Anybody else 100% stocks, no bonds?

[DawgMan]

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Originally Posted by VanWinkle +1 Boring is good in long term investing!!

+2
While I want to think I should be more aggressive with my fixed allocation (i.e. increase my stock allocation, add more preferreds, go junkier on my bonds for yield), I seem to just stay the course. Of course, I rely 100% on my portfolio to cover my annual spend so no pension in play for me.

While I get (and was) being much more aggressive in the accumulation years, I wonder how many on this board retired before 2007 100% stocks with no pension and have stayed there since??

Until I can be convinced there is better long term risk/reward mousetrap out there (which I am always looking for), I will stay with my snoozie 60/40.

[CyclingInvestor]

Quote:

Originally Posted by DawgMan While I get (and was) being much more aggressive in the accumulation years, I wonder how many on this board retired before 2007 100% stocks with no pension and have stayed there since??

Retired Oct 2006 at 48, 100% stocks since 1990's, no pension. The stocks I own tend to be boring, however.

[RunningBum]

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Originally Posted by Bullwinkle I'm at 99/1 for the taxed account, but 70/30 in the 401k. This actually strikes me as backwards. Since I can't get my mitts into the 401k for another 18 years anyway, it seems like 401k should be the aggressive one, and taxed should be the conservative one. But I can't really move much in the taxed account without paying a lot in taxes when I'm still in a high bracket. But since the 401k is not a practical buffer anyway, why not go all in with 100/0 in it? Then I will truly be at 100 but I'm sort of stuck there. Except accumulate into cash and hope I've got a big enough buffer when I go. Logical? Crazy?

1. Figure out your overall AA. Or bucket plan.
2. Figure out the most tax efficient placement of assets. This probably means bonds in your 401K.

If you need cash for living expenses, you can sell equities in your taxable account and trade bonds for equities in your 401K to get back to your desired AA.

This is a pretty simplified view, but does show how to effectively use bonds in your 401K even if you aren't able to access the account for many years.

You may find that ACA subsidies make that periodic selling of equities in taxable undesirable. In that case you have to weigh the tax effects of having some bonds or other fixed income assets in taxable vs. keeping them all in your 401K.

[Time2]

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Originally Posted by clifp What happens if the Fed can't/won't get inflation under control and interest rates rise? Inflation is running at 5.5%, once you factor in taxes the 10 year T-bill would need to yield 6.5-7.0 just to break even with inflation. What happens to the value of your bond holdings. Obviously, they go down. In fact, we can measure pretty accurately how much they go down. The effective duration of the Vanguard Total Bond market is 6.8 meaning that a 5% rise in interest rates will result in a 34% (5%*6.8) decline in bonds. Vanguard Wellesley has a duration of 7.9 so the fixed asset portion of the fund will drop by almost 40%. Stocks will probably drop also, but probably not as much. Historically stocks are more volatile than bonds, but don't kid yourself that there isn't risk associated with bonds. if your bonds are yielding 2% or more you are taking a lot of risk.

I never said it was easy. In fact with the gains we have had the past two years, I'm thinking seriously about pulling those gains out of the market. I don't see myself putting those gains into a bond, so cash is probably where it would go, but I would kick myself if we have another 15% or 20% year.

[OldShooter]

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Originally Posted by GTFan I'm boring, went with the traditional 60/40 about a year before ER (age 50). ...

Good for you. In the wrap-up ending my 6 hour Adult-Ed investing class I tell them this:

"Investing is boring. If you're not bored, you're not doing it right."

The Reverend Buffet has consolation for you, too:

“The stock market is a device for transferring money from the impatient to the patient.”

"Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell. ... Lethargy bordering on sloth should remain the cornerstone of an investment style."

Quote:

Originally Posted by Bullwinkle ... taxed should be the conservative one. But I can't really move much in the taxed account without paying a lot in taxes when I'm still in a high bracket. ...

Be careful to not let the tax tail wag the investment dog. Your goal is not to starve the IRS, it is to maximize MIP (money in pocket). History tells us that maximum MIP will come from equities, so your 99% is probably optimal. Blend to taste total us market and total international market funds, ideally tax-managed funds, and you're done. In our case, we hold the total world, VTWAX, so we don't have any need to worry about the blend.

Re "taxed should be the conservative one" remember that volatility is not risk. IMO it is conservative (in the literal sense of the word) to maximize MIP.

[Time2]

To paraphrase Kermit, "It ain't easy having green.

[Koolau]

I think I've seen 2 or 3 members say (or suggest) that they can or do live off their fixed incomes (SS, Pension, annuities, etc.) So, they feel comfortable with high % equities. I guess my question would be: Why swing for the fences when you don't even use (don't even "need") the extra money generated by equities? Is it for the next generation? If not, what do you plan to use the extra for? An elaborate funeral?

One of my personal back-ups is to be able to live from my fixed income. But I hope it doesn't come to that. Right now, I'm even taking MORE than my official RMDs. I use the extra for the fulfillment I planned for in retirement. So far so good. Having said that, I don't see that I need any more in the future EXCEPT to cover inflation which is one reason I DO invest in some equity positions.

Mentioned before, I see 2 potential black swans on the horizon: Excessive inflation and LTC - for an extended period. Other than one or both of those, I'll be hard pressed to "get rid" of my current stash (except through my will.)

No implied criticism in this post. (I can barely run my own life. I won't try to run someone else's.) I just wonder what folks plan to do with "all that money" - especially those, like me who are closer to the end of FIRE than to the beginning (statistically, anyway) YMMV

[FLSUnFIRE]

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Originally Posted by Koolau I think I've seen 2 or 3 members say (or suggest) that they can or do live off their fixed incomes (SS, Pension, annuities, etc.) So, they feel comfortable with high % equities. I guess my question would be: Why swing for the fences when you don't even use (don't even "need") the extra money generated by equities? Is it for the next generation? If not, what do you plan to use the extra for? An elaborate funeral? One of my personal back-ups is to be able to live from my fixed income. But I hope it doesn't come to that. Right now, I'm even taking MORE than my official RMDs. I use the extra for the fulfillment I planned for in retirement. So far so good. Having said that, I don't see that I need any more in the future EXCEPT to cover inflation which is one reason I DO invest in some equity positions. Mentioned before, I see 2 potential black swans on the horizon: Excessive inflation and LTC - for an extended period. Other than one or both of those, I'll be hard pressed to "get rid" of my current stash (except through my will.) No implied criticism in this post. (I can barely run my own life. I won't try to run someone else's.) I just wonder what folks plan to do with "all that money" - especially those, like me who are closer to the end of FIRE than to the beginning (statistically, anyway) YMMV

For myself, if I can make it to 60 SS and my small pension will fund my current lifestyle if spending only increases with inflation. I'm currently spending pretty lean so my expenses will likely increase more than inflation in later years (at current valuation I expect 1.8% spending rate in 2022). My reasons for being ~100% equities:


Inflation protection
I want BTD $ -I have my wish list ready to go!
LTC self-insurance
100% safe using all calculators (unless using Monte Carlo with really harsh assumptions) It doesn't seem that risky at my current WDR and why would I want to invest in something that has a lower expected return if I can handle the risk? I got here by optimizing (well, except for all my mistakes along the way)!

[Time2]

Quote:

Originally Posted by Koolau I think I've seen 2 or 3 members say (or suggest) that they can or do live off their fixed incomes (SS, Pension, annuities, etc.) So, they feel comfortable with high % equities. I guess my question would be: Why swing for the fences when you don't even use (don't even "need") the extra money generated by equities? Is it for the next generation? If not, what do you plan to use the extra for? An elaborate funeral?

I'm starting to wonder that myself. We could have another 20 years, maybe a few more, that would put my youngest at 50 years old. I would hope they have their own nest eggs by then. Why do we still live frugally? But then what do I need? A new car, why, I don't drive 5000 miles a year. A new house and higher taxes, what a hassle moving. I guess I could do some travel, my wife has little interest and all she would want to do is food shop anyway, and we already have too much in the freezers. Maybe I'll splurge this winter and turn the heat up from 68* to 70*.

[plex]

100% stocks since I started investing, aside from obvious cash for expenses. I see some room for holding cash or a leveraged treasuries, but bond interest rates have been so incredibly poor in recent history that it just isn't reasonable holding them. There most certainly will be a time I hold bonds, such as a 5%+ interest environment. The late 70's and 80's was an incredible time to hold bonds.

[ICanSeeTheBeginning]

One of the big big benefits of a mixed portfolio is being able to rebalance. With 100 percent of anything that simply is not possible. By rebalancing, one is always selling high and buying low....and if you limit yourself from being able to do that, you limit your potential growth....IMO.

[bevette]

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Originally Posted by FREE866 I'm 55 and have been retired almost 5years and although it is against conventional wisdom I'm at almost 100% stock. I always have been. I keep ~1-2 years in cash and draw on my account a few times a year to cover expenses. When I ran numbers paring my AA down to 70/30 it just didn't make sense to me.

Free866, do you have a pension? What is your withdrawal rate? When you say you “ran the numbers,” are you referring to FIRECALC? I’m 53 and still w*rking. No pension on the horizon but I aim to retire by 55. I am both waiting for a separation package as well as padding my coffers to self insure for LTC. I’m sitting around 80/20 with 4 years expenses in cash (that’s included in the 20%). I feel 80/20 is too conservative and feel the pull toward 90/10 or higher. I’ve weathered several market drops at 100% equities and am confident that a 2-3 year expenses cash buffer and 100% equities might be a better fit for me.

[DogGone]

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Originally Posted by Bullwinkle I'm at 99/1 for the taxed account, but 70/30 in the 401k. This actually strikes me as backwards. Since I can't get my mitts into the 401k for another 18 years anyway, it seems like 401k should be the aggressive one, and taxed should be the conservative one. But I can't really move much in the taxed account without paying a lot in taxes when I'm still in a high bracket. But since the 401k is not a practical buffer anyway, why not go all in with 100/0 in it? Then I will truly be at 100 but I'm sort of stuck there. Except accumulate into cash and hope I've got a big enough buffer when I go. Logical? Crazy?

Yes backwards.
The money you won’t touch for years should be aggressive and you can trade more actively if you wish since you do t have capital gains.

[ychuck46]

Same situation as you (no debt, medical covered, SS at 63/DW at 62) and we are now 68, almost. Carrying some bonds but only ones that are tax-exempt either fully or deferred (municipal bond ETF and I Bonds). The vast bulk of our assets are in stocks, both ETFs and individual issues, as well as being active in the options market. Best of luck.

[Sanbenito1]

I’m in the same boat- age 63; pension and rental cottage cover all basic costs and house is paid off. I keep about 80 percent stock, 20 bonds. The only reason I keep so much in bonds is that I toy with the idea of buying another house (and even if I don’t, it’s nice to be able to help the youngsters with their down payment). If the stock market tanks when/if I need down payment money, I’d still be able to move forward. If it wasn’t for buying houses, I’d probably be closer to 100 percent stock. I also keep about $60K in an emergency fund (government Ibonds, mostly) for my next car/roof/emergency

[winyaz]

Personally I am too risk averse to buy and hold 100% in equities, even if I had an income stream covering all expenses. Reading this thread helps me better understand current market valuations. The old rule of thumb was to own one's age in bonds. It feels almost surreal to see retirees discussing their 100% equity portfolios. I get that bonds are not the investment that they were, but the fact that they may not be a good investment does not decrease the risks in the stock market. In fact I fear it may increase it, since so many seem to be loading up on equities instead.

[indiajust]

I keep 2 years in cash roughly. The rest in stock/reit/mlp. Fed killed bonds for now. Though awealthofcommonsense did mention the 7% yield in savings bonds with inflation protection, though limited to 10k.

[Souschef]

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Originally Posted by winyaz Personally I am too risk averse to buy and hold 100% in equities, even if I had an income stream covering all expenses. Reading this thread helps me better understand current market valuations. The old rule of thumb was to own one's age in bonds. It feels almost surreal to see retirees discussing their 100% equity portfolios. I get that bonds are not the investment that they were, but the fact that they may not be a good investment does not decrease the risks in the stock market. In fact I fear it may increase it, since so many seem to be loading up on equities instead.

I am 83. If I went by that old rule I would have missed out on the market, while losing to inflation.
If I considered our SS and pensions as a SPIA, my AA would be 65/35.
The fixed income covers all our expenses, and then some.

[FREE866]

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Originally Posted by bevette Free866, do you have a pension? What is your withdrawal rate? When you say you “ran the numbers,” are you referring to FIRECALC? I’m 53 and still w*rking. No pension on the horizon but I aim to retire by 55. I am both waiting for a separation package as well as padding my coffers to self insure for LTC. I’m sitting around 80/20 with 4 years expenses in cash (that’s included in the 20%). I feel 80/20 is too conservative and feel the pull toward 90/10 or higher. I’ve weathered several market drops at 100% equities and am confident that a 2-3 year expenses cash buffer and 100% equities might be a better fit for me.

I do not have a pension.
Yes---ran numbers in FIRECALC, Fidelity Planner and ********


not sure why site wont let me put the ******** one


my withdrawal rate started out at like 4.5% now its like ~2.6 % even less I think now

[FIREarly]

Yes, almost 100% TSLA
A few EVGO with leftover money. Investing in the future.

*Company 401k is 100% S&P500 index stocks.
Is it possible to trustee-to-trustee company 401k money to personal broker/dealer 401k while still working at the company?