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Chips off the table...
Old 09-08-2009, 10:22 PM   #1
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Chips off the table...

Hi all!

I have a desire to hash out opinions on what to do after you take your money out of the (US) market.

My husband and I are very concerned about what is happening in the US. We have no confidence that the market will not take a nose dive going forward. We have also decided that we no longer need to take market risk. We have been careful with our investments and have enough to last us going forward. I retired (at 47) and my husband has about 8 more years to work if the airline he works for stays solvant.

But, there is still inflation, the dollar dropping in value and such to be concerned about. Massive inflation, for example, could hurt us.

So, we are thinking about what to do from here. The Everbank index CD's with a mix of 4 foreign currencies seems one possible place to put some money. Gold and silver another. Maybe some TIPS, although that concerns me. I thought about a World Bond Fund. Even buying land in another country.

Is anyone else in the same situation? I used to be so confident with my investing skills, but with the new administration I feel like all bets are off.

Thanks for any discussion!
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Old 09-08-2009, 10:31 PM   #2
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Well, I'm staying in the market because I don't think there's a better place to hide. I have the money in a little bit of everything and I'm hoping for the best.

We can only base what will happen in the future on what's happened in the past. If we look back it seems that there's always something to be concerned about. World Wars, terror threats, oil price run ups, what can you do. Just sit tight and see what happens, trying to time markets is a fools game.
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Old 09-08-2009, 11:01 PM   #3
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Hi all!

I have a desire to hash out opinions on what to do after you take your money out of the (US) market.

My husband and I are very concerned about what is happening in the US. We have no confidence that the market will not take a nose dive going forward. We have also decided that we no longer need to take market risk. We have been careful with our investments and have enough to last us going forward. I retired (at 47) and my husband has about 8 more years to work if the airline he works for stays solvant.

But, there is still inflation, the dollar dropping in value and such to be concerned about. Massive inflation, for example, could hurt us.

So, we are thinking about what to do from here. The Everbank index CD's with a mix of 4 foreign currencies seems one possible place to put some money. Gold and silver another. Maybe some TIPS, although that concerns me. I thought about a World Bond Fund. Even buying land in another country.

Is anyone else in the same situation? I used to be so confident with my investing skills, but with the new administration I feel like all bets are off.

Thanks for any discussion!
Keep working. Wages usually combat inflation.
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Old 09-08-2009, 11:04 PM   #4
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I'm nearly 100% equities, but half of that is international. The market may go down, in which case I will add my little bit of cash and HELOC borrowed money and shift from conservative funds to more agressive ones. I don't see the market going any lower than in March, but I'm kind of hoping for a 10% to 20% drop so I can add the cash and leave it in this time. The market is already higher than I thought it would be at this time, so I'm not confident enough to go all cash.
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Old 09-08-2009, 11:09 PM   #5
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What 73ss454 said.

DH and I are no longer adding to the pot as we are both retired. Stocks are volatile and can be scary, but I think inflation is even scarier. So, we hold approximately 30% in US lrg/mid cap stock and a tiny bit in foreign. Fortunately we don't have to take much risk.

The only other thing I can add is keep up with your expenses. Understand exactly where your money is going and do your best to stay out of debt.
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Old 09-08-2009, 11:12 PM   #6
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Remember, we have no need to take that kind of risk. I would kick myself for the rest of my life if we had plenty of money to easily last us the rest of our lives (we do) and yet I continued to invest in the market at a time when my rational mind tells me that danger abounds...and then we lost a large portion of our nest egg.

We knew someone that had somewhere between 3 and 4 million dollars and the dot com bust wiped him out. He never considered his NEED to take risk. I don't want to make that mistake.

(We have no debt and have 3 houses paid off.)
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Old 09-09-2009, 12:42 AM   #7
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If I had no need to take risk in the market I would still hold about 20% in equities split 50:50 domestic and foreign. The rest would be split 50:50 total bond market and TIPS. Stay diversified and don't bet against the US dollar/market...

DD
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Old 09-09-2009, 01:04 AM   #8
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I can't vouch for whether the new administration will make things better or worse....hindsight works well with that. I DO know the last administration was in charge while the big harm was being done....and ignored.
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Old 09-09-2009, 05:40 AM   #9
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I think I know where you are coming from. If it weren't for the risk of inflation, I think I'd just hide my money in a safe deposit box in cash! Very little risk and I'm basically set for life without taking a lot of risk. BUT, inflation IS or WILL BE a fact. It sounds like you are already way ahead of me in finding things to do besides store cash. All I can offer is that I agree with your assessment (forget any politics - just look at the facts) and I think you are asking the right questions. I'll be watching this space for ideas too.
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Old 09-09-2009, 06:09 AM   #10
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My approach is a well diversified portfolio and remain fully invested...no market timing. Generally this means a mix of domestic and foreign stocks and bonds. But I do make investment changes (adjust the portfolio) when I think it is needed. I currently try to use index funds for the portfolio because of the low cost. Plus my approach ( strategy) changes a bit from accumulation phase as I approach (and will soon be in) the decumulation phase.



I have confidence that the market will recover (it seems to be doing it). But there is always some sort of risk. There is no clear answer.

One key questions is: Do you already have enough assets to fund your preferred/acceptable retirement lifestyle on an inflation adjusted basis?


If the answer is yes... IMO - I would not take on unnecessary risk if oyur primary goal is to ER. In other words, I would limit my equity investments but use some to help hedge against inflation (for the long-term) and use fixed securities (some of which would be TIPS).
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Old 09-09-2009, 06:37 AM   #11
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I am not as safety minded as most on this site. I am NOT planning on working any longer than I have to. At this time my plans are to retire in just under 2 years at 54 (teacher). We will have about $650,000 in different places plus an immediate pension that will give us about $12k after taxes (also the SS suppliment from 56-62 with VERA). House already paid for......we plan to live "within our means"....which for us is around $45k a year. But.....with this plan we do have adjust our spending if the market fades....just the way it is. Simple question for us.....work for another 5-8 years and have plenty of money, or behave ourselves (we currently spend under $40K a year) and live reasonably thrifty lives and retire soon.....no hesitation for us.
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Old 09-09-2009, 07:52 AM   #12
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If inflation was not a risk, I would keep everything in cash or CD's or under the mattress, and I would have plenty to last throughout my retirement.

And if the moon was made of green cheese, the world would never go hungry.

The fact is, that inflation DOES exist and inflation risk is something we all have to deal with in structuring our portfolios.

Each of us is betting our lives and retirement on our portfolio structure and its capability of withstanding inflation. This is true whether we are investment gurus or beginners doing the best we can (like me), so it is vital to put all of your intelligence, judgment, and effort into determining what your portfolio structure should be. Somebody once told me, "nobody cares as much about your money and retirement as you do", and I do believe that and invest with that in mind.

I have a conservative 45:55 asset allocation and diversification of investments, while taking advantage of low fee Vanguard index funds when appropriate. I would strongly recommend Larimore et al. The Bogleheads' Guide to Investing. Diversify your income sources, diversify your portfolio, and provide yourself with sufficient "cushion" and hopefully everything will be fine.
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Old 09-09-2009, 08:14 AM   #13
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Current allocation is 44/54/2 in primarily MFs.
Chips off and on the table...12% of stocks in funds is international, 32% domestic.
FIREd but still accumulating at age 51, using pension and TSP annuity as sources.
I'm currently building a moderate size TE money market fund to increase cash reserves (short term) and continuing majority of DCA into stock funds (long term).
I have a decent size stake in TE muni funds (short term) to tap into as extra income or a big ticket OMG situation if I have to.
Inflation? No guesses where that is heading.
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Old 09-09-2009, 11:33 AM   #14
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Seems the worst-case preparation spectrum for most people goes something like this:

- international stocks

- commodities

- TIPS

- international REITs / corporate bonds / govt bonds

- have one or more of your houses in a foreign country (one where you could realistically see yourself living if SHTF in the USA)

- gold "paper" holdings

- physical precious metal holdings

- learn foreign language; get foreign citizenship/passport

- guns & ammo
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Old 09-09-2009, 12:07 PM   #15
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The only reason I invest in stocks is for inflation protection. The only reason I invest in international stocks is for devaluation protection. Otherwise, I would avoid the risk.

However, having lived through the stagflation of the 70s, I know what it can do to savings. I believe (and I use the term advisedly to mean a not-entirely-rational conclusion based on insufficient information) that a diversified portfolio is the most prudent course.

The giant question is "what allocation?". I don't have a good feeling for that, even after time spent with Financial Engines and FIREcalc. We own enough bonds to "live off the interest" and the rest is equities. For us, that ended up a conservative 40/60. We just hope that the 40% in equities (about 25% of which is international) is enough to offset any inflation and/or devaluation. Not very sophisticated, but then, neither am I.
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Old 09-09-2009, 03:36 PM   #16
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For us, that ended up a conservative 40/60. We just hope that the 40% in equities (about 25% of which is international) is enough to offset any inflation and/or devaluation. Not very sophisticated, but then, neither am I.
There are a number of us around who share both your allocation and your level of sophistication. I'm hoping the "safety in numbers/conventional wisdom" side overrides the "herd mentality/a fool and his money" side of the equation.
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Old 09-09-2009, 04:58 PM   #17
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You're worried about the US stock market, but you're not worried about foreign currency fluctuation, the fluctuation of gold and silver values, or foreign land values?

If you are ok with the risks associated with those assets, I don't understand how equities could be all that frightening.

I think you've been watching too much Fox News

It sounds to me like you need a nice diversified portfolio with a lower than average equity allocation. What equity allocation you choose can be weighted heavily toward foreign stocks if you feel that the US is heading down the tubes.


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Originally Posted by Repairmanjack View Post
But, there is still inflation, the dollar dropping in value and such to be concerned about. Massive inflation, for example, could hurt us.

So, we are thinking about what to do from here. The Everbank index CD's with a mix of 4 foreign currencies seems one possible place to put some money. Gold and silver another. Maybe some TIPS, although that concerns me. I thought about a World Bond Fund. Even buying land in another country.
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Old 09-09-2009, 06:57 PM   #18
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First, take off the tinfoil helmet, then turn off Fox "News"...

Seriously, if you really do have enough money to not have to take much risk, then don't. Buy what you feel are safe assets, and leave a modest proportion of the portfolio for risk assets. A couple examples:

- I have owned/followed several Bermuda reinsurers for years. They have generally done extremely well over the long run with 80 to 90% fixed income and the rest of the money invested in equities, hedge funds, credit funds, etc.

- I manage a portfolio for my FIL. It is maybe a quarter to a third of his invested assets, with the balance in an equity heavy mutual fund portfolio. Since I intentionally wish to balance out the portion I do not manage, the account I run is heavily invested in US bonds, foreign (sovereign) bonds, commodities, covered call funds, and alternatives like MERFX. The account took some lumps in the downdraft, but never saw the sort of losses that the equity indices showed. It is already back up to its peak value.

- To take things to extremes, invest 90 to 95% of the account in fixed income (US and foreign, nominal and inflation adjusted) and a smidge of commodities. The rest you can put into moonshot bets: out of the money calls and puts on equity indices, warrants, individual small caps, currency options, etc. Some of the moonshots will pay off over time and will provide a kicker to the rest of the portfolio.

But bear in mind that I don't recommend any of this. I still believe that a broadly diversified portfolio with expected volatility matched to your risk tolerance makes the most sense.
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Old 09-09-2009, 07:18 PM   #19
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The US economy (and US dollar) is the worst place you could be. Except for everywhere else...
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Old 09-09-2009, 07:58 PM   #20
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Remember, we have no need to take that kind of risk. I would kick myself for the rest of my life if we had plenty of money to easily last us the rest of our lives (we do) and yet I continued to invest in the market at a time when my rational mind tells me that danger abounds...and then we lost a large portion of our nest egg.
You could diversify in relatively safe instruments like TIPS, Treasuries, Immediate Annuities, CDs, foreign sovereign bonds. I've read that commodities, especially oil, are a good hedge against inflation, but there seems to be much disagreement about it. Whatever you do, diversify.

You seem so worried about the nation and the stock market. Why do you still own 3 houses? Isn't that a risk?
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