What you do in good times to prep for the bad?

[OldShooter]

... I was a little nervous at first with all the activity but I don't pay trade fees and I'm making lotsa dough. ...

The question is: Are you making (net after ALL fees) more than the market average? Total return on the broad market Russell 3000 index was 12.74% last year. (Russell Index Performance Calculator | FTSE Russell) The total return of S&P 500 was 12.25%. (https://dqydj.com/2016-sp-500-return/)

Statistically speaking, what your FA is doing is a recipe for failure over the long term even if he is beating the market net of fees right now.

 

[OldShooter]

... It is just a poor attempt to show the poster that what he is doing is wrong, but it is his assets, his portfolio, his life.

@Rustward, I didn't see your post before I made mine, but it is my impression that one of the reasons people come here is to learn. I would not use the word "wrong," rather the word "non-optimum."

There are plenty of investors who are being gulled by the hucksters at places like Merrill, Morgan-Stanley, etc. Hopefully @RobbieB is not one of them, but from what he said he may be. Hopefully comments he sees here will at least make him wary and at best save him a lot of money.

 

[razztazz]

. . . but nobody brought it to you to look at, or did they?

If the poster is satisfied with what he he doing, isn't that what matters -- to him?

I don't see him criticizing what you do.

. . . and we see lots of comments comparing the S&P 500 to a balanced portfolio. There is very little objectivity or validity in such comparisons, but it is what happens here so very often. It is just a poor attempt to show the poster that what he is doing is wrong, but it is his assets, his portfolio, his life.

So true. I never understood why the S&P500 had to be the benchmark for comparison. Always and everywhere there are other ways to invest and other things to invest in that could have made more money. If you have a balanced portfolio you will beat the S&P on the way. And be holding the bag for missed profits on the way up. And using a 100% S&P AA is fine too. I guess....? My personal benchmark is "Do I have enough money?"

Personally I couldn't do what robbie is doing. ie Take a lifetime of money and give it to somebody else and, "See ya later" But if he can, hey, it's his bread and I'm sure he's meeting his benchmark 'cause he has enough money.

As far as what I do in good times to prepare for the bad times: I try not to spend too much

 

[Ready]

Yes, I get from Robbie's responses that he doesn't want to change what he is doing. But these forums serve as learning tools for everyone who comes here to read them, and perhaps someone will read this thread and learn something from the exchange of conversations.

I have no intent to try and change the behavior of someone who does not see the need nor desire to change what they are doing.

 

[jollystomper]

During the "good times" I look at what the impact of losing 25% of my savings/investments would be. If I can live with that I do nothing but maintain my AA, currently at 44% equities.

I also maintain enough in cash so that I can use that for my target SWR without being forced to sell investments for 5-7 years (by which time we will be eligible for SS). Perhaps overly conservative, but that lets me sleep at night.

 

[RobbieB]

Don't worry about me I'm used to it. Ever since I've been here "helpful" people have been trying their very best to "correct" my errant investment practices.

FA at % of AUM at a full service broker?

Yeah, works for me -

 

[Idnar7]

W2R if I recall correctly you are approaching age 70. You will lose your spousal ss at 70 (from being married 10 years). Will your RMD's cover that loss in income? Not meaning to pry, just curious if you have considered. I remember you were surprised to discover you qualified for the additional ss.

 

[W2R]

W2R if I recall correctly you are approaching age 70. You will lose your spousal ss at 70 (from being married 10 years). Will your RMD's cover that loss in income? Not meaning to pry, just curious if you have considered. I remember you were surprised to discover you qualified for the additional ss.

You have a great memory! Or maybe you were the person who told me about divorced spousal SS. I cannot for the life of me remember the person here who told me, but I am eternally grateful to whoever-it-was.

I will be switching over to my own SS, which is supposed to be growing all this time. If everything works out as I expect, then my SS deposits will be bigger by about $500/month starting a year from this month. So this, plus my RMDs, is an example of "The Tax Bomb" that some seniors experience at age 70.

I have been spending a little more money from my TSP (=401K) than I might have otherwise, since that money is taxable as ordinary income. At 70, I can lean a little more on my taxable accounts and less on my TSP. Hopefully that will soften the blow. But I will probably pay more taxes anyway.

 

[gcgang]

Gathering nuts and storing them away.

Keep trying to reduce my equity exposure; not reinvesting dividends or cap gains distributions, more aggressively writing calls letting some shares get called. Have very little equity not subject to cap gain tax in taxable account. Have a couple balanced funds in tax sheltered, will take another look at those balanced funds to see if I can reduce further.

 

[Scuba]

Don't worry about me I'm used to it. Ever since I've been here "helpful" people have been trying their very best to "correct" my errant investment practices.

FA at % of AUM at a full service broker?

Yeah, works for me -

You seem to have a pretty great lifestyle so something must be working well. May be a different path than some others would choose but hey - bidets and filets - sounds like you're enjoying your life and your asset performance is meeting your needs. Well done!

 

[audreyh1]

What tactical moves are others doing as their money grows in these good times?

As an example, here is what I've done:
A) Continued to stick with my current AA
B) In the fixed income part I moved some intermediate bond money to a short term investment grade bond fund. This should see us through the worst of the bad sequence years (like those starting in 1966, 1929, and 1906).

Regard (B), this is enough to cover:
(1) a Reserve account to boost normal portfolio spending should we have a very bad sequence of returns going forward
(2) the next 12 months of spending

So I think I've insured that even in a very bad sequence of return years we should be able to spend at levels that will please even DW. Now I can relax ... I think .

When the market is happy and my portfolio is growing, my income is rising faster than my spending. So (as you already know) I let the unspent income pile up in short-term, safe investments separate from my retirement portfolio (where I maintain an AA). They are thus protected from a sharp market selloff and available to pad future income if needed. Over the past few happy years these short-term funds have grown quite a lot. I'm going to keep letting them build while the crazy party continues. You know my outlook is pessimistic.

 

[pb4uski]

Sticking to my 60/35/5 AA, but rebalancing more frequently to lock in market gains. Sticking with CDs and 2020 target maturity bond funds to mitigate interest rate risk. Otherwise, very boring.

 

[Blue Collar Guy]

i wont do anything, i didnt retire that close to the edge, i have a cushion. i guess we could tighten our belts and spend less . But even if another 1929 comes or a 2007 im good. ill just have less. I withdraw zero now, so zero of a smaller pie is still zero. my tactical move is to let it accumulate.

 

[Rustward]

You seem to have a pretty great lifestyle so something must be working well. May be a different path than some others would choose but hey - bidets and filets - sounds like you're enjoying your life and your asset performance is meeting your needs. Well done!

I think this is well worth repeating. Way to go Robbie, and thanks for the post, Scuba.


We will all end up dead, and as long as we enjoyed the journey that is what really matters.

 

[daylatedollarshort]

Stockpile food and ammunition. Learn fun hobbies that are useful if tshtf.

I don't have any ammo, but I have stockpiles of staples and lots of sustainable living hobby projects on my to do list like solar projects, micro-greens and herb gardening that also help to lower our overhead.

 

[brucethebroker]

Love this topic!

INVESTING:

I am sticking to the same investment AA as always (45:55, including index funds, TSP "G Fund", and VWIAX Wellesley). I have about 6 years in cash. This AA did well by me in 2008-2009 so I feel it has been well tested.

Right now I am pretty well set with income from pension, SS, and dividends, as things presently stand. I base my yearly WR on my investment portfolio total on 12/31 each year. So, it is variable and spending flexibility is tremendously important.


SPENDING:

I am working on my spending patterns, trying to position myself so that my monthly required spending is lower, allowing enough flexibility for overall spending to be drastically cut back ASAP if need be.

For example:

$110/month savings from cancelling my cable TV and only using OTA reception
..$39/month savings from cancelling my land line
..$31/month savings from switching from Verizon to Cricket
$105/month savings on generic prescriptions that recently became available, just good luck

$285/month total savings for the above (= $3420/year)

Right now I am spending this saved money on discretionary stuff, but I can cut that off instantly whenever necessary.

No loans of any kind to pay. Enough clothing to last me until doomsday if need be. A nice paid off house with low utility bills and upkeep expenses.

Also trying to get some major dental work done and out of the way. Making sure my house and car are in good repair.

I guess that about covers it.

Great plan.

 

[brucethebroker]

Staying the course with AA, but I've been putting some gains into physical real estate. Not paper assets, but physical property. Closing on a piece of land next week in one of the ski resort areas near us.

Another good plan, I think.

Are you concerned that you might be moving $$ from one bubble into another?

 

[brucethebroker]

Reducing expenses (like W2R), and started up a PT business that is about as recession proof as can be expected. Sold an underperforming rental home once the market recovered. AA is top heavy with rental income, so little concern about wall st. movements. Very, very frugal lifestyle.

Not too worried overall since there are still two "milestones" in the next couple of years (another SS check and Medicare enrollment on short term horizon).

 

[Johanson]

Oh Bernie -

Nah, I'm with BofA / Merrill Lynch and I'm up 6% (including fees) YTD. So yeah, I'm making a lotta dough just like everyone in the market. No *****-pocus, no funny business, just a managed account.

I'm up 10.69% YTD and I rarely move my money.

 

[mathjak107]

we are at 45% equities over all and the rest bonds and cash . up or down it is a comfortable level .

we hold current year in cash and the rest optimized in 3 different portfolio's based on time frame .


we have an income model that is 77% assorted bond funds and 23% a dividend equity fund . the model is 75% less volatile than the s&p 500

we have a growth and income model which is 60/40

lastly we have a 100% equity model for the money we will eat with in 15-25 years

since we have been using the fidelity insight models for 30 years the models do stay dynamic and shift a bit over time as the bigger pictures unfold .

because we get a weekly update we really do no portfolio planning in our heads at all which is great .

i like speculating with my fun money so it leaves me free to only concentrate on that .

 

[1-31-18]

Appreciate the reports on this thread, from W2R in detail, about cutting expenses. I'm close to retiring and LBYM has been my practice forever, but LBYM for an extremely busy professional (who sells his time to earn dough) means there is always plenty of fat that can be trimmed. It will be a comfort and a pleasure, when at last I have time to do as I please, to cut needless expenses (as folks like you instruct), thereby freeing up some cash for our most highly valued experiences and also creating even more of a cushion against SOR risk.

Thanks for all the great advice.

 

[athena53]

No plan, really. I retired 3 years ago and the market has been pretty good but have been through the bad cycles before- the earliest I can remember was the October 1997 crash.

I've got an aggressive mix but don't reinvest interest and dividends so I always have a cash reserve. I've also got bonds I could liquidate if the market were at the bottom and I needed cash. My "zero-based budget" spending (mortgage, taxes, food, utilities, health insurance) would be covered by my SS plus two small pensions. In drastic circumstances I could cut my travel and my church pledge but both of those would really hurt. I could also switch from SS Survivor benefits to SS on my own record to bump up my income but prefer to wait till I'm 70.

I also periodically weed out investments that aren't doing well. The good ones recover, and then some.

 

[Danmar]

Nothing special as there is so much cushion in our current finances. Upped our spending a little recently but basically are "bullit proof" in my opinion. Lived through 2008/ 2009 and could certainly do it again. Debt free is an advantage with lots of liquidity available. Also, large pension that could cover most of our fixed expenses.

 

[Koolau]

At age 70, this is the first year I am no longer using a 30 year time frame for survival (down to 29, heh, heh.) That doesn't actually change much, but in theory it means Port. survival is less and less of an issue - or else WDR can rise. Having said that, my greatest fear is something like run-away inflation or N. Korea, etc. etc.

I'm actually not doing much at all differently. My AA of about 30% stock, 70% "other" seems to be working just fine as long as the future is not dramatically different from the past 50 to 60 years or so. My monthly income is nearly enough to secure a decent life style while the Port. supplies most of the "goodies." Preparing for black swans is difficult since we would be lucky indeed to guess what form they might take. YMMV

 

[Ted_Shepherd]

I move my spending up and down in a damped response to market volatility. When I have a lot to spend, I don't let it become a habit, and I don't then mistake luxuries for necessities. Other times, when I have less to spend, it's no problem. I still have plenty of income for a modest standard of living, and life is sweet.