anybody else super conservative?

[Koolau]

All true from my POV, particularly the bold text. Finally the war on savers seems to have ended, at least for a while. I'm getting an average of ~5% on my fixed income investments in my IRA and close to 8% in my 401k where I have my big bucks. Like everything though, it can be a double edged sword. RMD's start for me next year and it's going to be close on hitting the lower IRMAA tier.

Consider taking some of your 401(k) this year to reduce RMDs later. Perhaps open new tIRAs and convert to Roth if appropriate. I basically went on a 401(k) reduction binge when I was in my 60s. I'm glad I did. RMDs are still manageable (heh, heh, if my balance would just quit growing so fast!) In late 70s now so RMDs will keep increasing due to the factor. BUT at least the IRMAA limit is safe for a while if I'm careful of any other tax torpedoes.

 

[RetiredAt49]

Just spent 4 hours with my older sibling today because she’s still working in her late 60”s and we discussed her finances… she told her FA 30+ years ago that she was (and still is) extremely conservative. I pulled up her portfolio and her AA is and has always been 10/90. Yep, that’s 10% equities /90% fixed assets.

Her annualized returns are about 2.6% over those 30 years. She is at least 5+ years from being able to retire but her health is so poor that she can no longer work.

She asked me how on earth I retired at age 49 and I showed her my 100% equity portfolio, ran her numbers using portfolio visualizer, and she nearly fainted.

My coach always told me, “The best defense is an aggressive offense”. I have stuck with a 100% equities portfolio for the past 30 years (including rentals which I inherited via marriage). We have amassed such great returns that we could live off 1% of our portfolio if needed.

Let’s just say my sibling started crying when I showed her even what a 50/50 portfolio would have given her. She could have retired over a decade ago.

YMMV

 

[latexman]

Let’s just say my sibling started crying when I showed her even what a 50/50 portfolio would have given her. She could have retired over a decade ago.

Such a tragedy. Educating our children and grandchildren on finances and investing is so important.

 

[ychuck46]

Closing in on 70 and retired for ten years now. I have a large allocation to equities and will likely keep it that way. Why do I do so? I have seen enough cycles to understand that what goes down oftentimes does come back up, if you look at the market as a whole. I have made a lot of mistakes in picking individual securities and would have been better off keeping that money in my portfolio of index ETFs, but that's water under the bridge, and gave me the chance to play and have the occasional goodly winner. Oh, and I have just over six figures coming in from dividends alone on a yearly basis from my stock holdings, when I only need about $50K per year on average after SS to be all in on expenses, including lots of travel. Having things set up this way lets me easily sleep well at night.

 

[ychuck46]

I prepaid for life a few years ago.

Did you use the discount code that was available at that time? Would have saved you even more.

 

[pb4uski]

^^^ Of course.

 

[meleana]

We are pretty conservative but keep stock funds in our Roths and a few bond funds and cash in our iras and brokerage accounts. Stable value fund in hubby's 401k. Savings bank also but living on that until can take SS at age 70.

 

[DJRR]

My coach always told me, “The best defense is an aggressive offense”. I have stuck with a 100% equities portfolio for the past 30 years (including rentals which I inherited via marriage). We have amassed such great returns that we could live off 1% of our portfolio if needed.

Let’s just say my sibling started crying when I showed her even what a 50/50 portfolio would have given her. She could have retired over a decade ago.

YMMV

Reminds me of one of my first jobs where the owners had 2 $1M whole life policies. They were looking to cash them out and they had a cash value of a little over $100k each. When I ran the premiums through the stock return calculator they would have been worth ~ $7M combined. Someone got rich off that.

 

[rogert]

In 2015, after about 7 or 8 years of bull market. I read a lot of finance magazines, googled bear market 101, etc made a decision to diversify my 100% stock into a much conservative portfolio including bond index. Only a few months later, stock already rose more than 10% which at that time I told myself to admit my mistake and should go back into stock for all (which was my original resolution in case stock do not crash but rise more than 10%). As everyone can imagine, due to human nature, I guess, I comforted myself it is just timing issue, stock will crash shortly as I was so convinced from all those Experts. I regretted so much until 2020 after it probably rose more than 200% from when I diversified. Well luckily or unluckily for some, Covid came and I said I could not afford to lose this once in lifetime opportunity. When most people are selling, I kept buying until a point the S&P just touched the 30% drop. All my family members were all against me buying stock as Experts said this this time was real, it could drop to 50 or even 60%. Couldn't resist their pressure, I stop buying but at least cover back half of my stock position. The rest is history, they all don't want me to talk about that now as they know they were all wrong stopping me from buying in bargain! Now, I swear to myself would never sell stock unless I need the money and not because of the experts!

 

[kgtest]

Curious as to other people feel like this? How do you hold 60% equities in this kind of world and sleep?

Easy...always have, always will. I do own RE and am still in the accumulation phase of FIRE, but I am not only 100% equities, our household portfolio is invested in close to 20% AAPL alone.

I think knowing that I still have a good while before I need to withdraw anything leaves me wide open to take risks. I wouldn't say I am taking any crazier risks than some folks, but I do keep the throttle pinned on equities.

I try to invest into equities as quickly and as often as possible. That way, if there is a downturn, likely I've already plowed 10 to 20% more into my portfolio than I wanted or needed to by being aggressive, so that if there is a little pullback, or heck even a correction, I can still continue to sleep.

IF I had to submit an order to SELL equities after taking that crushing 33% decline last year, yeah I might have a hard time selling and the feeling that I might have knowing I had to sell in a down market. I know someday, somehow I will have to sell something in a down market. I might have some passive income in Real Estate by then to help offset needing to withdraw more than I want when markers are down.

But yeah, we were down 33% last year and are only up 19% this year... so that means we are still down 24% from our all time high.

Our net worth is still steadily climbing though as we reduce debt and our RE equity climbs as well.

Both DW and I actually sleep fine at 42 y.o. just because we know the markets fluctuate from time to time. I look at this as a buying opportunity, a 24% discount from where I was buying last Christmas....so from this glass half-full perspective, I guess Christmas has come early in the equity markets if you are a buyer lol.

 

[kgtest]

In 2015, after about 7 or 8 years of bull market. I read a lot of finance magazines, googled bear market 101, etc made a decision to diversify my 100% stock into a much conservative portfolio including bond index. Only a few months later, stock already rose more than 10% which at that time I told myself to admit my mistake and should go back into stock for all (which was my original resolution in case stock do not crash but rise more than 10%). As everyone can imagine, due to human nature, I guess, I comforted myself it is just timing issue, stock will crash shortly as I was so convinced from all those Experts. I regretted so much until 2020 after it probably rose more than 200% from when I diversified. Well luckily or unluckily for some, Covid came and I said I could not afford to lose this once in lifetime opportunity. When most people are selling, I kept buying until a point the S&P just touched the 30% drop. All my family members were all against me buying stock as Experts said this this time was real, it could drop to 50 or even 60%. Couldn't resist their pressure, I stop buying but at least cover back half of my stock position. The rest is history, they all don't want me to talk about that now as they know they were all wrong stopping me from buying in bargain! Now, I swear to myself would never sell stock unless I need the money and not because of the experts!

I buy EVERY DIP! Human Nature makes this sometimes a difficult decision to make based on how we are programmed. I think its the media honestly. If you tune all that out, and look at your data points...knowing that the ocean is sinking together puts you in a good position to allow your vessel to rise faster than the others when the tides come in again!

 

[pb4uski]

Reminds me of one of my first jobs where the owners had 2 $1M whole life policies. They were looking to cash them out and they had a cash value of a little over $100k each. When I ran the premiums through the stock return calculator they would have been worth ~ $7M combined. Someone got rich off that.

Not really... or at least it wasn't the insurance company. No insurance company could invest premiums in common stocks. First, the regulatory design would preclude that and second the rating agency expectations would preclude that. The vast majority of life insurer investments are in high quality bonds and then in real estate... very little in stocks.

 

[target2019]

Do you buy steak when it goes on sale, or do you wait for the price to go up?

 

[pb4uski]

Do you buy steak when it goes on sale, or do you wait for the price to go up?

It depends, if it goes on sale and is still a poor value, then no. OTOH, if it goes on sale and is a good value then yes.

IOW, just because something is on sale doesn't mean it is a good deal.

Same with stocks, just because they are down doesn't mean that they aren't overvalued.

When they are a good value it doesn't really matter whether they are on sale or not. If the reason that they are on sale is because earnings have plummeted and the future prospects are not looking favorable then they aren't a good value.

 

[FREE866]

When they are a good value it doesn't really matter whether they are on sale or not. If the reason that they are on sale is because earnings have plummeted and the future prospects are not looking favorable then they aren't a good value.

I don’t buy individual stocks, but from a general market view in your example if earnings have plummeted and prospects are “not favorable “ history shows us that represents a fantastic opportunity. 2009 was a perfect example of that.

 

[pb4uski]

The whole point was that just because stocks are down doesn't make them a good buy.

 

[ychuck46]

I buy EVERY DIP! Human Nature makes this sometimes a difficult decision to make based on how we are programmed. I think its the media honestly. If you tune all that out, and look at your data points...knowing that the ocean is sinking together puts you in a good position to allow your vessel to rise faster than the others when the tides come in again!

I also sell covered calls on my holdings during down periods, especially when I feel the market may continue to trend down or sideways. Since many of my stocks are dividend payers it tends to goose the returns nicely.

 

[Gumby]

The whole point was that just because stocks are down doesn't make them a good buy.

The old "value trap".

https://www.investopedia.com/terms/v/valuetrap.asp

 

[FREE866]

The old "value trap".

https://www.investopedia.com/terms/v/valuetrap.asp

Value investors have done so poorly in last decade and really lagged. Miller Value Partners, who are very smart people, have had horrendous returns.

 

[target2019]

The whole point was that just because stocks are down doesn't make them a good buy.

And my whole point was that when your favorite seafood (maybe lobster) goes on sale, you go over to the counter and take a look.

I would not walk out of the store when I heard about that sale. I may find out that the lobster looks kinda whatever, and not buy, but I wouldn't walk out of the store when there's an announced sale.

YMMV, correct?

 

[pb4uski]

I agree with you, if [-]stock [/-]lobster is on sale then I'll consider it, and if it looks good then I would buy but if it looks so-so then I would walk away and keep my eyes peeled for another sale.

That said, I don't currently have any interest in stocks.

 

[Aerides]

Do you buy steak when it goes on sale, or do you wait for the price to go up?

But with steak you know the price last week, the price across the street, and whether $15 is a real sale or not. You know it's normally $20, and you know it will be $20 again next week.

Stocks? You have no idea, could be $12 next week, could be $0. Could be $25.

 

[COcheesehead]

I have a feeling for many reasons: lag effect of interest rate hikes, overdue recession, fixed income looking really attractive, demographic shifts - boomers retiring, etc, that we could be in for at least a mid range length of time where stocks underperform. Doesn’t mean you should ignore them, just don’t expect historic returns for awhile.
The question we all must ask is do we have awhile to wait? For some that’s an easy yes, for others it’s a no.

 

[marko]

And my whole point was that when your favorite seafood (maybe lobster) goes on sale, you go over to the counter and take a look.

I would not walk out of the store when I heard about that sale. I may find out that the lobster looks kinda whatever, and not buy, but I wouldn't walk out of the store when there's an announced sale.

YMMV, correct?

To quote Warren Buffet: "the stock market is the only market where, when the price goes down everybody runs for the exits"

 

[target2019]

But with steak you know the price last week, the price across the street, and whether $15 is a real sale or not. You know it's normally $20, and you know it will be $20 again next week.

Stocks? You have no idea, could be $12 next week, could be $0. Could be $25.

I don't know the price of steak last week, Lol.

I hope everyone realizes the difference between an analogy and the actual thing of comparison.

You're kinda mixing a metaphor here. You're comparing the price of steak last week to the price of a stock next week. Actually, in both cases I can easily find the price last week.

I'm interested in steak, lobster, and U.S. companies. I obviously cannot predict the future prices, but there are past prices and indicators. I do not know which are more predictive than others, but I do enjoy filet on sale. Was it a better price before? Why should that stop me from buying right at this moment in the supermarket, and enjoying my dinner tonight?