Awhile back I read the book "The Smartest Investment Book You'll Ever Read" by Daniel Solin. It was a quick and very informative read, and I do recommend it.
In a nutshell, it explains why you should invest in low-cost index mutual funds and stay away from stockbrokers, and why asset allocation is so important. (I heard about this book on the Vanguard Diehards Investment Forum.) I was already a believer in low-cost index mutual fund investing, but this book helped solidify my beliefs and it was a real eye-opener about stockbrokers ... It offered the insider scoop on the tricks some brokers use to make their clients think they are smarter than they really are.
At the back of the book was a really interesting questionaire to help you determine your ideal asset allocation. It was very, very different from any other asset allocation quizzes I had done.
The ones I had done before were really simplistic: Age, years to retirement, and risk tolerence (I'm sure you've all done those things on-line). But I always felt those quizzes missed so much. I'd find myself asking: "Wait! What about the fact that our expenses are so low and we save a huge chunk of our net each year? Doesn't that count for something?!?" Intuitively I always felt that the stock/bond allocations spewed out were riskier than what we really needed. [60% stock, 40% bond was the most conservative I ever got with those simple on-line tools.]
Well, at the back of Mr. Solin's book there was a detailed but easy-to-follow questionaire that I completed, and it came up with a result of 10-30% stocks and 70-90% bonds as our ideal asset allocation. Well, you could have knocked me over with a feather, and I do wonder if that may be a bit too conservative. But it definitely gave me something to think about and helped validate what I had been feeling intuitively. [In case you're wondering, Mr. Solin does recommend up to 90% stocks for some people, so he's definitely not anti-stock. It's just that his formula takes so many variables in to account, and in some cases he recommends something fairly risky, and in some cases like mine & DH's something extremely conservative.]
I hesitated to blog about this before because I knew you all would want to know what the formula was, and it's too complicated for me to explain and I didn't want to in any way infringe on Mr. Solin's intellectual property.
Then, our friend Broken Arrow posted a question on Asset Allocation on the forums, and that got me thinking about this book again, so I started looking around on-line, and lo & behold, I found the questionaire published!!! So, you all can take it yourselves and see what numbers you come up with.
Here is the link, thanks to baselle teaching me how to make one:
Feel free to share what numbers you get and what you think of the results.