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Old 03-04-2012, 01:26 AM   #61
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This is my view also. The next big crisis will be currency devaluation.
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But I don't think it will involve civil unrest, just that the way the points are tallied (ie currencies) might change. To those that don't have many points, it won't make a difference, but to those of us that do, well, could be a surprise.
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Old 03-04-2012, 01:28 PM   #62
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We are off track, as this thread is about equity allocation.

My feeling is the higher the allocation, the more important it is to diversify the equity. That is probably easier and less expensive now than any time over the past century.
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Old 03-04-2012, 01:39 PM   #63
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I've started a new thread and moved the currency related posts there. Please carry on with the equity allocation discussion.
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Old 03-04-2012, 04:04 PM   #64
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The high frequency traders scare the crap out of me. My fear is they greatly increase the likelihood of black swan events. As such, my portfolio is heavily hedged. (ie: the best way to make money is to not lose it)

I'm in my 30s. 60% bond allocation, 25% equities, 15% options. Leverage ratio slightly above 1. We'll see how this works .
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Old 03-04-2012, 04:27 PM   #65
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I am 38 and working with 60-something percent equity. Much of the rest is bonds, but most of the bonds are in the form of bank loan funds (junky) and straight out individual junk bonds, so my FI has a hefty flavor of equity. I have even stopped buying junk and will slowly allow cash to pile up awaiting better opportunities.
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Old 03-04-2012, 06:18 PM   #66
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I still have possibly 25 years to go before I retire (I'm 35), but I will probably be around 70% to 80% in stocks, as I am now. Theoretically I will have social security and pension money. If you factor that in, then the asset allocation would probably look very conservative.

But who knows what will happen in 25 years, or if I will even live that long. It is pointless to give it much thought.
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Old 03-05-2012, 02:11 PM   #67
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100% equities and still 4-5 years from FI (I'm 31 now). I'll probably keep piling up the money till I get enough to have a roughly 3%ish withdrawal rate and enough fat in the budget to cut if the equities get hit really hard.

At a 3% withdrawal rate, I can just about meet that with dividend yield from a broadly diversified equity portfolio (yield was 2.7-2.8%ish last year). I tentatively plan to remain roughly 100% equities in ER assuming the dividends will mostly cover my expenses. Odds are I will actually carve out a few percent allocation to cash or very short term bonds just as a safety net initially to cover shortfalls in dividend payments or lumpy expenses. Probably 5% max of my portfolio and I'll probably not keep track of it in my portfolio allocations - just call it "cash in my checking account".

I don't really see the value from bonds today since I can get a similar yield from investments plus the high probability of future growth of earnings and hence dividends. Since I am planning on a 5-6 decade retirement, inflation is my biggest enemy, not volatility. The idea is that equities growth over time will lead to a rising stream of dividends (in real terms).

Perhaps some day the bond yield or yield on CD's or cash will get back to the point where it is high enough to justify fixed income investments for me. But I can't bear to invest in something that I expect to lose to inflation every year when I know there are alternatives that have real earnings (at an admittedly much higher volatility of principle).
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Old 03-05-2012, 02:38 PM   #68
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VERY interesting article in today's Wall St Journal re Bill Bengen, author of the "4% Rule" & practicing financial planner. Article outlines a "representative" portfolio for 60yo client. This model portfolio only includes 32% stocks, along with 60% bonds/cash & 8% gold. It appears the 4% Guru would not agree with 100% stock allocation1?!!!
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Old 03-05-2012, 02:53 PM   #69
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VERY interesting article in today's Wall St Journal re Bill Bengen, author of the "4% Rule" & practicing financial planner. Article outlines a "representative" portfolio for 60yo client. This model portfolio only includes 32% stocks, along with 60% bonds/cash & 8% gold. It appears the 4% Guru would not agree with 100% stock allocation1?!!!
maybe not but he may not have a pension either. He said in one article that the " real" number was more like 4.5%
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Old 03-05-2012, 08:17 PM   #70
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+1 What he said.
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100% equities and still 4-5 years from FI (I'm 31 now). I'll probably keep piling up the money till I get enough to have a roughly 3%ish withdrawal rate and enough fat in the budget to cut if the equities get hit really hard.

At a 3% withdrawal rate, I can just about meet that with dividend yield from a broadly diversified equity portfolio (yield was 2.7-2.8%ish last year). I tentatively plan to remain roughly 100% equities in ER assuming the dividends will mostly cover my expenses. Odds are I will actually carve out a few percent allocation to cash or very short term bonds just as a safety net initially to cover shortfalls in dividend payments or lumpy expenses. Probably 5% max of my portfolio and I'll probably not keep track of it in my portfolio allocations - just call it "cash in my checking account".

I don't really see the value from bonds today since I can get a similar yield from investments plus the high probability of future growth of earnings and hence dividends. Since I am planning on a 5-6 decade retirement, inflation is my biggest enemy, not volatility. The idea is that equities growth over time will lead to a rising stream of dividends (in real terms).

Perhaps some day the bond yield or yield on CD's or cash will get back to the point where it is high enough to justify fixed income investments for me. But I can't bear to invest in something that I expect to lose to inflation every year when I know there are alternatives that have real earnings (at an admittedly much higher volatility of principle).
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Old 03-06-2012, 11:31 AM   #71
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Well, I'm the opposite, I'm 54 and got completely out of the market a few months back. I have $2 million in various retirement savings, and can average 4% return with muni bonds, guaranteed funds through 401 k accounts etc. That's $80 K per year. My wife gets a $60K per year pension, and we can easily live off $100K per year pre tax.

So, we make $40 K more than we need every year, which stays in the funds to offset inflation.

Why would I want to be involved in the uncertainty of the stock market? I never really understood it anyway, I felt like a gambler more than an investor...
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Old 03-06-2012, 01:50 PM   #72
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So that you can make more and live large!

Or have more money to leave to heirs!
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Old 03-06-2012, 01:55 PM   #73
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If all of us went 100% stocks, it would drive up their prices, particularly if we all bought the same stock, so we'd all be happily FIREd. Just let me know which stock before y'all decide to pile in. :-)
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Old 03-06-2012, 02:34 PM   #74
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Just to add a reference article to the thread subject, for those that wish to read further on retirement equity holdings, and the reasons why one may wish to hold more/less than is suggested by looking at your "expanded portfolio":

http://www.austinlemoine.com/documents/File36.pdf

While DW/me were in our accumulation years - some 25 years of investing, we kept just over 90% in equities with the remainder in bonds. Cash was only held if it was within a fund. We felt comfortable with a high equity exposure for the simple fact that we did not live on our portfolio, but had two paychecks. Additionally, we didn't start investing for retirement till the age of 34, when our respective pensions (defined benefit) plans were eliminated and replaced with the 401(k) along with starting our respecive IRA's. We took the risk for our future.

Being retired (me 5 years, DW later this month) we went to a 60/40 (equity/bond-cash) mix about three years before I retired and stayed at that level until two years ago, when we went 50/50.

100% equity in retirement? No, we're not that brave ....
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Old 03-06-2012, 04:00 PM   #75
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So that you can make more and live large!

Or have more money to leave to heirs!
Thanks, I knew I was missing something!
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Old 03-06-2012, 04:14 PM   #76
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Used Vanguard's free CFP department today for the first time to see what they say, and it is (for my age 67) a 60% bond/40% stock portfolio. Since I have 23% now in bonds and the rest in stocks she didn't like it, but did admit that Vanguard is a more risk management company, hence, she thought it was too risky.
I'm using just 2% of the portfolio a year, but the way the CFP acted was if there was another crash I wouldn't be eating. Interesting reaction from Vanguard--not that I enjoyed seeing my portfolio crash in 2008 at all.
Just throwing that in FYI.
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Old 03-06-2012, 04:18 PM   #77
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OF, you should do what some of these people here have done--follow the safe AA for your age for the majority of your portfolio, and then for 10 percent or so, go crazy and risk it in whatever you're studying up on. We'll call it the Orchid Portfolio .
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Old 03-06-2012, 04:26 PM   #78
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OF, you should do what some of these people here have done--follow the safe AA for your age for the majority of your portfolio, and then for 10 percent or so, go crazy and risk it in whatever you're studying up on. We'll call it the Orchid Portfolio .
+1

Unclemick calls the ~10% of his portfolio he actively manages his "testosterone stocks". Maybe you'd prefer to use the term "estrogen stocks", but whatever you call them, the strategy of not betting the farm with anything more than 10% of your portfolio makes a lot of sense. Good entertainment value with far less opportunity for a gut-wrenching outcome.
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Old 03-07-2012, 12:02 AM   #79
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I am very close to retiring, but not quite there yet. I am 85% equity, 15% cash in savings or short CDs. I was 100% a few months ago. Yes, I do have a pension and Soc Sec to draw on and it is equal to a 50% sinking annuity without an inflation rider..
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Old 03-07-2012, 12:28 AM   #80
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I never got the "set aside 10% for stock picking" idea. Either you believe you can beat the market, or you don't. If you truly believe it, you would want to dedicate much more than 10% to this superior strategy. If you don't believe you can beat the market, why would you risk any money on a lost cause?

I understand the testosterone thing, but why not find some other, cheaper, way to indulge it?
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