What percentage of net worth allocated to stocks ?

[scrabbler1]

Using only my investments (my apartment is slightly under 10% of my NW), I have about 39% in stocks. That reflects a greater percent of stocks in my IRA and a smaller percent of stocks in my taxable accounts (because I am ERed and have a more income-oriented portfolio in my taxable account).

[Moemg]

60% . Occasionally I go lower but I am comfortable at this level most of the time .

[Katsmeow]

55% of portfolio. About 45% of portfolio + home equity and non-invested cash.

[Dawg52]

27% stocks.

[panacea]

Our investments are 60% stocks, 15% REITs and 25% bonds. We consider the house a safety net and exclude it from the allocation.

[HighRoller]

at this time, <10% stocks - I'll probably double or triple that percentage when the time is right (on a big dip)

[ejman]

It depends who answers the question. Vanguard says I have 55% in stocks, 44.7% in bonds and rest in cash.. Fidelity says I have 52.8% in stocks, 46.7% in bonds and rest in "other". Same funds and share quantities used as input for both Vanguard and Fidelity. I think getting an exact number is an exercise in futility as funds constantly trade and the overall "picture" also depends on how recent and accurate each funds asset allocation is reported.

[Jager]

Conventional financial thinking is that you'll need a significant proportion of equities, forever, in your portfolio, Steven, if you expect to be retired a long time and wish to outrun inflation. So take heart.

Alas, I'm one of those contrarians who rejects the conventional model. I have zero in stocks.

[haha]

Quote:

Originally Posted by Jager Conventional financial thinking is that you'll need a significant proportion of equities, forever, in your portfolio, Steven, if you expect to be retired a long time and wish to outrun inflation. So take heart. Alas, I'm one of those contrarians who rejects the conventional model. I have zero in stocks.

You seem thoughtful, so you must have some well thought out alternate plan. If you feel like it, tell us what it is.

I can promise that you will get no argument or counterpoint from me, I am just curious.

Today's WSJ Encore Section quotes Wm.Bernstein as saying that retirees should think of a two part portfolio. The first should contain at least 20 to 25 years of basic living expenses, and this should be invested only in annuities, bonds or CDs. Sounds very restricted, but if the quote is accurate, this is a person with a large following.

Ha

[Jager]

Quote:

Originally Posted by haha You don't some across as a whacko, so you must have some well thought out alternate plan. If you feel like it, tell us what it is. I can promise that you will get no argument or counterpoint from me, I am just curious. Ha

Well, I'm not at all against equities. Up until 2004, when I bailed from the market, I was 100% in stocks - and had been for many years. I look forward to getting back to them somewhere down the road.

In the meantime, here's a thumbnail of what informs my thinking:

- Most financial pundits (and most investors) came of age during the long-running secular bull market from 1981-2000. They know nothing else.

- The secular bear market which began in 2000 has largely been held in abeyance by the infusion of liquidity and stimulus by central bankers around the world. At the cost of gargantuan and rapidly rising debt.

- Societal obligations (SS, Medicare, and their equivalents across the developed world) are not fundable in the long run via any cogent scenario I have ever seen presented. The math simply does not work.

- The politics are such that the hard, painful decisions that could be made, won't be. It will first have to devolve into crisis.

- Financial tools such as Firecalc, wonderful as they are, have embedded within them as their major assumption that the future in front of us will never be worse than the past. There will never be a financial dislocation, for instance, worse the 1930's.

I'm an optimist by nature. But I'm utterly convinced there will be a reckoning. The math impels it.

I believe the times speak to the preservation of what one has saved. Not return on investment.

And so I have a portfolio significantly exposed to gold. Treasuries and money market funds make up the rest.

I'm not a goldbug. I actually think gold is today overpriced on a historical basis. And I'm convinced gold as an "investment" will blow up one day. But if you worry about these things like I do, there aren't a lot of safe places to put your money.

I say all these things with not a little reticence. After lurking here for awhile it's clear that there are an awful lot of smart people around. The financial acumen on this site is incredibly high. Far be it for me, a relative newbie, to suggest that there might be a fly in the ointment.

[mod edit]

[ERD50]

Quote:

Originally Posted by Jager Conventional financial thinking is that you'll need a significant proportion of equities, forever, in your portfolio, Steven, if you expect to be retired a long time and wish to outrun inflation. So take heart. Alas, I'm one of those contrarians who rejects the conventional model. I have zero in stocks.

I'm curious as well. What is your plan to outrun inflation? Real Estate (that seems to be one alternate plan that comes up from time to time)?

-ERD50

[haha]

Quote:

Originally Posted by Jager Well, I'm not at all against equities. Up until 2004, when I bailed from the market, I was 100% in stocks - and had been for many years. I look forward to getting back to them somewhere down the road. In the meantime, here's a thumbnail of what informs my thinking: - Most financial pundits (and most investors) came of age during the long-running secular bull market from 1981-2000. They know nothing else. - The secular bear market which began in 2000 has largely been held in abeyance by the infusion of liquidity and stimulus by central bankers around the world. At the cost of gargantuan and rapidly rising debt. - Societal obligations (SS, Medicare, and their equivalents across the developed world) are not fundable in the long run via any cogent scenario I have ever seen presented. The math simply does not work. - The politics are such that the hard, painful decisions that could be made, won't be. It will first have to devolve into crisis. - Financial tools such as Firecalc, wonderful as they are, have embedded within them as their major assumption that the future in front of us will never be worse than the past. There will never be a financial dislocation, for instance, worse the 1930's. I'm an optimist by nature. But I'm utterly convinced there will be a reckoning. The math impels it. I believe the times speak to the preservation of what one has saved. Not return on investment. And so I have a portfolio significantly exposed to gold. Treasuries and money market funds make up the rest. I'm not a goldbug. I actually think gold is today overpriced on a historical basis. And I'm convinced gold as an "investment" will blow up one day. But if you worry about these things like I do, there aren't a lot of safe places to put your money. I say all these things with not a little reticence. After lurking here for awhile it's clear that there are an awful lot of smart people around. The financial acumen on this site is incredibly high. Far be it for me, a relative newbie, to suggest that there might be a fly in the ointment. [mod edit]

Thanks for a well thought out answer. I tend to think the same way, although I sold out of gold way too early some years ago.

I also hold more stocks, mostly because the taxes would be too high to get rid of them. I probably should not let that be so important, and 2013 is a new slate so I'll be looking. One thing that bothers me is when I make a move, pay taxes, and then the stocks go up or stand still rather than falling! It is an easy way to feel stupid.

Ha

[pletal]

Quote:

Originally Posted by Jager Conventional financial thinking is that you'll need a significant proportion of equities, forever, in your portfolio, Steven, if you expect to be retired a long time and wish to outrun inflation. So take heart. Alas, I'm one of those contrarians who rejects the conventional model. I have zero in stocks.

I also reject the conventional model. I have close to zero in stocks myself. I would rather spend more time working on my business then trying to figure out the market. My plan is to put enough back and plan on no more then a two percent return per year. When I can pull at least 160k per year for 35 years I'm done. If I don't spend it all that year it stays in the account. If interest rates go up, I can't lose.

[sheehs1]

Quote:

Originally Posted by ERD50 I'm curious as well. What is your plan to outrun inflation? Real Estate (that seems to be one alternate plan that comes up from time to time)? -ERD50

While not ideal and does not really ensure the buying power of liquid assets keeps up with inflation, it seems prudent to try to get or keep one's expenses at 50% or less of the income generated or one's safe withdrawal rate (i.e. a low debt to income ratio).

At least then one has some buffer, so to speak against inflation.
I call it, the inflation protection plan because quite honestly, our debt is the one thing we have some control over.

Keep debt ratio low while investing in safe assets on the other side to supplement the income that is generated, keep up with some percentage of inflation, or even continued savings.

Now, if I can just hold to that model and not do something stupid.

[sheehs1]

Quote:

Originally Posted by haha One thing that bothers me is when I make a move, pay taxes, and then the stocks go up or stand still rather than falling! It is an easy way to feel stupid. Ha

+1

[samclem]

Quote:

Originally Posted by sheehs1 While not ideal and does not really ensure the buying power of liquid assets keeps up with inflation, it seems prudent to try to get or keep one's expenses at 50% or less of the income generated or one's safe withdrawal rate (i.e. a low debt to income ratio). At least then one has some buffer, so to speak against inflation. I call it, the inflation protection plan because quite honestly, our debt is the one thing we have some control over.

Yes, it sounds like your plan provides a buffer, but like all buffers it won't be effective if the difference between the two things it is buffering continues for too long. There's no getting away from the fact that if an investment plan is structured so that the expected return is less than the expected inflation, then the buying power of the portfolio should be expected to decline over time. Eventually, if one lives long enough, the portfolio won't provide enough resources to meet living expenses. Probably not a factor for an 85 YO with a 50% buffer, but something very different for a 50 YO.

For an early retiree, the conventional definition of investment risk (portfolio volatility) has very limited utility. If individual assets or even the entire portfolio goes down and back up in value before one needs to sell them, it hardly matters (unless we're participating in a "net worth" discussion on this forum). If investments go down and down in buying power in a "safe", steady, nonvolatile way, the only advantage to the long-term retiree is that the need to buy Alpo eventually won't come as a surprise--it was baked into the plan.

[Midpack]

55% of portfolio last time I ran it thru M*. I don't include primary residences or personal property in net worth, and our home would be a small % anyway, so the % of portfolio number is fairly representative.

[ERD50]

Quote:

Originally Posted by Jager ... - Financial tools such as Firecalc, wonderful as they are, have embedded within them as their major assumption that the future in front of us will never be worse than the past. There will never be a financial dislocation, for instance, worse the 1930's.

I didn't quote all the preceding, but I think they are reasonable observations.

FIRECALC is a tool - it does exactly as you say (assuming no programming/data errors!). But then you can use that as an input to your decisions, not make it the decision. It's why I prefer to shoot for 100% success, take the most conservative view of a 30 or 40 or 50 year portfolio (longer time frames also reduce the data set, so it may give a counter-intuitive higher success for longer time frames), and keep my expected spending level with inflation (rather than assume my spending will decrease with age).

All of those will provide some buffer, but it's still a crap-shoot, but as I've said before - so is getting out of bed to go to work.

Note that the 70's were about as bad/worse for a retiree's portfolio as the 30/s.

Quote:

I say all these things with not a little reticence. After lurking here for awhile it's clear that there are an awful lot of smart people around. The financial acumen on this site is incredibly high. Far be it for me, a relative newbie, to suggest that there might be a fly in the ointment.

Your input is certainly as valid as anyone else on this forum. I listen more attentively to a first time poster who presents reasons/data along with their viewpoint than I do one of us blow-hards with thousands of posts who just repeats the same self-proclaimed mantra with nothing to back it up.

Maybe I'm in the minority, but I'd much rather have someone warn me about the fly in the ointment than to choke on it because I wasn't warned. I find it interesting, but some people really don't want to be warned - I can't understand that (outside of harmless 'white lies').

That said, I've got a fairly high allocation to stocks. I don't disagree with your points, but I'm not sure the alternatives are better. Some have pointed out that at any time in history, one could come up with a credible list of why the market was scary. I just don't know, but I'm staying the course until I see a clear alternative.

But thanks for your thoughts, that was a very well written post, IMO.

-ERD50

[clifp]

30% of my net worth is allocated to Real Estate (both house and rentals).
If the remaining 70% my AA is 80 stocks/ 10 bonds/10 cash/cds. So I guess that makes me 56% stock (which includes a some REITs which arguably should be in Real Estate).

My view is governments are not very smart in general, and the US government in particular is borderline insane. I fear most of the same issues that Jasper fears.

But my reaction is to keep most of my money in the hands of the generally smart CEOs that run Fortune 500 global companies. My believe is that whatever happens to the US economy, the rich will still come out ok. Even excluding organization like Goldman Sachs which have a huge sway on Government policies, your average global company like Boeing, Exxon, GE,Apple will all do ok regardless of what Uncle Sam does. Most of these companies could survive just fine if they never made, researched, or sold another product in the US. I expect if the governmental policies, economic climate gets particularly ugly in the US or Europe these companies will relocate a large portion of their business to the green pastures of developing countries.

Gold makes some sense, but I am not sure why a company like Royal Dutch Shell which pumps a commodity Oil is not an equally good hedge.

As I have noted in the past the countries that have not defaulted on their debt like US,Canada,Switzerland,and Australia are greatly outnumbered by countries that have, either through outright default or via hyperinflation. In particular, I am not at all optimistic that a 30 year US bond is a good vehicle for preserving wealth.

[gerntz]

Around 50%. And I think anyone who answers closer than the nearest 5% for anything over 10% spends way to much time thinking about this subject.