DOW heading 20K !

[audreyh1]

I haven't been in bonds since 1990 and wondering if maybe I should move some of my 401K money into a bond fund with the drop in bond prices. I've got about 5 years before I retire. Anyone with an opinion?

Wow - you've had quite a ride!

Do you have a target AA for when you retire in 5 years?

Seems like you could shift gradually over those years. If bond prices continue to drop, you can buy more at lower prices. If stock prices hit an air pocket during that period you will at least have shifted some of your assets over.

 

[Johanson]

Wow - you've had quite a ride!

Do you have a target AA for when you retire in 5 years?

Seems like you could shift gradually over those years. If bond prices continue to drop, you can buy more at lower prices. If stock prices hit an air pocket during that period you will at least have shifted some of your assets over.

I don't have an AA for when I retire except I think it should be more weighted in equities beyond the current wisdom. I'm thinking 80-20 max. I'm not sure that's right.

I did just shift from 38-30% in my company stock and move some of that 8% into a Retirement Date 2025 fund. That was my biggest and only move into bonds but it was more of a buy/sell company stock transactions i.e. where I'm going to park my cash.

 

[GrayHare]

I haven't been in bonds since 1990 and wondering if maybe I should move some of my 401K money into a bond fund with the drop in bond prices. I've got about 5 years before I retire. Anyone with an opinion?

Bond prices have exhibited multi-decadal cycles: down from 1946 to 1981, up from 1981 to 2016. Have we now begun the next 35-year cycle, one of dropping bond prices until circa 2051? It's time to consult your crystal ball.

 

[audreyh1]

I don't have an AA for when I retire except I think it should be more weighted in equities beyond the current wisdom. I'm thinking 80-20 max. I'm not sure that's right.

I did just shift from 38-30% in my company stock and move some of that 8% into a Retirement Date 2025 fund. That was my biggest and only move into bonds but it was more of a buy/sell company stock transactions i.e. where I'm going to park my cash.

Well that builds up some bond exposure (35% looks like), and I suppose it is designed increase over time with a 2025 target.

20% bonds - it won't take much to build that up, especially doing it gradually over 5 years. The target retirement fund will do it part of it for you, although on a much longer time frame.

 

[NW-Bound]

Yeah, my small cap stocks took off like a rocket in the second half.

But large caps took off huge in November.

Rocket? Did someone just say rocket?

Some of my holdings look like this.

 

[HadEnuff]

I haven't been in bonds since 1990 and wondering if maybe I should move some of my 401K money into a bond fund with the drop in bond prices. I've got about 5 years before I retire. Anyone with an opinion?

Since you asked for opinions, I'll give you mine.
Are you "there" yet? By that I mean do you still need to be that exposed to the possibility of a 40% correction in equities seriously depleting your retirement funds, with only 5 years to recuperate before you want to retire?

Like you, I rode the ride for a long time, with no bond allocation. Then one day I realized that I didn't need to be that exposed. I didn't need to make 10% or 20% a year. What I needed to do was hit nice solid singles to right field, and not hit into a triple play.
That's what having something like a 40-60, 50-50, or 60-40 AA is all about. Keeping the nest egg healthy, and making enough to support the lifestyle, without being exposed to a big drop.

In all of the calculators I've run, it didn't really make any significant difference how it projected out between 30-70, and 70-30. But for me to have enough money to have a big crash not seriously erode my lifestyle, I'd have enough money to live nicely on a very conservative AA, so why live so dangerously if you needn't?

 

[Corporateburnout]

Since you asked for opinions, I'll give you mine.
Are you "there" yet? By that I mean do you still need to be that exposed to the possibility of a 40% correction in equities seriously depleting your retirement funds, with only 5 years to recuperate before you want to retire?

How about 57% drop in equities in the 2007/2008 period? If someone has the stomach to endure such a drop then by all means they can be in all equities. My threshold is around 25% loss in portfolio value that's why I have been 50% in equities since two years before retirement.

 

[CaliforniaMan]

We have a lot of discretionary travel and other plans for next year and the year following and I wanted to know how much we will have to spend for the next two years.

So recently transferred enough cash to my MMF so we will now have 9 quarters of known monthly income, no matter what the markets do. If they are higher during this time, that is great. If they drop precipitously, then we have two years to adjust our spending plans.

Not market timing, but rather life timing. For me it is really comforting to know that over the next two years we won't have to worry about the markets. And if in year 3 we have to cut down our expenses a bit, well we have the time to adjust, and that will be fine too. Just change from international travel to more local activities. No problem. Only a problem for us if we are looking forward to doing something, and then find we can't because of a market bubble suddenly bursting.

I don't count that MMF in my asset allocation, it's already taken out for spending. And that spending rate is still less than SWR from the remainder of the portfolio without the MMF. So I feel good about the amounts.

Just seems to me that sometimes life timing makes sense, and allows us to make longer term plans and still sleep well.

 

[jazz4cash]

Dow 20k? PFFFT!

Dow 50,000! When to ignore the holiday hype for stocks - MarketWatch

 

[Johanson]

Since you asked for opinions, I'll give you mine.
Are you "there" yet? By that I mean do you still need to be that exposed to the possibility of a 40% correction in equities seriously depleting your retirement funds, with only 5 years to recuperate before you want to retire?

Like you, I rode the ride for a long time, with no bond allocation. Then one day I realized that I didn't need to be that exposed. I didn't need to make 10% or 20% a year. What I needed to do was hit nice solid singles to right field, and not hit into a triple play.
That's what having something like a 40-60, 50-50, or 60-40 AA is all about. Keeping the nest egg healthy, and making enough to support the lifestyle, without being exposed to a big drop.

In all of the calculators I've run, it didn't really make any significant difference how it projected out between 30-70, and 70-30. But for me to have enough money to have a big crash not seriously erode my lifestyle, I'd have enough money to live nicely on a very conservative AA, so why live so dangerously if you needn't?

I only have about $450K saved in my accounts and I think I will need to have double this amount. I did double and a bit more the amount I have now in the past 5 years. So to answer your question, no I am not there yet.

How about 57% drop in equities in the 2007/2008 period? If someone has the stomach to endure such a drop then by all means they can be in all equities. My threshold is around 25% loss in portfolio value that's why I have been 50% in equities since two years before retirement.

I let it ride then and kept pumping money into my 401K. I had $88K in 2008, down from $127K the year before. Now I'm at $430K.

 

[Corporateburnout]

I let it ride then and kept pumping money into my 401K. I had $88K in 2008, down from $127K the year before. Now I'm at $430K.

I also kept pumping money into my retirement and brokerage accounts during the downturn and was 65% in equities then but I gradually moved down to 50% two years before I retired in 2014.

The point here is when the paycheck stops and you're depending solely on your portfolio to survive are you willing to absorb a 50% drop in your portfolio with an 80% allocated to equities? If so you're a brave man.

 

[Johanson]

I also kept pumping money into my retirement and brokerage accounts during the downturn and was 65% in equities then but I gradually moved down to 50% two years before I retired in 2014.

The point here is when the paycheck stops and you're depending solely on your portfolio to survive are you willing to absorb a 50% drop in your portfolio with an 80% allocated to equities? If so you're a brave man.

I could if it happened now with the assumption that it would rebound in less than 5 years. I would even be willing to work another year or two if I had to. I have a really good gig so it wouldn't be that big of a deal for me. Plus, my pension would end up being higher by a quite a bit. I'm thinking about getting into bonds but probably not for another year or so. I wish I had a crystal ball.

 

[explanade]

You can't always count on a quick rebound after such a steep downturn either.

How fast did equities come back after the 1929 Crash?

 

[Big_Hitter]

should hit it today

 

[Car-Guy]

Over 19900 now.

 

[frayne]

I think the recent announcement about Tillerson will drive the market above 20K today.

 

[photoguy]

You can't always count on a quick rebound after such a steep downturn either.

How fast did equities come back after the 1929 Crash?

I agree with that you can't count on it. But the answer appears to be 4 years and 5 months from the bottom: The Road Back From the ’29 Crash Wasn’t So Long, After All - The New York Times

 

[Car-Guy]

I think the recent announcement about Tillerson will drive the market above 20K today.

The announcement certainly isn't hurting XOM's stock price.

 

[misshathaway]

How about 57% drop in equities in the 2007/2008 period? If someone has the stomach to endure such a drop then by all means they can be in all equities. My threshold is around 25% loss in portfolio value that's why I have been 50% in equities since two years before retirement.

Me too. I don't regret it, but it is disheartening in times like these to see the bond side fall in value almost the same as the gains on the stock side.

 

[audreyh1]

Me too. I don't regret it, but it is disheartening in times like these to see the bond side fall in value almost the same as the gains on the stock side.

That's OK. That's why investors should diversify because different types of investments do better/worse at different times. It is unrealistic to expect all asset classes to go up all the time. Add to bonds when they are down, and when it is stock's turn is to go down bonds generally go up (the high quality ones, that is).

I'm a bit disturbed that you find it "disheartening" because that means something in your diversified portfolio is always going to disappoint you. You're setting yourself up for continual disappointment until you accept that the reason you are diversified is because you never know what is going to go up and what is going to go down, and that by being diversified at least you aren't 100% invested what is going down at the moment!

Rebalancing is your friend. Use it when one asset class way outperforms another, because eventually the roles will reverse.

 

[Hamlet]

I've been reducing our nearly 100% stock position since the election. I'm becoming uncomfortable at these valuation levels. I'm down to about 84% stocks/16% cash.

Hopefully, we will also have a decent chunk of cash coming in next year when we finish fixing up our old house and get it sold.

If the market is still this over-heated, I think paying down the new mortgage will get the bulk of that cash.

 

[Another Reader]

I do not own bonds except for whatever is in Wellington in an IRA. I own real estate, equities and cash. Cash for protection from a drop in rental income and to take advantage of asset sales when they appear. Equities for growth in the retirement accounts along with cash to meet distributions for several years.

My situation allows me to take more risk with paper assets. I have pensions, RMD's and social security plus the rentals. I think my situation is more secure than that of folks that rely exclusively on distributions from a paper asset portfolio for income and I therefore can tolerate wide swings in portfolio value. Extra money goes first to pay off higher interest rate rental mortgages which cannot be refinanced and then to taxable accounts.

If the paper portfolio is cut in half and the RMD's are also cut in half, no one will starve in this house. I'm concerned about valuations, because I don't think corporate income growth can keep up. Haven't sold anything yet, though.

 

[W2R]

We almost made it to Dow 20,000 today! 19,975 - - - just 25 short.

Sounds like we might have a Christmas present in store.

 

[SecondCor521]

We almost made it to Dow 20,000 today! 19,975 - - - just 25 short.

Sounds like we might have a Christmas present in store.

Thank you for not using the word.

 

[Texas Proud]

Thank you for not using the word.

Too late.... she was thinking it!!!!