I currently have a three fund portfolio in my Roth IRA. I am 35 years old and can tolerate the risk. Should I just do FSKAX (Total market index fund) and FTIHX (Total intl index fund) and drop the us bonds index fund? And when I’m older around 45-50 add the bond index fund?
You could! That wouldn’t be crazy. In my experience when I have talked to people around traditional retirement age (65+) they’re generally MUCH more concerned about preserving the capital they have spend a career building than they are with trying to maximize another percent of potential growth.
At 35 it may be hard to predict how you’ll feel at 65. So now you have to make the best decision you can with the info you have. One thing to consider is WHEN you’ll start migrating towards bonds. What you want to avoid is something like this: You’re 65 and still 100% stocks when the market drops by 50% and you see half of your nest egg go up in smoke, then freak out, sell everything and convert to bonds, and thus lock in those losses.
That’s obviously an extreme case, but any sort of reactionary trading or timing the market is more likely to hurt you than help you. That’s why I like target date index funds. They take the decision making out of it and have a smooth glide path towards bonds as you age. You always have the option later of going heavier into stocks if you feel more aggressive at 65.
At any rate, I don’t think it’s a big deal to have 0% bonds at 35, but I’d make sure to set a plan ahead of time and stick to it. 
3 Likes
How would you split up the US/International allocation if you opt to not use bonds until a later age? 70/30? 60/40? I am still on the fence with international investing as I been a VTSAX JL Collins fan 
The “efficient market” guy in me says you should split them up based on market cap because otherwise you’re betting on a single company based on you knowing more than the sum total of human knowledge that’s constantly being priced into the global market.
I’m a huge fan of JL Collins (I’m even facebook friends with him) and I think he’d agree that investing in international is also good (Although not his personal preference). If you invest in a global index fund, like VTWAX, it’s about 57% US, 43% everything else. I think that, or 70/30 or even 80/20 is fine! They’re all different flavors of good!
1 Like