Pimp my ride!

[cute fuzzy bunny]

Nope...not until after the quarter ends.

By the way, the current port above dropped 3/10ths of 1% today, and is averaging 8.5% per year over the past 3 years...

 

[charlie]

No klaxon, but I would be inclined to split Equity Income and
Windsor II equally. You will only loose a little yield and gain
a lot more diversification including the 7.6% foreign in WII.

Cheers,

Charlie

 

[unclemick]

No klaxon here either,

BUT!!! - if those pesky hormones are still bothering ya:

Do a little nosing around a raddr's website and perhaps a little independant research into PCRIX and that ilk.

 

[cute fuzzy bunny]

Thought about some pcrix or tips. Pcrix bounces like a ball and should be good primarily in the event of unexpected inflation. I'm not expecting any unexpected inflation over the next 5 years. Go figure THAT statement out. The TIPS fund also throws off a lot of capital gains every year, which wouldnt be too horrible as I have a lot of old capital losses I just cant seem to use up.

Charlie...I'll think about increasing the windsor II. So far your advice has been spot on.

 

[preben]

th; great portfolio. Nothing to add otherwise that has not already been covered by you or others. Cheers!

 

[unclemick]

Yeah

I like Charlie's advice too. Never owned Windsor/or II - but I've caught myself looking many a time.

 

[cute fuzzy bunny]

So I'm going to cheat on wellesley and you're guilty of coveting another fund? Oh the humanity...

 

[greg]

I changed my mind. I forgot about your circumstances--you young rascal you.

hypothetical: What if the market dropped, oh say 5-10% each year, for an extended period. You might do some mild rebalancing from those funds that lost the least to those that lost the most during that time. When would you bail and restrategize? Where's your new 'portfolio' stop- loss, percentagewise? What if the country moves to high inflation mode (15-20%/yr for a few years)?

 

[cute fuzzy bunny]

Well clearly that would suck, but I wouldnt change anything, sell anything, etc. If one or more funds lost significantly, I would rebalance from other funds that held their ground into it. I'm not afflicted with that disease that says you run from the market when its on sale or sell low and buy high.

I'm unexcited about valuations in equities, but the stuff I'm buying (while expensive by long term historic value stock valuations) is not as expensive as other sectors. I think I've come to believe that the market is more likely to go sideways a while than experience a drop. People just arent going to sell, they're going to slide sideways with it. Unless we get another 9/11 or similar event that makes people go hoo-hoo. So old school managed value equity funds with dividends is where I'm headed.

If the country moves to high inflation mode, we're all gonna get killed unless you're holding a lot of tips or ibonds. I dont see high inflation as being terribly probable in the next 5 years. I dont think most banks and financial institutions do either. Even if inflation does run high, I have a funny feeling CPI will tell us it isnt that bad. By the way, I think if you hold a lot of tips and ibonds in the fear of inflation, that lousy 1-2% 'supposed real yield' will kill you as well...its just going to take 10-20 years.

I'm still considering a hunk of the tips fund, because its liquid and will pay about the same total output every year as the gnma fund (~4.5%) if you include the capital gains, and I have a good dollop of capital losses I'm still using up leftover from 2000, so 3/4 of the gains will be "free" for at least a few years.

 

[cute fuzzy bunny]

By the way Off Topic, I didnt figure out you were marthas husband renamed until just now. I was wondering who the #$^%$ this guy and his 'depends' comments was.

 

[BUM]

Bum - the only way gabes getting a brother is if some sort of severe brain damage strikes me. The first time I was left in charge of him for 72 hours straight my brain told my body to stop producing testosterone, and I believe my sperm count went negative. Not to mention at our age, the odds of getting pregnant ONCE is about 1 in 10 over a year long period. DW's lady doctor said it was very very unlikely to happen at all the first time. A repeat? (shiver) I had a nightmare that we had a second baby right now (a neat trick, that 4 month pregnancy). Woke up with the sweats

Disclaimer CHP:
Another scary coincidence. DW's groinacologist said the same thing, "Immaculate conception. Can't happen again in a million years." Three years later, yet another bundle of joy. I think I'll go pour another glass of brain damage.

Cheers! (sorry charlie)
BUM

 

[REWahoo]

...groinacologist...

CHP:

"Edith, I don't wanna hear nottin' about what yer groinacologist said about yer female problems."

"Oh, Archie..."

REW

 

[treypar]

Normally I would suggest a balanced approach for a retired person more 50/50 but since your wife is carrying you itlooks good to me. I also like Windsor II.

 

[cute fuzzy bunny]

Well...the 'carry' isnt too heavy...since I paid off the mortgage, the cars, and the rest of the debt, do most of the child care, cleaning, gardening, maintenance and repair of the home and cars, and most of the cooking...

50/50 is close to where I was...well...48% stocks and the rest split between bonds and cash. I agree that was prudent for someone living off the egg. For a 5-10 year period a little more high dividend paying equity might help build the egg further.

My main concern is regarding health care if and when she finally stops loving her job. She has a preexisting condition (asthma) thats well controlled by ~$120 a month in medications, but if we cant cobra/hippa our way into a reasonable plan, we'll end up a family of three in the state high risk pool...thats 1500-2000 a month for health care...about a 50% increase in our current budget...

 

[cute fuzzy bunny]

Well we've entered phase I...

I put in sell orders for all of the gnma, california intermediate tax exempt, wellesley and wellington.

Started dumping the money market to my credit union for conversion to 5 year CD's.

Monday I'll watch the market action. if it keeps dropping i'll wait a bit to buy the equity income and windsor II.

All together now... "DIRTY MARKET TIMER!"

 

[cute fuzzy bunny]

Looks like I'm done. I ended up splitting the proceeds between the windsor II fund and the equity income fund, 50/50. I also converted my skimpy europe and pacific funds into the international value fund...its a little pricey (>.5% ER) but I liked the long term track record of international value better than the pure blend funds.

All the bonds I have left (except for whatever the equity funds hold, since they are allowed to buy bonds and other fixed income investments) is 5% of the total port in vanguard high yield. I'll sell that when the nav bounces up a little. Bondless. Reminds me of investing in the late 90's when Peter Lynch said something like 'bonds are for idiots'.

We'll see. Volatillity here we come!

 

[Nords]

We'll see.  Volatillity here we come!

Nine days from this thread's start to finish-- you don't mess around. I still haven't gotten around to this year's IRA conversion and the kid's IRA.

So is this the ultimate asset allocation? With spouse cash flow and another two years' expenses in cash, how much would it take to make you reconsider? No disagreement or devil's advocate here, just curious about investor psychology.

We've tested -40%. Beyond 40% I can't think of what would cause us to say "Oooh, let's buy some of that!", which is probably a good thing. I'd be equally tempted among small-cap value, Berkshire Hathaway, and international.

What, if anything, would you change if/when spouse's income stops?

 

[cute fuzzy bunny]

Hey, I was dragging my feet and the weekend got in the way, sorry for the long delays

Its not any ultimate allocation, although I think its a good idea for the 3-5-7 year term and I think value is a good idea for very long (15-20 year) terms. The value premium is still in effect. You get the dividends even if the underlying stock goes nowhere.

I ended up with 3 years cash plus the wifes income that pays the bills and then some. And thats with her having cut from 5 to 2 days a week. We may even drop her from 8 days a month to 6 or 7, but so far her conversion to day shift has been pleasant...she really likes it for many of the reasons why she avoided it up until now. Just goes to show you, sometimes you end up liking what you fear.

Tell me more about the question on reconsideration and 40%...what exactly are you looking for...what would make me buy more of xx if the price went down 40%? If it went up 40% would I keep it? Not sure what the question is!

Bearing in mind the wife wants to work 7 years at least, and honestly has no hard stop on it. Likes the job, likes the people, makes good $ and the health care is pretty nice. Working just two days a week in a row isnt too rough. Even if she does stop at 7, we dont have to tap the port until year 10 due to the cash buffer. If we had a huge run-up, I might be tempted to take some money off the table.

Once we get to that point and we're living off the portfolio again, with no earned income, I have to say that I'd be tempted to slide right back into the old wellesley/wellington buckets I just crawled out of. Only reason why I did this is to drop the bond income and its associated taxes and shoot for higher medium term returns while I can take the volatility.

 

[Nords]

Tell me more about the question on reconsideration and 40%...what exactly are you looking for...what would make me buy more of xx if the price went down 40%?  If it went up 40% would I keep it?  Not sure what the question is!

I'm asking what you'd do if you lost 40% on 17 Sep 2001 or during a long, painful slide like 1973-4.

A lot of investors avoid a 100% equity portfolio, for example guys like Bernstein, because it's "too volatile".

Others get into a high-equity situation when volatility is only of the upward kind and think it's great. Then they experience the downward kind, investor psychology takes over, and they sell out just when the buying gets good.

I was at a living-trust sales meeting seminar in 2002 when the subject of volatility came up. A retired guy said that he always thought he could handle volatility until he actually had some of the downward kind without a paycheck, and then he found out that he couldn't sleep at night.

Having said all that, I'm going to have to go back and look at Bernstein to see how he addresses dividends. If you're living off your dividend income without chewing into principal, then 100% equities makes sense. As long as they don't strangle the dividends...

 

[unclemick]

I have no problem doing both - cause in my ER case:

I have a big 85% trad IRA port - sooooo with RMD coming up in 8 yrs - will be attempting to damp SD aka volitility along the trad age/pie chart lines.

Along side - 15% dividend stocks - aka Norwegian widow - ballpark 4% marked to market - what me worry - volitility, smalli-til-ity.

And then, and then as an anchor to the windward - SS by then plus a small defined pension - could cover a bare bones frugal - in a pinch.

And NO, NO, NO - I do NOT try to count/estimate equivalent bond value of pension/SS.

That horse hopefully was buried on the old forum.

 

[cute fuzzy bunny]

Ah! I took a 20% drop back in 98, bought more. Took on some QQQ's in 2000 after they dropped to 3000 and more at 2000...rode them to 1200 and back to 2000 and sold. Still working off that capital loss. Kept on keeping on in 98 because that seemed to be the right idea at the time. Sold in 00 because I realized the bloom was off the rose.

This time it stays where it stays. For a decade, maybe more. Wife told me this eve she figures she might work until Gabe is in high school. Since he's still drooling and just started solid food, that sounds like a long time. We'll sip at the dividends when we feel like splurging a little, I'll turn back the leftovers into more shares if it starts piling up.

I'm really happy about the tax situation. I *think* I'll swing zero income taxes this year (wife took 6 months off work, no income, plus we have an extra exemption this year) and may be able to swing nearly zero next year. After that, qualified dividends are supposed to drop to 0% rate in my expected tax bracket. Then we'll shift more of her money into her 403b if necessary to get back to zero taxes.

Me no likey giving money to the government...