First and foremost, it's been a whirlwind for the Lao family in March. My financial planning firm just went through its first audit, woohoo! In the midst of all of the heavy lifting preparing for said audit, my wife gets the worst food poisoning of her life. Needless to say, Daddy's daycare was in session for the majority of last week. To cap things off, my oldest son got sick, so I took my twin boys to their first hockey game on Sunday just the three of us. While there, my wife called me with the news that one of our dogs, Guinness, was bitten by a venomous snake. We spent the rest of the day in the ER while he received anti venin and pain meds. Thankfully, he survived and was released the following evening. He's doing much better now, but the pain meds are keeping him up all night with "stomach problems." TMI, but I woke up this morning to prep and record this podcast only to find multiple piles of you-know-what scattered throughout my office. When it rains, it pours!!
But thankfully, I was able to do some prep and record later in the afternoon...so you all BETTER enjoy this episode!
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The issue with getting too conservative too quickly is that you bring inflation, longevity, and interest rate risk into the picture! This is NOT an ideal situation for retirees in 2024!
In this episode, I discuss the three reasons I believe most investors get too conservative too early, my issue with "Risk Tolerance" as the primary driver of asset allocation, and the concept of "Risk Capacity."
Instead of selecting your asset allocation based on how you feel, or overly simplistic rules of thumb, reverse engineer your asset allocation based on your personalized financial goals and "required rates of return!" Meaning, don't invest based on how someone ELSE tells you to invest but invest based on your priorities and values.
A few links I referenced:
Jack Bogle's Asset Allocation Rule of Thumb
Ep. 36 - Asset Location to Improve Tax Efficiency in Retirement
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Thank you!