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Old 07-02-2009, 06:02 PM   #21
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Originally Posted by Meadbh View Post
I thought the primary objective was to get a higher return at an acceptable risk, rather than to reach a specific asset allocation. Of course, it may be different early in life....
I think my "problem" is that I do not mind taking on more risk. In fall 2007 we were 100% equities, and it occurred to me that we stand to lose quite a bit if the market takes the dive... so, I re balanced down to 80% (simultaneously as my employer did some retirement plan changes) just in time to test my new allocation by watching the never ending spiral down for the next 18 months. I have discovered I was not bothered by it at all.

Now, after all the loses we all had so far, I am thinking I would not mind a bit more risk... how much larger can my potential loses be if I increase equity allocation (80% vs 90-95%)? Not all that much...

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Old 07-03-2009, 10:55 AM   #22
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The efficient frontier would argue that somewhere between 10-30% bonds is the sweet spot for maximizing returns with minimal risk. 100% equities gets you slightly better predicted returns - but at the cost of proportionally greater risk.

We survived this bear (so far) with 80:20 equity:FI and are on autopilot for shifting the AA to 60:40 in about 10 years when I hope to retire. If a bull comes along that shift may occur a little more quickly as my need to take risk decreases. One take home message from this latest bear was do not wait until the day you pull the FIRE trigger to adjust your AA.

Rather then increase the equity ratio we have been saving more aggressively during this bear. I took on a locums job and we shifted the extra mortgage payments to investments.


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Old 07-04-2009, 02:15 PM   #23
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I'm nominally 100% equities and retired (though DW is still working). I put about 25% in cash in mid-2007 as I retired, to avoid any problems with a bear market just as I retired. The idea was to spend down the cash first, regardless of the market. Not really market timing, though I was concerned about consumer debt at the time. I also did a little timing, with gold and a bear market fund with another 15% of the portfolio.

As the bear unfolded, I got rid of my hedges first and then bought equities with cash. I added equal amounts every time the market went down another 5% from the peak. I planned on a 40% drop, since that seemed like an average bear. When the markets dropped below that, I used my home equity line of credit to add another couple of buying steps to my plan. I tried to preserve 2 years living expenses in cash, though that ended when the market was at its lowest. I had about half a year cash in March this year, and had shifted from some conservative equity funds to more aggressive funds.

With the latest recovery I ended up with about 11% cash as I sold some of the equities. I'd like to drop that to 5% or less. I'm hoping to buy if the market will go down a bit more. Then I'm probably back in "permanently" until things look too optimistic or I need more cash for expenses.

So, yes, I'd be more agressive with the allocation for the next few years. My risk tolerance is obviously high. I was more worried that the market would start going up before I bought my next chunk of equites than I was about the market continuing down. At least until I was "all in" in March. If it had gone down any more the only thing I could have done was shift out of conservative funds and into agressive funds a second time. And I may have had to sell some of the equities I had just bought, hopefully at just a small loss.
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Old 07-04-2009, 03:41 PM   #24
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For me the last year or so the returns have been below the value of the risk. However the cost of changing the risk were above the value of potential returns. So steady as she goes.

As I often say things are down so low the seem like up to me. Surely the up will come..... hopefully in this lifetime.

At least between TIAA and Vanguard the costs of investments is not that high.
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Old 07-06-2009, 11:31 AM   #25
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Originally Posted by DblDoc View Post
One take home message from this latest bear was do not wait until the day you pull the FIRE trigger to adjust your AA.
Excellent point.

I've decided to stick with 100% equities for my new contributions, as I've been doing since October 2008. Barring any major drop in the stock market, this will likely change my AA from 80/20 to something approaching 85/15 by year's end. I'll revisit at that time.

Like Lucija, I probably won't increase my stock holdings above 90% of my AA, but somewhere in between 75% - 90% seems to be a comfortable range for me at this age.

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