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Have the asset classes taken their hits equally?
Old 05-05-2009, 04:34 PM   #1
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Have the asset classes taken their hits equally?

I managed to get out in time to miss most of the damage in the markets, but of course that only makes me half right. The result is that I cannot decide where or when to get back in!

Most of my problem is that I have the bulk of my investments in taxable accounts. The reasons are personal, but that is the way it ended up. I am looking at real estate, which seems to be a good buy, but I don't think I really want to be a landlord. Stocks are scary after what they have just been through and the bond market is paying virtually nothing.

Here is my question:

Since it would seem that every asset class got hammered in this downturn, is everything prety much equally on sale? If that is the case then couldn't I just ease into a couple of funds like Wellesley and DODBX and call it good?

I dread paying the taxes every quarter, but since I am only about 5 years from ER it doesn't make sense to go into an index assortment, sell in 5 years and pay the taxes to move to a fund I like long term, and I like Wellesley and DODBX long term.

My previous setup was a self directed slice and dice which was OK, but I did not seem to get any more than I would have with the two funds listed and I felt like I had to watch it myself. I am glad I did, because I got out in time but still, I could have done just as well by letting those two funds do all the work.

Am I wrong, is there one asset class which is better than the others that I should be loooking at?

I would welcome any feedback. I don't post often but I do respect the opinions I frequently read on this board.
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Old 05-05-2009, 05:00 PM   #2
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You can see the returns of various Morgan Stanley indexes here:
Index Returns

& use that to determine if all asset classes have taken equal hits. My experience says No.
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Old 05-05-2009, 06:09 PM   #3
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I've sliced and diced (in mutual funds) for many years. I've also owned Wellesley and Wellington for many years. It almost makes me cry when I look at my returns over the years and realize that I could have done just as well (or better) to have invested just in Wellsi/Welltn over this time and gone fishing or picked up a hobby like examining the lint formations in my belly button instead of all this research....Oh well!!!
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Old 05-05-2009, 06:32 PM   #4
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Originally Posted by plattj1 View Post
I dread paying the taxes every quarter, but since I am only about 5 years from ER it doesn't make sense to go into an index assortment, sell in 5 years and pay the taxes to move to a fund I like long term, and I like Wellesley and DODBX long term.
I have 30% Wellesley, but no matter how much I love it I would not want to put all of my eggs in one basket (not even the Wellesley basket). The rest of my nestegg is in broad index funds (total stock market, international, total bond market). Perhaps this general approach would work for you.
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Old 05-05-2009, 07:15 PM   #5
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For the most part, all equity asset classes got whacked relatively equally. REITs got whacked harder, but they also outperformed in 2000-06 and mean reversion would expect this to happen. International got whacked harder than U.S., but again, this was a "flight to safety" thing and the dollar tanked until last summer when it rallied again.

I'd maintain my target allocation at this point across all equity asset classes.
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Old 05-05-2009, 10:26 PM   #6
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No, all asset classes didn't get whacked equally. A lot did all got whacked at different degrees, but many others act inversely to the market, and many of those have since gone back to normal. Example treasuries held pre market crash would have landed a nice profit if sold in December. Precious metals have held up well(taking a minor hit), too in comparison of most asset classes. And cash(also an asset class) appreciated signifantly in the last year.

Past performance isn't a determinant of future returns.

"Am I wrong, is there one asset class which is better than the others that I should be loooking at?" I repeat previous statement, past performance isn't a determinant of future returns. Actually its largely the opposite. Asset classes that have taken the biggest beatings usually do the best in the near future. Of course unless it is what I call a carryover bubble, but those you should be very, very squeamish about because those can hurt.
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Old 05-05-2009, 10:39 PM   #7
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Quote:
Am I wrong, is there one asset class which is better than the others that I should be loooking at?
Yes, there is. The problem is, you and I won't know which one it is until afterwards.
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Old 05-05-2009, 11:20 PM   #8
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Bingo
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Old 05-06-2009, 02:18 AM   #9
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One good source:

http://www.callan.com/research/insti...c/free/311.pdf
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Old 05-06-2009, 05:03 AM   #10
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If you got out at the top, you timed the market, and saved yourself a lot of grief, but if you aren't at least partially back in, you missed (some) of the eventual uptick that may already be well on its way (or not). If I were you, sittin on a pile o' cash, I would probably get back in while the gettin's good. But, pick your allocation, and learn to stick with it. If you must, take a portion (allocate it) that is your "play money" for market timing and the like. Otherwise, even though you got out with good timing this time, you may lose your shirt (or uptick opportunities) as the case may be. Just pick a well diversified AA and stick with it (or go with a combo of Wellesley and Wellington, plus some cash).

my two cents. fwiw.

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Old 05-06-2009, 05:40 AM   #11
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On the descent I thought that anything under dow 8000 was a good buy, and anything under 7000 as a great buy, I didn't care if it went down much more, all I could tell is that I was picking up at good prices. Now those that are still on the outside, you are put in what I feel is a more difficult position. I do believe that this current rally is fragile and at least a decent sized pull back will occur, but when? And how far will the market rise before it has a pull back? So, I would put a sizeable position in now, at dow over 8000(just in case) and keep enough free to pick up some more on a pull back. Hopefully then you can dollar cost average to values that are associated(obviously loosely) with dow at 7800-8000(a good price in my mind).

Make sure you hold up in a potential pullback right now, don't be squeamish if the market retreats back considerably.
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Old 05-06-2009, 09:59 AM   #12
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Yakers,

Thanks for the Callan link. I was hoping they were still keeping that one updated. Most instructive.
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Old 05-06-2009, 11:36 AM   #13
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Originally Posted by Ed_The_Gypsy View Post
Yakers,

Thanks for the Callan link. I was hoping they were still keeping that one updated. Most instructive.

That table makes it look SP 500 and Bonds are going to be a screaming rocket ride since they've been on the low end recently.

-CC
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