60/40 Portfolio is dead, Long live stocks!

[Rickt]

Here's a link to this interesting article in today's USA Today in which the author Jeff Reeves argues that while 60/40 portfolio was Ok a generation ago, people are now living longer and so investors must adapt.

The 60/40 stock-and-bond portfolio mix is dead in 2016

Cheers

 

[REWahoo]

Here's what the article recommends.

No way I could handle the volatility/risk of equity allocations that high, at least until I make it to my 70's. (Note the graphic implies no one makes it beyond that age...)

 

[NW-Bound]

Here's what the article recommends.

No way I could handle the volatility/risk of equity allocations that high, at least until I make it to my 70's. (Note the graphic implies no one makes it beyond that age...)

The stress of portfolio volatility weeds out 99% of the retirees prior to them reaching 70?

 

[REWahoo]

The stress of portfolio volatility weeds out 99% of the retirees prior to them reaching 70?

Looks like you nailed it.

 

[easysurfer]

I wonder what is the article author's personal allocation? Probably 60/40 .

 

[Dawg52]

Yeah.... a 69 year old reads this and converts to an 80% equity portfolio and then watches the market correct by 20% or so. I wonder how they handle that scenario?

 

[someguy]

I took the infographic as showing the author's recommended divergence from the standard plan (i.e., 60/40 all the way), not that plans end at 70. Or that from 70+, his recommended AA remains the same.

 

[nun]

I have a liability matching portfolio made up of a pension, rent and a 30% TIAA-Traditional allocation. I've been moving out of bond funds since I retired. I'm 54 and have 70% in stocks and plan to let that percentage drift up as I get older by simply reinvesting dividends.

 

[statsman]

Well, that pretty much confirms it. My wife and I are in trouble.

 

[Rickt]

Sounds like the article is more like an infomercial for FA firms including retirement services firm "Rebalance IRA" in Bethesda, MD.

I noticed that in the last paragraph of the article, author quotes Scott Puritz, managing director of that firm who says "There is no sense in creating the optimal asset allocation that works at an intellectual level if when the markets drop, the investor can't sleep at night" Puritz says, "Particularly, as people get older, have families and mortgages and are paying down debt, their financial situations get more complex, so it's good to have a seasoned professional in the mix to strike the right balance for you personally"

 

[lem1955]

I'm so glad all you others responded as you did, so I don't have to!

 

[RunningBum]

When was 60/40 ever the status quo for all ages? I've been hearing age based allocation for as long as I can remember. Maybe 100-age or 110-age in stocks is outdated and the number should be increased.

Has life expectancy really gone up dramatically, or is it just continuing it's steady climb? People aren't suddenly "now living longer". And anyone basing your years left from 60 on base life expectancy is not one to listen to. There are plenty of statistics to show how much longer a 60 year old can expect to live.

 

[nun]

It's a pretty meaningless article......interest rates are low and so bond funds are bad......so up your stock allocation and get ready for the roller coaster. We are living longer so out money must last longer so what are we to do? A more sensible article might have given some other options for retirement fixed income......what about buying an SPIA and deferring SS until 70?

 

[Bestwifeever]

You guys! You are missing the most important part of the article, the punchline at the very end--we cannot figure this out all by ourselves!:

“There’s no sense in creating the optimal asset allocation that works at an intellectual level if when the markets drop, the investor can’t sleep at night,” Puritz says. “Particularly, as people get older, have families and mortgages and are paying down debt, their financial situations get more complex, so it’s good to have a seasoned professional in the mix to strike the right balance for you personally.”

I'm holding at 40/60.....

 

[REWahoo]

I'm holding at 40/60.....

DW says the same thing, but over the last few years she's had a difficult time convincing folks she's 40 and I'm 60.

 

[nun]

I'm at 52/48.....if you include my rental property, present value of my pension and TIAA-Traditional as fixed income. I have less than 1% in bonds.

 

[FI by 2024]

When was 60/40 ever the status quo for all ages? I've been hearing age based allocation for as long as I can remember. Maybe 100-age or 110-age in stocks is outdated and the number should be increased.

Exactly.

Prior to the recession I heard a lot of "120 minus age = percentage in stocks." Since then I've heard 100 replace 120, but I have NEVER heard that you should have the same allocation at all ages. Personally, I continue using roughly 120 minus age because I am risk tolerant.


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[NW-Bound]

You guys! You are missing the most important part of the article, the punchline at the very end--we cannot figure this out all by ourselves!:

“There’s no sense in creating the optimal asset allocation that works at an intellectual level if when the markets drop, the investor can’t sleep at night,” Puritz says.

Can FAs write Prozac prescriptions for their clients now to let them sleep at night?

That said, I personally like a higher stock AA. It makes life interesting.

 

[W2R]

Here's what the article recommends.

No way I could handle the volatility/risk of equity allocations that high, at least until I make it to my 70's. (Note the graphic implies no one makes it beyond that age...)

+1

Yeah, I'm 67 and perfectly happy with 45% equities, for now. When I turn 70 and start getting RMD's, and hopefully my age 70 SS instead of just my divorced spousal 50%, I'll have more money coming in. For that reason I might need to tweak my AA at that time. Or not.

I sure hope that I live into my 80's and 90's, even, but right now I do not have a clue about that. This week I am starting to feel very old because of having had my (wildly successful) cataract surgery. Isn't that just for old people around 90? Oh well. Guess my eyes had a shelf life of 67 years.

 

[Lsbcal]

I'm at 52/48.....if you include my rental property, present value of my pension and TIAA-Traditional as fixed income. I have less than 1% in bonds.

Explains the why bonds posts. Many of us do not have a pension.

 

[razztazz]

Explains the why bonds posts. Many of us do not have a pension.

I have a pension and I still keep a lot in bonds. Unless the pension is several times your expenses you still need to guard your purchasing power and ability to supplement a pension

 

[FI by 2024]

I have a pension and I still keep a lot in bonds. Unless the pension is several times your expenses you still need to guard your purchasing power and ability to supplement a pension

Are you assuming a non-COLA'd pension? For instance I am working toward a COLA'd pension that will be ~1.3x expenses. For this reason I feel very comfortable with an aggressive allocation as my purchasing power will match inflation and I technically wouldn't need to supplement my pension (although I will have money available to do so).


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[razztazz]

Are you assuming a non-COLA'd pension? For instance I am working toward a COLA'd pension that will be ~1.3x expenses. For this reason I feel very comfortable with an aggressive allocation as my purchasing power will match inflation and I technically wouldn't need to supplement my pension (although I will have money available to do so).


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I have a Cola'd pension but really wtf does that mean? It might be COLA'd to the CPI but not to me. My pension is about 1.11 of my regular expenses and there is no reason to believe it will always"match inflation". They will "up" it as they wish and suppress it as they wish and call it "Adjusted." (Yeah man, I have exactly that much f'ing confidence in them)

My stash is only for supplementing any excess. I do not think this justifies any kind of "aggressiveness". If I'm going to need the money, I'm going to need the money. Increasing the "odds" of an upside always increases the odds of a downside too. The object is to "screw the odds" and gamble as little as necessary. As least that's my objective. And make no mistake about it. Trusting equities is a gamble. More like sizing up horses at the track or counting cards in blackjack than rolling the dice or simply pulling the handle. Not a crap shoot or waiting for a lottery hit, but still gambling.

 

[Lsbcal]

When equities were done correctly, they use to call it business man's risk.

 

[Ed_The_Gypsy]

so it's good to have a seasoned professional in the mix to strike the right balance for you personally"

Seasoned professional [thief?]


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