Revisiting my asset allocation

[audreyh1]

Quote:

Originally Posted by OldShooter Be a little careful with this. The jump in bond values in 2008 was due to central banks' dropping interest rates to zero. Our 2026/2% TIPS went up by 50%! I don't think you can confidently project that kind of central bank action for future periods of excitement.

My main point was that high quality bond funds did not crater.

[Ready]

I like the idea of reducing exposure to equities at the beginning of retirement and then gradually increasing it just slightly over the next decade or two. It helps to address sequence of returns risk during the early years.

[audreyh1]

Quote:

Originally Posted by Ready I like the idea of reducing exposure to equities at the beginning of retirement and then gradually increasing it just slightly over the next decade or two. It helps to address sequence of returns risk during the early years.

Kitties co-authored a fabulous article that illustrated how that approach can work very well. If I had had that kind of research available in 1999 I think I would have taken that exact approach.

[NW-Bound]

Quote:

Originally Posted by audreyh1 I hope it’s a blip on the radar - I don’t want a blimp!

What if the market is now like stealth planes?

When it shows up as a blip on your radar, it's almost on top of you.

[NW-Bound]

Quote:

Originally Posted by copyright1997reloaded I would have a slightly modified version of this. Put enough in cash and equivalents to have something if the market really tanked, and the let rest ride. Assuming a 5% dividend rate, this is a $6 Mil asset base. Stick $1-$1.5 in short term or inflation adjusted fixed so that you can "guarantee" that it isn't wiped out, no matter what happens in the market.

The dividend yield of the S&P is less than 2%. Even buying dividend stocks, one still gets less than 3%. It means more than $6M in capital.

Maybe preferred stocks can get to 5%, but if interest rate rises, one can get hurt.

[copyright1997reloaded]

Quote:

Originally Posted by NW-Bound The dividend yield of the S&P is less than 2%. Even buying dividend stocks, one still gets less than 3%. It means more than $6M in capital. Maybe preferred stocks can get to 5%, but if interest rate rises, one can get hurt.

Yes, I know that.

I was being conservative and using AT&T's dividend yield as a high water benchmark. (Currently 5.5% at closing market price today.)

$500.00*12/.02/.05 = $6,000,000.00

[michelek]

Quote:

Originally Posted by audreyh1 Kitties co-authored a fabulous article that illustrated how that approach can work very well. If I had had that kind of research available in 1999 I think I would have taken that exact approach.

Please give a link to this article by Kitces. I’d like to share it with my FIL.

[audreyh1]

Quote:

Originally Posted by michelek Please give a link to this article by Kitces. I’d like to share it with my FIL.

Kitces blog talks about it and links to his original paper https://www.kitces.com/blog/should-e...tually-better/

[NW-Bound]

Quote:

Originally Posted by copyright1997reloaded Yes, I know that. I was being conservative and using AT&T's dividend yield as a high water benchmark. (Currently 5.5% at closing market price today.) $500.00*12/.02/.05 = $6,000,000.00

Son of a gun! You know what? I own T, and I do not even know its dividend yield is that high. I spend more time looking at all the price movements for gains and losses of my growth stocks, and frankly do not think much about dividends.

Currently the shares of T are 0.6% of my stash, not one of the bigger positions.

[RobLJ]

Quote:

Originally Posted by audreyh1 Kitties co-authored a fabulous article that illustrated how that approach can work very well. If I had had that kind of research available in 1999 I think I would have taken that exact approach.

I was impressed by Kitces's article as well. I'm using a variation--since I'm 5 years older than DW and will pull from my account only for the next five years, my allocation is 50-35-15 in those two accounts. DW allocation is a bit above 75-20-5.
When she gets nearer to 59.5, I'll dial back her stock exposure and then increase my stock allocation when we can draw from her accounts (and two years later when I hit FRA for SS). Overall, we're at 60-25-10.

[copyright1997reloaded]

Quote:

Originally Posted by NW-Bound Son of a gun! You know what? I own T, and I do not even know its dividend yield is that high. I spend more time looking at all the price movements for gains and losses of my growth stocks, and frankly do not think much about dividends. Currently the shares of T are 0.6% of my stash, not one of the bigger positions.

I'm beginning to think you are really me. I also own T, but it is 1.34% of my stash.

[FREE866]

Even though I'm 95% stock I was relieved to see a 10% pullback. I think it just prolonged the bull, scared people ( which is good from a sentiment standpoint), and personally gave me an idea of what it looks like on paper for a quick drop. Keep in mind, IF the market drops 40% the market usually comes back to the tune of ~20% per year in bull markets.