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Old 04-02-2009, 07:31 AM   #1
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The closer I get to finally hanging out the work boots, the more I ponder about the notion of investing on the stock market. In my short term experience, this crazy market has gone through the 93 problems, 97 emerging market crises, 2000 internet bubble, and the latest fiasco created by white people with blue eyes according to Lula (president of Brazil). I had originally intended on getting closer to a balance (50/50) approach on my asset allocation but the more I ponder or wonder. It scares the pants out of me after looking at the latest results from Wellesley and Wellington funds. I can't afford to take anything greater than a 10% percent hair cut during retirement. It is most likely that I will probably have only 20-25% stocks, but if I can get a 6-7% CD that will probably change to 10% or less. I donít want the market to dictate or spoil my future plans (you only live once).
Some thoughts:
The market is not your friend, should avoid if possible, invest/ gamble the money that you do not need, etc.

What other lessons have you learned

Speedy
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Old 04-02-2009, 07:49 AM   #2
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I took more than 10% haircut. If I could roll the clock back, I would allocate as you suggest.
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Old 04-02-2009, 08:34 AM   #3
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What other lessons have you learned
There is no such thing as a no risk investment.

Inflation can kill your nest egg as easily as market value fluctuations.

No one gets out of life alive.

And of course, never brush your teeth with a brick...
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Old 04-02-2009, 08:40 AM   #4
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Several on this board are happy being all-cash. I'm sticking with my stupid brilliant allocation for now, with the eye of gradually getting more conservative, ala 110-age=bonds/cash.

And my eyes are not blue! Well, they kinda are...
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Old 04-02-2009, 08:42 AM   #5
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The closer I get to finally hanging out the work boots, the more I ponder about the notion of investing on the stock market. In my short term experience, this crazy market has gone through the 93 problems, 97 emerging market crises, 2000 internet bubble, and the latest fiasco created by white people with blue eyes according to Lula (president of Brazil). I had originally intended on getting closer to a balance (50/50) approach on my asset allocation but the more I ponder or wonder. It scares the pants out of me after looking at the latest results from Wellesley and Wellington funds. I can't afford to take anything greater than a 10% percent hair cut during retirement. It is most likely that I will probably have only 20-25% stocks, but if I can get a 6-7% CD that will probably change to 10% or less. I donít want the market to dictate or spoil my future plans (you only live once).
Some thoughts:
The market is not your friend, should avoid if possible, invest/ gamble the money that you do not need, etc.

What other lessons have you learned

Speedy
If you honestly can't afford to take anything greater than a 10% haircut, maybe you are not quite ready to retire. The nature of the market is to rise and fall, and even with just a 25% equity allocation some have lost 10% during the past year or two.

You could lose a lot more than 10% due to inflation if you invest too conservatively.

These are realities that need to be considered when planning even a bare-bones retirement.
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Old 04-02-2009, 08:52 AM   #6
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It is most likely that I will probably have only 20-25% stocks, but if I can get a 6-7% CD that will probably change to 10% or less.
If you can find a 6-7% CD let me know, I will go to zero. Oh, I'm already at zero.

As other posters said, you better have more than a 10% cushion if you're going to retire, regardless of what you are invested in. And there is no such thing as a risk-free investment. For me, in cash, I'm subject to interest rate and inflation risk.
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Old 04-02-2009, 08:55 AM   #7
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The closer I get to finally hanging out the work boots, the more I ponder about the notion of investing on the stock market. In my short term experience, this crazy market has gone through the 93 problems, 97 emerging market crises, 2000 internet bubble, and the latest fiasco created by white people with blue eyes according to Lula (president of Brazil). I had originally intended on getting closer to a balance (50/50) approach on my asset allocation but the more I ponder or wonder. It scares the pants out of me after looking at the latest results from Wellesley and Wellington funds. I can't afford to take anything greater than a 10% percent hair cut during retirement. It is most likely that I will probably have only 20-25% stocks, but if I can get a 6-7% CD that will probably change to 10% or less. I don’t want the market to dictate or spoil my future plans (you only live once).
Some thoughts:
The market is not your friend, should avoid if possible, invest/ gamble the money that you do not need, etc.

What other lessons have you learned

Speedy
Vanguard retirement income is about 30% stocks maybe that should be a lesson for all the retired folks. Vanguard lifestragy income is about 20% in stocks. I think we all need to learn from Vanguard.
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Old 04-02-2009, 08:59 AM   #8
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If there were 6% CD's available I'd put a chunk there . I lost a lot last year but I'm slowly getting some back . I agree with the fact that if you do not have padding in your budget you are not ready to retire .
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Old 04-02-2009, 09:01 AM   #9
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The stock market has made me wealthy. I am not afraid of it.

In 1999 there were lots of folks talking about 100% allocation to stocks. In 2009 there are lots of folks talking about 100% allocation to CDs. I doubt that either one of these groups was/is 100% correct.
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Old 04-02-2009, 09:22 AM   #10
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Here's my approach (27 years old):

1) LBYM.
2) Pay off all debt >0% interest, including mortgage.
3) Invest as follows, using low-cost indexes, rebalancing annually, with a constant asset allocation from acumulation through retirement:

33% TIPS
33% Nominal bonds (treasuries, corporates, munis)
33% Equities (US, international)

This is not going to make me a millionaire, but it should protect me from moderate inflation and deflation, allow me to get some equity upside with less risk. There have been 40 year periods where stocks underperformed bonds. TIPS are a recent invention that are cheap inflation insurance, and they are way underutilized by most.
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Old 04-02-2009, 09:33 AM   #11
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My perspective is always due was best for one self and this regard everything else.
Currently on a yearly basis my largest expenditure besides Fed/ state taxes is real state tax. I will not be working and the fed portion will be very small, no state taxes, and my property taxes will drop from currently almost 4000 to 30 dollars. Yes, my property taxes on my 2 flat house is only 30 bananas. I can always rent the other unite if I need some cash. I also have plans to dimish all other expenditures by installing solar panels, using LED lights, and a solar water heater. My other big plan is to develop a bio digester (your stomach is bio digester) and capture the mathane gas. Last year, I install 2 solar lights and the town lost power and residents where wondering how come I had ligts on the house. This is why I want to move back as young as possible and due some actual teaching. I just need to create a plan for my laboratory.

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Old 04-02-2009, 10:47 AM   #12
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I can't afford to take anything greater than a 10% percent hair cut during retirement. It is most likely that I will probably have only 20-25% stocks, but if I can get a 6-7% CD that will probably change to 10% or less. I don’t want the market to dictate or spoil my future plans (you only live once).
Son, your 25% equity allocation would have already knocked you out of the box. Dow and S&P have both experienced > 50% drawdowns since Oct '07, and are barely above that now. So -.5*.25= -12.5%.

Better dial down to 10%. Then if you lost 90% you would still be breathing.

Ha
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Old 04-02-2009, 11:06 AM   #13
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My plan for the stock portion is to use this plan. See the link

Protected Index Program
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Old 04-02-2009, 11:08 AM   #14
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Being ALL CD's I too am looking for the long term 6% or more FDIC/NCUA Insured CD. Best I can find this morning was 4.25% long term (PENFED) for a maturing 7 years PENFED CD. Actually "nice" to have another place to put the money (HELOC pay down) where it has 0 impact on Net Worth.
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Old 04-02-2009, 11:30 AM   #15
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My plan for the stock portion is to use this plan. See the link

Protected Index Program
A 10% track record isn't very long, considering the type of investments this firm favors. You may also want to investigate asset allocations like Coffee House Investor, Lazy Portfolios, or Paul Merriman. Paul Merriman has a 30 year track record that he shares on his website.

I am not a client of Merriman but do read his articles and use his allocation to determine my own.

-- Rita
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Old 04-02-2009, 11:41 AM   #16
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The stock market has made me wealthy. I am not afraid of it.

In 1999 there were lots of folks talking about 100% allocation to stocks. In 2009 there are lots of folks talking about 100% allocation to CDs. I doubt that either one of these groups was/is 100% correct.
I agree, although I would say the stock market made me "independently middle-class". I could never have retired 2.5 years ago (and paid off my mortgage) without stock investments. I have been 100% in stocks since 1993 and am happily living on my middle-class+ dividends (extracted via 72t) from my IRAs.

While the market value of my investments is of course down substantially since Oct 07, earnings and dividends in the aggregate have consistently increased. I am far more afraid of inflation than any market fluctuations.
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Old 04-02-2009, 11:49 PM   #17
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My paltry poke (70% equities, 50/50 US/furrin) is up about 10% since Jan 31. I am looking up. Am I right? Am I wrong? Dunno. Stubborn, yes.
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Old 04-03-2009, 12:50 AM   #18
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I took more than 10% haircut. [...]
I got the complete Kojak. More than 40%, and I thought I was conservatively invested.

When I think of investing now, I think more in terms of piling up cash, the old-fashioned way. In an FDIC-insured bank, money market fund or credit union. I'll still keep my mutual funds (why sell now?), but I no longer rely upon the old (pre-2008) conventional wisdom.

I'll retire when I have twenty years' of retirement expenses, adjusted for inflation, in cash.
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Old 04-03-2009, 02:34 AM   #19
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I'll retire when I have twenty years' of retirement expenses, adjusted for inflation, in cash.
out of curiosity, what would that number be, in cash?
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Old 04-03-2009, 03:08 AM   #20
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out of curiosity, what would that number be, in cash?
At the current 20-year TIPS rate of 2%, it would be a 6.1% SWR (2 divided by the PV of the coupons), so the amount of cash needed would be about 16.4 times the annual expenses.
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