total US isn’t available. $VXUS (Total International minus US) for International, and $BND (Total Bond Market Index) for my bonds.

~~Miniwing~~
Stoic, Investor, Parent