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View Poll Results: Investment choice
All Bonds 75 61.48%
All Stock 47 38.52%
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Old 02-05-2011, 12:25 PM   #41
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Originally Posted by ERD50 View Post
Actually, it may be a simple poll that tells us something else - if a significant % choose 100% bonds, it may tell us that the forums members do not understand the risks associated with bonds versus stocks.

That is different from understanding how much risk they wish to take.

-ERD50
+1

OP's "poll" will not measure participants penchant for risk. It will measure their gullibility. The OP imposed definitions of a 100% bond vs 100% equity portfolio are not realistic. The implication that there is no risk with a 100% bond portfolio held for decades is just silly........
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Old 02-05-2011, 12:25 PM   #42
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Originally Posted by Rustic23 View Post
I took 'a little over inflation' as meaning it would make inflation thus cover your current expenses and thus 100% with a small chance of doing better. Never did it say 'not covering inflation'. I am beginning to see why new bills in congress are 2,000 pages long. In order to ask a simple question 'are you risk adverse' you have to write a novel to explain the question. Me thinks, too many of us have too much time on our hands, maybe it will get better when it warms up out.
"Not to beat a dead horse", but it was the phrase "realistic chance" (not a "little over inflation") that left the opening for not keeping up with inflation.
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Old 02-05-2011, 12:26 PM   #43
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Originally Posted by ERD50 View Post
Where is your evidence of this? - ERD50

Evidence?...Evidence? ...... The Playoffs?

As devil's advocate...do you have 100% in bonds or 100% in stocks? If not, why not?
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Old 02-05-2011, 12:27 PM   #44
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Me thinks, too many of us have too much time on our hands, maybe it will get better when it warms up out.
The weather where we are is NICE. Sunny and 64F. We usually go for a long hike on both weekend days, but my wife is out of town to attend a funeral on her side of the family. So, I am still inside BS'ing with ya all.
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Old 02-05-2011, 12:28 PM   #45
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Originally Posted by FIRE'd@51 View Post
ERD50 laid out the research that seems to clearly indicate that, for the same withdrawal rate, (A) is not only not safe, but dominated by (B)?
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Originally Posted by audreyh1 View Post
Why do you think option A has little risk? Or even lets you maintain the status quo?

After about 10 years, inflation will start eating your lunch, and you will definitely NOT be maintaining the status quo in terms of cost-of-living. You will have to keep downgrading your lifestyle. And it will get much worse at 20 years and on out.

Audrey
Because the OP laid out the parameters saying so. Yes, in the real world you would be correct but according to the rules established by the OP I think not.
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Old 02-05-2011, 12:33 PM   #46
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... I took the poll at face value; there are two choices (risk taker or non-risk taker); care to play?! ...
Well, if that was the intent (and I'm not sure it was), it was really poorly worded:

Quote:
1) Invest all of it in Ultra-safe Bonds with a realistic chance of making a little over inflation.

It wasn't stated as some hypothetical investment guaranteed to keep up with inflation. It wasn't even stated as "probably making a little over inflation". So I'd interpret it as a less than 50-50 chance of keeping up with inflation.

And have Ultra-safe Bonds historically kept up with inflation? I don't know, but I'd think not.

So to be any measure of one's risk tolerance, it would have to be stated as some thing like :

1) Invest all of it in a portfolio guaranteed to provide an inflation adjusted X.X% WR for life(*), or...

2) Invest that same portfolio all in the Stock Market. You could go broke... You could maintain your lifestyle There is chance you might impair lifestyle ... but! You could wind up rich....

Further, we'd need to define that X.X% (and we'd expect it to be very low) to determine how big a portfolio that would equate to. And based on my earlier FIRECALC runs, I'd expect stocks to beat out this hypothetical portfolio. There would be no 'guarantee' with stocks, but unless you can find a hypothetical bond portfolio that really comes with a guarantee and can provide a reasonable inflation adjusted WR, it's all kind of silly anyhow. I might as well change #2 to say the stocks are guaranteed to go up faster than inflation.

What do we learn from unequal choices?

(*) - can you say "annuity"?

PS - sorry if I covered some old ground, or hurt any dead horses, I didn't see the posts after Nova's when I hit submit

-ERD50
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Old 02-05-2011, 12:34 PM   #47
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Because the OP laid out the parameters saying so. Yes, in the real world you would be correct but according to the rules established by the OP I think not.
Geesh. One of us must lack reading comprehension.

This is beginning to remind me of the grade school game, in which 20 students stood in a line and the teacher whispered something to the first student in line and told him to pass it on, and so on. It was astonishing how much different from the original statement what got to the end of the line was.
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Old 02-05-2011, 12:38 PM   #48
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Even though my spouse and I both have pensions (mine has a COLA), retiree health insurance, social security eligible (not quite there yet), and lots and lots of money from 401Ks, I am a financial conservative. I was very poor early in life and learned it was hard enough to be young and poor that being old and poor would simply be unacceptable. I was lucky enough to ride the stock market in my 401K in the '90s and made lots of money off it.

We moved two of our 401Ks to a USAA IRA last year and one to their Global Opportunities Portfolio. Our living expenses will be less than half our income once we start collecting social security and monies off the other instruments. We have no debt.

I will not stay awake at night wondering if I'm going to turn into an older person without financial security. Not gonna happen. I'll stay conservative and take a very calculated risk with a small portion of the overall portfolio. I have people who manage that for me and I have, and will always have, complete faith that USAA will do the right thing at the right time for the right reason. They can stay up at night figuring things out while I sleep.
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Old 02-05-2011, 12:40 PM   #49
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This is a made up scenario.... but please take it seriously... as if it were a real life choice you were making.

Here is the scenario: You are going to FIRE... age does not matter... you have the assets to do it. You have enough PV assets to live your current lifestyle for the rest of your natural life. All you need to do is keep up with inflation.

You have two options that cannot be changed later (one time decision on the asset class):

1) Invest all of it in Ultra-safe Bonds with a realistic chance of making a little over inflation.

2) Invest it all in the Stock Market. You could go broke... You could maintain your lifestyle There is chance you might impair lifestyle ... but! You could wind up rich....


What would you do?
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Geesh. One of us must lack reading comprehension.

This is beginning to remind me of the grade school game, in which 20 students stood in a line and the teacher whispered something to the first student in line and told him to pass it on, and so on. It was astonishing how much different from the original statement what got to the end of the line was.
Maybe it's me but I read the bolded part to say that you will most likely stay just ahead of inflation. I agree that in the real world this is unlikely but that doesn't seem to be chinaco's intention here. I'm sure the OP will correct me if I'm wrong.
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Old 02-05-2011, 12:43 PM   #50
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Erd50,
If someone agrees to give you 'a little over a dollar' would you say you have a 50/50 chance of receiving less than a dollar?

And, I am not going to write 2,000 pages to explain what the risk category, of the person, or there health, intent or anything else.
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Old 02-05-2011, 12:44 PM   #51
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I am beginning to see why new bills in congress are 2,000 pages long. In order to ask a simple question 'are you risk adverse' you have to write a novel to explain the question.
Risk is anything but simple. In fact, I think a lot of damage and bad decisions are made because we tend to substitute the word "risk" for "volatility" when we talk of investments. They are not interchangeable.

BTW, there is an excellent novel (well, maybe not a novel, but much of it is written in story-telling fashion, not just documentary style) on the subject that I highly recommended:

Amazon.com: Against the Gods: The Remarkable Story of Risk (0723812295630): Peter L. Bernstein: Books


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Evidence?...Evidence? ...... The Playoffs?

As devil's advocate...do you have 100% in bonds or 100% in stocks? If not, why not?
I am heavily weighted in EQ (~75%), but I hold some bonds to provide dividend cash flow (for now, while my taxes are low) and for re balancing opportunities.

For evidence of that strategy, I also used FIRECALC, which shows that a weighting in that range is slightly better than 100% stocks, and FAR better than 100% bonds.

And where is your evidence?

-ERD50
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Old 02-05-2011, 12:48 PM   #52
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Maybe it's me but I read the bolded part to say that you will most likely stay just ahead of inflation. I agree that in the real world this is unlikely but that doesn't seem to be chinaco's intention here. I'm sure the OP will correct me if I'm wrong.
I'm beginning to feel like I have no communication skills.

If I say to you, the Steelers are "most likely" to win the Super Bowl tomorrow, would you take that as 100% certainty?
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Old 02-05-2011, 12:49 PM   #53
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My evidence? I get a nice comfy pillow and sleep well at night while not 100% allocated in Bonds or Stocks
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Old 02-05-2011, 12:55 PM   #54
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Sheesh... and naive new posters wonder why we can't even agree on a definition of net worth or whether to pay off the mortgage...
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Old 02-05-2011, 12:56 PM   #55
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I'm beginning to feel like I have no communication skills.

If I say to you, the Steelers are "most likely" to win the Super Bowl tomorrow, would you take that as 100% certainty?
No, I understand what you're saying but am just reading it differently than you. Again, maybe the OP will pop back in and clarify this point.
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Old 02-05-2011, 12:56 PM   #56
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Geesh. One of us must lack reading comprehension.
If I was on my first cup of coffee, I'd think it was me. Maybe some of these other posters have not caffeinated yet?

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Erd50,
If someone agrees to give you 'a little over a dollar' would you say you have a 50/50 chance of receiving less than a dollar?
Rustic, can we look at what the OP wrote (one again, I will BOLD the relevant words you seem to keep missing):

Quote:
1) Invest all of it in Ultra-safe Bonds with a realistic chance of making a little over inflation.
That has no correlation to your phrasing. It would be closer for you to say:

Erd50,
If someone agrees that there is a realistic chance that they will give you 'a little over a dollar' would you say you have a 50/50 chance of receiving less than a dollar?


And I would say (and I have said), that since they didn't say they would 'probably' give me a little over a dollar, I have to assume that there is a 50/50 chance they won't. What would you assume?

Better yet, wanna play this game with real money? You can send me $100,000, and I will promise you a realistic chance that I will send you back a little more than $100,000. Are we on?

-ERD50
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Old 02-05-2011, 02:03 PM   #57
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Geesh. One of us must lack reading comprehension.

This is beginning to remind me of the grade school game, in which 20 students stood in a line and the teacher whispered something to the first student in line and told him to pass it on, and so on. It was astonishing how much different from the original statement what got to the end of the line was.

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Old 02-05-2011, 02:09 PM   #58
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I guess for you it depends on what the definition of is is. What ever it is, we will should agree to disagree with what we think the OP was trying to poll.
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Old 02-05-2011, 02:36 PM   #59
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Happy to take the risk at 100% stocks, and do in real life. The odds are still good, and I can be flexible if needed. Most of the risk should be within the first 10 years or so of starting withdrawals.
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Old 02-05-2011, 03:03 PM   #60
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All bonds ~ risk of money not lasting

All stocks ~ risk of crash and burn
I don't think so. The condition as set up by chinaco in the original post is
Quote:
You have enough PV assets to live your current lifestyle for the rest of your natural life.
Whatever amount that means in terms of actual dollars, which would vary with the age of the person taking the poll, and exactly what is meant by "ultra safe bonds", the condition set forth in the OP is that you have that much money. Thus, the choice offered is between the certainty of having enough, and the potential to have more than enough coupled with the risk of having less than enough.

I prefer certainty. I simply don't understand why anyone who had attained certainty of success on a greatly desired goal like ER would voluntarily risk losing it.
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