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Old 03-05-2008, 12:54 AM   #81
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But talking about the japanese market since 1989, it makes me wonder where do you invest your money if you are Japanese?
I have asked myself that question many times; imagine you are some working stiff in Japan who just senses things are not good, how do you invest your workers income? I guess real estate was not the answer, probably buy foreign funds while the yen was still high enough.

An what should we do today? All I have done is increase my foreign stocks by 15%. Don't know what other bonds and things to buy. I came too late to buy into REITs and hold RE (other than my residence) only as part of my total market index. I would add commodities but it may be too late now to add that asset class.
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Old 03-05-2008, 01:16 AM   #82
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Please examine the following:
^N225: Basic Chart for NIKKEI 225 - Yahoo! Finance

What you are saying is an oft-repeated fallacy.
I guess I'm going to need you to explain the fallacy. I just looked at the chart; doesn't look too good to me compared to almost any other possible use of the money.

Ha
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Old 03-05-2008, 01:18 AM   #83
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I came too late to buy into REITs and hold RE (other than my residence) only as part of my total market index. I would add commodities but it may be too late now to add that asset class.
The beauty of asset allocation is that it is never too late. Any day is as good as any other day to invest your dollars, yen, or whatever.

Ha
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Old 03-05-2008, 06:40 AM   #84
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Not to be argumentative, but how do you they're going back up? :confused:
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Old 03-05-2008, 07:42 AM   #85
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I have asked myself that question many times; imagine you are some working stiff in Japan who just senses things are not good, how do you invest your workers income? I guess real estate was not the answer, probably buy foreign funds while the yen was still high enough.

An what should we do today? All I have done is increase my foreign stocks by 15%. Don't know what other bonds and things to buy. I came too late to buy into REITs and hold RE (other than my residence) only as part of my total market index. I would add commodities but it may be too late now to add that asset class.
A well diversified portfolio (including several asset classes that are not too closely correlated with one another) is supposed to be the best protection against an uncertain future. Lacking my crystal ball, the future definitely qualifies as uncertain. The fact that a well diversified portfolio is advisable doesn't mean that it wouldn't take a hit during tough times, though.

This is why I would urge all of us to build a little slack into our ER plans that will allow us to tighten the belt for a long time without excessive discomfort, should times get tough and stay that way for over a decade.

My conservative "sleep at night" asset allocation should hopefully damp market swings at least to some extent. But I expect that LBYM will be my closest friend should future long term market trends become grim.
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Old 03-05-2008, 07:50 AM   #86
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This is why I would urge all of us to build a little slack into our ER plans that will allow us to tighten the belt for a long time without excessive discomfort, should times get tough and stay that way for over a decade.
I believe a "buckets of money" strategy which leaves 10-15 years of reliable, inflation-adjusted income in "safer" stuff while letting the rest ride in diversified equities would seem to be the trick here.
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Old 03-05-2008, 08:05 AM   #87
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An what should we do today? All I have done is increase my foreign stocks by 15%. Don't know what other bonds and things to buy. I came too late to buy into REITs and hold RE (other than my residence) only as part of my total market index. I would add commodities but it may be too late now to add that asset class.
Personally, I think bonds of almost every stripe except treasuries and agencies are a remarkable bargain right now. You can buy AA rated notes issued by "too large to fail" banks that yield 150 to 200BP over treasuries. You can buy junk at ridiculous yields. You can buy bank loan funds at very attractive prices/yields. Heck, you can buy AAA munis at yields in excess of treasuries.
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REITs
Old 03-05-2008, 08:06 AM   #88
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REITs

Regardless of current environment, how much REIT do you own if you have (hopefully) an asset allocation plan?

A Vanguard financial planner talked me into selling our REIT index back in June. Had had a pretty good run up over several years. First of this year we decided that REITs just make sense for diversification and especially for retirees due to healthy dividends. Took 7.5% out of our 30% US stock allocation to purchase almost the same dollar amount of the REIT index, but now have almost 25% more shares than when we sold!
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Old 03-05-2008, 08:11 AM   #89
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I believe a "buckets of money" strategy which leaves 10-15 years of reliable, inflation-adjusted income in "safer" stuff while letting the rest ride in diversified equities would seem to be the trick here.
That would work.

I guess my plan partially resembles the "buckets of money" approach, since I plan to keep sufficient cash/MM/CD reserves (a bucket of money?)to maintain my income at the same level for 10 years if necessary.

Beyond that, my plan relies on reducing the expenditure side of the equation rather maintaining than the income side. I know that I can cut back on my SWR substantially without suffering severely should the bottom drop out for longer than 10 years, and that provides me with much peace of mind. Probably around year 7 I would cut back my SWR by about 0.5%, which would make the bucket last a few more years beyond 10. Once the bucket is empty, I know I can cut back further and still enjoy life. In the Japanese type of long term downturn, I believe a technique such as this one would be a more effective approach as it can be maintained indefinitely.

It would also give me time to get a nice, productive vegetable garden going!

Edited to add: In my case am talking about going from an SWR of 4%, to 3.5%, to 2%. Luckily I have enough slack in my plan to get by happily on 2% due to fortuitous circumstances, and I could get by grimly on 0% (pension, SS, and food stamps) if I really had to though short of the end of the Earth, I can't imagine having to. I would still urge others to at least think about having enough slack in your plan to reduce to at least 3% in a worst case situation.
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Old 03-05-2008, 08:21 AM   #90
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I'll be 65 in a couple of months. The main reason any of my investments is in the market is to ameliorate inflation. Thanks to pensions and SS payments, we have never touched Vanguard. I am diversified enough, and have enough cash, to ride out the gyrations of this and, I believe, any future market. The mantra is allocation. Do it right, sleep at night. Do it wrong, cry all night long.
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Old 03-05-2008, 08:41 AM   #91
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I'm in the "bucket" camp. I built a CD ladder at a mean of 6% with a 3% COLA for the next 10 years. We have no pension so I need the security. My DW just ER'ed and we have moved her 401K to cash and I will be slowly DCAing into our AA at Vanguard. Equities may be high or low but as I still have a lot of cash I feel that a slow DCA is my best approach. When I reach my final AA we will "let it ride".

As want2 said, we can reduce our spending if required and extend our cash for up to about 4 additional years without great problems - if the market goes up then we will start to set up another CD "annuity" before the end of the 10 year "bucket".

Every approach has to be based on personal situation and risk tolerance. This one lets me sleep at night.
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Old 03-05-2008, 08:57 AM   #92
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Just a tip, but watch the VIX. When volatility is high it's a traders market. When the VIX gets below 20 and especially in the lower teens, it will indicate the buy and hold people coming back into the market. JMO.
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Old 03-05-2008, 10:15 AM   #93
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Personally, I think bonds of almost every stripe except treasuries and agencies are a remarkable bargain right now. You can buy AA rated notes issued by "too large to fail" banks that yield 150 to 200BP over treasuries. You can buy junk at ridiculous yields. You can buy bank loan funds at very attractive prices/yields. Heck, you can buy AAA munis at yields in excess of treasuries.
I know it's just a guess, but I value your opinion. Over what period do you think I should be DCA'ing into these. I want to take a significant stake in some of the bonds you mention. Do you think there is only a month or so to get in before these are higher? Or a year or two?

I know there are several distressed securities funds being set up and when they get involved prices could jump.
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Old 03-05-2008, 10:19 AM   #94
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I know it's just a guess, but I value your opinion. Over what period do you think I should be DCA'ing into these. I want to take a significant stake in some of the bonds you mention. Do you think there is only a month or so to get in before these are higher? Or a year or two?

I know there are several distressed securities funds being set up and when they get involved prices could jump.
Gawd only knows. I would hazard a guess that any significant improvement in spreads will take a while, several months to a year most likely. I would expect the muni market to heal first, then the agency MBS market, then the various flavors of corporate bonds and loans. I am selectively buying stuff now, though. If you stick to ~5 year and shorter maturities (and bank loans), you reduce the risk of getting whacked if spreads continue widening, at least compared to longer maturity stuff.
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Old 03-05-2008, 10:22 AM   #95
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Old 03-05-2008, 10:39 AM   #96
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um...what is the "bucket approach"?

please point me to that...
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Old 03-05-2008, 10:49 AM   #97
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um...what is the "bucket approach"?

please point me to that...
"Buckets of money" is a concept popularized by Ray Lucia. What that means (from 40,000 feet) is that you structure your asset allocation in retirement not as a typical "percentage of the portfolio", but into years of income. Each piece of the allocation is said to be a "bucket" and it's designed to provide years of income from "safe" investments so you can ride out stock market volatility and minimize the need to sell stocks while they are down.

http://www.early-retirement.org/foru...=buckets+lucia
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Old 03-05-2008, 11:10 AM   #98
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"Past performance is no indication of future results." Or something like that . . .
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Old 03-05-2008, 11:39 AM   #99
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"Buckets of money" is a concept popularized by Ray Lucia. What that means (from 40,000 feet) is that you structure your asset allocation in retirement not as a typical "percentage of the portfolio", but into years of income. Each piece of the allocation is said to be a "bucket" and it's designed to provide years of income from "safe" investments so you can ride out stock market volatility and minimize the need to sell stocks while they are down.

http://www.early-retirement.org/foru...=buckets+lucia
thanks. i'll check it out.

is the "buckets" approach one of the sound ones or one of the "avoid like plague" ones?

hope i'm not opening a can of worms with that question
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Old 03-05-2008, 11:47 AM   #100
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thanks. i'll check it out.

is the "buckets" approach one of the sound ones or one of the "avoid like plague" ones?

hope i'm not opening a can of worms with that question
No, it's perfectly legit and it makes sense, IMO. It's just really just a different way to look at asset allocation -- as a number of years of income rather than as a percentage. We usually talk about asset allocation in terms of a percent of assets -- for example, "60% in stocks and 40% in bonds." A "buckets" approach looks at allocation a different way -- several years of immediate income needs in cash, a few more in somewhat more volatile investments, and the rest in stocks that won't need to be "sold low" for at least 14 years. The thinking is that your "safe money" buckets will have a chance to be replenished during a time when stocks are higher -- pretty likely at some point in a 14-year period.
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