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Old 05-08-2013, 06:10 AM   #21
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We have very different risk profiles, ERD50. But I won't be shut up because you happen to disagree with me.

The "system" went bankrupt in 2008, remember ? And it has only been kept afloat after massive, coordinated, global interventions from central banks and governments. At taxpayers' expense. There is no evidence whatsoever that similar coordinated worldwide interventions will take place next time things go south. Is it propaganda to say that?

You can be as blunt as you want. Be as fed up as you wish.
[mod edit] Just check your BP once in a while :-) However, I will continue to express my opinion - which is as valid as any other forum participant's, including yours.


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I will be blunt - most of us are here to try to share/learn from good information with/from others on this forum. Why do you insist on repeating these unfounded, non-factual, misleading and dangerous assertions that equities are 'risky' to people who come to this forum looking for insights? What's the point?

If you personally are 'afraid' of equities, so be it, act as you see fit. But what use is that to others? And why tell others that they are 'too risky'?

I don't get it, but I'm fed up with this ongoing propaganda from you. Can you provide some useful information/data to the OP regarding AA?
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Old 05-08-2013, 06:18 AM   #22
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Like holiday meals and family get togethers, we can learn to disagree without being disagreeable, and we should challenge each other in a way that is respectful, on topic, and appropriately impersonal.
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Old 05-08-2013, 06:29 AM   #23
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In some other thread, I mentioned I've been selling lately, and that's true. That's just been to shift things from one pile to another since there seems to be the opportunity.

But in the original pile, I am firmly in stocks. I emerged from the womb a while ago.
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Old 05-08-2013, 07:02 AM   #24
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To the OP, the real issue is how much risk can you take. If 90% equities allows you to sleep at night fine, go for it. Personally I was 80-90% in equities in my 401K on "Black Monday" in 1987 (age 29) when I lost about 25% in one day. A lot of my co-workers my age panicked at their losses. I almost panicked but remembered that this was money I wasn't planning on touching for another 30 years so didn't change. Starting at age 40 I gradually shifted my equity allocation down as my risk comfort and age changed. But really only you can decide how much risk you are willing to take on. As you can see from this thread, as Sly sang, "different strokes for different folks".
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Old 05-08-2013, 07:07 AM   #25
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I was usually 90-100 % equities at that age. I pretty much just blindly DCAd money into my chosen stocks at first not really knowing if they were "on sale" or not, then later when I thought I was smarter only put money in when I thought they were "cheap". Luckily I chose some decent stocks and didn't blow myself up.

In hindsight it may have been less risky to DCA into index funds and the return would have been similar. The key is dont stop plowing money in when everything falls and gets cheap. Easy to say but hard to do.

I would recommend your reserve 10% in cash and not bonds.
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Old 05-08-2013, 07:11 AM   #26
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A few people have emailed me in the past advising not to answer a specific individual. The main reason ? They don't want to get into arguments with him (or her). However, I believe I still have the right to express my opinion also without this same individual calling my conservative, low risk views as 'misleading' or 'dangerous' while millions of people have been financially devastated in the last few years by taking so-called 'risks'.
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Old 05-08-2013, 07:17 AM   #27
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Originally Posted by ERD50 View Post

So let's put some actual numbers to this - here are four FIRECALC runs. Two show a $100 portfolio, 26 years, zero spending to show portfolio growth during the accumulation phase that the OP is asking about. Two more show an inflation adjusted 5% contribution (typical of someone in the accumulation phase).

Worst case scenarios w/o contributions:

Zero equities does not even keep up with inflation over 26 years. OP would lose buying power w/o equities.

90/10 EQ/Fixed mix would ~ DOUBLE in buying power - worst case.

In what world is a worst case scenario of doubling your buying power, 'more risky' than losing buying power?

And the zero equities AA maxed out at about double, while the 90% EQ AA had lots of results moving into the $700 range.

Worst case scenarios with contributions:

Zero equities with 5% contributions only 'grows' to ~ $170 - which a loss in buying power from the starting portfolio plus contributions ($100 + $5*26 = $230), using a simple calc assuming no inflation on the contributions.

Worst case 90/10 EQ/Fixed mix with contributions would provide ~ DOUBLE the buying power of the zero equities portfolio.

And the more typical outcomes also favor the 90/10 mix by ~ 2x.

Now, what evidence do you have that a 90/10 mix is 'too much risk' for someone in the accumulation phase?

I will be blunt - most of us are here to try to share/learn from good information with/from others on this forum. [mod edit]

If you personally are 'afraid' of equities, so be it, act as you see fit. But what use is that to others? And why tell others that they are 'too risky'?

[mod edit]

Here's the first two charts (can only add 3/post, two to follow), Zero no contribs, 90/10 no contribs:

-ERD50
+2. This is good info. You are young and making decent money I assume. You SHOULD be mostly equities. Many of us here are OLD and making no money, so we have to hedge our bets somewhat.
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Old 05-08-2013, 07:25 AM   #28
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Directing our advice to the OP, keeping it impersonal and using the ignore function is a good way to keep the thread relevant, assertive and useful.
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Old 05-08-2013, 07:39 AM   #29
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It is fair to say that views are quite widespread. I am in the minority in this forum for being over conservative. I also recognize that many here have had to take more risks to become financially independent - and they have my respect for this.
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Old 05-08-2013, 07:44 AM   #30
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For me, it's all about having a plan and sticking with it. I'm 62% equities with my target at 60%.....sure I wish I had more equities now that the market is running strong. I can also tell you that I wish I was more conservative back in 2009. I do my best to avoid making decisions based on short term market conditions, this isn't easy, I know....I do believe that any decision based on the current conditions is a recipe for disaster. Slow and steady wins the race when you have a long horizon ahead.
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Old 05-08-2013, 08:24 AM   #31
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Our portfolio is 90% equity and 10% bond. This is for 401k and roth IRA so will be withdrawing in 26 years when we're 60. Back in 09, our porfolio dropped 40% and we were ok. Bought more into the market.

Assuming we will keep it in there until we're 60, does it make sense to increase bond allocation? It seems that the main reason for equity/bond is to decrease risk but, if we're ok with fluctuation in porfolio, doesn't it make sense to keep more in equity for higher overall return?

Based on the books I've read, 90%/10% seems too high so that's why I'm having this dilemma.
Some recommend your age in bonds or fixed income. Keep in mind that the range around the target percentage can be wide. For example, an adviser may write that 10% is a target, but 0-20% could be worth considering. This pdf has a reasonable graphic that explains the risk, and also how a "normal" investor's attitude might change over time.
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Old 05-08-2013, 09:06 AM   #32
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The next two (Note that all these have different scales due to the FIRECALC formatting):

-ERD50
ERD50,

Hope it is OK to respond to your previous posting eventhough it apparently got deleted.

I understand what you are saying regarding 90/10 in the accumulation phase. What is your take once you are retired (or early retired)? I know there is no right answer, ie we are all different in terms of risk etc. But I respect your take on this issue. So, I am curious, would you stick with 90% once accumulation is done and retirement is starting or would you at that point change it to something else 80/20, 75/25 or whatever?

My current plan is to have 80/20 when retired but I am not 100% sure. It lowers risk (compared to 90/10), but it also lowers return. It seems like it lowers risk more than it lowers return and thus 80/20 might be a good compromise for me.

What's your view?

George
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Old 05-08-2013, 09:14 AM   #33
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George76, if you don't have a pension, annuity or another 'bulletproof' source of income and can stomach an 80/20 or higher allocation in retirement, you've got a huge set of huevos. FIRECalc (see chart below) shows once you get to an AA of 40% equities there is little "upside" for going higher, and the volatility a larger slug of equities can make for a very bumpy ride.
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Old 05-08-2013, 09:25 AM   #34
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Originally Posted by Enjoy the Ride View Post
Our portfolio is 90% equity and 10% bond. This is for 401k and roth IRA so will be withdrawing in 26 years when we're 60. Back in 09, our porfolio dropped 40% and we were ok. Bought more into the market.

Assuming we will keep it in there until we're 60, does it make sense to increase bond allocation? It seems that the main reason for equity/bond is to decrease risk but, if we're ok with fluctuation in porfolio, doesn't it make sense to keep more in equity for higher overall return?

Based on the books I've read, 90%/10% seems too high so that's why I'm having this dilemma.

Thanks
First, you are a mere 34? Kudos for your focus on the future!

I am certainly afraid to give you my opinion on your question but I wonder if you have other investments outside the IRA and 401k and what the breakdown would be for your total stash? That might change the perception of risk.

I am pretty sure that at your age we had 100 percent of our nest egg in one stock--company stock at that. Wonder if that was a good idea (as soon as the plan opened up to other options we moved it out).
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Old 05-08-2013, 09:27 AM   #35
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George76, if you don't have a pension, annuity or another 'bulletproof' source of income and can stomach an 80/20 or higher allocation in retirement, you've got a huge set of huevos. FIRECalc (see chart below) shows once you get to an AA of 40% equities there is little "upside" for going higher, and the volatility a larger slug of equities can make for a very bumpy ride.
Nice chart. I thought there was a bit more improvement between 40% and 70%, but apparently it is less than I remembered.
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Old 05-08-2013, 09:30 AM   #36
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With a 26 year investment horizon I like a high equity percentage (maybe 80%). But remember, if the market tanks you don't sell! Also, consider always having a cash position - you have to have money at the bottom to buy at the bottom. Consider a 10% cash position.
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Old 05-08-2013, 09:41 AM   #37
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George76, if you don't have a pension, annuity or another 'bulletproof' source of income and can stomach an 80/20 or higher allocation in retirement, you've got a huge set of huevos. FIRECalc (see chart below) shows once you get to an AA of 40% equities there is little "upside" for going higher, and the volatility a larger slug of equities can make for a very bumpy ride.
I have to agree with Rewahoo . I went into retirement in 2008 with 72/28 and got severely burnt . Luckily I had a pension and SS survivor annuity to keep me sane. I am at 60/30/10 now and I sleep fine.
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Old 05-08-2013, 11:43 AM   #38
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As long as you can get through the dips without selling, and with rebalancing into stocks at the least, you should be fine with 90% equities.

In addition to the 26 years you have until 60, you have hopefully a 30+ year retirement. You won't be selling all your equities at 60. Most likely your portfolio will be growing throughout retirement. Although the SWR doesn't increase significantly towards 100% stocks, the average final balance does. So there is a benefit to be had, either in the ability to increase spending later in retirement or to leave an estate.

I'm retired (DW will be I hope at the end of this year). I'm nominally 100% equities, though I raise cash when the portfolio is running ahead of retirement planning expectations. I'm currently about 85% equities/15% cash and bonds. If the market keeps going up I'll have even more cash. The cash will be reinvested in a bear market, or used for expenses if there is no bear. I'll only need to sell equities once the cash runs out and I'm back to 100% equities.
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Old 05-08-2013, 02:27 PM   #39
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Originally Posted by Enjoy the Ride View Post
Our portfolio is 90% equity and 10% bond. This is for 401k and roth IRA so will be withdrawing in 26 years when we're 60. Based on the books I've read, 90%/10% seems too high so that's why I'm having this dilemma.
ETR - don't know what books you've read, but I'm reading William Bernstein's The Four Pillars of Investing and highly recommend it. Since you're so young I think you'll get an education from the author's analyses of historical "Bubbles and Busts". Best of luck to you on the ride!
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Old 05-08-2013, 03:05 PM   #40
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At the moment, I'm 100% equities. However, I have 2 pensions cooking (55, not retired yet). Also, I'm pretty sure I'm about to change that equity position soon...
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