Have you been reducing equities in recent years?

[Exchme]

We reduced from 85-88% equities during accumulation to 80% at retirement. The idea is that when SS nears, we will let it glide back up. Going too low seems silly as DW could have decades more on this planet plus there appears to be enough left over that we should be thinking about our kids' investment horizons.

This thread is making me nervous seeing all these high equity allocations!

 

[Markola]

We reduced from 85-88% equities during accumulation to 80% at retirement. The idea is that when SS nears, we will let it glide back up. Going too low seems silly as DW could have decades more on this planet plus there appears to be enough left over that we should be thinking about our kids' investment horizons.



This thread is making me nervous seeing all these high equity allocations!

^^^^^^ That makes mathematical sense. Michael Kitches wrote about that strategy, which he called a Bond Tent, IIRC. The idea is low bond allocation during accumulation; peak bond allocation while nearing and after retirement; then when sequence of returns risks are lessened, SS comes online and expenses reduce in later ages, low bond allocation again to achieve growth. I wonder how many seniors would actually increase their risk later in life though?

 

[disneysteve]

^^^^^^ That makes mathematical sense. Michael Kitches wrote about that strategy, which he called a Bond Tent, IIRC. The idea is low bond allocation during accumulation; peak bond allocation while nearing and after retirement; then when sequence of returns risks are lessened, SS comes online and expenses reduce in later ages, low bond allocation again to achieve growth. I wonder how many seniors would actually increase their risk later in life though?

I like that strategy and it certainly makes sense.



Whether or not older folks actually do it is a good question. I guess the issue is whether or not they see any need to doing so. If their expenses are lower and the portfolio they have along with SS is adequately covering everything, they may not give it any thought unless they are seriously thinking about what they will leave behind for their heirs and/or charity.

 

[Markola]

^^^^^ Maybe a compromise for a senior is to figure out how much of their portfolio is needed to live on comfortably, carve that amount into one hunk and invest it moderately or conservatively; then put the remaining hunk into a 100% stock index fund, leaving that to heirs/charity and allowing it to grow for themselves in case they live a very long time or if the SHTF.

 

[scrabbler1]

As others have posted already, I rebalance regularly but only in my rollover IRA, something I have had since late 2008 when I ERed at age 45. I have been slowly drifting more toward bonds as I age. Rebalancing forces me to lock in gains (usually on the stock side) while buying relatively low, all at the same time, and I like both ideas!

In my taxable account (about 60% of my total portfolio now), I rarely rebalance because the goal is to generate sufficient income to cover my bills, and, more recently, to make sure I qualify for a growing ACA premium subsidy. This cross-purpose sometimes causes me to make unusual moves to lower my income.

I am now under 50% stocks in both parts of my portfolio.

 

[tsoispf]

I reduced from 65/35/0 to 50/25/25 (stocks, bonds, cash) during the early stages of COVID. It was a SWAN move until I get on Social Security and Medicare. No regrets. I'm drawing down the cash position with plans to eliminate it by 65. After that, I'll get more aggressive with stocks, given that I won't be so dependent on my investments.

 

[CardsFan]

^^^^^ Maybe a compromise for a senior is to figure out how much of their portfolio is needed to live on comfortably, carve that amount into one hunk and invest it moderately or conservatively; then put the remaining hunk into a 100% stock index fund, leaving that to heirs/charity and allowing it to grow for themselves in case they live a very long time or if the SHTF.

I don't do any physical carving out (like setting separate accounts), but this what I effectively do. I know the bonds and cash are more than we need, barring a meteor strike, so the rest is in equities. Roth's are all equities, we never intend to use them. Current AA is about 59/41. Probably will let that grow.

 

[eytonxav]

Is it possible this analysis only looks at mutual fund flows, not ETFs or direct holdings, and doesn’t capture a large part of asset purchases. If so, it would also cover mostly retail investors, as high net worth and institutional investors tend to avoid mutual funds.

+1 my thoughts exactly

 

[jetaylor]

I'm 100% in dividend-paying equities that provides our yearly income (not counting my "safety cash" which, if needed, will carry me through five years of expenses).

 

[2177V]

25% equities, 25% bonds, 25% income producing properties, 25% cash and precious metals. Equities and income producing properties have done well while bonds and cash and precious metals have been flat.

 

[EastWest Gal]

It's the same as one cannot disagree with people who recommend youngsters to get an education or training, then go get a stable job with a megacorp or the government.

I would not advice anyone to strike out on his own to open a small business or form a venture. Would you?

Yes, I would.

Given that starting one's own business may be a positive thing, financially and emotionally. Just ask Mark Zuckerberg and Bill Gates. If someone has a great idea for a business, it is probably healthier than working for others. When I was in private medical practice, if one family "fired me" it was just one of 1500-2000 "bosses". If I got fired from a job, it was the whole enchilada.

We routinely hire self-employed folks for handyman jobs that we choose not to do ourselves. They are the most honest, and the most likely to get word of mouth referrals from us and our neighbors.

Example: 7 years ago we hired someone to build a storage shed for some of our yard care equipment. He was hired on the recommendation of one of the hospital secretaries, who is his mother-in-law. He matched our siding and roof perfectly, and it was a perfect fit for the house. This year we put in some security lights and cameras, and DH was perplexed regarding mountings and electrical. We called the same guy and he did an amazing job for a cheaper price due to low overhead, working for himself.

Succeeding in one's own business appears far more stable than working for others. Just my two cents.

I think there are many pathways to financial stability in this environment and applaud and support those who work for themselves. This is what most of our ancestors did, after all.

 

[Lsbcal]

Let's see what this thread was about...
Oh yes now I remember, not sure what this has to do with whether one runs a small business or not.

The chart below would seem to indicate that investors are strongly increasing their bond allocations at the expense of equities. Somehow I do not get that impression with folks on the ER site mostly holding steady (Bogleheads?). FWIW, I have increased my equities strongly over the last year but AA was pretty steady before that.


From this Carlson article: https://awealthofcommonsense.com/2021/06/why-arent-interest-rates-higher/

 

[PatrickW]

I’ve not increased bond allocation. Indeed, it’s at zero.

85% equities (split equally across QQQ, VTI, and VTWO) and 15% in GLD.

DW retired earlier this year. I’ll retire in either 9 months or 21 months, depending on how things transpire at work…

- Pat

 

[Old Microbiologist]

Went to 100% cash since Biden was elected but continue to Day Trade but return to cash daily. Average daily earnings are roughly $1,000 but we are very cautious about staying in overnight. The market no longer is free at all and heavily manipulated.

 

[CSdot]

Other than a $100 savings bond I bought with some money in college, I have never been a bond investor and am not sure I fully comprehend what makes the bond market tick.

For my investment accounts (both taxable and tax sheltered), I am 100% in equities. 90% of that is in stock mutual finds with 10% dedicated to individual stocks.

Although I don't invest in bonds, I have a fully paid for house, several year's expenses in cash, and other assets that would fall into the collectibles category. Meaning, I can survive the few years it would take for the equity market to recover from a correction, which I imagine is the reason many have bond exposure.

 

[2177V]

Yes, I would.

Given that starting one's own business may be a positive thing, financially and emotionally. Just ask Mark Zuckerberg and Bill Gates. If someone has a great idea for a business, it is probably healthier than working for others. When I was in private medical practice, if one family "fired me" it was just one of 1500-2000 "bosses". If I got fired from a job, it was the whole enchilada.

Succeeding in one's own business appears far more stable than working for others. Just my two cents.

I think there are many pathways to financial stability in this environment and applaud and support those who work for themselves. This is what most of our ancestors did, after all.

I also agree that starting a business is a positive thing. I went to UC Berkeley and got an engineering degree and had a successful career as an engineer. My wife never went to college, went to a 3 month, once a week vocational class as a massage technician and worked as a massage technician for 3 years before starting her own successful business with a partner. A partner is important because you split the $80,000 start-up cost and the profits but more importantly split time supervising the 6 to 8 massage technicians.

A massage cost about $45 per hour and half goes to the partnership and the other half goes to the massage technician. 100% of any tips goes to the worker. The business works well and my wife is doing very well considering she did not attend college.

On the other hand, a friend started a restaurant business and had to sell that business because he could not cook and had to hire one. All the good cooks had jobs and the available cooks were not that good so the business revenues were lower than he expected. The difference: My wife knew the business while my friend had no clue.

 

[beernutzbob]

We're currently 56/44. My wife retired in 2019 and I'm retiring 1/1/22.
Ideally we'd be between 60/40 and 65/35 but we recently received a 6 figure inheritance cash infusion and got another 6 figure amount from an ESPP stock sale.

I haven't yet invested this cash as we have some large outflows for gifts and Roth contributions coming up and we want to pay cash for a large part of an upcoming new home build. Our plan is to use just my pension and cash to pay our expenses for the first 3 or 4 years of my retirement, then consider whether to turn on other income streams like my wife's pension and social security, and/or liquidate taxable investments / pull from retirement accounts.

I may adjust our equity percentage upwards after a few years of both of us being retired.

 

[O2Bfree]

I'm at 84% equities and have never rebalanced. I've been thinking about reducing by around 10%, but am feeling lukewarm about it. Especially after reading this thread. It'd be interesting to see a poll!

 

[Lsbcal]

I'm at 84% equities and have never rebalanced. I've been thinking about reducing by around 10%, but am feeling lukewarm about it. Especially after reading this thread. It'd be interesting to see a poll!

I thought about a poll but it was unclear what exactly to ask. The parameters are not just stock/bond allocation but also age, other income sources, etc.

 

[Markola]

Went to 100% cash since Biden was elected but continue to Day Trade but return to cash daily. Average daily earnings are roughly $1,000 but we are very cautious about staying in overnight. The market no longer is free at all and heavily manipulated.

LOL. It was ever thus.

 

[indiajust]

Bonds feel risky to me, all risk and no premium. Stocks are getting there too, but it depends on the allocation.

I have a mortgage that pays my baseline bills, otherwise I generate income via dividends and cap gains.

 

[mickeyd]

I am still 45/45/10 and simplicity rules my life.

 

[pb4uski]

The chart below would seem to indicate that investors are strongly increasing their bond allocations at the expense of equities. ....

The mystery to me is if equity flows are declining so much then that would suggest that demand for stocks is declining, at least for individual investors.... and if that is right then why is the stock market so strong?

 

[Markola]

The mystery to me is if equity flows are declining so much then that would suggest that demand for stocks is declining, at least for individual investors.... and if that is right then why is the stock market so strong?

I get the supply/demand point but could prices continue to go up even while trading volumes grow smaller due to there being less money circulating in a stock market? IOW, could fewer and fewer stock market participants nevertheless bid up stock prices? Something I’ve wondered.

 

[Lsbcal]

I get the supply/demand point but could prices continue to go up even while trading volumes grow smaller due to there being less money circulating in a stock market? IOW, could fewer and fewer stock market participants nevertheless bid up stock prices? Something I’ve wondered.

I don't really understand the dynamics but it appears US mutual fund and etf investors are not going wild over stocks even though equities have done quite well since 2016. From Jan 2016 through June 2021 the returns are:

5yr Treasury = 21%
SP500 = 133%

Perhaps the extra money pushing up stock shares are in institutional and foreign holdings not part of these fund flows?