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Old 04-14-2016, 01:32 PM   #21
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Precisely. And that's the main reason why retirees usually ratchet down their asset allocation. They are not investing to maximize their portfolio size in most cases; they are investing to *minimize* the risk of running out of money. And in terms of strategy those are usually two very different goals.
Excellent point.

I'm familiar with some trust funds that have very low risk and fairly small gains, but the amount of the fund is so large that even a 2% annual gain is more than enough to cover the payouts.

Instead of matching risk to an unnecessary level of growth, they figure out the income requirement and back into an appropriate risk level.
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Old 04-14-2016, 01:58 PM   #22
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Anyone taking money off the table?

Poor idea. I did it just once and learned my lesson. On our way out of a restaurant, I took some money off the table of another couple whom had just left. A surprising number of people became upset. Trying to explain to the other customers that I thought the couple had needlessly over-tipped and that I was simply trying to rectify the situation didn't impress anyone.
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Old 04-14-2016, 02:28 PM   #23
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The market's had a run-up? Huh. Who knew?

Seriously, though. It's still off its all time highs, so to me taking money off the table because of what the market's done since January 1st is as arbitrary as buying more because the market is cheaper than it was May 21st.

But that's "to me" - someone still accumulating.
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Anyone taking money off the table?
Old 04-14-2016, 02:41 PM   #24
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Anyone taking money off the table?

Who, me? I have no plans to take any money off the table.

If I did, what would I do with it? If I was any good at market timing, that would be one thing, but the truth is that I am not.

What I am pretty good at, is doing nothing (except for my January withdrawal and rebalancing each year). That seems to work for me.
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Old 04-14-2016, 02:47 PM   #25
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We all know that market timing does not beat the market over the long term, and yet we try to do it, but without calling it market timing of course. Somehow calling it something different makes it sensible.

What will I be doing during the current market run up? The same thing I was doing during the market downturn, nothing.

Of course to me the market seems relatively high, on the other hand almost everyone thinks the market is relatively high. So there we were and here we are. No market timing for me whatever we choose to call it. I know I am not that smart.
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Old 04-14-2016, 04:45 PM   #26
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Seems to me most smart retirees would hold 3 years worth of expenses in cash, that way you should be able to outlast any market correction before you have to sell into the down market. You can then afford to have a higher % in equities then the normal by your age %.
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Old 04-14-2016, 04:50 PM   #27
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Who, me? I have no plans to take any money off the table.

If I did, what would I do with it? If I was any good at market timing, that would be one thing, but the truth is that I am not.
Except that we know what to do when you say "Whee!".....
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Old 04-14-2016, 05:12 PM   #28
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Seems to me most smart retirees would hold 3 years worth of expenses in cash, that way you should be able to outlast any market correction before you have to sell into the down market. You can then afford to have a higher % in equities then the normal by your age %.
Those employing a cash bucket strategy need to replenish the cash periodically. It's better to do that after a run up than after a sell off, so now is better for equity sales than two months ago. Of course, perhaps November will be even better than now.
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Old 04-14-2016, 05:54 PM   #29
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Those employing a cash bucket strategy need to replenish the cash periodically. It's better to do that after a run up than after a sell off, so now is better for equity sales than two months ago. Of course, perhaps November will be even better than now.
Most would call it periodic rebalancing. I suppose you can justify it as not market timing if you state that you rebalance when your asset allocation get out of wack.

I do sell off equities periodically - to rebalance... usually when there's been a big run up of stocks triggering my 5% out of band rule.
I also sell off bonds periodically - also to rebalance... for the same reasons. I try to keep my percentage in cash consistent with my asset allocation, as well.
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Old 04-14-2016, 06:28 PM   #30
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Just re-shuffled the deck. Moved all VG 2015 to Wellesley.
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Old 04-14-2016, 07:44 PM   #31
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How about this variable as less complicated choice. If you plan to make charitable gifts of stock to meet an annual giving goal, might not now be a good time to make that transfer?
Fewer shares to make a gifting target.
Not earth shaking but still some potential incremental benefit even if you are a "buy and hold" investor.
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Old 04-14-2016, 08:09 PM   #32
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Seems to me most smart retirees would hold 3 years worth of expenses in cash, that way you should be able to outlast any market correction before you have to sell into the down market. You can then afford to have a higher % in equities then the normal by your age %.
I'm not sure that it is clear at all that that would be 'smart'.

Holding that cash is a drag on performance. Since markets generally go up over the longer term, and a retiree is also getting much (most?) of their income from dividends, and probably some from pension/SS, the amount of equities that they need to sell each year is small.

So holding cash to avoid the occasional small amount of selling in a down market could do more harm than good.

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Old 04-14-2016, 08:34 PM   #33
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I'm always under invested in equities because I have more pain when the market drops so I set a low AA for a reason. My husband is 78% in cash and I'm about 40-50% in cash. I don't even plan to use my money until RMD, which is 15 years from now.


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Old 04-14-2016, 10:00 PM   #34
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I believe in index funds, staying fully invested, keeping expenses low, and being highly diversified as proven ways to build wealth, and that basic wisdom has served my growing net worth very well for decades. Still, there is a puritanical standard against any market timing among many who invest the "Bogle Way" as I do, which I can't fully agree with. Isn't a Vanguard Target Date Fund that owns the world's economy of stocks and bonds, rebalances those many asset classes constantly, and then gets a little more conservative each year, a form of market timing? In reality, who buys only the S&P 500 or another index and then never adjusts course regardless, as the table would imply we should? In other words, aren't we all guilty market timers, at least at the margins? I'll go first: Hi, I'm Markola, and I'm a market timer.
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Old 04-15-2016, 05:26 AM   #35
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I'm a market timer and a gambler (individual stock buyer). Welcome to the association of anonymous timers.

We have regular meetings over at LoL's newsletter. Free virtual coffee.

I am largely Bogle, just not exclusively. Probably too youthful to have learned my lesson? We'll see.
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Old 04-15-2016, 05:42 AM   #36
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Timely thread because we plan to close on buying a condo in ~30 days and I'm trying to decide whether to sell some mid and small cap funds whose proceeds I plan to use for the condo purchase today or let it ride until we get closer to closing. Whatever I decide, once I pull the trigger I won't look back.
After looking at some charts yesterday afternoon I did decide to take some money off the table to fund the condo purchase as the S&P was within 3% of its all-time highs... so call me a dirty market timer.

The big problem with that is that I had substantial capital gains on those sales so I won't be able to do as much Roth conversion as I would normally do this year but I think that is not a bad problem to have.
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Old 04-15-2016, 06:10 AM   #37
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We are 54.5% equities, as of March 31. Still working and contributing.

I don't look at our AA picture, except at EOM. If I did, it would be tempting to fine-tune the results.

Thinking ahead, I hope to do the same. Set an AA, make it less aggressive each year, and keep monthly totals so I can have perspective.

I think 35% equities is an appropriate target, from what I've seen in in-laws portfolio over the past 10 years. Where they had 20% equities, it did not grow. Where they had 35% or more equities, it grew.

In a few years I will probably need to confront the need to lock in gains. So I am reading this thread with interest.
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corrections
Old 04-15-2016, 10:58 PM   #38
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corrections

People lose more money trying to avoid stock market corrections than they do just going through the correction. Some auto rebalancing goes a long way towards selling high/buying low in a properly diversified portfolio.
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Old 04-16-2016, 05:09 AM   #39
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I timed market to tax loss harvest a substantial portion of our taxable portfolio at the beginning of the market to get out of expensive broker recommended funds into vanguard index. Unfortunately I ones being out the 31days to miss much of the recovery. Typical for me and I am done with timing.

I take solace that I went from an average expense ratio of about 1% to less that .2% while paying no capital gains to convert. Hopefully over retirement the lower expense far outpaces the lost gains.


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Old 04-16-2016, 06:16 AM   #40
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One way to think about this is that if I have a 3% WR and a 60% equity allocation I'm effectively overweight equities relative to my minimum return requirements. The question then becomes: do I want to be overweight equities relative to my needs?
Ok and point taken. But how about that old enemy: inflation? If you adjust your risk to only your WR needs, inflation will eventually eat you up. No?
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