So we have been doing the 60% equities and 40% bonds for the last few years, I am 49 and my wife is 51, plan to work 10 more years or so, is the ratio too conservative for our age? The 60% equities is split 50-50 US & International, large & small cap, all vanguard index funds. Your thoughts/comments welcome please.
60/40 buy and hold - too conservative @ 50?
- Thread starter tsturbo
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Moemg
Gone but not forgotten
I guess it depends on a few factors . Can you sleep at night with that split. How risk adverse are you ? and considering we just had our portfolios tested how did you feel ? I've always had a higher stock ratio usually 70 - 75% which was fine while I was working but now that I've retired I've gone more conservative.
Notmuchlonger
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What kind of risk are you comfortable with? Do you have enough money to live on without taking any risk? There are many questions to ask yourself. Im sure others will chime in with more.
freebird5825
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Reality Check: all you need to do is look at your portfolio "in the worst of times". right now is some darn good data out there for that. you can use Morningstar for free to model your actual portfolio. then ask yourself if you are sleeping well now at 60/40 AA.
"What If" Exercise: make two copies of your portfolio. in one of them, change your stock stake in your AA higher to see your YTD loss. in the other copy, change your bond stake to a higher number. look very closely at 10 yr return data at both extremes.
Horror Scenario:
then imagine if the market took even more of a loss
.
see what your gut feelings are. what numbers make you queasy?
then imagine if your job(s) went away. rinse and repeat - redo the Reality Check and What If and Horror. write down your queasy points.
once you find your queasy and comfort datum for AA, the answer will come.
FYI - i am FIREd. I am also a moderately risky investor, mutual funds only. i believe in Bogle's rule of age = bonds in your AA, whether w*rking or not. a lot of articles will tell me that sitting on a 50/50 AA at age 50 is just plain nutz. My YTD loss of only 26% in a ferocious bear at 50/50 AA tells me i'm not nutz for listening to Mr. Bogle.
You just can't argue with data.
"What If" Exercise: make two copies of your portfolio. in one of them, change your stock stake in your AA higher to see your YTD loss. in the other copy, change your bond stake to a higher number. look very closely at 10 yr return data at both extremes.
Horror Scenario:
then imagine if the market took even more of a loss
. see what your gut feelings are. what numbers make you queasy?
then imagine if your job(s) went away. rinse and repeat - redo the Reality Check and What If and Horror. write down your queasy points.
once you find your queasy and comfort datum for AA, the answer will come.
FYI - i am FIREd. I am also a moderately risky investor, mutual funds only. i believe in Bogle's rule of age = bonds in your AA, whether w*rking or not. a lot of articles will tell me that sitting on a 50/50 AA at age 50 is just plain nutz. My YTD loss of only 26% in a ferocious bear at 50/50 AA tells me i'm not nutz for listening to Mr. Bogle.
You just can't argue with data.
Look at your YTD RR - if its a loss are you comfortable with it? if so, ratchet up stocks until no longer comfortable and back up a bit. Or maybe you are one of those sturdy souls that can deal with 100% stocks. Most studies show that will give you the highest return if your time span is long enough.
60/40 has served me well for several years now (ER'd since 2002) Down 21% so far this year. It's really not all warm and fuzzy to me but since my bond ratio has gone up am starting to rebalance. If you have a YTD gain, it would be nice to share what you have in your portfolio
60/40 has served me well for several years now (ER'd since 2002) Down 21% so far this year. It's really not all warm and fuzzy to me but since my bond ratio has gone up am starting to rebalance. If you have a YTD gain, it would be nice to share what you have in your portfolio
Spanky
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60/40 is most likely 47/53 by now.
Gone4Good
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Too conservative? Not in my view.
My split is 65/35. I came to that AA by going through a bunch of simulations with historic data. What I found is that upping the stock allocation beyond 65% starts yielding diminishing returns in terms of portfolio survivability but adds substantially to portfolio volatility.
As others have said, it's a personal decision. But I don't think you're sacrificing much by going with a 60/40 split.
Dawg52
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
If you can afford a 30% haircut, no. If you can't, yes.
I was 60/40 and I'm now about 45/55. I'm 57.
I came up with my split because the 40% fixed (all CDs and govt MM) amounts the the cash needed to fund a decent retirement with SS and a small pension.
Since I'm expecting to have retirement thrust upon me in a few months or weeks, I'm not going to rebalance cash into equities. I'll maintain the cash level where it is. Mr. Market will have to rebalance me back to 60/40.
I came up with my split because the 40% fixed (all CDs and govt MM) amounts the the cash needed to fund a decent retirement with SS and a small pension.
Since I'm expecting to have retirement thrust upon me in a few months or weeks, I'm not going to rebalance cash into equities. I'll maintain the cash level where it is. Mr. Market will have to rebalance me back to 60/40.
jIMOh
Thinks s/he gets paid by the post
I would look at the 60/40 at age 50 situation this way:
1) Know your annual expenses
2) does the dividends+interest of the 60-40 exceed the expense needs?
3) how much cash do you have (1 years expenses, 2 years, 3 years...)
You can modify all 3 variables to make sure you can sleep at night
1) you can always cut expenses
2) you can shift to more dividend paying stocks and higher yielding bonds
3) increase the cash if #1 or #2 was not comfortable. If you have 5 years expenses in cash and inflation bonds, then is #2 does not happen (dividends and interest from 60-40 do not meet expenses), you have the ability to live until the market returns help make #2 true again.
1) Know your annual expenses
2) does the dividends+interest of the 60-40 exceed the expense needs?
3) how much cash do you have (1 years expenses, 2 years, 3 years...)
You can modify all 3 variables to make sure you can sleep at night
1) you can always cut expenses
2) you can shift to more dividend paying stocks and higher yielding bonds
3) increase the cash if #1 or #2 was not comfortable. If you have 5 years expenses in cash and inflation bonds, then is #2 does not happen (dividends and interest from 60-40 do not meet expenses), you have the ability to live until the market returns help make #2 true again.
