Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Old 05-21-2011, 03:49 PM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
Join Date: Sep 2005
Posts: 5,381
Originally Posted by clifp View Post
It is just that for somebody that is currently comfortable with 100% equities . . .
They should be in 100% equities.

But the question I responded to was "what's the risk of owning 100% equities?"

It's interesting that after two years of a nearly vertical stock market, which has more than doubled in value, we're starting to see threads again asking about 100% equity allocations. I don't recall any such threads in 2009 when valuations made far more sense to go 'all-in'.

Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-21-2011, 04:23 PM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
Join Date: Oct 2006
Posts: 7,455
Good point there clearly are risks to 100% equities even a decade before retirement and the examples you cites should give people pause.

As for the threads in 2009 urging 100% equities, you are right among new members of the forum there does seem to be a strong correlation for high equity allocations after recent stock market run ups and low ones after market crashes.

But I'll say many forum members are natural contrarions and/or disciplined rebalancers. So there were plenty of folks who either bought steadily during the decline like myself, and even more who gritted their teeth and said my AA is 50/50 and I need to rebalance by selling bonds and buying stocks even if it is scary to do so.

clifp is offline   Reply With Quote
Old 05-21-2011, 05:05 PM   #23
Dryer sheet wannabe
Join Date: Jan 2010
Posts: 16
Agreed. Depending on what about of money one has at risk very few people can tolerate 100% equity portfolio. If one had $1,000,000 in equities and lost 50% during a bear market, how many in the population would stay in 100% equity?
ral3210 is offline   Reply With Quote
Old 05-22-2011, 12:17 AM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Ed_The_Gypsy's Avatar
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,307
You don't 'lose' if you don't sell. If you pick reliable dividend-producing stocks, the price of the day does not matter. My dividends have been much more stable than my valuations.

I did a short eye-ball study a while ago using Vanguard funds that showed that a bond component smoothed total valuation fluctuations out at the cost of lower returns over the last ten years or so. I do not like to invest in things that have low long-term returns on investment.

Having said that, it has also been shown that having a buffer (say, 10 years) in bonds or equivalents improves overall results if you sell the bonds first, allowing the stocks to grow.

Full disclosure: I have not started regular withdrawals yet so have not committed to any particular strategy. Almost 100% equities (50/50 US/non-US today) for over 20 years and now paying off debt rather than putting new money into equities.
my bumpersticker:
"I am not in a hurry.
I am retired.
And I don't care how big your truck is."
Ed_The_Gypsy is offline   Reply With Quote
Old 05-22-2011, 12:29 AM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Ed_The_Gypsy's Avatar
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,307
As I look at it, Social Security will be my bond fund. Bonds do not excite me as an asset.

If you decide that you want a 10-year fixed-income buffer, you could
a) move one year's worth out of equities to bonds every year,
b) wait until you retire, then move 10-years' worth all at once.
You could build a bond or CD ladder at any time.

You could take distribution from the bonds or the equities depending on which one is doing better that year, or you could take x% (3%? 4%?) out of both asset groups and rebalance every year.
my bumpersticker:
"I am not in a hurry.
I am retired.
And I don't care how big your truck is."
Ed_The_Gypsy is offline   Reply With Quote
Old 05-22-2011, 03:47 AM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Feb 2007
Posts: 5,072
No way to know how the future will turn out.

Plus, there are too many variables to really discuss this topic. It depends on many many factors.

Going all stock might yield a better outcome (looking at historic averages).... but you would have to time the lock-in value with a conversion to some bonds at some point in time... that timing would be critical to not encounter revers dollar cost averaging during the withdrawal phase (assuming you cannot live off of stock dividends alone).

Some of the decision also depends on the stock market... look at the secular bull of the late 80's and 90's. Compare that to the last 10 years.

Obviously if the stock market is marching upwards over a long period (even with periodic bears)... holding stocks over time will increase. During the last 10 years.... it looks to me like up down sideways.....

You cannot predict the future.... if something happened and you needed the money unexpectedly, the bonds would provide a little more stability in the pricing.

Plus, the rebalancing provides some level of buy low sell high action along the way.

IMO - Strategic allocation is a more safe approach. The amount of stocks vs bonds depends on your appetite for risk. In this case.... trade-off of a little higher return vs the risk of delaying retirement.
chinaco is offline   Reply With Quote
Old 05-25-2011, 08:17 AM   #27
Dryer sheet aficionado
Join Date: Jun 2008
Posts: 44
Originally Posted by Gone4Good View Post
Risk of not retiring.

NASDAQ 5,000 circa 2000 . . . eleven years later 2,800
Nikkei 35,000 circa 1990 . . . 21 years later 9,800
Nikkei 20,000 circa 2000 . . . 11 years later 9,800
SPX 1,500 circa 2000 . . . 11 years later 1,342

Stocks don't always go up, even over decades.
Ok, that helps to explain the reasoning ... thank you. So, if I'm understanding correctly, during these downturns bonds didn't have a corresponding downturn, and in fact might have increased in value?

FWIW, wife and I have been DCAing for the past 10+ years into 401Ks - all going into mutual funds. We think we're now about 10 years or so from RE and are trying to formulate an AA that will make sense going forward. I figure bonds will need to become a part of that AA at some point, just trying to determine how much and how soon for our comfort level.

Appreciate all of the advice.

intent is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
the next 100 years dex Other topics 19 09-02-2010 12:16 AM
A billion dollars from $100 in 10 years. Gworker Stock Picking and Market Strategy 9 09-02-2007 08:35 AM
I'm up 11.1% this year, with 100% equities AirJordan FIRE and Money 4 07-06-2007 07:59 AM
Not so young: Is 100% equities too dangerous? drboston FIRE and Money 9 03-11-2007 08:42 PM
I'm young - why not 100% equities now??? accountingsucks FIRE and Money 43 03-07-2007 11:39 AM


All times are GMT -6. The time now is 07:55 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.