Hi Dan,

Congratulations on securing a tenure-stream appointment.  As you doubtless know, tenure-stream positions have been disappearing in all sorts of disciplines at a fairly rapid rate.

I see no reason why you should be apologetic about using Boglehead language.  You have already constructed a simple understandable portfolio.  As Bogle himself likes to say, "The enemy of a good plan is a perfect plan."  You've got a good plan to start with--all the more so because your new school is helping you double your contribution.

Frankly, I would stick with the plan until you achieve tenure (I hope you are immediately vested).  Once you get past the tenure hurdle, I'd take a good look at your asset allocation again and see if it's still the plan you feel most comfortable with.

If you go to the TIAA Asset management website, there's lots of research on the TIAA Real Estate account.  I don't believe TIAA itself recommends more than 15% in TREA  model portfolios, but there certainly are folks who hold, or have held,  a higher percentage at some time--myself included.

As you say, there is no "right" anwer, but for now you certainly seem to be on the "right" track.  Best wishes with your new appointment. Bob U.

Hi Dan,

I think some here used to call it "equity-lite" and I like that formulation, though as alternatives to stocks and bonds are big now I don't see any need to pigeonhole it.  It's certainly less volatile than EITHER publicly-traded equities or bonds and personally I consider it more like a private equity fund than anything else . . . Without getting into the semantics of whether or not it's appropriate to call it a private equity fund, I don't think it's controversial to say that it's a rare opportunity to invest in stuff that's similar to the stuff that university endowments invest in.  In this vein,  if you know of David Swenson of the Yale endowment, he recommends  20% to TREA, and I believe that's on the high end of "mainstream" recommendations for what you should allocate to it . . . I'd argue for even higher, myself, but as the fund moves so slowly in comparison to publicly-traded funds.I also find it tempting to try and time it :  )

All best,

Pete 

I agree with Pete.  I will be 50 this year and have about 15% in TREA now; planning to raise it to 20% (possibly more) over the next decade. 

I am parking a small amount in Traditional, with the idea of moving some in the ILB and TREA when the time seems right.  ILB is my only bond fund, except for the bonds in Social Choice.  I am using TREA and Social Choice, plus some smaller amounts in ILB and Tradtional, to diversify and stabilize, but with lots of Stock, Growth and Income, and RWIFX, I am not doing all that well this year overall.  Still, I am hanging in there and am very glad to have been in TREA! 

Although I continue to hold a substantial position in TREA, I have to note that Pete is incorrect when he states that Swensen recommends "20% to TREA."

Swensen identifies six core asset classes in his book, Unconventional Success (much discussed at this and other sites shortly after its publication in 2005).

What Swensen did recommend in the book is a 20% holding in "real estate," about which he comments: "Exposure to real estate contributes diversification to the portfolio with lower opportunity costs than fixed-income investments." (See pages 33-34 of his book).

Although Swensen has subsequently tinkered with his "lazy portfolio," he has yet to remove the 20% allocation to real estate investments which, of course, include REITS,  possibly REOCs, and maybe even a more expansive notion of "real estate" to include, say, TIAAs recent investment in farmland  .  Bob U.

Hi Dan,

I rarely post, but thought I'd offer a few of my ideas in response to your situation.  Love the AA (it is exactly the same as my own-- although I slice/dice the stock portion).  As you continue to accumulate more assets and increase your income, it seems to me that the logical way to go w/ keeping your AA intact is to structure it based on your 403b contributions (e.g., 80-10-5-5).  Then, use your Roth to primarily rebalance or add small cap stocks, etc. since you can make the contribution all at one time, if you wish. Might be easier than to worry about Trad. vs. ILB contributions and an expected sway toward a higher % of stocks over time.  I do this quite easily using our Roth contributions, which we house at VG.

Assuming a full Roth contribution ($5k), it seems to me that the ILB allocation will be markedly higher than the Trad'l (5% of 20% of your salary as a new tenure-track professor) on an annual basis...

Cheers,

GL
 

Hi Bob,

Well, that "real estate" component in the chart on p. 34 has to be filled with something, and I think one can infer from his discussion on pp. 75-76 that he's fine with filling it all with TREA.  (Similarly, I don't think Bogleheads are too far off in concluding from his discussion on the remainder of p. 76 that they can fill it with Vanguard's REIT index fund . . . )  It's certainly not possible for the average REIT investor to mix in TREA, and I'm at least not aware of his ever suggesting that the average TREA investor would be better off splitting their 20% RE allocation between TREA and REITs . . .  Nor am I saying I think he'd be against diluting TREA with REIT's, I just haven't seen him say that, have you?.

All best,

Pete
 

Hi Pete,

Swensen, like the rest of us, has a right to alter his views over time.  In his book, his discussion of TREA, as you know, falls under the general heading of "real estate" (private and public).  We know he believes TREA represents a unique opportunity as a private real estate fund (his term, p. 79).

On the other hand, he writes on the same page: "Unless investors identify an unusually equitable private deal structure, gaining real estate exposure through public securities makes the most sense" (hence, the Boglehead option).  Clearly, for TIAA folks TREA is "an unusually equitable private deal structure" (or at least I and some others believe so despite the ER).

Now, I happen to be influenced by the TIAA Asset Management study that recommends using both TREA and a REIT fund, but when Swensen was last (to my knowledge) given the opportunity to comment on "real estate" he used the examples of TIAA-CREF and Vanguard REIT funds, with nary a mention of TREA.

Here's a link to his April 3, 2008 NPR interview wherein he lists two REITS--VGSIX, TCREX--that he recommends.  http://www.npr.org/templates/story/story.php?storyId=89324244

Look for the boxed in section in the interview.  Bob U.

On page 14 of "TIAA-CREF RETIREMENT STRATEGIES," 15-20% allocation to either REA or ILB is recommended as a "hedge against inflation," "WHEN YOUR ESTIMATED INCOME IS ABOUT WHAT YOU'LL NEED." I guess the 35-40% recommendation for CREF stock is also for inflation protection, but obviously not as smooth as the others. I'm a 20% REA man, holding steady as she goes...

Henry

Hi Bob,

That's an interesting interview and I love how they mixed in the Ameriprise commercial, but I feel like the somewhat sloppy associated story (attributed to Chris Arnold -- note that the pie chart still says "real estate" though the legend now says REITs) is somewhat less authoritative re Swenson's preferences than the book  . . .

In terms of the book, as long as we're on p. 79 note that that's also where he calls TREA "a nearly unimaginable fair deal"  . . .  odd phrasing, to my mind,  as I don't think he'd characterize Vanguard's REIT fund as substantially less "fair," so to me it all suggests that at least back in 2005 the man really, really dug TREA . . . now, REITs had certainly come down in price by April 2008, but at least for me Arnold's "precis" (and, of course, TREA's ER increase) aren't enough for me to infer that that 2005 enthusiasm for TREA has much waned . . . in any event, I usually avoid making arguments from authority in the first place and was just trying to give the (non-REIT-fund-owning) OP a quick heads-up about Swenson.  It would certainly have been more precise to say that, "as of 2005, David Swenson was both a) an advocate of a 20% allocation to real estate and b) a great enthusiast for TREA in particular."

All best,

Pete
 

Thank you all so much for your comments and for the spirited discussion about Swensen's opinions of the TREA. I am pretty comfortable with my plan because it very much makes sense to me and it seems as though it is reasonable to others as well. For now, at least, I will continue on this path and consider going up a bit in TREA as time goes on. In the meantime, I will be buying much CREF stock "on sale" because it is 80% of my portfolio. A small value tilt is something I will certainly consider in the future—after I do much more homework.

You are a great bunch. Keep up the good work. 

Once there, I will be contributing about 10% of my salary to a 403(b) with TIAA-CREF and the university will be kicking in another 10%.

Wait, don't go yet, Dan. How does this sound? Let's say that you put up $10,000 and I say to you, give it to me and I'll guarantee to give you back $21,200 after one yea