Forbes Article: 60/40 Portfolio is dead (Comments)

[euro]

Yep. I am mad that I spent the 180 seconds reading it when I could have been more productive watching this:

Bottom line: Diversify and stay off of Forbes.com

 

[alaska55]

See also this on Jim Cramer (yet another "authoritative" huckster's hype peeled back revealing a track record of bad advice):

Mad Money. Questionable Ethics.



The same could be said for the author of this Forbes article (as well s Jane Bryant Quinn's latest fluff piece about planning to celebrate your 101st birthday). Read MSM business rubbish with care. Better yet, don't read it all.

I'm gonna guess you never read her book "How to Make Your Money Last: The Indispensable Retirement Guide"

 

[Cobra9777]

I didn't read the article. In fact, I never read anything on Forbes because they won't let me past the "Quote of the Day" page without disabling my ad-blocker. Not gonna happen. Anyway... doesn't sound like I missed much.

I sold a chunk of my bond fund allocation several years ago and bought two rental houses. When I first retired, I was going to expand to 5 houses with leverage, but eventually decided that would be too much like work. Handling the two is no big deal and I've been very happy with the steady cashflow stream, preferential tax treatment, and appreciation in value.

I still own plenty of stock, and more bonds than real estate. Essentially, I'm a conventional buy-and-hold index guy, but I do think there is a role for alternatives. I'd never go 50% though. And I'd never invest in alternatives I know nothing about, like medical accounts receivable.

 

[COcheesehead]

Predictions = noise (typical Forbes/MSM business section click bait). Thankfully, I landed on the last page of the "article" so I didn't waste any time out of my life reading the first two pages.

This"advice" is downright dangerous to most investors:



Active investors crash and burn, and only particular individuals have the temperament/personality to "start a business" or "invest in real estate". This "advice" is thrown out so casually like it's as easy to do any of these things as buying a pair of shoes. The best investors are the most conservative, thorough, and stick only to what they know (see Buffet/Charlie Munger's "too hard" pile concept). Perhaps returns will be lower going forward, but this in no way means taking on undue risk.

I'm too lazy to dig up the endless studies/research showing the above Forbes "suggestions" are just plain wrong for most investors (aside from being based on faulty forecasting and subject to behavioral bias). Google it.

I did both: started a business and invested in RE. You should meet me someday. I am nothing special. It just takes the willingness to do it. I read somewhere that most men don't take too many risks, they take too few.

 

[Options]

I'm gonna guess you never read her book "How to Make Your Money Last: The Indispensable Retirement Guide"

Normally, I shudder at the thought of reading any book with the word "indispensable" in the title. However, it's on order at the library as Taylor Larimore recommends it and that's always enough for me (the degree to which I skim the book remains to be seen, however). After a while, all these "new, definitive, latest and greatest" books on retirement investing, be it in the accumulation or decumulation phase, get old. At some point, you just create a well thought out, well-crafted plan and stick to it. The secret is sticking to your plan, not in changing it everytime someone says 50 is the new 40.

I did both: started a business and invested in RE. You should meet me someday. I am nothing special. It just takes the willingness to do it. I read somewhere that most men don't take too many risks, they take too few.

You have to get real about this stuff. Whether you feel you're "special enough" to invest in something of no consequence, and in fact is extremely dangerous (overconfidence bias, among others). There's a huge difference between someone born with what is known as entrepreneurial intelligence and another who is simply "starting a business" because an author in Forbes thinks doing so will make up for stock returns possibly being lower in the future (again: predictions = noise). Same goes for investing in real estate.

If you read venture capitalists, you will see a common thread is they make a very big distinction between investing in companies started by CEO's who are missionaries versus mercenaries. They want to invest in the Mark Zuckerbergs of the world, who are interested in building businesses because they don't feel they were born to do anything else. These people have the persistence, doggedness, and other qualities to push through when others will quit and fail. OTOH, someone who starts a business because "starting a business is the new 60/40 PF" is an excellent example of a mercenary, with the predictability of the success and longevity of that business matched perfectly.

Investing in real estate because "investing in real estate is the new 60/40" is another fool's errand. It's been said investing in real estate is much like running a business, and if you've got what it takes, by all means go for it. As I've said, I have friends who have been highly successful in their RE investing. OTOH, here in Southern California where everybody "wants to be rich", the real estate investing graveyard is running out of room for most others.

As to taking risks in life, investing is never the place to take foolish risks. As I've posted before, success in investing is not so much getting everything right (as in guessing whether 60/40 is "dead", or this time it really, truly, absolutely is different), but in not doing what are known as "bone-headed" things. Taking undue risk in investing is a bone-headed thing.

 

[COcheesehead]

Starting a business can be something as simple as opening an eBay store. Something I am sure anyone on this forum could do. We all have expertise in something, if we stop and think about it. I started a manufacturing business 20 years ago based on a sliver of knowledge, but on the side my wife and I sell mostly used bike parts and camera equipment on eBay. Over the last 15 years we've made nearly $90,000. Not a ton of money, but enough to take a nice vacation every year.

 

[Sunset]

Starting a business can be something as simple as opening an eBay store. Something I am sure anyone on this forum could do. We all have expertise in something, if we stop and think about it. I started a manufacturing business 20 years ago based on a sliver of knowledge, but on the side my wife and I sell mostly used bike parts and camera equipment on eBay. Over the last 15 years we've made nearly $90,000. Not a ton of money, but enough to take a nice vacation every year.

The danger which you avoided is starting an expensive business.

The person who starts a business that costs a lot to start, so borrows $200,000 or uses their own cash, or starts a business that costs a lot to run per month while waiting for customers to appear, and then it fails.

Much better to start a business for $5,000 and try it for a year or 2 and if it fails you only lost $5,000.

 

[COcheesehead]

The danger which you avoided is starting an expensive business.

The person who starts a business that costs a lot to start, so borrows $200,000 or uses their own cash, or starts a business that costs a lot to run per month while waiting for customers to appear, and then it fails.

Much better to start a business for $5,000 and try it for a year or 2 and if it fails you only lost $5,000.

I am not sure anyone is going to get a $200k loan to start a business unless it comes from family or friends.

I wrote a personal check for $32,000 when I started my company 20 years ago. That represented about a third of my networth. That original $32k has blossomed into many, many times that. Nothing ventured, nothing gained.

 

[eta2020]

That's what stood out to me as well. I'm surprised he didn't suggest buying Himalayan yak cheese futures.

+1

This article is written by "this time its different" kind of guy.

But I find it is always the same. I would prefer 60/40 over his suggestions.

 

[Sunset]

I am not sure anyone is going to get a $200k loan to start a business unless it comes from family or friends.
......

But those are exactly the worst kind of loans, with a bank you can tell them to forget about it, as you declare bankruptcy.

With family you still have to repay them, or crawl under a rock...

 

[COcheesehead]

But those are exactly the worst kind of loans, with a bank you can tell them to forget about it, as you declare bankruptcy.

With family you still have to repay them, or crawl under a rock...

My point was a bank would never do that loan or if they did, you wouldn't want the terms.

 

[Mulligan]

My point was a bank would never do that loan or if they did, you wouldn't want the terms.

CO, I imagine many are skeptical based on the risk, and I am certainly one of those and have been my entire life. But if everyone "worked for the man" there would be no work, as there ultimately has to be someone out there willing to stick their neck out over a chopping block that ultimately provides jobs for others. I salute you for taking that risk!


Sent from my iPad using Tapatalk

 

[HadEnuff]

Running a business does not equal retirement. Retirement is being free of all of that stuff.

It is, at best, a career change.

I've seen more than one well funded retirement nest egg decimated by a late-in-life decision to "retire" and start a business of my own. If 60/40 is risky, starting a business that will really make a difference in a retirees income level is really really risky.

 

[HadEnuff]

I don't necessarily think the 60-40 AA is "too risky". What I think is risky depends upon what number you plug in for your expected rate of return, for the number of years you are likely to live and need that rate of return in order to succeed.

As others on this board have done, look at that 60 (equities) and imagine a worst-case scenario of, say, a 40% drop, with a decade long flat period, and can you survive that.

I couldn't get into the Forbes article, but did it acknowledge that whatever might cause the failure of the 60-40AA, might have an even more disastrous impact on the business one has created to "mitigate" the risk of the 60-40 portfolio?