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02-07-2020, 11:24 PM
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#41
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Dryer sheet wannabe
Join Date: Oct 2018
Posts: 24
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I was at 100% stocks up until a few months ago. Currently at 80/20. You also have to think that this portfolio has to last you longer than 30 years, quite possibly 40-45 years.
__________________
FREE at last!! ;-)
FIRE'd in 2/2019 at age 49. AA 80/20.
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02-08-2020, 11:38 AM
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#42
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Full time employment: Posting here.
Join Date: Dec 2018
Posts: 966
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Quote:
Originally Posted by mountainsoft
I know the ratio of stocks and bonds is basically a personal choice based on your comfort level with risk. However, it can be helpful to have a general guide to start with.
A common answer is to subtract your age from 100 (or 110, or 120) to determine how much you should have in stocks. However, I've never heard if that is based on a specific retirement age? If I was 50 years old and planned to retire at 65, I might be willing to accept a bit more risk. But if I planned to retire at 55, I would probably want to reduce my risk.
Are there any allocation guidelines based on how many years till you retire, instead of how old you are?
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I don't know of any. However, you are probably aware that when you retire, your paycheck stops and you are dependent on your nest egg, your pensions (if any), your SS, your rental income (if any), etc. This means you should think about liquidity. Liquidity is overlooked prior to retirement because your paycheck provides liquidity to meet your needs.
I suggest developing a post retirement budget. If it is $3,000 a month, then that is what your nest egg should provide as a minimum. The elephant in the room is a recession. Here is a useful link to review:
https://obliviousinvestor.com/what-h...-market-crash/
People often assume their bonds provide a soft landing in a recession. However, the link above indicates what "type" of bonds that you have will determine your risk. If you have mostly high yield junk bonds then you may not have a soft landing.
If you have a total bond index fund as an example, I suggest you review the performance of your total bond index fund during the last recession or 2007 to 2009. If it is positive during those years, then you should be OK.
However, if it is negative, then I would suggest creating a "rainy" day cash fund. Some AA can be 50/40/10 which means 50% stock, 40% bonds, 10% cash, CD or treasury. The 10% provides additional liquidity. Be aware that too much liquidity also hurts overall performance. The balance between reward and risk should be up to that individual situation.
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02-08-2020, 12:13 PM
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#43
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,202
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I started a poll asking whether and what age based AA people used. 75% said they didn't use one.
https://www.early-retirement.org/for...oll-88258.html
While I don't agree that it's horrendous advice, I'm fairly convinced to ditch my age based plan. It happens that I'm right about where I'd want to be anyway, so I really don't need to decide which way to go for a couple more years, but I'll probably settle in at about 60/40.
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02-08-2020, 02:36 PM
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#44
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Posts: 1,166
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Quote:
Originally Posted by tmitchell
I haven’t retired yet but having built a nest egg bigger than I ever imagined I’d have makes me feel skittish. I don’t have kids and legacy is unimportant to me so my main goal is to get to the grave with as little drama possible. I have considered dropping to 55/45 or even 50/50 once I do pull the trigger (hopefully around 55–I’m 52 now).
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Given that you don't have kids (same here), don't care about legacy (ditto) and want to get to the grave with as little drama as possible (ditto again), you might want to look at whether an even lower equity allocation would still meet your financial needs.
I ER'd at 55 and am roughly 25% equities. Instead, I rely heavily on generating income through CDs, bond fund dividends, stock dividends, etc to cover a good chunk of our living expenses. The equities are solely for LONG-TERM (10+ year) growth and future expenses, and I hope to never have to sell from the equity portion of our portfolio in a down market. (As is often said, you should never have money in the market that you need in the next 10 years..so all these equity heavy portfolios I see people talk about so regularly here is definitely not for me..)
That said, even 25% makes me nervous because a 50% market drop would mean a 12.5% drop in my net worth - and at this point in life when I've turned off the W2 streams for good..that'd be something I'm not particularly comfortable with. I also know from my experience in 2008 that I would stress in a big way even with a 12.5% drop in my overall net worth, so invest accordingly..
Rick Ferri wrote a great article some time back that was posted in Forbes that says the "center of gravity" for an Early Retiree is ~30% equities. He made a pretty good case for that with some hard data as well. Here's the article if you're interested..
https://www.forbes.com/sites/rickfer.../#659a32be5dae
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02-08-2020, 02:48 PM
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#45
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Posts: 1,166
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Quote:
Originally Posted by COcheesehead
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There have also been periods where it's taken the market > 15 years to recover from "peak" (albeit, inflation-adjusted). Those include stretches of 16, 23, 26 and 29 (!) years.
Here's an article that might provide some additional perspective..
https://seekingalpha.com/article/420...t-happens-next
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02-08-2020, 06:05 PM
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#46
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Full time employment: Posting here.
Join Date: Dec 2018
Posts: 966
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Quote:
Originally Posted by RunningBum
I started a poll asking whether and what age based AA people used. 75% said they didn't use one.
https://www.early-retirement.org/for...oll-88258.html
While I don't agree that it's horrendous advice, I'm fairly convinced to ditch my age based plan. It happens that I'm right about where I'd want to be anyway, so I really don't need to decide which way to go for a couple more years, but I'll probably settle in at about 60/40.
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I agree that the age based AA is just a guide. I personally did not use it.
I was 100% stock from age 25 to age 50 for my IRA because I knew my IRA is something I cannot withdraw until age 65. I was an aggressive investor for my IRA but I was rewarded for it. After age 50 I started thinking bonds but I started using bonds to exchange my bonds to stocks during a 10% market correction.
When I retired at 65, I was 60/40 but now that I am close to 70, I am now nearly 100% treasury bonds. Looking back... I went from super aggressive during my working years to super conservative during my retirement years. I am now in an asset preservation mode to protect the assets that I earned during my aggressive investment years.
I totally agree with your personally statement "I am right where I want to be". Ditto for me. Everyone is different.
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02-09-2020, 09:00 AM
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#47
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Thinks s/he gets paid by the post
Join Date: May 2019
Posts: 2,727
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Quote:
Originally Posted by 24601NoMore
There have also been periods where it's taken the market > 15 years to recover from "peak" (albeit, inflation-adjusted). Those include stretches of 16, 23, 26 and 29 (!) years.
Here's an article that might provide some additional perspective..
https://seekingalpha.com/article/420...t-happens-next
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You need to factor in dividend reinvestment, and it's not as bad as the numbers above.
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02-09-2020, 09:28 AM
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#48
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Posts: 1,305
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Quote:
Originally Posted by 24601NoMore
There have also been periods where it's taken the market > 15 years to recover from "peak" (albeit, inflation-adjusted). Those include stretches of 16, 23, 26 and 29 (!) years.
Here's an article that might provide some additional perspective..
https://seekingalpha.com/article/420...t-happens-next
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Lance Roberts has been a permabear his whole career. The fact that people follow that guy is mind boggling. When I backtest a 100% equity portfolio from 2001-2010 ( 2 bear markets) the numbers aren't as bleak as this article leads us to think.
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02-10-2020, 09:11 AM
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#49
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Thinks s/he gets paid by the post
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 2,705
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Quote:
Originally Posted by FREE866
That whole "subtract your age from 100 and put that in stocks" mantra is such horrendous advice.
The main consideration is time horizon, cash flow needs, and your own ability to deal with volatility.
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^This
Personally still at 80/20 despite being 68. Getting conservative. Was 100% stock when I retired in 2004
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02-10-2020, 09:19 AM
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#50
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,337
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Quote:
Originally Posted by 24601NoMore
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Sorry. SeekingAlpha's authors are there to hawk their investment newsletters or to generate clicks on their web sites.
If any of them could make reliable predictions they would not be living such a miserable existence. They would be off on a private yacht or a private tropical island. The mere fact that they are writing for SeekingAlpha is proof that they have judged their own predictions to be useless.
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