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Re: Are you afraid of Money?
Old 11-22-2006, 08:22 AM   #21
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Re: Are you afraid of Money?

Quote:
Originally Posted by DOG52
ESRBob,

Thats why I like having enough in cd's/treasuries to get me to ss age without having to touch equities in a down market. Having said that, a correction like 2002 will still be uncomfortable to watch when/if it takes place.
I, too, have some funds placed in other accounts (besides equities) to draw from when the market turns down. I thought it would be best to use "buy low; sell high" strategy there, too. That would be "withdraw high; do nothing low!" with the equities. The challenge for me during those times is to avoid making emotional decisions.

The markets WILL turn down some day. We just don't know when or for how long.
I got through the 2002 downturn in pretty good shape. When I chart it out and draw a trend line, The progress is pretty consistent over the last 12 years with one abberation up in 1999 and 2000 and one abberation down in 2002. Otherwise over the long haul....... it looks good.

If I sat around and worried about it all day, it would probably drive me crazy!

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Re: Are you afraid of Money?
Old 11-22-2006, 04:22 PM   #22
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Re: Are you afraid of Money?

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Originally Posted by DOG52
Thats why I like having enough in cd's/treasuries to get me to ss age without having to touch equities in a down market.
DOG52, I did the same thing.
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Re: Are you afraid of Money?
Old 11-22-2006, 06:04 PM   #23
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Re: Are you afraid of Money?

I've noticed I worry more about money after getting out of debt than when I owed money all the time. You have fewer choices when you're in debt. Now that I'm not in debt I worry about what will decimate my portfolio. Actually I don't worry as much anymore; I figure if there is a depression/war/comet/whatever I'm financially better off than most (and than my former self) by staying out of debt and having savings.

Besides, if you go conservative then inflation eats away. For a while there I kept saying cash is overvalued. I think I managed to accidentally get that one right, at least over a term of a couple of years.

Both of my grandmothers lived through the depression and both hid cash around the house in books, drawers, etc.. You'd go through their stuff after their passing and find $100 bills in the oddest scattered places. A few months ago I asked my granddad what he thought a good investment would be. His answer was municipal bonds, although later he started going to seminars and though deferred indexed annuities sounded good because of the "guarantee".
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Re: Are you afraid of Money?
Old 11-26-2006, 01:13 PM   #24
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Re: Are you afraid of Money?

Dog and Bob Smith --
What % does that work out to be for fixed income in your portfolios? It may be that a lot of us are doing it without actually thinking of it in the way you do -- just through having a 40% or so fixed income component in our portfolios.

In my case 40% fixed income spent for the next 20 years (while earning 5% interest) would cover our living expenses and still leave a good amount of fixed income left over even after inflation.

Likewise annual rebalancing and pulling cash out then for next year's living expenses would have much the same effect as your practice -- if equities were down that year relative to fixed income, you'd be selling the fixed income or other "up" asset classes for spending cash, and to buy more equities.
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Re: Are you afraid of Money?
Old 11-26-2006, 03:28 PM   #25
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Re: Are you afraid of Money?

This reminds me of an excellent book that I have been reading "Why Smart People Make Big Money Mistakes" by Belsky & Gilovich.
http://froogle.google.com/froogle?bt...p&q=0684859386

As investors it really behooves us to learn about behavioral economics and all of the ways that we can be led astray in these matters and not realize it until we have taken a financial bath.
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Re: Are you afraid of Money?
Old 11-26-2006, 05:54 PM   #26
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Re: Are you afraid of Money?

Quote:
Originally Posted by ESRBob
Dog and Bob Smith --
What % does that work out to be for fixed income in your portfolios? It may be that a lot of us are doing it without actually thinking of it in the way you do -- just through having a 40% or so fixed income component in our portfolios.

In my case 40% fixed income spent for the next 20 years (while earning 5% interest) would cover our living expenses and still leave a good amount of fixed income left over even after inflation.

Likewise annual rebalancing and pulling cash out then for next year's living expenses would have much the same effect as your practice -- if equities were down that year relative to fixed income, you'd be selling the fixed income or other "up" asset classes for spending cash, and to buy more equities.
Cd's/treasuries account for roughly 20% of my portfolio. I follow the 100 rule. My age is my fixed income % and the balance is invested in equities. Bond funds account for the rest of my fixed income investments.

So yes, there is really not much difference in what we are doing. It's just the way I look at it. Cd's/treasuries bring me a certain amount of comfort for money I will need over the next few years.
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Re: Are you afraid of Money?
Old 11-27-2006, 07:01 AM   #27
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Re: Are you afraid of Money?

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Originally Posted by DOG52
I follow the 100 rule.
If your portfolio is still holding plenty of assets when you are 90 I can't see any reason to go 90% fixed. You are just reducing the pot for your heirs. Better to leave them a "foundation" portfolio, all set up to last them forever.
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Re: Are you afraid of Money?
Old 11-27-2006, 08:00 AM   #28
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Re: Are you afraid of Money?

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Originally Posted by donheff
If your portfolio is still holding plenty of assets when you are 90 I can't see any reason to go 90% fixed. You are just reducing the pot for your heirs. Better to leave them a "foundation" portfolio, all set up to last them forever.
It's just a general rule of thumb, but one that fits my personality. If I make it to 90, I probably won't be entirely in control of my assets anyway. One of my nephews will probably be calling the shots.
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