update on Wellesley and Intermediate-Term Bond fund

[obgyn65]

Thank you everyone for posting. I will need a day or two to digest the advice provided and will answer then.

 

[48Fire]

If you don't have time or knowledge, then maybe you are better off paying 1% or 2% to a Financial Advisor that you trust. I know that is contrary to most people here, but may work for you. good luck

 

[Gatordoc50]

Another approach for those not willing to risk principal is to invest the interest from CDs or treasuries in equities. To me, it's a great way to invest, especially for those with higher incomes or those with large lump sums.

 

[LOL!]

If you don't have time or knowledge, then maybe you are better off paying [-]1% or 2%[/-] to a Financial Advisor that you trust. I know that is contrary to most people here, but may work for you. good luck

Uh, no. Perhaps 0.1% to 0.4% would be reasonable.

 

[Ready]

Uh, no. Perhaps 0.1% to 0.4% would be reasonable.

There is nothing a FA is going to tell the OP that he doesn't already know from spending time in this forum. And if after reading all of our posts over the years he is still risk averse, an FA is not going to do anything magical to change that. The OP clearly has an aversion to equities. He needs to do what he is comfortable with. Spending any amount of money on an FA will only reduce his returns further because he won't be any more comfortable investing in equities with an FA than he is now and he will just be paying someone money to confirm that.

 

[nun]

obgny65 should look at total return over the duration of the bonds his funds hold rather than short term price fluctuations. I hold both funds and plan to keep them for the long term as I think they will be good income producers

 

[Major Tom]

It seems to me that fixed income investments take time as well. CDs come due and need to be replaced, annuities need to be researched and understood (hopefully!), and likewise with muni bonds. Whereas some people just go heavy into Wellesley, or target funds, or a simple mix of Total (US) Stock/Total International Stock/Total Bond). In the latter, take a look once a year and rebalance. No need to even do that in the other two since they are self-balancing. It really is that basic and shouldn't require the hand-holding of an adviser, though I think the OP may be using one anyway.

I think it's very possible that buying CD's, munis etc the way that Obgyn does, involves more time and effort than maintaining a simple index fund portfolio. However, if you're very risk-averse, you'll be willing to take that time and effort in order to buy investments that are guaranteed to go up in value. We all need to do whatever allows us to sleep at night.

I'm not 100% keen on the phrase "risk-averse" though, thinking that it should be a more literal description. "Perceived risk-averse" might be a better moniker, because what many fixed income only investors perceive as risk in equities is just the short-term volatility which means little to someone who is in it for the long haul.

On a related issue, some of us talk about the relatively long periods over which various indexes were flat. However, in real life, none of us put all our money into the market at one time and withdraw it all at one time. We dollar-cost average into the market over our working lives, and slowly dollar-cost average out of it while we are retired. A person who begins saving at the age of 25 and finally goes to meet his/her maker at 85 is in the market for 60 years. That is a long time to be invested. I'll take that bet. Everything in life is a gamble anyway. We all, in one way or another, play the game of risk-assessment every single day in our lives.

 

[REWahoo]

Everything in life is a gamble anyway. We all, in one way or another, play the game of risk-assessment every single day in our lives.

+1

Even posting here you run the risk of having someone take you to task because they disagree with your [-]wrong-headed, stupid[/-] opinion. Not me, of course...

 

[Major Tom]

Hehehehehe. I'm staying well away from that one

 

[modhatter]

I'm no expert of course, but to me it depends on how much the OP currently has saved and how close he is to retirement. If he has sufficient funds, even if they are in CD's and muni's, and the addition of some funds like Wellesley or Wellington, of which both pay out dividends of between 2 to 2.5%, and usually as the stock price goes down the dividend % goes up, thereby maintaining the same income from it (depending on how low it goes). So if a certain portion of his portfolio is in a fund like this that pays a decent % income (though less than he might like right now) it gives him exposure to equity with the likely hood over the long run to grow and help offset inflation.

In other words it is a balanced fund with dividends to go towards your income, while still having growth potential from the equities.

The only other thing that I can think of him doing to try and give him additional income if that is his objective, is to purchase maybe ten very solid stocks like Coke, Proctor & Gamble, Johnson & Johnson etc. that have a long history of paying dividends as well as increasing them. At least with that, he might garner about 3% income from them, and still have some capital growth to help with the inflation portion. But if he only has 20% in such a fund or stocks, I don't think there would be enough to carry the whole inflation risk factor. He would need to bump it up to at least 40% I would think.

And if he is in any type of balanced funds, he doesn't need an adviser, as the fund all ready has advisors managing the funds. Why pay twice. If your going to purchase several funds and want to be sure your not overlapping and you don't have proper diversification, then either a trip to a paid adviser to examine the mix, might be advisable.

I know I'm going to be shot for saying this, but equity evaluations are very high right now. Not saying that they couldn't still go higher, but they are in the historical all time high arena. So, it might be more prudent for OP to go slow right now anyway. Have money ready to buy on the dips. Listen for bad news. Market always reacts to bad news. But most times it quickly passes and stocks regain their original value.

 

[ER Eddie]

I first put money into the market about a year ago. I lost $8000 within the first month. That was fun. My stomach sank a little and I started to doubt my decision. However, a year has passed, and now I'm up by $27,000. It's just the way the market works. One day it's up; the next day it's down. You just ride it like a roller coaster -- but to reduce the nausea, try not to pay attention to the daily (or weekly) fluctuations. They don't mean a whole lot. It's the long horizon that matters.

I do question putting so much into bonds. I would've chosen a balanced fund.

 

[Major Tom]

I first put money into the market about a year ago. I lost $8000 within the first month. That was fun. My stomach sank a little and I started to doubt my decision. However, a year has passed, and now I'm up by $27,000. It's just the way the market works. One day it's up; the next day it's down. You just ride it like a roller coaster -- but to reduce the nausea, try not to pay attention to the daily (or weekly) fluctuations. They don't mean a whole lot. It's the long horizon that matters.

There you go.

Today the S&P500 was down by 1.43% so I cycled to Target, bought some coffee, 24 cans of Fancy Feast for the kitties, and 60 rolls of bathroom tissue. Then I cycled back home, made lunch, and watched a couple more episodes of Twin Peaks on Hulu.

That was my strategy for today. If the market drops precipitously over the next few weeks, I'm secure in the knowledge that I have 60 rolls of bathroom tissue here However, it will go back up at some point - probably in the next few days.

 

[REWahoo]

If the market drops precipitously over the next few weeks, I'm secure in the knowledge that I have 60 rolls of bathroom tissue here .

You're fishing for a "wiped out" joke but I'm not taking the bait!

 

[RunningBum]

There you go.

Today the S&P500 was down by 1.43% so I cycled to Target, bought some coffee, 24 cans of Fancy Feast for the kitties, and 60 rolls of bathroom tissue. Then I cycled back home, made lunch, and watched a couple more episodes of Twin Peaks on Hulu.

That was my strategy for today. If the market drops precipitously over the next few weeks, I'm secure in the knowledge that I have 60 rolls of bathroom tissue here However, it will go back up at some point - probably in the next few days.

And something to eat if things get really bad! The cats can catch their own dinner!

 

[Major Tom]

You're fishing for a "wiped out" joke but I'm not taking the bait!

I'm not aiming to make myself the "butt" of anyone's jokes, trust me

 

[NW-Bound]

My equity portion is down only 0.99% today, so not too bad compared to S&P. I even have a position that goes up 8%, if one can believe that. The next best one goes up 4%.

On the other hand, the worst one is -7%. Next worst one is -5.5%.

Nah, no need to buy "Depend" yet!

 

[Major Tom]

Nah, no need to buy "Depend" yet!

Although, after what you went through at the hands of your doctor yesterday, you could be forgiven for doing so.

Hope you're feeling recovered by now!

 

[NW-Bound]

Although, after what you went through at the hands of your doctor yesterday, you could be forgiven for doing so.

Exactly right!

Man, when you are physically suffering, money means little! Even a billionaire would have to suffer the same at the hands of these doctors, I would think.

Hope you're feeling recovered by now!

I am, thank you! Would not be posting otherwise. Can hardly wait until the next [-]torture er[/-] procedure.

 

[NW-Bound]

My wife's 401k has just reported in. It is early today, as I often have to wait for another hour or 2.

Total equity including her funds: -1% today.
Total portfolio: -0.75%.

So what? It's only money, folks. It's better to be living poor than not living at all, or worse, living in pain.

 

[steelyman]

My wife's 401k has just reported in. It is early today, as I often have to wait for another hour or 2.

Total equity including her funds: -1% today.
Total portfolio: -0.75%.

So what? It's only money, folks. It's better to be living poor than not living at all, or worse, living in pain.

Yes indeed. This is when dollar cost averaging kicks in.

 

[NW-Bound]

Talk about health and the market, I still have the fight in me. Else, I would not look at my portfolio. However, as most retirees, I do not have fresh money from earned income to do dollar cost averaging. And the market has to be a lot lower to buy or to rebalance, no matter what you call it.

So, I will be just watching for a while. As I own stocks in different sectors and often overweight one sector over another depending on my interpretation of the world economy, I always have something to watch. Watching just the indices like the Dow, S&P, or Nasdaq is not exciting enough for me.

 

[steelyman]

Talk about health and the market, I still have the fight in me.

Yeah boy, and you got some cheerleaders right here!

 

[Major Tom]

It was pointed out (time and time again) that a 100% fixed income portfolio historically has a low success rate with a 30 year time frame at a 3.5% WR - only 79.3%. An AA of anywhere from 30% to 85% equities however, provided a 100% success rate. That's not 'critical' - that's information. And it gets worse at 40 years - 27% success with all fixed, and 98% success with higher equities (~ 50/50 to 65/35).
-ERD50

Obgyn has said before that he accepts his portfolio will lose out to inflation. If you enter a figure of 0% for inflation in Firecalc and run it for a 100% fixed income portfolio, you can take up to 4.5% out, based on the starting value and get 100% success over 30 years. In fact, you can get 100% success with a WR of 3.5% and a constant inflation rate of 1.75%.

We all know that inflation is almost certainly going to run higher than that and most of us want our income to keep track of inflation, but Obgyn has already said that he is comfortable with losing spending power over time, so who are we to question that? He keeps telling us he's risk averse (in almost every post, it feels like) so I think he just might be telling us the truth

Ob - if you ever change your mind and decide that you want your retirement income to keep pace with inflation, we'll be here for you

 

[Katsmeow]

He keeps telling us he's risk averse (in almost every post, it feels like) so I think he just might be telling us the truth

I have an issue with calling wanting no equities something you do when you are risk averse. This is because having no equities is risky, actually very risky. "Risk averse" seems to really be a code for "averse to the risk of any volatility in the nominal amount of my portfolio." Risk averse does not mean averse to reduction of the real value of my portfolio since someone who was averse to that kind of risk wouldn't have a no equity portfolio.

Of course, Obgyn can choose to take whichever of those risks he wants to take, but I don't think he is at all risk averse. I think he is risk seeking. Again, that is fine if he doesn't care that his course of action minimizes volatility at the cost of loss of real value of his portfolio.

 

[Meadbh]

I think risk aversion is not obgyn's profile. He craves numerical predictability. Hence, he is variability averse.