Major Tom
Thinks s/he gets paid by the post
You're right, you did answer the question. Not sure how I missed that. Thanks for pointing that out.
Anybody else 100% stocks, no bonds?
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You're right, you did answer the question. Not sure how I missed that. Thanks for pointing that out.
clifp
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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I think I've seen 2 or 3 members say (or suggest) that they can or do live off their fixed incomes (SS, Pension, annuities, etc.) So, they feel comfortable with high % equities. I guess my question would be: Why swing for the fences when you don't even use (don't even "need") the extra money generated by equities? Is it for the next generation? If not, what do you plan to use the extra for? An elaborate funeral?
One of my personal back-ups is to be able to live from my fixed income. But I hope it doesn't come to that. Right now, I'm even taking MORE than my official RMDs. I use the extra for the fulfillment I planned for in retirement. So far so good. Having said that, I don't see that I need any more in the future EXCEPT to cover inflation which is one reason I DO invest in some equity positions.
Mentioned before, I see 2 potential black swans on the horizon: Excessive inflation and LTC - for an extended period. Other than one or both of those, I'll be hard pressed to "get rid" of my current stash (except through my will.)
Why swing for the fence is a great question, that I've asked myself a lot over the last decade, ever since I survived and even prospered during the 2008/9 crash.
At least part of the reason is I enjoy playing the game and it is a way of keeping score.
But at a practical level, I think why I invest in a variety of things (including risky assets) is to diversify and to increase safety. What does safety really means, is it simply stock market volatility. I don't think so
You mentioned two black swans. Inflation is truly scary for those who remember the 70s and early 80s. Long-term care is another great one. I'd add dementia, which would cause me to buy or give away too much money. Or more likely get taken advantage of by some scammer, like my grandmother was. I've joked if a Anna Nicole Smith type befriends me when I'm 90, maybe I don't care if she takes millions as long as I die before she takes it all.
I see many other black swans. In my mind, virtually every asset class from Bitcoins, bonds, real estate, and equities is overvalued. I can make the case that any class's value could drop by 50% even 75% in a short (yearish) time frame. Bitcoin could easily go to zero. I also fear the great hack, which crashes the financial system and makes it really hard for me to prove I own financial assets or access them. I think hard assets like Real Estate or gold are a good hedge against this as would be owning an essential business.
I don't think we fully answer the consequences of climate change on the economy, but maybe owning farmland in Canada is a good hedge.
Now I don't have a solution to what happens if all the asset classes crash at once. I think that bonds are the most overvalued asset class, they don't help me increase my wealth. The only thing I think bonds are good for in today's environment is reducing volatility in a correction (a 20-30% market drop).
Now, none of these things really keep me up at night, I'm quite confident I'm fine financially.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Dividends 1930-1953 averages around 6%. (https://www.multpl.com/s-p-500-dividend-yield/table/by-year)
It's not that you "can't" look just at NAV, it is that any piece that does not look at total return is an untrustworthy piece. Either the author is truly ignorant or he is trying to support a viewpoint rather than to provide information. (Particularly with Motley Fool, it's sometimes hard to tell which.)
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SS is my fixed-income allocation
100% equities at age 71 and no plans to add bonds. I once calculated that I’d have to invest a lump sum of $550,000 to yield my monthly, inflation-adjusted, lifetime SS payment of more than $3,000.
My stocks, a mix of blue chips, tech/growth companies, and index ETFs, have averaged more than 20%/yr for more than a decade. And yes, I’ve owned some stinkers.
But my best performing asset has been bitcoin, bought initially at $280 per!
100% equities at age 71 and no plans to add bonds. I once calculated that I’d have to invest a lump sum of $550,000 to yield my monthly, inflation-adjusted, lifetime SS payment of more than $3,000.
My stocks, a mix of blue chips, tech/growth companies, and index ETFs, have averaged more than 20%/yr for more than a decade. And yes, I’ve owned some stinkers.
But my best performing asset has been bitcoin, bought initially at $280 per!
seems like there are a few Bill Bernsteins out there....does the one you're referencing manage money?if so for how long and do you know his track record?
thx
@Danalyst thanks for sharing your experience. Do you mind sharing what your withdrawal rate was at retirement? Were you 100% equities at the start of retirement?
All in ... equities
Everyone is different (I'm specifically talking about the individuals tolerance for risk) so to ask "Am I OK with ..." is impossible to answer with -any- confidence. I'd suggest you're OK if you sleep well at night and don't worry about your finances. However, if not, then rethink your strategy so you can enjoy your life!
For me ... I sleep well at night with the following:
+ My only consistent income is from a first trust deed on a commercial investment property
+ Some crypto (Bitcoin & Ethereum) holdings
+ Withdrawals as needed from IRA (90% equities) for all expenses with some "dry powder" available
+ Several years expenses of post-tax cash for emergency when the bad dip hits
+ The ability to start SS (when needed)
Everyone is different (I'm specifically talking about the individuals tolerance for risk) so to ask "Am I OK with ..." is impossible to answer with -any- confidence. I'd suggest you're OK if you sleep well at night and don't worry about your finances. However, if not, then rethink your strategy so you can enjoy your life!
For me ... I sleep well at night with the following:
+ My only consistent income is from a first trust deed on a commercial investment property
+ Some crypto (Bitcoin & Ethereum) holdings
+ Withdrawals as needed from IRA (90% equities) for all expenses with some "dry powder" available
+ Several years expenses of post-tax cash for emergency when the bad dip hits
+ The ability to start SS (when needed)
His biography is right there at the end of the post. And yeah he manages money and is kinda famous.
Al in Ohio
Thinks s/he gets paid by the post
The risk of losing a ton of what you consider “play money” then. I just don’t play around with any large sum of money. I want the highest appreciation at the lowest possible risk in all my accounts. That’s how I got FI in the first place.
I am at 50/50. All projections show a 100% chance that I can achieve my financial objectives (and then some) with that allocation. I don't see any reason why I should take more risk than I need to take in order to achieve my financial objectives.
One response to that -- which is true -- is that I could also achieve all of my financial objectives if I had 100% cash, all in FDIC insured accounts. So why do I even have 50% in stocks? That is a fair question, which I have thought about. The honest answer is that I would feel regret about not sharing in the benefits of appreciation in the equity markets. So that is the psychological part, which as we all know -- but sometimes do not like to admit -- gets in the way...
One response to that -- which is true -- is that I could also achieve all of my financial objectives if I had 100% cash, all in FDIC insured accounts. So why do I even have 50% in stocks? That is a fair question, which I have thought about. The honest answer is that I would feel regret about not sharing in the benefits of appreciation in the equity markets. So that is the psychological part, which as we all know -- but sometimes do not like to admit -- gets in the way...
RetiredAt49
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I'm in a similar situation and I asked my financial planner the same question. Since the beginning of the stock market, if you look at say the S&P 500, there's never been a time when the S&P 500 has had a negative period over a 20 year time period and certainly not over a 30 year time period. I am 49 years old and my time horizon is 40+ years so I am comfortable with going 100% stocks. Now, in other 20 years or so I might change my mind but I'm okay with the math + historical values in determining how best to invest.
That is rational. But the way I looked at it is there's some chance that the next 20 years will be really bad in the equity markets. Maybe that is a low chance, but it is certainly not zero. So if I have no need to take that risk, why should I do so? The only answer I could think of is "it could result in your kids inheriting more money than they otherwise would." But that did not move the needle for me, since they will already inherit a lot of money and they also have earning capacity.
GTFan
Thinks s/he gets paid by the post
He can't lose any of it if he never has to use it.
I agree with what you're saying in principle but it doesn't apply to OP - all of his portfolio can go to stocks because he doesn't need to cash it out to live on. He has a greater chance of maximizing returns and little risk of losing if he puts it all in stocks. And if he loses it all, we're all lost.
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OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Don't we all? What is your method for managing these negatively correlated parameters ?
@bubbabubba What is the reason your investing horizon is not perpetuity?
RetiredAt49
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Assuming you mean leaving a ton for my posterity? My wife and I's dying wish is to spend our last dollar when we croak
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GravitySucks
Thinks s/he gets paid by the post
If the Japanese investor put 100k yen in a year from 1979 to 1989 they still would have had more than 1M yen in 1990 after the fall.
I do keep enough bonds to cover 10 years of basic expenses but with SS coming up in 7 years I'm letting my AA slowly slide up from 60/40 to 70/30 and will reevaluate then.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
This is why we diversify and avoid strong home country bias. Google tells me that Japan is about 4% of the world GDP and about 7% of the world's market cap. Not a huge deal in a diversified portfolio.
Lots of things can happen, beginning with the asteroid. Classical risk management involves three parameters: impact, probability, and cost to mitigate. For us, mitigation by serious international diversification but heavy equities is the choice. Mitigation of low-probability impacts by staying out of equities is too expensive. YMMV.
Al in Ohio
Thinks s/he gets paid by the post
If you claim 100% equities you have no cash and no bonds other than what’s in your wallet and basic checking account. , so I don’t understand your question.
I absolutely agree with international diversification, but if the US goes down most other countries tend to follow. With US valuations lower only than the 2000 highs, most valuation based estimates that I have seen for 7-10 year US stock market returns are negative. No one knows what the future will bring but based on history and current valuation, negative returns over an extended period of time are not a low probability right now. I think many investors are not prepared for this.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Sure. No argument. The idea is mitigation of impact, not elimination of impact.
Well, everyone gets to come up with their own numbers. For me "low probability" means well under 0.5 and my WAG for your scenario is under 0.2. What's your number?
I have no idea. Google says something over 50% of households are said to hold stocks directly or in retirement accounts. I don't have the interest or the resources to poll a statistically valid sample of these folks to find out what they think.
To assign a number I first took a quick look for the accuracy of the 10 year forecasted returns from CAPE (Cyclically adjusted PE Ratio). According to this article (link below) the 10 year forecasts are highly accurate over the past 25 years - 95% of the time the actual return was within 2.74% of the future 10-year predicted returns. It was less accurate over a longer time frame but still predicted 70% of stock market returns from 1940. So extrapolating from the table in the report, because the current CAPE of 39.54 is so high it is literally off the chart, yields an estimated annual return of right about 0%, over 10 years.
To account for the +/- 3% uncertainty, I will use real returns and say that annual S&P 500 returns (after inflation) over the next 10 years will be less than 0, with a probability > 50%, and I am being conservative.
Want to know what is very unlikely over the next decade, with a probability of under 1%? Annual returns of 16% that we have enjoyed the past decade, or even the roughly 10% returns that have been enjoyed historically.
Me either, but frankly I was stunned to see so many retirees and near retirees talking about their 100% stock portfolio's with the market at near record high valuations. I can't help but think most people don't realize how low estimated future returns are or how accurate the past estimates have been.
https://www.advisorperspectives.com...-accuracy-of-cape-as-a-predictor-of-returns-1
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Koolau
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I don't think many of us stay out of the market. But we do mitigate by balancing at least part of our equities with bonds or cash (or something else.) 100% of anything as a portfolio simply does not appeal to me. YMMV as always.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Well, we'll have to wait to see how things turn out, but sorry to say that article really isn't useful.
In the paragraph following his first chart, the author implicitly assumes that he is dealing with samples of a random variable with a Gaussian (normal) distribution. This is a popular error among economists because it lets you say things like "67% of the values are within 1 SD" and "95% of the values are within 2 SD." But the fact is that the samples are not random at all; they are highly correlated. Whether the distribution is Gaussian or not is unknown but I'd bet against it. So, the numbers in the article are not really useful to prove anything. Also, as they always say, past results do not predict future performance.
The author also uses the time-honored technique of rejecting time periods that do not support his thesis.
The acid test, really, is this: If the CAPE is really this reliable in predicting returns, why do we not see equity mutual funds that are able to use this information to consistently outperform the market?
Backtests are fun. Playing at statistics is fun. Neither AFIK has been demonstrated to be successful at predicting the future.
Yes I have been 100% stocks for the past 8 years (since I was about 32).
Here are my results of that past 8 yrs:
33.42% (2014)
45.01% (2015)
12.04% (2016)
26.67% (2017)
-4.43% (2018)
37.91% (2019)
37.15% (2020)
23.68% (2021)
On a side note, my ol man who is 70 is also 100% stocks *But we own some real-estate as well, not sure if that is noteworthy. What are bonds? *kidding
Here are my results of that past 8 yrs:
33.42% (2014)
45.01% (2015)
12.04% (2016)
26.67% (2017)
-4.43% (2018)
37.91% (2019)
37.15% (2020)
23.68% (2021)
On a side note, my ol man who is 70 is also 100% stocks *But we own some real-estate as well, not sure if that is noteworthy. What are bonds? *kidding
