Asset Allocation in Retirement: 100% in stocks???

[pfleming]

As far as allocation and investment styles - has anyone used the Money Movement Strategy from Wealth Without Risk? The premise is that there is only one "best" asset class for any particular interest rate environment. (Now would be 100% stocks/equities)

Some back testing shows very interesting results. Based entirely on the Prime Rate to determine investment class, it avoided the negative results from 9/11 and 2008 by being in bonds during both of those time frames. It's not perfect, looking back and using ETFS it had one period of negative returns - bonds from 8/98 - 7/99.

 

[Animorph]

When you have a 100/0 asset allocation, you lose the "sell high/buy low" advantage to rebalancing because, well, you never rebalance since you'll never have an AA out of whack unless you don't reinvest dividends...

I get plenty of rebalancing advantage, it's just between equity allocations instead of stocks/bonds. So when emerging markets gets hot, I'm selling some of it and buying domestic small value or something like that. That's the advantage of "slice and dice" investing over the simplest all-world fund portfolios. Plus I do cheat and raise cash in good times and reinvest it in bad times. I just try not to hang onto it for too long.

 

[SVHoper]

I never got the "set aside 10% for stock picking" idea. Either you believe you can beat the market, or you don't. If you truly believe it, you would want to dedicate much more than 10% to this superior strategy. If you don't believe you can beat the market, why would you risk any money on a lost cause?

I understand the testosterone thing, but why not find some other, cheaper, way to indulge it?

I can't answer for others but I am an engineer - rational, logical, decisions based on research and believe that I can't beat the market - hence slice and dice, index funds for the majority, no bonds but leveraged real estate for 50%. However, I am an optimist and have had enough recent success to hope my stock-picking might be improving - so set aside my oft-supplemented "winnings" (<<10%) to "reinvest"

 

[Tyro]

Late to the party...

Hi folks,

Being recently (and somewhat unexpectedly) prematurely retired, I've been looking at a lot of suggested asset allocations -- 100-age, 110-age, 120-age, and enough pies to choke Marie Callender.

Today I came across this discussion -- very interesting and thought-provoking -- but still... all pies, from what I can tell. (Not saying there's anything wrong with pies. It's the explanations for the allocations that are often nebulous.)

Ironically, one of the first articles I came across online when I began looking into all this was Retirement Portfolios: Skip the Pie and Try the Cake by John Spitzer, Ph.D. and Todd Houge, Ph.D., CFA (February 24, 2012) of the Iowa Center for Wealth Management. They advocate a different approach, one based on layers (somewhat reminescent of investment pyramids). Of course, when you get all done, what they propose can easily be converted to a pie chart if that's easier to explain & understand, but it's the different approach (mindset) that interested me -- it seems to make more sense than just arbitrarily chopping up a pie. (like basing the cash reserve portion of a portfolio on liquidity needs rather than a percentage of the total portfolio).

Tyro

 

[teejayevans]

I can't answer for others but I am an engineer - rational, logical, decisions based on research and believe that I can't beat the market - hence slice and dice, index funds for the majority, no bonds but leveraged real estate for 50%. However, I am an optimist and have had enough recent success to hope my stock-picking might be improving - so set aside my oft-supplemented "winnings" (<<10%) to "reinvest"

Local financial advisor (Brian Rezny) who is on the radio in Miami area on June 3rd said he was pulling his clients out of equities and shorting the market...that was 11% ago. You can't predict the market, it's not Newtonian physics, to try is just gambling IMOH.
TJ