Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Are you changing or tinkering with your strategy in 2016?
Old 12-27-2015, 03:20 PM   #1
Full time employment: Posting here.
 
Join Date: Oct 2015
Posts: 900
Are you changing or tinkering with your strategy in 2016?

I am still in the accumulation mode looking at about 4 yrs from FIRE. My AA has been about 83/17 (53% Large Cap/20% Small Cap/10% International/15% Short/Intermediate Bond/2% Cash). I am not sure what I will do when I FIRE, but can see the arguments for both going more conservative and also staying relatively aggressive. I learned allot about myself in the last market debacle as for the most part, I rode it out and was rewarded as the market came back. While one part of my logic says stay the course and follow my plan, another part of me says...

- The US seems to be the safer place to be and while international stocks are down (one argument is a buying opportunity), should I push some of my international portion back into US (of course you could argue US stocks are more fully priced)?
- Interest rate will most likely only increase 2 - 4 more times in 2016 so why the hell wouldn't I sell my bonds and stay in cash?

You can argue this is all a little market timing approach, but I feel like I have to have these little discussions/arguments with myself before I settle on a final strategy.

I would be curious to hear what both the pre-FIREs and post FIREs are planning to do different in 2016, if anything, and how you reconcile the 2 logical sides of your brain as you analyze the markets going forward?
DawgMan 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 Early-Retirement.org 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 12-27-2015, 03:29 PM   #2
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 47,474
Well yeah, it is a little bit like market timing, I agree. When I was in the early stages of the accumulation phase, I did a few things like you are suggesting. But later on, I sat down and devised two written investment plans: one was a pre-retirement plan, and the other a post retirement plan.

Especially now that I am retired, I do make an effort to stay the course. Like you, I came out of 2008-2009 very nicely, mostly because I did nothing. This gives me the conviction to stay the course. It worked for me in 2008-2009, a very dark hour for so many investors.

I would not be at all shocked if we had another crash like that before too long; we have had such a great market surge ever since, and eventually I would think that it will have to turn around.

Still, I don't plan to do anything different in 2016.


I think a couple of us said the same in your previous thread, and suggested that you might want to create a written investment plan.
http://www.early-retirement.org/foru...ain-80025.html
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.

Happily retired since 2009, at age 61. Best years of my life by far!
W2R is online now   Reply With Quote
Old 12-27-2015, 03:57 PM   #3
Recycles dryer sheets
 
Join Date: Dec 2013
Posts: 331
Pre-FIRE here. There is only one logical side of the your brain. The one that tells you to chase returns to beat the market isn't logical. The only reason you should change your plan is if your plan is returning significantly less than the market as a whole, AND that isn't intentional on your part to lower risk.

I am sticking with my plan. Approximately 25% of my contributions go into a lifecycle plan that adjusts for me. 70% goes into diversified mutual funds to try to match the market - aggressive because I am young and plan to have a 40+ year retirement and also I am working on a pension that will cover 100% of my needs. 5% is play money to scratch the itch of that illogical side.

Stick with the plan, man!


Sent from my iPhone using Early Retirement Forum
FI by 2024 is offline   Reply With Quote
Old 12-27-2015, 04:02 PM   #4
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: Conroe, Texas
Posts: 18,645
Post Fire here - I'm going to change a few things in my asset base since I am pulling RMD's for year 3 of this.

I need to increase my cash position to cover this year's RMD pull. I will do that by selling my remaining energy holdings that I have left from reducing earlier this year. Energy sector performance will deteriorate this year as many companies have not paid the piper for the loans they can't pay back. Given most oil/gas wells are unprofitable at these low prices and we are in a worldwide hydrocarbon oversupply position, I see no good things for the U.S. energy sector.

I also plan to shift my asset allocation to 50/35/15 and only invest in Vanguard ETFs (where I can).
__________________
*********Go Astros!*********
aja8888 is offline   Reply With Quote
Old 12-27-2015, 04:53 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 9,343
With specific investment grade preferred stocks still running historically above average 400 bp's above treasury, I am staying near fully invested here. With stocks still at high PE ratios with financially engineered earnings and bonds at low yields, the best value to me is these. My cheap crystal ball senses no strong economic growth on horizon.
I thought about selling my one stock mutual fund, but have decided to keep it to have a small skin in the game. Will probably stretch a bit more in higher yielding past call "yield trapped" issues with additional incoming monies and dividend reinvestments.
Living off a pension allows me a bit more flexibility with my investments than a person who doesn't I believe.


Sent from my iPad using Tapatalk
Mulligan is offline   Reply With Quote
Old 12-27-2015, 05:17 PM   #6
Thinks s/he gets paid by the post
Markola's Avatar
 
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,927
Basic FI achieved here and 5-7 yrs out from RE: I think my most comfortable allocation while working is naturally about 75/25. I recently connected all of my accounts to Personal Capital's free tools, which let me see my entire AA in one place and I was surprised that I'm actually pushing 90/10. Since I've gotten out of whack, yes, I'm going to back off stock index funds a bit in 2016 as soon 2015 fund distributions are complete.

I don't believe in market timing yet it is hard for me not to tinker based on nonscientific macroeconomic factors in the news that give me the willies. The tech sector is again surging beyond reason and profits and finance is right behind it. The other day I saw an ad for $1,000 socks. I sort of want to get a shoe shine and see if he gives me a stock tip, at which point I'll know euphoria has arrived. I won't actually do anything about all this beyond adjusting my AA back to normal but, like the OP's concern about bond prices seeming to have no where to go but down, riding this long bull does make me squirm in the saddle, I can't help but admit.


Sent from my iPad using Early Retirement Forum
Markola is offline   Reply With Quote
Old 12-28-2015, 03:10 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
Quote:
Originally Posted by FI by 2024 View Post
Pre-FIRE here. There is only one logical side of the your brain. The one that tells you to chase returns to beat the market isn't logical.


Sent from my iPhone using Early Retirement Forum
interesting enough this is actually quite wrong . if you read jason zweigs book your money your brain they use modern brain imaging equipment to see just what our brain does with money decisions .

when we have no money at risk and make hypothetical scenario's up the brain is quite good at analyzing and handing back very rational logical decisions .

but when we have the stress of actual money at risk a whole different section of the brain takes over .

this section does not chase risk at all , in fact just the opposite , it hates it .

the human brain when under stress hates losing money far more then making it .

in fact it will talk you out of doing most things if you let it or to run for cover when thins get stressful ..

the scans that occurred when money was lost matched those of smelling dog poop or watching someone vomit .

luckily i was aware of this many years ago when i got the chance to buy in to a real estate partnership that would cost us a fortune to be part of .

night after night my brain pounded me with reason after reason why i shouldn't do it .

well i fought back and did the deal .

it turned out to be the deal of a life time and so life changing it let us retire .

the other thing that was interesting and we all experienced this , after the drop the body becomes okay again with it and just looks forward to the rise back .

so it is just the fear of loss that brings the other parts of the brain in to taking over , not the actual loss .

i am forever indebted to jason and his research for making me see i was not being handed a rational even handed view .
mathjak107 is offline   Reply With Quote
Old 12-28-2015, 03:15 AM   #8
Recycles dryer sheets
FrankiesGirl's Avatar
 
Join Date: Feb 2015
Posts: 176
Post FIRE (spring of 2015), and mostly just taking a wait and see approach. Not really changing anything and we have a pretty aggressive portfolio too (but I'm a couch potato index investor).

Husband is still working and was to quit himself in the early part of 2016, but might hold out a bit longer. He's still undecided about actually pulling the trigger tho, so the markets being a bit bumpy/flat right now are causing him to lean towards keeping the steady paycheck around.

Which is great, as we aren't currently drawing down anything other than RMDs from an inherited account and that can just be reinvested anyway.
__________________
FIRE as of spring 2015!
FrankiesGirl is offline   Reply With Quote
Old 12-28-2015, 03:19 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
my portfilio has always been a dynamic one forever changing slightly to better fit the big picture . just like steering a big ship to keep it on course it gets a tuck here and a tuck there .

last years changes were cutting back on intermediate bonds and going shorter term with some of the money .

it also had shifts in to funds less weighted in to biotech and energy .

not sure what this years moves will be yet .
mathjak107 is offline   Reply With Quote
Old 12-28-2015, 03:54 AM   #10
Thinks s/he gets paid by the post
 
Join Date: Dec 2015
Posts: 2,232
Quote:
Originally Posted by DawgMan View Post
I am still in the accumulation mode looking at about 4 yrs from FIRE. My AA has been about 83/17 (53% Large Cap/20% Small Cap/10% International/15% Short/Intermediate Bond/2% Cash). I am not sure what I will do when I FIRE, but can see the arguments for both going more conservative and also staying relatively aggressive. I learned allot about myself in the last market debacle as for the most part, I rode it out and was rewarded as the market came back. While one part of my logic says stay the course and follow my plan, another part of me says...

- The US seems to be the safer place to be and while international stocks are down (one argument is a buying opportunity), should I push some of my international portion back into US (of course you could argue US stocks are more fully priced)?
- Interest rate will most likely only increase 2 - 4 more times in 2016 so why the hell wouldn't I sell my bonds and stay in cash?

You can argue this is all a little market timing approach, but I feel like I have to have these little discussions/arguments with myself before I settle on a final strategy.

I would be curious to hear what both the pre-FIREs and post FIREs are planning to do different in 2016, if anything, and how you reconcile the 2 logical sides of your brain as you analyze the markets going forward?
It could be that your rational side doesn't really love your AA. I wouldn't, if I were only 4 years from FIRE. IMO, (and only since you asked) for someone only 4 years from retirement you are over-exposed to equities risk. I don't think you are well positioned for WHEN (not "IF") the equities markets take a correction.

Again, IMO, you are properly allocated when you aren't tempted to re-allocate in order to "time" a correction. Unless you want to be a timer.
HadEnuff is offline   Reply With Quote
Old 12-28-2015, 05:07 AM   #11
Thinks s/he gets paid by the post
Major Tom's Avatar
 
Join Date: Nov 2009
Location: SF East Bay
Posts: 4,324
I'm not smart enough to make changes to my strategy that would stand a fair chance of being good moves, so I stay the course. It also suits my investing "style" as it requires me to do very little, and doing very little just happens to be my specialty

I have a very approximate 65/32/3 mix, with no specific personal guidelines on when to re-balance, though I'd probably do it if the equities portion were to deviate more than 10% either way from the target. This strong reluctance I have for selling/purchasing/changing anything in my portfolio is the reason I have faith that I'll be able to stay the course when the first severe downturn occurs during my withdrawal phase (I began withdrawals in 2011).
__________________
Contentedly ER, with 3 furry friends (now, sadly, 1).
Planning my escape to the wide open spaces in my campervan (with my remaining kitty, of course!)
On a mission to become the world's second most boring man.

Major Tom is offline   Reply With Quote
Old 12-28-2015, 05:23 AM   #12
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
Much of asset allocation depends on the other money you have coming in. Over the long run, nothing beats the US stock market.

If you have a large pension, significant rental income, etc., you can leave the money in the market and have more stock market exposure.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 12-28-2015, 05:34 AM   #13
Administrator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,586
One thing I've noticed over the years is how different diversified asset allocations lead to such similar portfolio returns. It is easy to overthink AA and tinker to excess. There is no recession on the horizon, economic growth is slow but positive, housing continues to recover, so no changes to the portfolio for us. As for the increasing interest rates and falling bond prices, this has been forecasted for each of the past 7 years.
MichaelB is offline   Reply With Quote
Old 12-28-2015, 05:52 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2011
Posts: 8,363
Quote:
Originally Posted by MichaelB View Post
One thing I've noticed over the years is how different diversified asset allocations lead to such similar portfolio returns. It is easy to overthink AA and tinker to excess. There is no recession on the horizon, economic growth is slow but positive, housing continues to recover, so no changes to the portfolio for us. As for the increasing interest rates and falling bond prices, this has been forecasted for each of the past 7 years.
+1

I've spent too much time running theoretical AA's only to find that there's a .001% improvement of one vs the other over time.

Still wish the market would get going though! Sooooo frustrating.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline   Reply With Quote
Old 12-28-2015, 06:02 AM   #15
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,743
Post Fire here.... 4 years before retirement my asset allocation was 60/40. One year before I pulled the plug I adjusted it to 50/40/10 and it's been the same going on 3 years now with no plan to make any changes for at least the next 7-10 years other than rebalancing when equities deviate by 10% in either directions.
Corporateburnout is offline   Reply With Quote
Old 12-28-2015, 06:25 AM   #16
Full time employment: Posting here.
 
Join Date: Oct 2015
Posts: 900
Quote:
Originally Posted by HadEnuff View Post
It could be that your rational side doesn't really love your AA. I wouldn't, if I were only 4 years from FIRE. IMO, (and only since you asked) for someone only 4 years from retirement you are over-exposed to equities risk. I don't think you are well positioned for WHEN (not "IF") the equities markets take a correction.

Again, IMO, you are properly allocated when you aren't tempted to re-allocate in order to "time" a correction. Unless you want to be a timer.
Good points as are the others. I should clarify my situation and perhaps my logic for a more aggressive AA. While my "goal" is 4 yrs (will be 55 then), its really just a goal. I don't hate my job and while my income varies (self employed), it has been and will probably be thru 55 anywhere from 1.5 - 3 times my annual expenses so I am packing some $$ away. I may decide to keep working in some fashion another 5 yrs for a variety of reasons (i.e. OMY syndrome, haven't fully defined what I am RE too, market takes a big dump). I do have significant RE income goals of which all of my income will come from my investments (no pension). I am probably at 75% of my targeted "number", but feel like I can make up certain ground as noted above if the markets don't fully cooperate. Of course, the reverse argument can be made as well by ratcheting my AA down to say 65% - 75% equities. My issue becomes buying short term bonds, bond funds/etfs, laddering CDs, or just holding cash? Where is everyone putting their bond/cash allocations right now, particularly if you are more in the 65/35 AA camps?
DawgMan is offline   Reply With Quote
Old 12-28-2015, 07:14 AM   #17
Thinks s/he gets paid by the post
DrRoy's Avatar
 
Join Date: Dec 2015
Location: Michigan
Posts: 4,962
I am at FI and 1.5 yrs from RE. When the S&P 500 hit 2000 I took my AA from 82/18 to 75/25. Since I no longer have as much need for the portfolio growth, and since future economic growth looks to be limited (which drives earnings and equity gains), for 2016 I am adjusting my AA to 70/30. With the difference I am laddering individual short to intermediate bonds. As they mature I will reinvest at presumably higher rates.
__________________
"The mountains are calling, and I must go." John Muir
DrRoy is offline   Reply With Quote
Old 12-28-2015, 07:31 AM   #18
Full time employment: Posting here.
jjquantz's Avatar
 
Join Date: Jan 2014
Location: Western Maryland
Posts: 926
Just a couple of minor tweaks in this mixed household (I'm retired, DW has a few more years). We are currently at 82% equities and my current plan had us increasing the bond/cash side by 2.5 percentage points/year so that we would get to about a 60% equity position at the projected date of DW's retirement (about 8 years out). I think that I will accelerate this process a little bit just in case DW decides she wants to pull the plug early. The revised plan would get us to 40% bonds/cash in about 4 years instead of 8. The other (extremely) mild tweak is rolling DW's IRA into her TSP. This is mostly to continue the simplification process of reducing the number of moving parts (accounts and holdings) as we approach her retirement
jjquantz is offline   Reply With Quote
Old 12-28-2015, 07:53 AM   #19
Moderator
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 10,656
I tinkered a bit earlier this year when a PE10 signaled (see the example in the Rock Breaks Scissors book). Although it was an AA change, it involved only tilting away from US equities. This is post fire.
sengsational is offline   Reply With Quote
Old 12-28-2015, 08:52 AM   #20
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
Quote:
Originally Posted by DawgMan View Post
- The US seems to be the safer place to be and while international stocks are down (one argument is a buying opportunity), should I push some of my international portion back into US (of course you could argue US stocks are more fully priced)?
US equity valuations are high whereas international and EM are much lower. This implies better *expected* returns abroad. So you could argue for increasing your international allocation not decreasing (if you wanted to market time).

Quote:
I would be curious to hear what both the pre-FIREs and post FIREs are planning to do different in 2016, if anything, and how you reconcile the 2 logical sides of your brain as you analyze the markets going forward?
I'm not planning to do anything different other than regular rebalancing (I don't believe in market timing unless valuations are way out of whack). However, I'm allocated 43% (of equity) to international already.

If I had to do something with your allocation, I'd reduce US and US REIT and shift it into International/EM.
photoguy is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
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
Poll of What is Your Health Insurance Choice for 2016 easysurfer Health and Early Retirement 60 08-17-2016 04:39 PM
Total Return Strategy vs. Income and Dividend Strategy for a Nestegg Golden sunsets FIRE and Money 154 01-26-2016 08:45 AM
Eighty three year old tinkering in the garage UncleHoney Other topics 0 02-11-2008 08:03 PM
Changing your mind Martha Other topics 3 01-06-2008 06:53 AM

» Quick Links

 
All times are GMT -6. The time now is 11:32 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.