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Old 02-07-2013, 04:54 PM   #21
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At some point WHEN you think you have enough money it makes sense to take some percentage of risk off the table.
But I'm sure there are people who hit 25X their required annual withdrawals and decide to "take risk off the table" by going from a balanced portfolio with equities to 100% CDs and bonds. Doing that heaps a PILE of risk on the table.
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Old 02-07-2013, 05:08 PM   #22
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Thank you for posting Larry Swedroe's video. I think he makes a lot of sense. I read a book by him years ago, that I really liked and would recommend to obgyn65 and others, called

The Only Guide to a Winning Investment Strategy You'll Ever Need: The Way Smart Money Preserves Wealth Today by Larry E. Swedroe

The Kindle version is $7.99, and I am sure the book is available at many libraries.

He has also written several more recent books that one could investigate as well.
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Old 02-07-2013, 05:23 PM   #23
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Great video. Thanx for posting!
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Old 02-07-2013, 06:00 PM   #24
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Thanks for posting. I agree with the overall message of the video.
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Old 02-07-2013, 06:24 PM   #25
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The lesson for me was not so much about specific numbers. I enjoyed watching the video, as it reinforced the message about not being too greedy or taking too much risk.
Yeah, sometimes the devil's in the details though. That is, while he did talk about not taking too much risk when you've won the game and you get no real benefit from the upside potential of taking risk - he still in the end talked about reducing equities to 30-40% which is a far cry from what many here talk about when worrying about equity risk (i.e. advocating zero in equities).
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Old 02-07-2013, 06:27 PM   #26
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Wonderfully put. We all have insecurities about how much will be enough... and then there is that little devil on your left shoulder that keeps saying "go on ..one more year of w*rk will set you up nicely..."
Knowing when to knock that devil (greed) off your shoulder is hard
While for some it may be greed, I imagine much more commonly it is a fear of not having enough.

Ha
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Old 02-07-2013, 07:03 PM   #27
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Originally Posted by jags
... We all have insecurities about how much will be enough... and then there is that little devil on your left shoulder that keeps saying "go on ..one more year of w*rk will set you up nicely..."
Knowing when to knock that devil (greed) off your shoulder is hard
While for some it may be greed, I imagine much more commonly it is a fear of not having enough.

Ha
Yes, or even the opposite of greed. I want to keep my WR low enough (and/or build my portfolio large enough) to help assure that I don't become a financial burden on my kids. That's not greed, I don't think.

But I get what jags was getting at.

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Old 02-07-2013, 08:13 PM   #28
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While for some it may be greed, I imagine much more commonly it is a fear of not having enough.

Ha
I understand. But say you can FIRE with a comfortable income and zero probabality of failure. And if you work one more year you can add another $10k p.a , 2 years $20k+ , another 3 years $30k+

When do you say enough is enough, coz the extra $10k buys a great holiday $20k even better. $30 - first class all the way baby.

See what I mean
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Old 02-07-2013, 08:18 PM   #29
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What a stupid example. That couple was both stupid and greedy. I have no trace of sympathy for them. Swedroe is pitching in a different ballpark than mine.
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Old 02-07-2013, 08:21 PM   #30
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What a stupid example. That couple was both stupid and greedy. I have no trace of sympathy for them. Swedroe is pitching in a different ballpark than mine.
Hey Ed

What are you doing in Azerbaijan? Holiday or second home?
Perhaps going by your reply on the International Living thread, you escaping the gun violence in the US
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Old 02-07-2013, 11:04 PM   #31
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The main problem with the 70 year old couple he used as an example is NOT that they were in equities, but that they were concentrated in tech stocks. Had they had a balanced portfolio, their wealth might have dipped ~30% and then recovered but 70% would not have evaporated.
+1

That kind of a hit shows a lack of diversification, or perhaps somebody was churning their account.
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Old 02-07-2013, 11:23 PM   #32
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But say you can FIRE with a comfortable income and zero probabality of failure.
Not to nit pick, but achieving a "zero probability" of failure is a fiction. No swr modeling tool can be that precise.
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Old 02-08-2013, 01:16 AM   #33
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Thank you for the advice. I never thought of doing this. Will do so when time permits.

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How about this for specific numbers:

Play around with FireCalc until you find the lowest portfolio amount that yields 100% success. Then take whatever is left over off the table and put someplace safe (CDs, short term bonds, interest checking,). Or, since you don't need the left over amount, invest it in equities and shoot for the moon!
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Old 02-08-2013, 01:20 AM   #34
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Thank you, W2R. I just ordered this book.

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Old 02-08-2013, 01:24 AM   #35
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I guess we know when it is time but it is difficult to say goodbye to the additional money as there is no do-over. I know I am very close to making the jump though.
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When do you say enough is enough, coz the extra $10k buys a great holiday $20k even better. $30 - first class all the way baby.

See what I mean
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Old 02-08-2013, 01:25 AM   #36
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Pretty harsh comments. Would you say the same if they were your parents who only followed their adviser's recommendations?
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What a stupid example. That couple was both stupid and greedy. I have no trace of sympathy for them. Swedroe is pitching in a different ballpark than mine.
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Old 02-08-2013, 03:22 AM   #37
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Pretty harsh comments. Would you say the same if they were your parents who only followed their adviser's recommendations?
Yes. They aren't off the hook just by shifting the blame to some mythical "bad guy" advisor. It is their money, and ultimately, it is their responsibility to safeguard it.
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Old 02-08-2013, 03:33 AM   #38
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while i think the couple was financially ignorant and paid the price of being ignorant. i do believe in the story though. .

while i was an aggressive investor my entire life today it is no longer my goal to get richer. now it is about not getting poorer.

there are two ways of approaching retirement spending.

one way is go with a high allocation of risk or should i say higher allocation to risk and then base your lifestyle around 3.5% to 4% of your nest egg plus whatever income you have additional comming in..

in that case that would allow us a greater lifestyle and higher spending then we do now.

or we can stay with our current lifestyle and back into the lowest risk we can take and achieve that income we need and not elevate our lifestyle or spending from where it is now..

we are more comfortable cutting the risk and keeping our withdrawals at 2% or so since we have other income coming in.

as you see we had a decision to make.. does the dog wag the tail or does the tail wag the dog?

do we want 165-170k a year and go 40-60% equities or do we want our current life style at 100-120k a year and maybe 20-30% equities.. right now we are only 3% equities but as bond funds shift so will we.

we are going with the 120k lifestyle and lower risk. we always have the option of going to higher allocations and higher income.
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Old 02-08-2013, 04:18 AM   #39
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Thank you, W2R. I just ordered this book.
Hope you find time to read it and, if it raises any questions, to ask them here.
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Old 02-08-2013, 04:59 AM   #40
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I think fundamentally my problems with this video is that like so many other discussion of financial products is Larry make the assumption that historical volatility equals risk.

He concludes that equities are risker because their price fluctuates more than most other asset class. However, he fails mention the real problem. Back in 1999 equities in general and high tech stocks in particular were highly over valued. Frankly you didn't need to be a rocket scientist to know this, it was widely reported. The couple never had a portfolio worth $13 million, sure that individual couple could have sold it for $13 million to some other people for that price. But only a small fraction of the people who owned tech stocks could have sold their portfolio and stuck the proceeds into say Muni bonds, as the events over the next year proved. Price is what you pay, value is what you get. Stocks in 1999, by any measure P/E Price to Book, Price to Sales, dividend yield, discounted cash flow, were not worth what people were paying.

Houses, especially when purchased with low or minimal leverage, were never considered risky because historically the volatility almost never exceeded 20% in a single year in a market, and nationally they never went down. The same thing is true for Mortgage Backed Security, historically low volatility means they are safe.
Obviously starting in 2007, these safe investments were no longer at all safe.

So it seems to me rule #1 for preserving principal is to follow Buffett's advice and don't lose money. A simple way is to not buy or hold too much of an over valued asset class. In some years this is equities, in other years in could be real estate, in other years it could be bond, gold etc.

Now there are lots ways of doing this. Certainly the simplest and most fool proof way, is having a diversified portfolio, with periodic rebalancing. I realize that have been wrong about long term treasury bonds for the better of 4 years, but that hasn't changed my opinion that they are overvalued so I don't own any.
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