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Asleep At the Wheel
Old 01-23-2023, 09:29 AM   #1
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Asleep At the Wheel

I retired in 2014 with a pretty standard asset allocation of around 60% stocks/40% bonds. This worked fine until recently. I thought I would just wait it out, so I still was not paying much attention. But today I did a check of the Prime Rate and was surprised to see it up to 7.50%. I guess I just have been having too much fun and not paying that much attention.

I had always planned to stay with my 60/40 asset allocation unless the interest rate got above the 7 to 8 percent range. I always thought that if you could get interest rates close to that, why not eliminate a lot of risk. So I guess its time to consider a big shakeup and a move to more fixed investments.

I have always been impressed with, and appreciative, of the advice from this forum so I want to ask what others here are thinking.

Have many others here moved out of stocks and bonds, and if so, where have you gone and what types of investments are you making (CD's, gold, etc.)? If holding on to stocks and bonds, at what point are you considering moving out of them?

Thanks!
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Old 01-23-2023, 09:39 AM   #2
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Have many others here moved out of stocks and bonds, and if so, where have you gone and what types of investments are you making (CD's, gold, etc.)? If holding on to stocks and bonds, at what point are you considering moving out of them?

Thanks!
Moved to all fixed income by late last year... Mostly CD's. Ever since I retired, I've been a "I have won the game, why risk it" type of investor. True, CD's don't keep up with inflation but they help close the gap with ~no risk. I did a lot of short term equity trading with some surplus cash over the past few years, but I've had enough of that. (Too much work for little, if any return)
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Old 01-23-2023, 09:41 AM   #3
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I believe the Prime Rate is what you're charged if you want to borrow money. The rate on CD's and treasury bonds is around 4% +/- right now.
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Old 01-23-2023, 10:14 AM   #4
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Have many others here moved out of stocks and bonds, and if so, where have you gone and what types of investments are you making (CD's, gold, etc.)?
Nope, not me. I'm a broad index fund buy-and-holder, sticking with my AA, happy with what I've got.

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If holding on to stocks and bonds, at what point are you considering moving out of them?
Never? My hair's not on fire (yet? ) and I am doing fine, so no reason to freak out and sell everything.
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Old 01-23-2023, 10:24 AM   #5
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Moved to all fixed income by late last year... Mostly CD's. Ever since I retired, I've been a "I have won the game, why risk it" type of investor. CD's don't keep up with inflation but help close the gap.
+1 but did it sooner... mostly but not all fixed income. Also, transitioned from bond funds and ETFs to CDs, UST, GSE/agency bonds and high IG corporates.
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Old 01-23-2023, 10:32 AM   #6
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I'm keeping my equity forever. Will likely buy more and never sell.
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Old 01-23-2023, 10:39 AM   #7
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I believe the Prime Rate is what you're charged if you want to borrow money. The rate on CD's and treasury bonds is around 4% +/- right now.
In theory, Prime is the rate that the highest quality borrowers get from banks. I think that concept is a little squishy. In practice I think it is used more as a reference rate where a business might be offered a loan at "two over" -- 2% over prime rate. Hence a variable rate. "LIBOR" used to be a popular reference rate but died due to some serious manipulation problems. Not sure anyone went to jail but it was that kind of thing.

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... Have many others here moved out of stocks and bonds, and if so, where have you gone and what types of investments are you making (CD's, gold, etc.)? If holding on to stocks and bonds, at what point are you considering moving out of them? ...
Plain old boring index funds and TIPS for us. Most other options for little guys have way too much juice squeezed out of them by the people selling them. I did small residential real estate for 25 years but I am too lazy to do that now, plus I really don't want to saddle our executor with a bunch of illiquid and hard to value assets.

A couple of other considerations: First, the need to resist recency bias, which tends to whip our attitudes around much too frequently. Second, absent SORR, volatility is not risk. A few years of equities up, a few years of equities down -- to be expected. History tells us that (so far) equities have had an upward bias that rewards long-term buy-and-hold investors.

Warren Buffet: "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."
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Old 01-23-2023, 11:08 AM   #8
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When the FED first started to raise rates in March 2022, I moved a large chunk of my QQQ holdings into Fido's FDRXX Money Market Fund. Rising rates tend to hurt the growth stocks that make up that index fund. That simple move has saved me from an excruciating downturn.

The FIDO money market is now paying around 4% thanks to those FED actions and I'm happy to collect the monthly stipend. You may say that 4% doesn't beat inflation....to which I reply that anything with a plus sign is welcome in my portfolio. I nibble at the TLT fund when it drops into the low $90 range, but that's about the extent of my buying. I still hold some QQQ, SPY and IWM so an up day like today still provides a boost.

Keep your eye on the general economic trends.
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Old 01-23-2023, 12:13 PM   #9
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Might be the wrong thread but I couldn’t resist.

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Old 01-23-2023, 12:25 PM   #10
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Uh--Oh, we're off the rails now.....



Got 8 cylinders and uses 'em all !!
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Old 01-23-2023, 01:17 PM   #11
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The best thing about the current market rally (22% S&P total return since mid October) is that no one notices or believes in it. People are still mentally stuck on the past, they don't see that the market seems to be moving on.
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Old 01-23-2023, 01:23 PM   #12
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It’s probably a good idea to check on your financial plan on a yearly basis. Last year many bond experts on this forum said sell your bond funds and switch to something more stable like CD or Treasuries. Bond funds behave quite differently from holding individual bonds if you hold them to maturity.
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Old 01-23-2023, 01:29 PM   #13
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Old 01-23-2023, 02:02 PM   #14
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The best thing about the current market rally (22% S&P total return since mid October) is that no one notices or believes in it. People are still mentally stuck on the past, they don't see that the market seems to be moving on.
Measuring from mid-October an interesting choice, since on October 15th SPY touched a bottom at $357. But 2 weeks later it hit $390 accounting for most of that recent run-up. And a month earlier, in mid-September SPY was at $410, so it's actually down a few percentage points measuring from that point.

Lat year has been a bumpy ride, for sure.
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Old 01-23-2023, 03:56 PM   #15
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Old 01-23-2023, 04:01 PM   #16
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Measuring from mid-October an interesting choice, since on October 15th SPY touched a bottom at $357. But 2 weeks later it hit $390 accounting for most of that recent run-up. And a month earlier, in mid-September SPY was at $410, so it's actually down a few percentage points measuring from that point.

Lat year has been a bumpy ride, for sure.
Oops, thanks for the catch, bad math on my part.

Since I'm too lazy to look up dividends, I use the Yahoo S&P 500 Total Return index when I want a look at "the market" once we are past one dividend season. That bottomed (at least for now) on Oct 12 and the corrected number I should have used is that it is up 13% since (or is flat since end of November, depending on how you want to look at it!). I am hopeful that the bottom is in, but I gave up my market timing crystal ball decades ago.
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Old 01-23-2023, 04:35 PM   #17
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Old 01-23-2023, 06:33 PM   #18
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I retired in 2014 with a pretty standard asset allocation of around 60% stocks/40% bonds. This worked fine until recently. I thought I would just wait it out, so I still was not paying much attention. But today I did a check of the Prime Rate and was surprised to see it up to 7.50%. I guess I just have been having too much fun and not paying that much attention.

I had always planned to stay with my 60/40 asset allocation unless the interest rate got above the 7 to 8 percent range. I always thought that if you could get interest rates close to that, why not eliminate a lot of risk. So I guess its time to consider a big shakeup and a move to more fixed investments.

I have always been impressed with, and appreciative, of the advice from this forum so I want to ask what others here are thinking.

Have many others here moved out of stocks and bonds, and if so, where have you gone and what types of investments are you making (CD's, gold, etc.)? If holding on to stocks and bonds, at what point are you considering moving out of them?

Thanks!
60/40 is just having a bad year, assuming your 40 is in bond funds/ETFs? I suppose it depends on your age and WR, but I subscribe to the "won the game, keep playing" approach, but I appease my conservative aka don't F it up gland with 10 years of planned spend (highly discretionary) in a bond ladder, letting everything else roll in a stock AA that is rebalanced annually.

That said, depending upon what you are underwriting as annual return, you can make an argument to go all fixed. Despite the fact that I have proforma of 5% annual average returns, I would rather play the game for the gravy and legacy. But that's just me...
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Old 01-23-2023, 07:02 PM   #19
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Have many others here moved out of stocks and bonds, and if so, where have you gone and what types of investments are you making (CD's, gold, etc.)? If holding on to stocks and bonds, at what point are you considering moving out of them
My stock market money is just in the MMF sweep account at the brokerage awaiting redeployment. All my other fixed stuff stayed the same. I have the good fortune to have saved up a "play sized pile" of excess funds ever since starting Social Seguridad. I was solicited by my bank to open a brokerage account or an "automated investing" account. Robo-investing. I am tempted to try the Robo just to do something different and see how well it does vis a vis a bunch of SPY's and QQQ's.
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