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Old 01-14-2013, 02:23 PM   #21
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In May of 2008, my best friend, who had just retired, at age 59, was invested in a fund, with an $840,000 value. In March of 2009, in the same fund, he was looking at $430,000 in value. Today ( or within the past 6 months) the fund has recovered to near the original value.

Since we are in the "withdrawal" years, I would not presume to have any knowledge or insight into the future, but rely on some CD's @5%, Ibonds 2001 -2003, at 4% to 6%, and a tiny annuity @4%... all longer term, low yield, but for now, about as much as our sense of well being could take.

The 2008-2009 market drop paralyzed us with fear, as we watched other friends making adjustments in their lifestyles.

Though we don't often talk about it in terms of real dollars, I can see a wide difference in mindset here... as we talk past net worth as being a factor in investment thinking. Just as Warren Buffet can be wise in choosing best investments, with no need to worry about the rent or the electric bill, so it is with those who have assets in the multi millions, who can adjust their portfolios to absorb small losses without concern for the long haul.

Risk averse is a subjective term. I would suggest that it may be more important when planning for 5 or 10 years into the future, than when one is looking at 30 to 40 years, as many of our DP's (Dear Posters) here, are doing.

If it's one thing years of retirement has shown, it is that "One size does not fit all".
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Old 01-14-2013, 02:47 PM   #22
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I'm also "all in stocks" in my portfolio (domestic and international index funds). Since I'm retired and 51, I worry more about inflation over the next 40 years than I do about "short term" panics.

We keep three years of living expenses in cash (in a cd ladder) to allow us to ride out a panic without selling assets. We also expect to cut back some on certain expenses in such a circumstance - mostly travel. That, along with dividends and eventually a little social security, and we expect to be able to ride out a longer downturn if need be. We also paid off our mortgage before retiring and carry no debt.

Given this cushion, We're much more comfortable being in stocks for the long haul.
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Old 01-14-2013, 03:34 PM   #23
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Ramsey is the only one I hear say to be 100% in stocks or real estate in retirement.

A 100% equity and real estate portfolio in retirement may or may not turn out to be the most profitable decision going forward. Only time will tell. But the lack of diversity would worry me. If it turns out that a 100% equity and real estate portfolio does poorly vs fixed investmens, you're really going to take it in the teeth.......

Many people would prefer a more diversified approach. But only the passage of time will prove whether Ramsey is correct or not.
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Old 01-14-2013, 03:40 PM   #24
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I'm also "all in stocks" in my portfolio (domestic and international index funds). Since I'm retired and 51, I worry more about inflation over the next 40 years than I do about "short term" panics.

We keep three years of living expenses in cash (in a cd ladder) to allow us to ride out a panic without selling assets. We also expect to cut back some on certain expenses in such a circumstance - mostly travel. That, along with dividends and eventually a little social security, and we expect to be able to ride out a longer downturn if need be. We also paid off our mortgage before retiring and carry no debt.

Given this cushion, We're much more comfortable being in stocks for the long haul.
Since you have a significant position in CD's, receive SS and own your house, I'd say you're NOT "all in stocks."

I have a significant exposure to equities in my RE portfolio too, I just don't call it 100% when it's not.

One of our board members states that he rents, is too young for SS, is not collecting a pension and his RE portfolio is 100% individual stocks. Now that's being "all in stocks."
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Old 01-14-2013, 05:47 PM   #25
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Since you have a significant position in CD's, receive SS and own your house, I'd say you're NOT "all in stocks."

I have a significant exposure to equities in my RE portfolio too, I just don't call it 100% when it's not.

One of our board members states that he rents, is too young for SS, is not collecting a pension and his RE portfolio is 100% individual stocks. Now that's being "all in stocks."
I agree that it is very confusing to hear about being 'all in stocks', and then saying you have 3 years of cash (or something like that).

I know this type of issue has been discussed before. Retiree's may be prone to keeping 1-3 years of their portfolio in cash, CD's, etc. Would financial experts count this cash in the portfolio, or would they exclude it when looking at asset allocaiton?
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Old 01-14-2013, 06:11 PM   #26
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There are too many other things in play for this to be a worthwhile one answer question. First, I feel it can be misleading when someone states they are 100% equities without full disclosure of pensions, other sources of income, retiree healthcare etc. I could be over 100% equities a little bit if I had those bases covered. Age is another factor. My 26 year old son is 100% equities in his retirement accts. but that in itself means very little to me.
Personally I'm 45 equity/40 bond / 15 cash with the cash enough to cover 5 years expenses. Raising the equity portion does nothing to improve my chances of success when run on Firecalc. Good enough for me.
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Old 01-14-2013, 06:46 PM   #27
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I agree that it is very confusing to hear about being 'all in stocks', and then saying you have 3 years of cash (or something like that).

I know this type of issue has been discussed before. Retiree's may be prone to keeping 1-3 years of their portfolio in cash, CD's, etc. Would financial experts count this cash in the portfolio, or would they exclude it when looking at asset allocaiton?
If it is cash, cash it is, no matter what its owner chooses to call it.

Ha
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Old 01-14-2013, 07:14 PM   #28
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If it is cash, cash it is, no matter what its owner chooses to call it.

Ha
Exactly.
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Old 01-14-2013, 07:58 PM   #29
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I'm close to ER with a target of 11/15 in equity and 4/15 in fixed income (cash/bond). Planning for a 3% WR.
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Old 01-14-2013, 08:09 PM   #30
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I'm "all" stocks. ....

I'm about 15% cash right now.
So you mean you are 85% stocks right now.


Quote:
Originally Posted by mpeirce View Post
I'm also "all in stocks" in my portfolio (domestic and international index funds). ....

We keep three years of living expenses in cash (in a cd ladder) to allow us to ride out a panic without selling assets.
Also noted by others.

I am not "all" stocks.
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Old 01-14-2013, 08:34 PM   #31
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Age 46. FIRE'd for 9 months.

Our current target portfolio allocation is 5% cash, 33% bonds and 62% stocks.

Having a bond allocation is important in dampening down the volatility in our portfolio and our bond portfolio includes I bonds, individual municipal bonds and bond funds (high yield corporates, TIPS and total bond market funds).

We are prepared to revisit our bond strategy at such time as interest rates begin ticking higher.
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Old 01-14-2013, 09:01 PM   #32
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If it is cash, cash it is, no matter what its owner chooses to call it.

Ha
To my mind, there is a difference between cash as part of the AA and cash on hand for expenses. My AA does not have a cash component that I keep in balance with the rest. Once I have cash it gets spent until it's gone, or until a bear market opportunity to reinvest crops up. I've had as little as 1% of portfolio value (not saying it's part of the portfolio!) and as high as 30% of portfolio value in cash, off the portfolio spreadsheet, not rebalanced. And some of that cash is in bonds, I hate to admit. But just as short-term storage until it gets spent.

As we have already seen in a previous thread, a study showed that even with 100% equities (for real), even a small amount of cash is just a drag on the portfolio. Pretty much true with bonds as well, at least for more than 15%. Hence, all equities. But if I can sell early to meet future expenses because the market is getting ahead of itself, I will. So I have cash around often enough. I have about 6.5% portfolio gain to go before I start raising cash again. I'm thinking the debt ceiling fight might tank that possibility, but it would be nice.
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Old 01-14-2013, 09:11 PM   #33
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Many of us who are retired consider our entire portfolio to be an "emergency fund" and don't have a separate category with that label. OTOH if you mean "cash" available without selling equities, breaking a CD, etc., then I would agree having a year on hand is better than only having 6 months.
+1

Too often asset allocation strategies ignore the concept of that 6-12mo cash fund for living expenses.
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Old 01-14-2013, 09:21 PM   #34
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To my mind, there is a difference between cash as part of the AA and cash on hand for expenses. My AA does not have a cash component that I keep in balance with the rest. Once I have cash it gets spent until it's gone, or until a bear market opportunity to reinvest crops up. I've had as little as 1% of portfolio value (not saying it's part of the portfolio!) and as high as 30% of portfolio value in cash, off the portfolio spreadsheet, not rebalanced. And some of that cash is in bonds, I hate to admit. But just as short-term storage until it gets spent.

As we have already seen in a previous thread, a study showed that even with 100% equities (for real), even a small amount of cash is just a drag on the portfolio. Pretty much true with bonds as well, at least for more than 15%. Hence, all equities. But if I can sell early to meet future expenses because the market is getting ahead of itself, I will. So I have cash around often enough. I have about 6.5% portfolio gain to go before I start raising cash again. I'm thinking the debt ceiling fight might tank that possibility, but it would be nice.
Sure, it is your money and you get to name it. But to me it is like saying I have no pets, just this dog that barks if someone comes around.

Also, from the POV of discussing allocations, if everyone gives his own idiosyncratic definitions to things, we are kind of constructing a Tower of Babel.

Ha
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Old 01-14-2013, 09:34 PM   #35
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I've had my portfolios totally invested in equities during the last 25 years. I do have some closely-held business interests that will be sold when I retire. The sales proceeds should produce enough cash flow to offset around a decade's worth of living expenses. My retirement date is flexible... anywhere between age 51 and 65.
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Old 01-14-2013, 10:00 PM   #36
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Sure, it is your money and you get to name it. But to me it is like saying I have no pets, just this dog that barks if someone comes around.

Also, from the POV of discussing allocations, if everyone gives his own idiosyncratic definitions to things, we are kind of constructing a Tower of Babel.

Ha
Or even a tower of Baabel?
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Old 01-14-2013, 10:07 PM   #37
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I wouldn't listen to DR, I think he is crazy based upon some things he says but then I'm not a fan.

To the OP - when I was your age I was working and 100% in equities, always was. I didn't get into any FI until 4 years before retiring. Today I'm 40/60 and when the market is doing swell as in the past few years I wish I was 50/50 or 60/40. But 2008 and early 2009 was very scary, I retired in August 2007 and was 60/40. I learned just how risk intolerant I was!

You have to be able to sleep at night. It's a personal call.
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Old 01-15-2013, 05:38 AM   #38
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I am very much into CDs and bonds.

Had I been invested in stocks in 2008-2009, I would have sold everything in a panic at the bottom. Not being greedy and sticking with CDs and munis has probably saved my chance to FIRE.

Quote:
Originally Posted by LeavingOhio

Ramsey is the only one I hear say to be 100% in stocks or real estate in retirement.
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Old 01-15-2013, 06:44 AM   #39
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A 100% equity and real estate portfolio in retirement may or may not turn out to be the most profitable decision going forward. Only time will tell. But the lack of diversity would worry me. If it turns out that a 100% equity and real estate portfolio does poorly vs fixed investmens, you're really going to take it in the teeth.......

Many people would prefer a more diversified approach. But only the passage of time will prove whether Ramsey is correct or not.
I'm not into real estate, so I wouldn't have any of that...if I went this way it would be all stocks...stocks within mutual funds that are well diversified, including ones that give big dividends.

For now, I still think bonds have their place...I could change my mind though. Ramsey's point about no bonds though is that over time stocks make so much more that even if there is a big stock drop, not only will it eventually recover, but you would have made so much more before the drop with stocks only vs. having bonds in there. Seems a bit scary to consider doing that in retirement, but I can see his point; especially if you have other controls in place; no debt at all including a paid for house, 12 months or more of expenses saved that isn't tied to the stock market. Another poster mentioned 3 years of expenses in a CD ladder...if I did that, then I think I would be comfortable with stocks only.
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Old 01-15-2013, 06:46 AM   #40
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I wouldn't listen to DR, I think he is crazy based upon some things he says but then I'm not a fan.

To the OP - when I was your age I was working and 100% in equities, always was. I didn't get into any FI until 4 years before retiring. Today I'm 40/60 and when the market is doing swell as in the past few years I wish I was 50/50 or 60/40. But 2008 and early 2009 was very scary, I retired in August 2007 and was 60/40. I learned just how risk intolerant I was!

You have to be able to sleep at night. It's a personal call.
Gotta take Dave Ramsey with a grain of salt. He's definitely got some good ideas, but I agree with you that some things he says to me are just a bit crazy.
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