That is a completely reasonable portfolio and asset allocation, congrats!
A 50% drop in stocks will result in a roughly 40% loss.
Jeb, just to amplify what Ed and Tony have said: that allocation is great, so long as you stick to it and keep contributing even when that 40% portfolio value drop occurs.
One gets a very queasy feeling (or worse) during a big market drop that seems to head nowhere but still further down, and when decades of slowly accumulated wealth has (on paper) disappeared. And it will almost certainly happen during your investing lifetime--it did happen in 2007-9, and many of the folks here have had to navigate it when well down the path to retirement. The key is to stick with the plan at those times--don't sell, keep the same asset allocation and keep making regular contributions when things are at their bleakest. If you are not sure of your ability to stay the course in such an extreme market event, then you should probably raise your proportion of bonds (or use a stable value fund if your plan offers it). 80% equities is great for long term (multiple decade) holdings, but many an investor has bailed out at exactly the wrong time when the market goes mad and all around are declaring doom. That scenario will create a much worse result than sticking with a conservative (i.e., less volatile) portfolio. In a way, knowing your emotional reactions and managing your behavior with regard to your portfolio is the most important factor in long term success.
Thank you! I appreciate the response. This is definitely reassuring as I prepare for the long haul. When I started my 403b it was 2007. I was living at home so I decided to invest aggressively and contribute $6000 a year from my annual salary. We know what happened to the market the following year. I stayed the course and ended up ahead ten years later. It's great to hear that this is the right approach for the future. Thank you
$6000 multiplied by 10 years = $60,000 if you just stuffed your money under your mattress. But your money was invested aggressively. So your aggressive portfolio should have rewarded you immensely.
For example, 10% per year compounded, with an ER of .18%
1 $6,589 2 $13,825 3 $21,772 4 $30,500 5 $40,084 6 $50,609 7 $62,168 8 $74,862 9 $88,803 10 $104,113
Is that about right?
People want to know that what we are preaching day in and day out about low costs, equity investing, and sticking with your plan results in real growth of MONEY! This is real stuff folks. A $60000 investment is over a $100,000 after a decade, and that is only the beginning. In 20 years when Jeb reach 57 years old, guess how much he might have?
Here are the data, continuing on the 10% a year assumption. Remember, there will be years when the market will way below 10% and way above 10% and Jeb will be gradually increasing his bond allocation. Stil, l just for the sake of argument the following is what Jeb could have when he is 57 years old (he is 37 now):
5 $40,084 Jeb already has ten years invested
30 $1,047,617 When Jeb is 57 years old. Does he have enough to retire along with his teacher's pension?
It's not that difficult folks to be a millionaire. Jeb will undoubtedly be increasing his contributions as the years go by. And he will probably not be buying a new car every three years.