Any regret for being conservative about investing

[Dtail]

Wac at 100% most of my career, now at 55/45 in retirement. Just lucky overall.

 

[Bir48die]

Went from 80/20 through my 50’s to 60/40. Yeah I’ll lose a bit on the upside but I think it will help me not to have to alter my WR as much year to year if the market tanks

 

[ncbill]

My target AA was 55/45 for most of my working years. The stock side rose during the late 1990s boom years. I did some minor rebalancing in 2001-2002 when the markets tanked, and in early 2003 when the bond fund prices spiked.


But there was one area where I sometimes regretted being too conservative. The company stock in my retirement portfolio (basically "found" money) exploded in value from 2002-2007. However, once we were allowed to divest a portion of it (the company had not yet gone public, so we had to hold most of the shares if we remained employed), I chose to do that. This was in the wake of Enron and other company failures which wiped out company-stock-heavy portfolios, so I was a little jittery about having so much money tied up with my company stock.


When I was doing this divesting, I hadn't yet put together my ER plan which included a magic number for the stock value. Once I created a magic number, I stopped divesting any more of the company stock.


But there was an upside to delaying my reaching the magic number for the company stock. By late 2008, when I finally reached it, the markets had been tanking for much of the year. The big bond fund's NAV tumbled, so I was able to buy ~25% more shares than I expected. So, I had less money from the cashed-out stock but bought cheaper shares with it.

The proceeds from the divested shares now reside in my rollover IRA, growing tax-deferred for now. And the tax bite on the cashed-out stock, despite using NUA, was still about 25%. So, it is hard to tell if I would have come out ahead, behind, or about even had I not done the divesting and retired 6-12 months earlier.

In any event, I don't regret how things turned out.

OTOH, at least you didn't end up like those blue-collar workers I knew who worked for a telecom whose stock became 'hot' in the first internet boom.

One guy I knew talked about his company stock being worth $600,000, and that he'd cash in when it hit a million.

instead he watched it go to $60,000.

 

[COcheesehead]

I heard Buffet say something along these lines. I googled it and can't find the exact wording. So take this in the spirit it was meant and not as an actual quote.

I would rather leave a dollar on the table on the way up, than loose a lot of dollars on the way down.

His number one rule is don't lose money . His number 2 rule is remember rule one.

 

[gcgang]

In accumulation phase, I heard an investment manager say "bonds are for getting out of jail". I never owned a bond, except for speculation in long term strips back when rates were double digits, until retiring 6 years ago.

While I've no doubt left money on the table since then, the difference wouldn't move the needle much on how I live, and I don't have the time or earning power to make back big losses. My 40% cash/bonds don't get me out of jail, but hopefully will keep me out of the poorhouse.

No regrets.

 

[Spanky]

Are you talking about during accumulation phase?

It’s a good idea to be more aggressive during accumulation phase and then gradually transition to something less aggressive starting say about 5 years before retiring.

Thanks for asking.

Yes, I was still in the accumulation stage back in 2009.

 

[FREE866]

50/50 stocks/bonds is conservative for sure, but it's not tragic.

I know people that have been like 70-80% cash for years--that's financial suicide!

 

[Spanky]

OTOH, at least you didn't end up like those blue-collar workers I knew who worked for a telecom whose stock became 'hot' in the first internet boom.

One guy I knew talked about his company stock being worth $600,000, and that he'd cash in when it hit a million.

instead he watched it go to $60,000.

I worked for a telcom company. During the telcom boom, many coworkers left to work for startups that offered generous stock options. Many saw their stock values grown significantly to almost a million dollars in a couple of months. However, they could not exercise the options because of the one-year holding period. It was too late when the holding period expired.

 

[HI Bill]

I regret being invested in value funds during the 1990s...they languished and did not provide any real returns...if I had it to do over again, I'd be in VTI or VOO from the beginning!

 

[audreyh1]

But there was one area where I sometimes regretted being too conservative. The company stock in my retirement portfolio (basically "found" money) exploded in value from 2002-2007. However, once we were allowed to divest a portion of it (the company had not yet gone public, so we had to hold most of the shares if we remained employed), I chose to do that. This was in the wake of Enron and other company failures which wiped out company-stock-heavy portfolios, so I was a little jittery about having so much money tied up with my company stock.

I rode company stock to early retirement. It was a hit the ball out of the park strategy and I was basically very lucky. My initial stock option buy in investment was not that high, so I never really worried about it. Just waited for my magic number and since I was young knew that I could keep working if I had to.

During the 1999 run up the company stock never caught on fire like a lot of tech stocks. And during the 2000 dot com crash it wasn’t punished nearly as severely. But I had already diversified quite a bit the year leading up to retirement, so I was not nearly as vulnerable (as compared to 1997 and 1998 when I saw my net worth cut in half and recover each year). I was quite worried about the overall stock market though, so in transitioning from mostly company stock to a diversified AA, I chose to average in over two years.