So if you had all of your assets in those funds, you wouldn’t have to do anything.

I really only have the ability to rebalance my retirement portfolio, so that’s the one I focus on. And it mostly sits in Target Retirement date funds, so it’s not that interesting or time consuming to manage. But at least I’m saving! As Don points out, the difference between “perfect” allocation and “ok” is somewhat negligible, even if everybody could agree on what “perfect” really means.

For early retirement, I plan to have two portfolios. One for pre-65 (in non-retirement accounts so I can access it) and one for post-65 (401k and IRA).

As far as actual asset allocation goes, start with something balanced (and before you ask, balanced any way it can be is good), and then tweak it to be more to your taste and risk tolerance. I’d say leave your properties out of things, but try to go light on any other real estate investments. Asset allocation is pretty arbitrary, so go with what makes sense to you and stick with it.

You are at 100% stocks right now (except for the diversification in your target date funds). Perhaps you’d like to be more like 20%. Fine. Don’t sell 20% of your stocks right now; no one knows the future, but we’ve seen recent under performance in stocks. Usually out performance follows.

So sell 2% of your (liquid) portfolio and move it to bonds, inflation protected treasuries perhaps. Next year, aim for 4% in bonds. If stocks have a big run-up, perhaps sell a bit more of the “winnings” and move a bit faster. After a decade, you’ll be at 20% bonds or more. By the time you’re 40, you’ll be at a very reasonable age-appropriate allocation.

it sounds to me like someone wants you to consider even more college!

the last thing i bought and held is dollars, about 8 months ago.

Personally, I think rebalancing is THE secret. Well, perhaps the 2nd secret behind “live on less than 100% of your income.”

In that light you might find it unsurprising if I say that you should consider your “portfolio” to be those assets that you can rebalance. Your investment properties aren’t part of because you can’t rebalance with them. Your house is not part of your investment portfolio. Real estate that you can’t sell to rebalance is not proper diversification (in my opinion) if you believe modern portfolio theory valid and you don’t count it in your portfolio.

So focus on your liquid investments, those that you can sell. If you can’t decide what your allocation be, don’t sweat it. It is essentially impossible to pick a “best” allocation anyway. Anyone who has tried to find the efficient frontier by backtesting has discovered how elusive that is.

So, pick something sensible and do it. It doesn’t have to be perfect to help mitigate your risk and increase your return. And the truth is, there probably isn’t that much difference between “perfect” and “ok”. Having a philosophy of savings makes way more difference.

Listen to John Bogle, let your stock allocation be 100-age. Sure, maybe 20% bonds isn’t as aggressive as you might be for a young person, but the difference between that and perfect is probably less than the difference between doing something reasonable and doing what you are doing right now.

Or go against the current, and take a 60/40 allocation stocks/bonds and just stay there. You say that the bulk of your non-portfolio assets are in properties, so perhaps you have plenty of risk in your life already. Again 60/40 might not be perfect, but it probably is better than not having a plan at all.

Personally, I’ve decided on a Margaritaville portfolio for the assets I manage myself in my IRA. 33% VTI (US stocks), 33% VEU (non-US stocks), 33% TIP (inflation protected treasuries). I’ve got work accounts in retirement date funds where they are available, and a 60/40 fund where they aren’t.

Looking at it, I realize that my portfolio is a bit haphazard, but key to it is that no matter what, I rebalance. Actually most of my accounts rebalance themselves, and I do my IRA myself, but the effect is that overall my portfolio tends to stay near the same allocation. And that’s what makes things work.

@ Rick – You’re right, I do try to rebalance my IRA, though without a totally defined target. And I have a detailed spreadsheet which outlines my asset allocation – it’s not that I avoid it – it just seems like my target is unrealistically far from what I can achieve right now, given the reserves I want to have and the properties that I’m managing.

And that’s one of the biggest issues – my real estate ventures are a primary component of my financial plan. I intend to have and manage 10 properties by 2017. That is going to completely skew my asset allocation – just like a small business would if I started one – and there just doesn’t seem like much I can do about that.