[quote=j.passing.by,Oct 12 2018, 06:28 PM]
Continuing from previous post on Rebalancing…

What is the proper Asset Allocation for a Unit Trust Investor?

In other words, what is the best Equity/Bond ratio that will be most suitable to the investor?

Explained in details in this blog by Financial Samurai, there are various models and all are based on the age of the investor.

https://www.financialsamurai.com/the-proper...d-bonds-by-age/

The classic model is using age 100 and subtracting your age to get the equity ratio. If you are 30 years-old, the appropriate ratio would then be 70/30; if age 60, then the ratio is 40/60.

There are 5 different models in the article. Do read the reasons why the models differ slightly from each other. Maybe you would be able to vary and adjust the ratio slightly and make it your own.

I find the Survival Model interesting. It is 50/50 from age 35 onwards. Perhaps it would be more appropriate if the age is set to 45 instead of 35, and taking into account that we (or rather most of us) have EPF too.

For those who are age 60 and in retirement and depending solely on passive income from their nest eggs, the 4-box method could also help to find the best ratio to have.

The 4-box method (as mentioned in an earlier post) is 2 boxes on expenditures (basic necessities and other things you can do or spent if there is the money for it) and 2 boxes on incomes (stable income and not-so-sure-and-risky income.)

In each of the 2 expenditure boxes, write down all the appropriate needs/expenditures and their cost. Then put as much assets into the stable-income to match the basic-necessities box.

For example, if the basic monthly expenditure is $3,000 a month or $36,000 a year, then there should be a principal of $600,000 in an investment vehicle giving an annual return of 6%. This ensures that you will never run out of money before you die since you are withdrawing only the annual returns.

Then put the remaining assets into the not-so-sure-and-risky income box. This is the asset that you can take some risk. If the annual returns are good, you spent more; if not so good, spent less.

Hopefully, the last box can conservatively, without too much risky expectations from it, match the other-needs box; else your nest egg is not as big as you had initially thought.

Edit: last sentence corrected to "not as big as..."