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Old 02-01-2010, 06:44 AM   #21
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Gotta be on your toes with the Boglehead folks. I stopped posting there after being chewed up a couple of times.....being nice isn't their strong point (and I think they are kind of proud about that).....but they have great info. Don't get locked into thinking your way is going to work.....I plan on taking early retirement in 1.5 years at 54....taking a bit of a risk, but it is do-able..... I put that plan out here and cringed hoping it would pass the test of smarter people than me on this site...it did. But I also was (and still am) very open to people who think my idea's are not wonderful and can give a good reason why. I also have a few books on retirement...keep re-reading parts of the 4 pillars, have a couple of the Boglehead books.....great to fall asleep to.....I really must have a lousy memory because a lot of this stuff is just slowly trickling in. Unless you are a finance savant....have to agree that 4 weeks isn't enough. I have been nibbling at it off and on for over a year...still don't know nuthin'. The more I learn, the more I realize what I don't know..... scary.
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Old 02-01-2010, 07:23 AM   #22
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Or that we all believe in evolution, and do not want to interfere with it's workings.

Ha
Ditto. I think you knew before you posted what this board is going to say about an extremely concentrated portfolio as you describe.

Your mind appears set. Good luck !

PS. what kind of boat ?
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Old 02-01-2010, 08:23 AM   #23
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Can someone tell me why it is 100% certain that the dividend will decline with time. Silverton 39 motor yacht. I will be the first to admit I don't have "the answer" but this seemed as plausible as many others out there
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Old 02-01-2010, 08:28 AM   #24
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To the OP or anyone learning about diversification, please simply lookup the risk difference between holding 1 stock and 200 stocks, or in this case, 1 bond and 200 bonds. In the OP's case, he is taking on approximately 150% more risk, for 0% additional reward. Not a good bet by anyone's standards.

Please explain
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Old 02-01-2010, 08:31 AM   #25
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Please explain
Ok, you are not crazy, just ignorant about investments. That said, you need to educate yourself. My favorite site for education is www.aaii.com , plenty of unbiased investment information.
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Old 02-01-2010, 08:45 AM   #26
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Can someone tell me why it is 100% certain that the dividend will decline with time.
It isn't.
People are looking at odds.
Who is more at risk of loosing everything, the investor with one stock (or bond) or the investor with 100?
Say I have a diversified portfolio and you don't. Company ABC goes belly up and default on everything. My portfolio takes a 1% hit as I own stocks/bonds from 100 different companies. You take a 100% hit as that was the only company you were invested in.

What you are doing very well may work out great for you. But you also have a much better chance of getting hit harder than you would if you were diversified.

In short, you are not investing, you are gambling.
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Old 02-01-2010, 09:02 AM   #27
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Some people use the target retirement funds that allow them to "set it and forget it" if you're interested in not having to manage your investments (not that all of them use those funds for that purpose, but it works). Personally, I'm not at all sure you're not just stirring the pot here, but in case you are seriously interested, that is one way that you could get more diversification without headaches.
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Old 02-01-2010, 09:23 AM   #28
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I think I'll just watch this unfold from the dock.
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Old 02-01-2010, 10:31 AM   #29
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Any community has "core beliefs". Without them, they don't survive.

Asset diversification is a core belief of this community. Coming in with something so opposed to this belief is, in my opinion, just trolling.
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Old 02-01-2010, 10:38 AM   #30
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I posted this on the boggleheads forum but did not really recieve much in the way of meaningful feedback.
The Boglehead forum people only know one true path, one right way, of course, the Boglehead way. Stock index funds could go down in price for 100 years and they'd still say, "Yeah, but I'm in it for the long haul."

I've actually been thinking about your approach and you might have something there. Since the last crash I've been paying more attention to people like Zvi Bodie. He's more of a sleep safe at night, TIPS and annuity kind of guy.

I have been thinking lately what if everything we've ever been told about the stock market is wrong? Maybe the future will be totally different from the past. I'm not willing to bet my retirement that it will be the same. I tried to talk to the reps at Fidelity about an all TIPS portfolio and they dismissed it for no good reason. They kept talking about needing equities keeping up with inflation. But TIPS do keep up with inflation and if you hold them to maturity they never lose principle - it is just that the Fidelity people don't make any money from TIPS. Other than that, they never came up with a good reason why an all TIPS portfolio wouldn't work.

I will never make 40% in one year with TIPS (unless we have hyper inflation) but I will never lose 40% either. And the more inflation there is the better off I am because I'm earning inflation protection on my entire portfolio but I only need inflation protection on my living expenses. So in high inflation years I will come out way ahead.

I don't think you are crazy. I don't know if what you are proposing will work, but it is good to think outside the box and get input like you are doing.
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Old 02-01-2010, 10:49 AM   #31
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Any community has "core beliefs". Without them, they don't survive.

Asset diversification is a core belief of this community. Coming in with something so opposed to this belief is, in my opinion, just trolling.
Funny, when I came to this forum in June '07, my PF was diversified up the wazoo. I saw a culture that believed in 100% equities along with a bit of speculation in order to get to RE as early as possible. Then I took the subprime mess in, realized I had enough to retire, and temporarily pulled out of almost everything, totally contrary to either belief seen on this board. IIRC, the 100%ers dominated this board in June '07, today it's harder to see which beliefs dominate; although many of us believe in diversification, we hear from many who wonder where to keep their money now.

Could we say that "core beliefs" vary with age and over-all situation? Had I not been near retirement in '07, I would not have changed anything in my PF.
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Old 02-01-2010, 11:00 AM   #32
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Well lets see you would have make about 6.6% over that last ten years. You had a bad year in 2008 loosing about 21% but that was much better than every one else. Many people are 100% stocks and they are not called crazy. According to what I see you are not that crazy. I myself favor the the short term bond index fund but I don't think you are that crazy maybe just a little bit.
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Old 02-01-2010, 11:16 AM   #33
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I tried to talk to the reps at Fidelity about an all TIPS portfolio and they dismissed it for no good reason. They kept talking about needing equities keeping up with inflation. But TIPS do keep up with inflation and if you hold them to maturity they never lose principle - it is just that the Fidelity people don't make any money from TIPS. Other than that, they never came up with a good reason why an all TIPS portfolio wouldn't work.

I will never make 40% in one year with TIPS (unless we have hyper inflation) but I will never lose 40% either. And the more inflation there is the better off I am because I'm earning inflation protection on my entire portfolio but I only need inflation protection on my living expenses. So in high inflation years I will come out way ahead.
I think you have a very good point, if you can live comfortably on the coupons alone and the bonds are in a Roth to protect you from taxes on the principle adjustments. The only hitch is that at present, coupon rates are lower than the historic median level of real interest rates, so you may experience drawdowns on your principle valuation if (or when) real rates return to mean.

Ha
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Old 02-01-2010, 11:43 AM   #34
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Different people, different styles. We are way overweighted in real estate and real estate backed investments because that is what we're used to. A few have pointed the risk out, and I'm aware of the risk, but you gotta back your own bets. It is to be noted that we are not retired, much less early.
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Old 02-01-2010, 11:46 AM   #35
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for the buy and hold equities crowd a fat 0% annual rate of return over the last 10 years does not appear compatable with an inflation hedge to me.
The asset allocation that Im planning on using when I retire in 5 years returned 7.61% over the last decade (as opposed to the 0% return you quoted which I assume is 100% SP500).

My allocation is 50 / 50 stocks and bonds and includes large cap, mid cap, small cap, international, emerging markets and REITS. It has dramatically less risk than what you propose and higher returns than the 6.6% return for the decade quoted a few posts above mine for your allocation
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Old 02-01-2010, 11:47 AM   #36
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I've actually been thinking about your approach and you might have something there. Since the last crash I've been paying more attention to people like Zvi Bodie. He's more of a sleep safe at night, TIPS and annuity kind of guy.

I have been thinking lately what if everything we've ever been told about the stock market is wrong? Maybe the future will be totally different from the past. I'm not willing to bet my retirement that it will be the same. I tried to talk to the reps at Fidelity about an all TIPS portfolio and they dismissed it for no good reason. They kept talking about needing equities keeping up with inflation. But TIPS do keep up with inflation and if you hold them to maturity they never lose principle - it is just that the Fidelity people don't make any money from TIPS. Other than that, they never came up with a good reason why an all TIPS portfolio wouldn't work.

I will never make 40% in one year with TIPS (unless we have hyper inflation) but I will never lose 40% either. And the more inflation there is the better off I am because I'm earning inflation protection on my entire portfolio but I only need inflation protection on my living expenses. So in high inflation years I will come out way ahead.

I don't think you are crazy. I don't know if what you are proposing will work, but it is good to think outside the box and get input like you are doing.

The risk I see with this (without thinking about it much) are:

Reinvestment risk. If you buy TIPS directly, then you get the inflation rate plus a spread. This spread has gone down over time. Who knows if it will go negative (maybe it can not... just looked it up... it can )... So, if you are living off the interest, your interest might be less when your current ones mature..

To much saving risk. Right now the interest is LOW LOW LOW... so if you needed $50,000 CASH to live... well, you have to get that cash... the rate for TIPS is 1.5% to 2%. So, you will need $3,333,333 in TIPS at the lower rate and $2,500,000 at the higher rate to get your $50K. Remember, your inflation amount need to go into your principal so your income goes up with inflation.... you can not spend it...

With a portfolio with equity etc., you only need to save $1,250,000 in order to get income of $50,000.

I don't want to work to save twice or more of what I need to retire... maybe you do..



A question... does the amount of money you receive increase each year with the increase in inflation? Not sure how they work... so in my example, you get $50K the first year... do you get $50K plus inflation in interest the second?
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Old 02-01-2010, 11:54 AM   #37
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I would not characterize the boglehead forum as having monovision.

There is a very long thread on Harry Browne's Permanent Portfolio.

There is a current thread dissing the bogleheads who tilt to small-cap and value stocks instead of using total market weights. It turns out that a majority of poll respondents actually do not follow Jack Bogle's total market weighting philosophy.

There are arguments about using actively-managed Vanguard funds such as HealthCare, Cap Appreciation, GNMA, corporate bond, TIPS, etc, etc.

There are daily arguments about TIPS -- whether to use them and whether to market time them.

There are arguments about rebalancing methods as well.

These are all the same discussions that happen on this forum. I think it is true that if you don't like the advice they give, then perhaps you should re-think what you are doing rather than find a forum where everyone agrees with you and pats you on the back.
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Old 02-01-2010, 12:03 PM   #38
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So in summary then...nobody really knows do they. I certainly am not ignorant, and I am not trolling here either. I simply wanted to get the pluses and minuses. I think most people have been taught some basic tenants about equities and buy and hold etc. and have chosen to stick with that.
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Old 02-01-2010, 12:12 PM   #39
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So in summary then...nobody really knows do they. I certainly am not ignorant, and I am not trolling here either. I simply wanted to get the pluses and minuses. I think most people have been taught some basic tenants about equities and buy and hold etc. and have chosen to stick with that.
Yes, most of us believe we DO know because we have taken the time to educate ourselves, and have decided that we do not want to put all of our money into one junk bond fund. I believe that you are the only one posting in this thread that does not seem to know what to do with your money. If you really want to learn and are not just trolling the board, I would suggest that you read the books on the Bogleheads book list.

Many of those on the Bogleheads forum are investment experts, authors, or otherwise extremely well versed in investing. Once you have read and thoroughly studied all of the books on the booklist, if you go to them respectfully and listen to what they have to say, they might answer some very specific questions about the plusses and minuses that you have learned about from the reading list.

Your posts so far are dangerously close to baiting our members to produce an emotional response. I hope you appreciate how polite our members have been to you in this thread.
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Old 02-01-2010, 12:21 PM   #40
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And the more inflation there is the better off I am because I'm earning inflation protection on my entire portfolio but I only need inflation protection on my living expenses. So in high inflation years I will come out way ahead.
This argument is not correct. You need your unused principal to keep up with inflation because when you withdraw it, you need to withdraw inflation-adjusted amount, not your starting amount. You will not come out ahead with high inflation.

Also, don't forget taxes. They will ensure that you will come out behind if your TIPS are in taxable account. Since then you would have to pay taxes as you go along - so you clearly loose here (think of 10% inflation - you'll pay say 25% of that in taxes and now you are 2.5% behind inflation for that year).
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