30/70 asset allocation is the best overall?

[Running_Man]

Quote:

Originally Posted by DFW_M5 So do you think the stock market would take such a rapid increase in stride

No I believe if interest rates were to start rapidly increasing stock losses would be greater than losses in 5 year treasuries

[mathjak107]

our comfort zone is 45-50% equities , success rates all look good in firecalc and the fidelity rip calculator so that is the plan.

i am not convinced that 30% equities and 70% bonds are a good thing to have going forward , there is no historical data on low rates and high valuations so going by what was may not mean much at all.

equities and cash may even be the new mix to run with or even equities/annuities as a cash/bond proxy .

[rayinpenn]

I believe your asset allocation should be contingent on just how much you have and how much you'll spend. For example if we take a couple with 2.2 million in investable assets and they invest $200k in fixed income and $2mil in low cost dividend focused mutual funds (IDV, DVY) and the yield is 4% it would throw off $80k in tax advantaged dividends (dividends receive favorable tax treatment) - coupled with their social security that couple could live well on the payout.

Bam a market correction happens - I say don't worry about the market value of the portfolio. Worry about the dividend stream. Do all the dividends go away? No they do not! They drop a little hence the $200k Safety net. What happens? Ten years later the portfolio is worth 3 million and the dividend stream is $120k.

I believe If you can live on the earnings the rules change...

Sent from my iPad using Tapatalk

[brewer12345]

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Originally Posted by NW-Bound But, as they say, we are spending too much time worrying about the "known unknowns", but we may get hit by an "unknown unknown". No, I am not bringing up REWahoo's asteroid, but am thinking of some politico-economic collapse that has never been experienced in the US, hence totally unplanned for. What if the drought in California extends to all Western states, resulting in half of the US becoming the bleak landscape in Mad Max movies? Or an epidemic that we no longer can dodge? No, I am not staying up late at night worrying about this. I am just saying there's only so much we can worry about AA and WR. There's a lot of uncertainties out there, and what I am trying to do is to eat and drink and be merry while I still can.

I attempt to hedge some of this, but of course one can only do so much. 6 months of food in the basement, plenty of ammo and a mortgage on the house (if where I live turns into Detroit, good luck to the mortgage holder) all help me with a bit of comfort to cut off the tail of the distribution. Happily, my hobbies and interests translate loosely to "prepper" (hunt, fish, camp, hike, have fun making all sorts of things people take for granted at the store, forage, etc.). Mostly it just helps to recognize that life is fleeting, so go live it.

[marko]

Quote:

Originally Posted by NW-Bound No, I am not bringing up REWahoo's asteroid, but am thinking of some politico-economic collapse that has never been experienced in the US, hence totally unplanned for. What if the drought in California extends to all Western states, resulting in half of the US becoming the bleak landscape in Mad Max movies? Or an epidemic that we no longer can dodge? No, I am not staying up late at night worrying about this. I am just saying there's only so much we can worry about AA and WR. There's a lot of uncertainties out there, and what I am trying to do is to eat and drink and be merry while I still can.

I've posted the following a few times before:

"The sixties had us digging bomb shelters in our backyards, stocking up on food and readying for nuclear attack.
If that didn’t happen, we were going to be all starving from massive overpopulation within 20 years.

The seventies brought us warnings about running out of oil. By 2010, all the oil was supposed to be gone and we were going to be living by candlelight and riding bicycles.
The ‘albedo effect’ was going to bring about global cooling not seen since the ice age, which, coupled to the demise of oil, one would assume we’d all freeze to death.

In the eighties the AIDS virus was “a mere mutation or two” away from being able to be contracted as easily as the common cold or flu.

The nineties saw us worrying about global warming, which then became climate change.

More recently, we had the BP Gulf oil spill which many billed as “the greatest environmental disaster in the history of mankind”.

I'm not saying that many of these issues did not impact certain people, but the severity and “end of life as we know it” never seems to materialize. "

I just can't too worked up about a lot of 'worrisome' things of late. Respectfully, maybe I just don't watch enough TV

[rayinpenn]

Allocation based on percentage isn't for everyone.
Joe (63) and Jen (62) have a cool million of investible assets - they have $100k in cash equivalents and $900k in equities that are yielding 4% or $36k. They feel pretty lucky the state jobs they retired from included health care (rare these days indeed) they have no debt - they traded in their 3000 square foot colonial for a 1700 square ft new ranch. They expect their housing expenses to be very low in there rural community. Joe has a green thumb, loves to grow veggies and an acre and a half to work with. With their modest pensions, social security and their dividends they run a very healthy surplus each month.

Jane has a business degree and is an astute ETF and mutual fund dividend investor. "I don't care how much my portfolio is worth I just care about the those dividends. She noted that during the credit crisis her dividends dropped slightly but not enough to panic. Janes Mother and Aunt are still living so she hopes to be around for a long time. If I left it in fixed income inflation will chew me up...

It's all about the income stream not how a fickle market values my portfolio.

[haha]

Quote:

Originally Posted by raymondjmillsjr It's all about the income stream not how a fickle market values my portfolio

Not according to 90% of the posters here, and a similar % of popular gurus. Can you show us how you would defeat their arguments?

Ha

[gcgang]

http://ycharts.com/indicators/sp_500...ends_per_share

This only goes back about 10 years, but shows that dividends on the S&P 500 tend to grow, having more than doubled in the last 10 years.

Even during the 2008 "crisis", dividend income didn't fall much.

So I think the guy who ignores market value and focuses on his (historically growing) income stream, will do better than most.


Sent from my iPhone using Early Retirement Forum

[mathjak107]

age old discussion and wrong thinking as well. it is all about total return -period.

lots of high yielding reits are paying out money that was ear marked for more properties or worse borrowing money to sustaiin the dividends and increase them.

if income and or share price are not growing and offsetting each other you are are down ,end of story.

[rayinpenn]

Quote:

Originally Posted by haha Not according to 90% of the posters here, and a similar % of popular gurus. Can you show us how you would defeat their arguments? Ha

I beg to respectfully disagree most of your so called gurus are concerned with portfolio valuation. I am not since my focus is on the dividend stream. Most people will use the 4% withdrawal rule - but what if your portfolio throws off a steady 4.5 % guess what? You never run out of money. Dividends rise with inflation and over time do does your portfolio. (But again I don't care since it is the dividends I am interested in).

No doubt I takes a cool head to ride out the storms but if those dividends are reminders that no matter what the market says there are company's out there providing you electric, water, communications services, entertainment and they are still paying dividends. Still This equity heavy strategy isn't for everyone.

Guru:? Exactly what makes a guru? Experience? I've been investing for a lifetime (I am sixty) and 35 years in banking. education? (BS, MBA, MS) success investing? Absolutely.. When I got my first dividend check an eternity ago I was hooked. Gurus. Hmmmm did you ever hear of a firm called long term capital management? They had a Nobel prize winning Harvard phd and some very smart people - guess what not only did they go bankrupt they nearly brought the country down. Gurus scare me.

Fred(Freddie 60) and Alice (57) are salt of the earth thrifty people. Fred always made a respectable living working 30 years for the same firm. They always lived below their means and saved first. Fred inherited his Dad's do it your self mantra. - swing a hammer, hang a door, fix the toilet, hang a light, etc., This coupled with Alice's coupon clipping and never buy unless it is on sale attitude and with their habit of hanging on to windfalls (bonus, tax returns etc.,) helped the couple amass a size able portfolio of 3.2 million with no debt.

Fred is a whiz with spreadsheets and tracks his portfolio with an eye towards the dividend/interest stream currently at $120k. Those dividends coupled with social security. should make for a secure retirement. Jack is cautious as he keeps $300k in cash like instruments.

I've tracked down turns before - dividends were impacted but no where like market valuations. "My $300k and social security should see us through any 5 to 7 year tuff patch"

Conventional wisdom would have the couple with 1.5 million at least in fixed income. Fred says "if I listened to conventional wisdom we wouldn't have 3 million! You know there are 50 million 401ks in the country and less than 1% have a million dollars in them. Most advice out there isn't for people like us."

[eta2020]

Quote:

Originally Posted by raymondjmillsjr I beg to respectfully disagree most of your so called gurus are concerned with portfolio valuation. I am not since my focus is on the dividend stream. Most people will use the 4% withdrawal rule - but what if your portfolio throws off a steady 4.5 % guess what? You never run out of money. Dividends rise with inflation and over time do does your portfolio. (But again I don't care since it is the dividends I am interested in).

I also focus on dividend stream and agree with all you wrote except 4.5% dividend yield. What kind of diversified portfolio throws that kind of dividend yield?

I am getting more like 2.1%-2.3%

[rayinpenn]

Quote:

Originally Posted by eta2020 I also focus on dividend stream and agree with all you wrote except 4.5% dividend yield. What kind of diversified portfolio throws that kind of dividend yield? I am getting more like 2.1%-2.3%

Mix Idv, dvy, vz, so and a few others others ...if you portfolio is not in a taxable account look at dogs of the dow maybe dome shifting is in order...

[rayinpenn]

Quote:

Originally Posted by mathjak107 age old discussion and wrong thinking as well. it is all about total return -period. lots of high yielding reits are paying out money that was ear marked for more properties or worse borrowing money to sustaiin the dividends and increase them. if income and or share price are not growing and offsetting each other you are are down ,end of story.

Who said anything about investing in high yielding equities? It's true I do have some O the monthly dividend company but it's just for fun.. I like those dividends on the off months... Naah I avoid high yield stuff.

If income stays relatively constant through a downturn why would I care if "I am going down" won't it come back? It always has- hasn't it? I'm living on that income if the portfolio is a dollar or a million dollars if the income stays constant why should I care!

[eta2020]

Quote:

Originally Posted by raymondjmillsjr Mix Idv, dvy, vz, so and a few others others ...

That is not diversified.

And you either get high dividend growth or high dividend yield. You do not get BOTH high yield and high growth at very same time.

Personally I like high quality companies with dividend growth like: SCHD or VIG ETFs and they are far far from 4.5% yield. They are more like 2.3%.

Though DVY that you mentioned at 3% yield did pretty good growing it's yield over a last 5 years......

[rayinpenn]

Quote:

Originally Posted by eta2020 That is not diversified.

Hmmm how so.? I said others... And Jeeze how many stocks are in IDV?

Quote:

And you either get high dividend growth or high dividend yield. You do not get BOTH high yield and high growth at very same time.

Who said anything or implied about high growth? My dividend stocks, ETFs are steady eddies ... Again I'm interested in income stream and dividends do go up!
I'm off to work ....post more details later.

[RunningBum]

I can't wait for those details, along with more stories of Freddie, the salt of the earth spreadsheet and toilet whiz, and his wife Alice, hmmm?

[target2019]

Quote:

Originally Posted by raymondjmillsjr Hmmm how so.? I said others... And Jeeze how many stocks are in IDV? Who said anything or implied about high growth? My dividend stocks, ETFs are steady eddies ... Again I'm interested in income stream and dividends do go up! I'm off to work ....post more details later.

I'd love to see the portfolio too. If yield is 4.5 then it must have utilities and telecoms as the base. Then what?

Built over time I'm sure it's possible. But it's not something most investors are capable of doing.

[audreyh1]

I think DVY did experience a significant drop in dividend payout and took several years to recover.

[eta2020]

Quote:

Originally Posted by raymondjmillsjr Hmmm how so.? I said others... And Jeeze how many stocks are in IDV? Who said anything or implied about high growth? My dividend stocks, ETFs are steady eddies ... Again I'm interested in income stream and dividends do go up! I'm off to work ....post more details later.

IDV has about 100 holdings. That is what I call not diversified.

This is example of diversified equity portfolio: 35% VTI, 35% VXUS, 10% VWO, 10% VIG, 10% SCHD. It has about 10000+ holdings. And it will yield about 2.1-2.3%.

Loading up on high yielding equities is not recipe for dividend growth.

And notice ETFs like VIG did not have any dividend yield drop over 2008-2009 because it is collections of high quality companies. Some high yielding equities disappeared in those years.

BTW VZ that you mentioned has on inflation adjusted bases close to 0% dividend growth.

[Fermion]

Dividends are great. Seadrill paid me a nice dividend...until they cut it to zero.