42. How Much Stock Should I Own If I'm Saving for a Fixed Spending Goal?
For long term investing (retirement investing, for example), many people will use an asset allocation that is somewhere between 70% and 100% in a portfolio of equities. They may trim that back as they approach retirement, moving to a portfolio that is between 40% and 60% in equities.
The design of a portfolio like this is to create an income for a long period of time. Picture a bucket of water that you slowly draw from, a cup at a time, for 40 years or more.
But how do you build a portfolio for a fixed spending goal? What if you have a big purchase coming up in 10 years?
It's long enough that you think you can take some risk and you want the money to grow. Picture a bucket of water that you are going to tip over and empty all on the same day. It changes how you can invest.
In this podcast I walk through an approach from Larry Swedroe in his book "Your Complete Guide to a Successful and Secure Retirement". Larry outlines different % equity allocations based on how far out your financial goal is.
Detailed notes and charts are available on my blog at www.walhoutfinancial.ca/podcast
Enjoy!