Stocks and James Bond

Wealthier people in America do not follow the conventional asset allocation model of buying bonds, i.e. age equals your bond percentage allocation or a 60/40 equities/fixed income split. How do I know this? Personal Capital has over 800,000 users of their free financial dashboard to help manage your money and Im a consultant who is privy to some of their data to share with all of you. Data geeks, rejoice!

Out of 800,000+ Personal Capital financial dashboard users, roughly 165,000 of them have linked investable assets of between $100,000 to $2 million. We call this the mass affluent class. or upper middle class if youre so inclined. The mass affluent are generally regular folks with mainly W2 income. They save and invest in order to provide for their family, pay for expensive tuition bills, take a couple nice vacations a year, and hopefully achieve a comfortable retirement when all is said and done.

Lets do a quick review of my proposed stocks and bonds asset allocation model before moving on to the big data.

FINANCIAL SAMURAI ASSET ALLOCATION MODEL

If you read my article about the proper asset allocation of stocks and bonds by age. Ive proposed five different types of asset allocation models:

1) Conventional Asset Allocation Model (Age = percentage allocation in bonds)

2) New Life Asset Allocation Model (A more aggressive blend than conventional)

3) Survival Asset Allocation Model (50/50)

4) Nothing To Lose Asset Allocation Model (100% equities until 65)

5) Financial Samurai Asset Allocation Model (hybrid between Nothing To Lose & New Life)

The Financial Samurai Asset Allocation Model shuns bonds until age 35, and begins with a 20% bond allocation until reaching a 50/50 split by age 75.

The Financial Samurai asset allocation model is based on the following assumptions:

* You have multiple income streams.

* You are a personal finance enthusiast who gets a kick out of reading finance literature and managing your money.

* You are not dependent on your 401k or IRA in retirement, but would like it to be there as a nice bonus.

* You are not dependent on Social Security.

* You are an early retiree or one who is shooting to be an early retiree who won’t be contributing as much to your pre-tax portfolios as before.

* You have average genetics and plan to live between the ages of 80-90.

In other words, my model is relatively aggressive. Whats interesting is that according to the data analysis of the

165,000 mass affluent users of Personal Capitals financial dashboard (most of whom are not paying clients, but free dashboard users), their bond allocation is also very minimal, much like the Financial Samurai Asset Allocation Model!

Lets explore the data in a little more detail.

BOND ALLOCATION BY AGE FOR THE MASS AFFLUENT

Study these six charts from Personal Capitals demographics carefully. The easiest way to analyze the charts is to compare the age range with the bond allocation in red. The higher the difference, the higher the investment risk compared to conventional wisdom.

At the end of the asset allocation charts, Ill share with you five key takeaways.

9% bond allocation for 20-34 year olds on average