From: joetaxpayer 
Newsgroups: misc.invest.financial-plan
Subject: Re: Pls help Asset Allocation  Question
Date: Fri, 13 Oct 2006 18:25:28 -0500
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avacohen100@yahoo.com wrote:

> Pls help Asset Allocation  Question
> 
> My brother is 51 years and his wife is 46 yrs old. 
> He is thinking of buying a home. 
> He is not sure of how much of his total wealth / net worth should be in 
> Stocks  and Real estate
> 
> Someone told him that cash and bonds aside,
> real estate and Stocks ( incl stock mutual funds) should be approx 50%
> each. 
> Since  both stocks ( incl stock mutual funds)  and real estate are more
> volatile, he was told to split that portion of his net wealth.. 50%
> each.
> 

You say 'home' implying a house to live in, not a rental property. There 
are guidelines for how much house one can afford, and 2-3 times one's 
income is the range, depending a bit on down payment and interest rates. 
Some would also say that the house isn't quite an investment, and 
shouldn't be counted as an asset toward retirement (although, in the big 
picture one can plan to trade down, and if you start with a house worth 
3X income, once it's paid off, it may be worth 6X at retirement. A trade 
down can give you 2-3X in cash, not chump change.)

The attempt to include it as a percent of one's net worth it a bit odd 
to me. When starting out, one might buy a house and have little other 
savings. Over time, the retirement accounts grow and the house is paid 
down. At your brother's age, he should be approaching 10 times his 
annual income as a net worth, if he'd retire at 62 with the goal of 
replacing 80% of his income. If he's on track, I don't recommend he 
takes half his savings to buy the house.
I hope that is close to an answer.
JOE