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[alanf]

10.00%       CREF Stock
30.00%       CREF Equity Index
10.00%       CREF Global Equities
20.00%       TIAA Real Estate
30.00%       CREF Bond Market

Any advice in terms of distribution? Thank you.

[pink_]

It rally depends on when you plan to retire, and how comfortable you are with risk.  I'm not a financial advisor, but those variables make s huge difference in the kind of advice you will get.

[mended_drum]

I use the 100 rule.  Subtract your current age from 100 and place the remainder in the stock section; make sure to shift at least every five years.  That's assuming a retirement age in your late sixties, I think.

[michigander]

I'm putting nothing into TIAA.  Stocks are on sale now, and any money that you put into TIAA will take you nine years to get out if you decide to change your investment plan.  At least you can move your CREF dollars around pretty much at will.

[alanf]

Thanks. I'm 31 in my second year at a State Univeristy (Tenure Track).

[aristotelian]

Your balance between stocks and bonds is pretty good.  20% in real estate seems like a lot to put in one sector while the rest is all in index funds.

Do you have the TIAA-CREF options as well?  You might also consider taking some of the allocation for CREF quity index and TIAA real estate and try some of their options that concentrate on specific strategies such small vs. medium vs. large cap, and growth versus value.

[spork]

10.00%       CREF Stock
30.00%       CREF Equity Index
10.00%       CREF Global Equities
20.00%       TIAA Real Estate
30.00%       CREF Bond Market

Any advice in terms of distribution? Thank you.

What you need to do is compare the returns and expense ratios of all these funds over the last 10 years and over the lifetime of the funds.  CREF Stock has much the same holdings as CREF Equity Index but higher expenses.

I got completely out of Global Equities because of the 1997 Asian economic crisis and the push by Summers and Rubin for the free flow of international capital.  In times of economic crisis, the USA is almost always a better investment than other parts of the world.  The turnaround, when it happens, will probably happen here first.  Europe, for example, has been left holding a lot of the bad debt that U.S. banks managed to outsource before the collapse.

Therefore my first suggestion is to change allocations from Global Equities and CREF Stock to CREF Equity Index.

I cut my holdings in TIAA Real Estate in half to 14 percent of my portfolio on the expectation that commercial real estate will not do well until the recession ends, but pre-recession it showed very good returns.

Perhaps clean, dismalist, or normative will come along with better advice.

[spork]

I forgot to add that my philosophy is to contribute at least enough to max out on my employer's matching.  I also contribute even more as a way of forcing myself to live below my means and save more for retirement.

[clean]

At 30, I was a lot closer to 100% equity. 

Interest rates are still very close to historic low levels.  IF you believe that interest rates will rise, then (because there is in inverse relation) you believe that bond prices will fall, and your bond investment must go down.

Some contend that this is a 'once in a generation' time to buy equity.

Some also believe that the credit/mortgage problems in housing is heading toward commercial property so Real Estate is heading for problems (and it is also pretty interest sensitive).

So when do you plan to retire?  IF, like me, your plan is to retire when they pull the markers from  your dead corpse.  (Retirement means not teaching summer school!).

So, historically, stocks have outperformed all other asset classes over long time horizons.  Will it continue?  Everyone wishes that they knew.  But if you have a long, long horizon, then now is the time to take the risks and invest heavily in stocks.

For what it is worth.

[alanf]

This is what I'm thinking:

90.00%       CREF Equity Index
10.00%       TIAA Real Estate

Thanks for the advice.

[tee_bee]

This is what I'm thinking:

90.00%       CREF Equity Index
10.00%       TIAA Real Estate

Thanks for the advice.

I am more risk averse, so I wouldn't go that high on the equity index. Maybe 60% or 70% tops, using the 100-minus rule. Also, I've been really pleased with TIAA real estate's returns, because they don't really buy real estate for its value as something to trade, and they don't get into shady REITs. They own and manage the properties for their lease income. Lots of malls, hotels, and office buildings, if memory serves. All of these will likely get soft in the next few months, but not like equities did.

In any case, weigh your risk tolerance, and set it and forget it. That's worked for me. My problem isn't my distribution--it's that I am not saving enough.

[spork]

Clean, can you explain why commercial real estate is interest-rate sensitive?

[clean]

"The value of any asset is the present value of the future cash flows"

To figure the cash flows with real estate we start with Potential Gross Income.  That is the absolute possible amount that you could get.  If it were an apartment complex that is 100 percent rented at a market rent, plus any vending machines, and washers and dryers.

Then you subtract vacancy allowance and then the other cash outflows.

Usually this is done for a five year period.  Then you take the cash flows in the last year,  grow them by a long term growth rate and multiply them by the 'Cap Rate'.

The higher the interest rate, the lower the cap rate and the lower the present value of the future cash flows.

For instance, if you wanted a 10% rate of return, you would be willing to pay 10 times the final cash flow, but if you wanted a 20% return, then you would only pay 5 times the final flow.

If interest rates rise, people will pay less for those future cash flows which are ultimately derived from the rents that the tenants will pay.

I hope that this helps.  Ive not taught real estate investment analysis for over six years, so I may be a bit rusty.

[spork]

Sounds like you are saying: if interest rates rise, people realize that other investments will generate returns that are larger than what they'll get from real estate.

[clean]

Real estate competes for capital.  If other assets (especially lower risk ones) pay a greater return, then real estate must too.  That changes the prices/values that one will pay for real estate.