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Old 10-07-2007, 07:34 AM   #21
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I am 90% equities (SP500 index, EAFE index, small cap index), but consider my two COLA'd pensions as my "bond" allocation. With them as an anchor, I feel I can invest a bit more aggressivly.
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Old 10-09-2007, 09:27 AM   #22
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Originally Posted by SecondCor521 View Post
I'm 38 and will likely FIRE by 50 (OK, the current spreadsheet says 52.XX, but my spreadsheet is conservative). Currently I am 100% equities. When I retire I plan to be at something like 85/15.

My theory is to go all out equities to the degree that I can still sleep at night when the market drops. I've been following that plan religiously and have been able to stomach the drops so far, but I have lately been considering a 5-10% bond position to take a little of the edge off.

So not really scientific on the period between here and FIRE; more gut feel. The 85/15 ratio is somewhere close to the optimal survivability frontier for a 40 year retirement.

2Cor521
My situation is similar to 2Cor (hi!). Same age, same general retirement plan. But I am a little more conservative - I have about 10% in bonds, plus I will get a pension (which is like having bonds, IMO). I don't plan to decrease my stock holdings over the next 10 years at all.
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Old 10-10-2007, 12:24 PM   #23
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Personally, I have decided that I'd almost rather jump off a cliff than continue working for more than two more years. My asset allocation is pretty conservative (only 60% equities) and I intend to continue LBYM in ER. That is the percentage that lets me sleep at night.
Want2retire - I like your reference about jumping of the cliff...

As our investments grow, I am less and less inclined to be aggressive. We were 100% equities at the beginning of the decade, not a problem at the time, but loss of 30-40% of our current portfolio would be extremely unnerving. At this point, a small drag in returns (i.e., bond exposure) seems a reasonable trade-off for a smoother ride.
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Old 10-10-2007, 03:00 PM   #24
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It is funny how people are more OK with risk as long as the numbers are small. Are we at the edge of a cliff (like the one that happened in the summer)?

If all us intelligent people think so, it will be so! How many are ready to jump when the next decline begins? Maybe it is best to beat the rush?
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Old 10-10-2007, 03:17 PM   #25
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It is funny how people are more OK with risk as long as the numbers are small. Are we at the edge of a cliff (like the one that happened in the summer)?

If all us intelligent people think so, it will be so! How many are ready to jump when the next decline begins? Maybe it is best to beat the rush?
My comment had nothing to do with the current state of the market.

Everything is relative... In 2001/2, I was probably making $65K/year, had about 30-35K in retirement savings (a very optimistic figure) and was saving about 15/year. A market drop of 40% at the time equates to 12K or less than one year worth of my contributions. Why fret?

At this juncture however, my recovery time from a similar slump would take much much longer... I would be an idiot not to consider the implications of a potential drop.
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Old 10-10-2007, 03:29 PM   #26
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Yes, a lot depends on where you are in the accumulation phase. I rode out 2000-2002 without much difficulty.

I had been avoiding Tech and dot.bombs because it was apparent to me that there was going to be a disaster at some point. So I missed most of the ride up, but my decline was much smaller. While everyone else was buying AMZN and EBAY, I was buying REITs and Berkshire

The decline I did face was much easier to deal with because I was buying into the drop, and the amount I was buying was still enough to almost keep up with the declines in my existing portfolio.

Now that my portfolio is much larger than my additions, a drop is going to be harder to deal with. I'm still 100% equities though. With REITs, banks, drug stocks, and utilities available, I've never been able to get myself to bother with bonds. I've upped my cash to about one year of my mortgage, though.

I'm only 35, so maybe bonds will look more appealing when I am closer to retirement. On the other hand, the ~10% drop we had this year didn't phase me at all, so maybe I will just keep on truckin'.

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Originally Posted by SecondCor521 View Post
It was somewhat painful but with the increasing equity in my home and my additions to savings, we basically went sideways net-worth wise from about 2000 through 2002 or so.

Then in 2003 it looks like the index went up 28% or so. That year was good to me.

Many people talk about the 2000-2002 slide. If you were in dot-coms or sold on the way down, yes, you didn't do well. If you stayed reasonably diversified, held on, DCA'd into it, and waited for the rebound, you did OK.

But like I said, the heartburn for me the next time may be too much.

2Cor521
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Old 10-10-2007, 03:45 PM   #27
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...
The decline I did face was much easier to deal with because I was buying into the drop, and the amount I was buying was still enough to almost keep up with the declines in my existing portfolio.

Now that my portfolio is much larger than my additions, a drop is going to be harder to deal with. I'm still 100% equities though. With REITs, banks, drug stocks, and utilities available, I've never been able to get myself to bother with bonds. I've upped my cash to about one year of my mortgage, though.
...

My situation in 2001 was very similar... I remember my 401(k) balance getting a bit smaller every month even with new contributions coming in...

Just out of curiosity... is that one year worth of mortgage a part of your AA? If so, you're not really 100% equities. If, on the other hand, that cash is a part of your emergency fund only - what up it now?
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