Getting to Enough

[arrete]

With a 30 year horizon and stainless steel or brass reproductive organs, a high or all stock portfolio will do ya

That's pretty much what I have. I occasionally weed out a stock or 2 which usually gives me enough to live on for the next year. I hope I am only weeding out ones that aren't going anywhere, but you never know.

My husband gets kind of green whenever I mention bonds or CDs. It just makes him ill to think of passing up possible higher returns. So I don't have a bond or CD ladder, and not likely to get one. He is willing to look for high dividend yielding stocks, but I think those have mostly been run up.

So I guess I'll keep doing what I've been doing. It's worked so far.

Don't know about brass or stainless steel, though.

arrete

 

[cute fuzzy bunny]

If you're going all stock, or nearly all stock, I would highly recommend a 3-5 year cash buffer either in short term bonds or cd's. A 7 year bear market, which has happened and probably will happen again will cream your port if you have to tap down your stock holdings while they're off 20-30%+...

 

[unclemick]

If you are 100% stock with enough dividends to live on - AND enough nerve to ride out down markets - you are home free. However! - there are some periods down history lane where dividend growth didn't keep up with inflation.

Chickenheartedness prevents me from going there - so balanced index plus dividend stocks is my reserve after pension and early SS.

 

[Jarhead*]

I'd like to give a better answer, and in context, except the thread is so loaded with troll crap its hard to see where the original line of discussion was running.  So I guess its been successful once again.

To give a generic answer, i'm not happy with either stocks or bonds right now, but considering the size of my cash position I dont want to keep any more money "out of play".  I'm finding it interesting and curious that some members would bail out or make conservative changes if they experienced a drop...thats exactly when you want to stay in, or increase your holdings.

To once again borrow that quote..."Its an interesting business that when things go on sale everyone runs away"...

TH: After a 20 year bull mkt. in stocks and bonds, and last 5 year run-up in Real estate prices, INMHO, there is going to be a helluva lot more pain ("blood in the streets"), before that sale is held.

 

[cute fuzzy bunny]

I couldnt agree more. When I look at every investing option available and want to put a substantial windfall into CASH theres a problem. I almost always find something to put money into thats better than a long CD.

 

[Jarhead*]

I couldnt agree more.  When I look at every investing option available and want to put a substantial windfall into CASH theres a problem.  I almost always find something to put money into thats better than a long CD.

Th: Being an old phart, and not the least bit interested in winning a pissing contest, on an internet board, I hope you will elaborate on what's better than a long CD at this stage. ( I have some CD"s, and a hedge fund, tips, short-term corp. etc. etc., but I have no idea whether the alternatives would be better than a long CD. Not trying to be a smart--ss, but would appreciate it if you would elaborate on what's better than a long CD.
I honestly ask, because for a major part of my investment philosophy at this point, is keep reasonably close to inflation, and not lose principal.
Thanks, Jarhead

 

[cute fuzzy bunny]

We're in agreement jarhead. There isnt anything better than a long cd. My lamentation was based on that...when a long cd is one of your best investing options, there should be cause for concern. It should be the SAFEST option...not necessarily your BEST.

But right now I think it is. I think you can lose your pants on almost anything else thats available to you and I. California real estate in our area is way past speculative value. REITS are blown up. Stocks are expensive. Bonds are still awaiting the interest rate spanking that they've avoided so far. etc.

 

[JOhn Galt]

Well, I agree with you guys (about long CDs). But,
I don't have any. I have short term CDs and long term
bonds. Of course, any fool can see the "spanking" that
TH refers to. However, maybe it will be pushed out further. No one knows. If all my NAVs went in the crapper due to interest rate increases, I could still
avoid returning to work. I wouldn't like it, but I could live
with it and I think that is the key test. Look at the
worst case. Can you survive it?

JG

 

[unclemick]

My no. 2 pencil says beyond a 6000 point drop in the Dow, I will start to get nervous.

Defense in the distribution phase (i.e. in ER) however you craft it is important. With the current low interest, high valuations in stocks and real estate it is really important.

 

[John Galt]

I want to know what De Gaulle and the Norweigian
widow would do. All other theories are of no use
to me.

JG

 

[unclemick]

For me and only me:

Income: 1. 60% defined non - cola pension. 2. 40% dividend stocks - utilities, telephone, banks, oils, drugs, food, REITs, etc (40 stocks of various size postisions) - aka the Norwegian widow.

And after 8/2005 - planning to take early SS.

Reserve: 75% Lifestrategy mod, 10% REIT Index - the other 15% of total portfolio is the dividend stock part providing the income in 2 above. That be De Gaul.

I haven't marked to market lately but my SWAG is a current yield around 3% give or take.

Thinking real hard about getting back to Ben Graham that is -50/50 stocks bonds using a mixture of the Vanguard Retirement Series - spliting out the the dividend stocks and treating them 'mentally like an income stream pension'.

Chapter 4 General Portfolio Policy: The Defensive Investor, 4th ed, page 41 written circa 1972 or earlier since I don't have the 1949 or interim editions: "--- a fundamental guiding rule that the investor should never have less than 25% in common stocks or more than 75% in common stocks, with consequent inverse range of between 75% and 25% in bonds. There is an implication here that the standard division should be an equal one, or 50-50 between the two investment mediums. According to tradition the sound reason for increasing the percentage in common stocks would be the appearance of the "bargin price" levels created in a protracted bear market. Conversely, sound procedure would call for reducing the common-stock component below 50% when in the judgement of the investor the market level has become dangerously high."

Given my personal prior skill with "in the judgement of the investor." - I'm planning to reduce to about 50/50 excluding dividend stocks and soldier on with DeGaul "God Looks after Drunkards, Fools and The United States of America."

So at age 61 - eleven years into ER - looking hard at:

1. early SS (end of the year)
2. defined non-cola pension( will continue to fade with inflation).
3. dividend stocks(some inflation help).
4. 50/50 balanced index

Four income streams with a lot of up/down Mr market potential in 3 and 4.

 

[preben]

Unclemick; I think that a 50/50% portfolio is a great allocation and historically the loss of return compared to heavier in stocks have come with a nice reduction in volatility.

My base portfolio is 40% global equities, 30% global FI(Incl. EM debt), 20% commodities and 10% reits. I.e. depending where one puts reits (and at current valuations it might make sense to put it with equities seen from a risk point of view) I am also 50% equities.

Cheers!

 

[unclemick]

Ben and TH are trouble - heh, heh

Along the lines of more than one way to skin a cat:

TH has pointed out more than once - how one good managed balanced value fund (Wellelsey) could be used to cover core budget with some degree of confidence.

Ben has posted his 'extreme slice and dice' portfolio - which I believe he stated about 3% ballpark dividend/interest yield.

I've owned Wellelsey in the 80's and early 90's and can get all warm and fuzzy about it Ben Graham wise.

If I were ex - pat or non- American and had to deal with world currency/across national inflation rates up close and personal - an all world stock/bond with perhaps some commodities and PM - something along Ben's lines would my choice.

 

[ESRBob]

Hi all, back from Vaca-

One answer to the angst about asset allocation and how you draw on your portfolio during the ER years seems to be missed in all this thread (amazing how easy it is to kayak through the flotsam when you catch up on 10 days of posts!)

Specifically, you could take the approach of seeking low volatility as your goal, vs specific returns or percentage allocations or what have you. Low volatility gives peace of mind and peace of stomach during a long ER.

Now obviously low volatility that doesnt keep up with inflation or doesn't keep up with your SWR is not attractive, but if you can get a low volatility portfolio that also meets minimum expected returns then that seems to suit the ER mindset.

(i've posted on my portfolio before -- it seems to work -- yes I became a slicer to get there, but it's been worth it. -- sort of like riding an ocean liner vs a little sailboat during rough seas)

 

[hocus]

obviously low volatility that doesnt keep up with inflation or doesn't keep up with your SWR is not attractive, but if you can get a low volatility portfolio that also meets minimum expected returns then that seems to suit the ER mindset.

I think you've gone right to the core of what a Retire Early investing strategy should entail with this comment, ESRBob. You need to have enough high-growth stuff so that you are doing a good bit better than keeping up with inflation and you need to have enough low-volatiliy stuff so that you are sure of not being forced to sell stocks when their prices are down. The trick is coming up with the particular mix of growth and safety that works best for someone in your particular circumstances.

 

[unclemick]

Of late - I've been intensly perusing Vanguard Target Retirement Series - why and how they are doing what they are doing (sliding toward fixed as you age with a strong dose of inflation protected) - and how I can apply that to my ER. Of special interest to me is current yield. Volitility is also thus damped as you age - as new kids on the block - no long track record so damping is 'inferred' from the holdings.