AA 2 questions - 1) Real Estate 2) Portfolio Volatility - Bogleheads

Dear all

This is my second post after becoming a boglehead.

I am now getting closer to a sensible AA after many many years of irresponsible neglect. I have two questions and will appreciate help on this.

Target allocations (portfolio size more than few hundred K):
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Cash 4%
Short Treasury Bonds 3%
Interm Treasury Bonds 5%
Long Treasury Bonds 3%
TIPS (VIPSX) 10%
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Cash, Bonds, TIPS = 25%
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REIT (TAREX) 9%
Equity in Real Estate 11%
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REITS + Real Estate = 20%
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US Index (VTSAX) 25%
Developed Markets Index (VDMAX) 10%
Emerging Markets Index (VEMAX) 10%
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Equity Indexes = 45%
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Individual Stocks (Employer, couple picks) 3%
Commodities (SLV, GLD 50-50) 5%
Energy Fund (VGENX) 2%
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Sector + commodities + stocks = 10%
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Total ================> 100%

Age is high 30s for him and her. 27-28 yrs to retirement for both. Income is decent, no issues.

1) Real estate question.
I am having a difficult determining rebal strategy with real estate. Our mortgage payment is building equity as we pay down our home over 10 yrs. How do you rebalance this percentage up or down? Help!
Also, let's say I would like to have an investment property by end of year. Until I procure that, I have the above AA. Then I make a lumpsum payment from excess cash saved this year (20% of investment property) and my AA is all out of whack. Help!! How do you guys deal with money going into land or investment home and ensure you can rebalance and gain benefits of rebalancing?

2) Can someone tell me what kind of risks I am looking at with the above AA? So for every 100K invested, what can a tough year look like?

Thanks again all. You have helped me get started and think through many many things.

Source: http://www.bogleheads.org/forum/viewtopic.php?f=1&t=109282&p=1588710

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