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Lazy Portfolios
Old 08-28-2006, 10:47 AM   #21
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Lazy Portfolios

Concerning allocations, Charles Farrell recently published relative performance of the "lazy portfolios" he follows. Fyi,

http://www.marketwatch.com/News/Story/Story.aspx?guid={DB2FE1FE-444D-4D59-AF7B-3BF006881A2E}&siteid=mktw&dist=
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Re: Lazy Portfolios
Old 08-28-2006, 11:52 AM   #22
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Re: Lazy Portfolios

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Originally Posted by WilliamG
Concerning allocations, Charles Farrell recently published relative performance of the "lazy portfolios" he follows. Fyi,

http://www.marketwatch.com/News/Story/Story.aspx?guid={DB2FE1FE-444D-4D59-AF7B-3BF006881A2E}&siteid=mktw&dist=
I think it is Paul Farrell (instead of Charles) who also predicted that a recession is inminent.
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Re: Retiree Asset Allocation
Old 08-28-2006, 12:12 PM   #23
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Re: Retiree Asset Allocation

i always say planning for retirement is no longer about getting richer, but about not getting poorer....
* its all about matching your risk to your needs....if i had enough dough id throw it all in treasuries and call it a day....but since there is always to much month left at the end of the money i still need it to grow and to grow more than treasuries will allow....at least at this point 7% is my magic number and a 50% stock ,50% all the the other crap does it for me.....
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Re: Retiree Asset Allocation
Old 08-28-2006, 12:29 PM   #24
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Re: Retiree Asset Allocation

after taxes and inflation most of the time cd's,money markets and bonds are a guaranteed loss over time...you thought you were playing it safe and secure but you guarrantee yourself a loss and you didnt bet on a thing.....
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Re: Retiree Asset Allocation
Old 08-29-2006, 07:36 AM   #25
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Re: Retiree Asset Allocation

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Originally Posted by hellbender
2)The strategies to get rich and to stay rich are COMPLETELY different.
The strategy to get rich is to work hard and to take risk (concentrate it too).
The strategy to stay rich is to AOVID/MINIMIZE risk and to not spend too much
That's definitely has been my approach. I took a risky approach to accumulating enough to retire. As soon as I retired, I cashed enough out of my risky investments to fund my retirement portfolio and put these in much more conservative investments, although in my case 55% in stock mutual funds seems to be a minimum to protect against several decades of future inflation.

Kind of funny how once there was "enough", there was a total flip-flop in point of view.

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Re: Retiree Asset Allocation
Old 08-29-2006, 07:53 AM   #26
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Re: Retiree Asset Allocation

I absolutely agree with mathjak, and I think hellbender is out of line (hope that isn't too strong a term) in responding to the OP who needs his investments to w*rk for him in retirement. The OP doesn't have ANY KIND OF PENSION, much less one that exceeds his spending needs or is adjusted for inflation, so all hellbender's and danm's "no risk" arguments go out the window as far as I'm concerned, and border on the obnoxious. Maybe there should be a separate section for discussing strategies based on whether you have a pension or whether you don't, because the challenges one faces without are dramatically different.

From all the info available to us, retirees who need to live off their investments need to have a bit of everything, as brewer points out.

Scrooge, also, is right that cash/MM/bonds are not the be-all and end-all as far as security is concerned. I would still be working today if I'd followed my dad's advice and kept most of it, or even 1/2, of my egg in treasuries over the last 20 years. Now that I am RE, and in theory out of the "accumulation" phase, I still think there's still some need to keep accumulating. In fact, I feel it even more strongly since I'm taking money out and not replacing it, which I never did before (this could be irrational). Looking at a retirement of 40-50 years means I don't personally think I can rest on my laurels, so to speak. I would be worried about going to a high %age of fixed income since, in my mind, too much can happen between "now" and "then" not to keep my money working at at least a "happy medium"-type pace.

Audrey also seems to be in the "happy medium" camp. While she was writing I found an illustration that would back up her approach. There's a chart in Bernstein's "4 Pillars" book that charts a $1mm portfolio from 1965-1995 and a $40k annual real withdrawal. The 100% bond pf peters out in '93-'94.. the 25/75 is continuing downward, while the 50/50, 75/25, and 100% stock pfs are all ramping back up.

Which leads me to believe, yes, bonds/cash can be "perfectly" safe if you are talking about a "normal" retirement of 20 years or so. Early retirement with no reliance on a pension is another animal.

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Re: Retiree Asset Allocation
Old 08-29-2006, 08:46 AM   #27
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Re: Retiree Asset Allocation

Quote:
Originally Posted by ladelfina
I absolutely agree with mathjak, and I think hellbender is out of line The OP doesn't have ANY KIND OF PENSION, much less one that exceeds his spending needs or is adjusted for inflation, so all hellbender's and danm's "no risk" arguments go out the window as far as I'm concerned, and border on the obnoxious.
The OP asked for others to share their allocations and rationale.* He specifically asked for respondents to address extent of reliance on pension income.* * That's exactly what I did.* I failed to note that the OP was asking for specific personalized investment advice.* In any event, I did not offer any.* I didn't make any argument and/or recommendation that the OP adopt my personal investment approach.* In addition, my approach is not "no risk" as fully one-half of my portfolio is in investment real estate (as I plainly indicated)* I responded accurately and within the context as set by the OP.* If you prefer to characterize the content of my post as "out of line or obnoxious", I suppose that is your right.
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Re: Retiree Asset Allocation
Old 08-29-2006, 09:33 AM   #28
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Re: Retiree Asset Allocation

Sorry, hellbender.. you're right: I was inferring a request for personal guidance that was not in the OP.*

The discussion did seem to be veering away from, yes, the all-important context and into 'capital preservation' (whatever that means* ). I'd still say that "stay rich = avoid risk" (which was in your other post) isn't really the way to go and could be misinterpreted; a "low-risk" portfolio could turn out to be risky, indeed, depending on the circumstances.

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Re: Retiree Asset Allocation
Old 08-29-2006, 09:40 AM   #29
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Re: Retiree Asset Allocation



I don't put my money at risk either...
yes, I know, that makes me a contrarian...
but still... compared to the typical American,
I am way ahead in the game.







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Re: Retiree Asset Allocation
Old 08-29-2006, 02:03 PM   #30
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Re: Retiree Asset Allocation

Quote:
Originally Posted by ladelfina
Sorry, hellbender.. you're right: I was inferring a request for personal guidance that was not in the OP.*

The discussion did seem to be veering away from, yes, the all-important context and into 'capital preservation' (whatever that means* ). I'd still say that "stay rich = avoid risk" (which was in your other post) isn't really the way to go and could be misinterpreted; a "low-risk" portfolio could turn out to be risky, indeed, depending on the circumstances.
My feelings on the matter would be more appropriately and fairly represented as "preserve your standard of living in retirement by avoiding unneccesary and excessive risk"* I know many equities investors who have ignored this basic philosophy to their great detriment.* Let's just say that maintaining too high an equity allocation was "hazardous to their wealth".* *I do agree that for many, being excessively risk-adverse can also create problems.* However, risk-taking for its own sake and absent the capacity or need to do so, can be quite foolhardy.
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Re: Retiree Asset Allocation
Old 08-29-2006, 03:56 PM   #31
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Re: Retiree Asset Allocation

Quote:
Originally Posted by hellbender
My feelings on the matter would be more appropriately and fairly represented as "preserve your standard of living in retirement by avoiding unneccesary and excessive risk"* I know many equities investors who have ignored this basic philosophy to their great detriment.* Let's just say that maintaining too high an equity allocation was "hazardous to their wealth".* *I do agree that for many, being excessively risk-adverse can also create problems.* However, risk-taking for its own sake and absent the capacity or need to do so, can be quite foolhardy.
Agree with this concept. There is a balance of equities needed to preserve longer term retirement standard of living. That balance of equities depends on size of portfolio, pension, etc. In my particular case (57) , my non-COLA'd pension will take care of most living expenses for the first 10 years or so and I will only need to tap into some income from investments. By about time I am 70 or so, I will likely need to use up more income....and by 80, perhaps some capital.

So to answer OP's question, I am currently 60/40 equities/fixed income and looking for some buying ops during upcoming correction or recession to go as much as 70/30 equities/fixed income for the next several years. Will likely move to 60/40 during my 60's and then 40/60 in my 70's and decreasing to perhaps 20/80 by my 80's.

I see no need to take "extra" risk in the equity market if it is not needed to support one's lifestyle. To me that is just a testosterone thing to see how big a net worth might be achievable and I hope I will have better things to spend my time on.
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Re: Retiree Asset Allocation
Old 08-29-2006, 04:22 PM   #32
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Re: Retiree Asset Allocation

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Originally Posted by hellbender
I agree that it would be painful to watch a perfectly safe portfolio completely eroded by inflation.* I don't agree however that owning equities is the only way to prevent that from happening and I don't believe that owning equities is a guarantee that it won't.*
Your last point here is often overlooked. During the decade of the 70s, T-Bills were a much better inflation hedge than stocks. And commodities, oil and gas, gold, and real estate were better yet.

While it is probably true that given a long enough time, the fact that stocks represent income claims on operating businesses almost has to make them at least somewhat responsive to inflation, it sure is not necessarily true over periods as long as 10 years, as was proven in the 70s. And this in spite of the fact that corporate profits and dividends held up very well in that period.

Ha
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Re: Retiree Asset Allocation
Old 08-29-2006, 04:27 PM   #33
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Re: Retiree Asset Allocation

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Originally Posted by HaHa
Your last point here is often overlooked. During the decade of the 70s, T-Bills were a much better inflation hedge than stocks. And commodities, oil and gas, gold, and real estate were better yet.

While it is probably true that given a long enough time, the fact that stocks represent income claims on operating businesses almost has to make them at least somewhat responsive to inflation, it sure is not necessarily true over periods as long as 10 years, as was proven in the 70s. And this in spite of the fact that corporate profits and dividends held up very well in that period.

Ha
I guess this brings us to the question of "which stocks?" Obviously commodity producers will benefit from an inflationary environment. I suspect that other equities in the most globally competitive segments of the US economy (especially finance) will likely handily outpace inflation. Manufacturers? Perhaps not (anyone looking for the auto manufacturers to blow the doors off? Not me).
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Re: Retiree Asset Allocation
Old 08-29-2006, 05:03 PM   #34
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Re: Retiree Asset Allocation

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I guess this brings us to the question of "which stocks?"* Obviously commodity producers will benefit from an inflationary environment.* I suspect that other equities in the most globally competitive segments of the US economy (especially finance) will likely handily outpace inflation.* Manufacturers?* Perhaps not (anyone looking for the auto manufacturers to blow the doors off?* Not me).*
I'm leaning toward consumer staples. Commodity-related stocks have too much downside potential after the recent run-up.
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Re: Retiree Asset Allocation
Old 08-29-2006, 08:17 PM   #35
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Re: Retiree Asset Allocation

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I'm leaning toward consumer staples.* *Commodity-related stocks have too much downside potential after the recent run-up.
Consumer staples are already taking off if you check recent ETF data on sector funds as people 'flee to defensive stocks' in anticipation of a recession.
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Re: Retiree Asset Allocation
Old 08-29-2006, 08:47 PM   #36
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Re: Retiree Asset Allocation

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Consumer staples are already taking off if you check recent ETF data on sector funds as people 'flee to defensive stocks' in anticipation of a recession.
I have never really understood why individuals, as opposed to mutual funds, pensions funds, etc, would ever flee to "defensive stocks" as a preparation for recession.

If you change horses from one stock or industry group to another, you are going to have to pay capital gains taxes (assuming you were successful in your investments). And if you feel strongly enough about an approaching recession to take the tax hit, why buy a so called defensive stock? What is wrong with cash in this situation?

Consumer companiesí sales don't improve in a recession, they only suffer less than more cyclical companies. And ordinarily, their stock prices don't improve either. At best, they suffer less than more cyclical groups.

So why do this?

Ha
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Re: Retiree Asset Allocation
Old 08-29-2006, 10:11 PM   #37
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Re: Retiree Asset Allocation

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Originally Posted by HaHa
Consumer companiesí sales don't improve in a recession, they only suffer less than more cyclical companies. And ordinarily, their stock prices don't improve either. At best, they suffer less than more cyclical groups.

So why do this?
Why buy inflation-proof companies with a global reach and expanding markets?* *Take a look at PEP, MO, PG, JNJ, MCD, etc for the last 30 years.* *Or, for many of them, even the last 5 years.* *Compare to the market as a whole.* *Compare to commodity producers, like XOM.* *Look at their performance during times of recession.* *I dunno.* Looks pretty good to me.
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Re: Retiree Asset Allocation
Old 08-29-2006, 11:14 PM   #38
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Re: Retiree Asset Allocation

I don't see the point of churn either to move around in the market incurring commissions and cg taxes. But it is worthwhile when in accumulation phase or to re-balance to take such things into consideration.
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