What percentage of net worth allocated to stocks ?

[haha]

How can increased failures be seen as less risky? Less volatile, yes, but less risky? Not historically.

-ERD50

In the context of portfolio risk and return, volatility is risk. Your definition of risk includes return, plus some soft factors. "I am risk averse" essentially means I do not want to see my portfolio values jumping around very much from day to day or even year to year, and we all will know what is being said.

I think this definition works well, and the broader definition you advocate would lead nowhere except to arguments. For example, some firmly believe that we are locked in deflation, and therefore that it is worth no cost to build in inflation protection, if that is even possible to do. Even though as investors this broader definition may in many contexts, but not others, be more important to our success.

Ha

 

[NW-Bound]

As I've said before, I don't think that keeping a large % of money in CD's or money markets is 'risk averse' at all. In fact, it has historically been just the opposite. Do some FIRECALC runs with 90% fixed and some with 25% fixed, and see how much higher the risk is that you FAIL with a high % of fixed.

How can increased failures be seen as less risky? Less volatile, yes, but less risky? Not historically.

So I will turn it around and say, yes, I think you are in the minority. Most of us choose not to expose ourselves to the level of risk you are taking on.

-ERD50

What helps the "risk averse" people is that inflation effect tends to build up slowly, and hopefully gives them time to recognize that gradual loss and to make corrections. In my view, it is still better than jumping into a highly volatile asset class without understanding it, and losing it all in a matter of a few months. Or they could get in at the wrong moment, then bail out in the next minor correction.

 

[Major Tom]

I don't own any property, so nearly all my net worth is in my investment portfolio. Of that, about 60% is in equity funds.

 

[brewer12345]

Leaving aside home equity (which I track but do not include in portfolio percentages), I am ~60% equity, ~35% cash and fixed income (including junk bonds), and 5% other (merger arbitrage).

 

[ERD50]

How can increased failures be seen as less risky? Less volatile, yes, but less risky? Not historically.
-ERD50

In the context of portfolio risk and return, volatility is risk. Your definition of risk includes return, plus some soft factors. "I am risk averse" essentially means I do not want to see my portfolio values jumping around very much from day to day or even year to year, and we all will know what is being said.

I think this definition works well, and the broader definition you advocate would lead nowhere except to arguments. For example, some firmly believe that we are locked in deflation, and therefore that it is worth no cost to build in inflation protection, if that is even possible to do. Even though as investors this broader definition may in many contexts, but not others, be more important to our success.

Ha

Well, there are lots of ways to look at it. But it seems to me there is no getting around the fact that FIRECALC shows that a portfolio with a high % of fixed income resulted in a much higher % of failures, historically.

Now there is a psychological component - if one is going to bail on stocks at their low, that volatility danger is magnified. But for me, that is a separate issue from the 'pure' results. But if one feels they need a low-volatility investment to prevent them from bailing, I think they are well served by recognizing what that has meant historically. They will need to start with a much larger portfolio to get to a high success rate, compared to the default 75% equity portfolio that FIRECALC uses.

The 'funny' thing is - once you start with a such a large portfolio, the volatility from stocks also gets buffered such that the lows are not as low (in absolute terms). It all seems rather moot. A rising tide lifts all boats.

All based on history of course, but what else can we do? I'm guessing that the worst of the future will at least 'rhyme' with the worst of the past.

-ERD50

 

[haha]

Well, there are lots of ways to look at it. But it seems to me there is no getting around the fact that FIRECALC shows that a portfolio with a high % of fixed income resulted in a much higher % of failures, historically.

You'll get no argument from me. It's just that I don't believe that FIRECAL runs have anything to do with the term risk aversion, as this term is used, and which is pretty well defined in every introductory investments class for at least the last 50 years as volatility. Redefine it as success rate on FIRECALC runs and I would guess that few would go along with you.

You know this as well as I do.
Ha

 

[ERD50]

You'll get not argumant from me. It's just that I don't believe that FIRECAL runs have anything to do with the term risk aversion, which is pretty well defined in every introductory investments class for at least the last 50 years as volatilty. Redefine it as success rate on FIRECALC runs and I would guess that few would go along with you.

You know this as well as I do, so I'll sign off here.

Ha

OK, so maybe I'm not using the traditional financial definition of 'risk'.

But to me, in the context of FIRE, the 'risk' of running out of money is the 'risk' that is important to me (and I would think any FIRED person). A low volatility path that historically leads to failure does not look more attractive to me than a higher volatility one that succeeds.

But that is enough - take care.

-ERD50

 

[samclem]

Equities: 80+% of portfolio. I-Bonds and ST Corp bonds: 10%. Cash: 10%. I'm nearing full (early) retirement, but have a long time horizon and a pension that meets our "no-kidding" baseline spending needs.

 

[mathjak107]

equites 3% right now, cash 10% and various bond and income generating funds 87%, some of which act more like conservativeo stock funds.

we do have a partnership in a family real estate business which is about 600-700k our share in value but i dont count that in the totals above. we get a yearly income from it.

 

[Animorph]

Equities are currently about 75% of our net worth.

 

[W2R]

I am 64 and completely retired, and so my planned asset allocation now includes only 45% equities. (It was 100% equities during the first part of the accumulation phase, and that was gradually reduced as I got older and especially when I put my retirement AA in place).

If I include house, car, and pension in my net worth, then the percentage equities is roughly 30%.

I'm puzzled as to what possible use a number like this could have. For example, I plan to stay in my modest home here in the South. If I lived in some [-]gawdawful[/-] expensive location where a similar home would cost 10 times as much, my risk tolerance would remain the same. Therefore my portfolio asset allocation would remain 45% even if I planned to live in that home forever. Yet my percent net worth devoted to equities would shift from 30% to 16%.

 

[Shawn]

Age 53, plan to ER this year.

70% of net worth is in equities, when net worth is defined as the investment portfolio (with cash and cash equivalents making up a significant fraction of the fixed 30%).

60% of net worth is in equities, when net worth is defined as the investment portfolio plus home equity.

40% of net worth is in equities, when net worth is defined as the investment portfolio, home equity, pending pension, expected SS, and misc (since the pension is an annuity, the 60% it has in equities is not counted as part of my equity allocation).

 

[mickeyd]

I don't track my NW but my guess is that if my home was included in my AA I would probably sit at around 50/50.

 

[tdv2]

46% of my net worth is in stocks (global allocation). That would be 54% of my portfolio less real estate.

 

[sheehs1]

24% net worth not in the market sitting in cash or CD's (4 % to 5%). Thought we were going to buy a 2nd home but we have not done that yet.

31% net worth in the market (at a broker). Of this 31% is in equities, 51% Bond funds and 17% cash. (waiting for the market to come down

14% in House

28% Family Business that yearly generates approximately 6% of current net worth in K1 income (income generating and not stagnant).

 

[scrabbler1]

Using only my investments (my apartment is slightly under 10% of my NW), I have about 39% in stocks. That reflects a greater percent of stocks in my IRA and a smaller percent of stocks in my taxable accounts (because I am ERed and have a more income-oriented portfolio in my taxable account).

 

[Moemg]

60% . Occasionally I go lower but I am comfortable at this level most of the time .

 

[Katsmeow]

55% of portfolio. About 45% of portfolio + home equity and non-invested cash.

 

[Dawg52]

27% stocks.

 

[panacea]

Our investments are 60% stocks, 15% REITs and 25% bonds. We consider the house a safety net and exclude it from the allocation.

 

[HighRoller]

at this time, <10% stocks - I'll probably double or triple that percentage when the time is right (on a big dip)

 

[ejman]

It depends who answers the question. Vanguard says I have 55% in stocks, 44.7% in bonds and rest in cash.. Fidelity says I have 52.8% in stocks, 46.7% in bonds and rest in "other". Same funds and share quantities used as input for both Vanguard and Fidelity. I think getting an exact number is an exercise in futility as funds constantly trade and the overall "picture" also depends on how recent and accurate each funds asset allocation is reported.

 

[Jager]

Conventional financial thinking is that you'll need a significant proportion of equities, forever, in your portfolio, Steven, if you expect to be retired a long time and wish to outrun inflation. So take heart.

Alas, I'm one of those contrarians who rejects the conventional model. I have zero in stocks.

 

[haha]

Conventional financial thinking is that you'll need a significant proportion of equities, forever, in your portfolio, Steven, if you expect to be retired a long time and wish to outrun inflation. So take heart.

Alas, I'm one of those contrarians who rejects the conventional model. I have zero in stocks.

You seem thoughtful, so you must have some well thought out alternate plan. If you feel like it, tell us what it is.

I can promise that you will get no argument or counterpoint from me, I am just curious.

Today's WSJ Encore Section quotes Wm.Bernstein as saying that retirees should think of a two part portfolio. The first should contain at least 20 to 25 years of basic living expenses, and this should be invested only in annuities, bonds or CDs. Sounds very restricted, but if the quote is accurate, this is a person with a large following.

Ha

 

[Jager]

You don't some across as a whacko, so you must have some well thought out alternate plan. If you feel like it, tell us what it is.

I can promise that you will get no argument or counterpoint from me, I am just curious.

Ha

Well, I'm not at all against equities. Up until 2004, when I bailed from the market, I was 100% in stocks - and had been for many years. I look forward to getting back to them somewhere down the road.

In the meantime, here's a thumbnail of what informs my thinking:

- Most financial pundits (and most investors) came of age during the long-running secular bull market from 1981-2000. They know nothing else.

- The secular bear market which began in 2000 has largely been held in abeyance by the infusion of liquidity and stimulus by central bankers around the world. At the cost of gargantuan and rapidly rising debt.

- Societal obligations (SS, Medicare, and their equivalents across the developed world) are not fundable in the long run via any cogent scenario I have ever seen presented. The math simply does not work.

- The politics are such that the hard, painful decisions that could be made, won't be. It will first have to devolve into crisis.

- Financial tools such as Firecalc, wonderful as they are, have embedded within them as their major assumption that the future in front of us will never be worse than the past. There will never be a financial dislocation, for instance, worse the 1930's.

I'm an optimist by nature. But I'm utterly convinced there will be a reckoning. The math impels it.

I believe the times speak to the preservation of what one has saved. Not return on investment.

And so I have a portfolio significantly exposed to gold. Treasuries and money market funds make up the rest.

I'm not a goldbug. I actually think gold is today overpriced on a historical basis. And I'm convinced gold as an "investment" will blow up one day. But if you worry about these things like I do, there aren't a lot of safe places to put your money.

I say all these things with not a little reticence. After lurking here for awhile it's clear that there are an awful lot of smart people around. The financial acumen on this site is incredibly high. Far be it for me, a relative newbie, to suggest that there might be a fly in the ointment.

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