qandaQ:  I am in the process of implementing your Buy and Hold Strategy… Based on my age, should my equity exposure be higher than 60%?

Q:  I really enjoy reading you articles on MarketWatch, your website and watching your videos. I am in the process of implementing your Buy and Hold Strategy in my 403(b) and Roth IRA accounts, which both happen to be at Vanguard. I am a 41 year old employed in the health care sector. I am currently maxing out both of these tax-advantage saving plans plus adding a few hundred dollars a month in a taxable account. Although I am doing a decent job of saving, I am still playing catch up.

Right now I have only approximately $150K total in these accounts. I currently set up my funds as you prescribed, with the exception of the International Small Cap Value fund. As you know Vanguard does not offer this yet. Hopefully it is in development.

My question is about the 60/40 allocation. Based on my age, should my equity exposure be higher than 60%? I was considering trying 70/30 or 75/25 until I reach about 50. Then I would start gravitating towards the 60/40 allocation. I have a pretty good amount of risk tolerance, Any thoughts on that plan?

A:  I’m glad my work has been helpful. Without asking lots of questions, let me assume you earn a 7% return and save $20,000 a year.  With that combination you will get to about $2 million by the time you are 65.  I think you should do better than 7% with 60/40.  

If you have the risk tolerance for 70/30, I don’t see any problem with using that for the next 9 years. Another approach would be to use 60/40 with the present $150,000 and all equity with new investments during the next 5 years. That serves to protect the present saving a little more than 70/30 but lets you take the higher risk with the part you are saving on a dollar cost average basis.