Burned more than once by the market

[TJFogelberg]

I don't understand what you are trying to accomplish, but showing up on a forum with minimal introduction and basically accusing the members of being naive rubes, smacks more of trolling than any real desire to become a respected participant.

I think my original question is very valid..."why take risk if you don't have to?" I've posted a lot of personal information. Not accusing anyone of anything, and yes I'm new and haven 't fully explored historical posts yet.

 

[Midpack]

Currently 70% CD, zeroes, ST Vang bond. 30% index stock funds, a few ind securities, and high yield and longer duration bond funds.

So you're well within the broad range of AA's here, 72% of us have between 25-75% in equities - that's the "group think" here. The data was in post #4 earlier. And your plan assumes you've 'already won the game' like many here.

Though you've overlooked the distinction between SIRE and FIRE, a large factor in each of our plans.

But your title and uninformed assumptions were a nice ruse though...

 

[audreyh1]

I think my original question is very valid..."why take risk if you don't have to?" I've posted a lot of personal information. Not accusing anyone of anything, and yes I'm new and haven 't fully explored historical posts yet.

Then why this statement?

I am surprised at the group think on this board that seems to have most fully invested in stocks.

You barely even know this group, your first post was yesterday, yet you open this thread painting everyone else here with this broad brush that isn't even true. And declaring us all of group think - that was an accusation.

 

[easysurfer]

I think my original question is very valid..."why take risk if you don't have to?" I've posted a lot of personal information. Not accusing anyone of anything, and yes I'm new and haven 't fully explored historical posts yet.

I think the answer is would the person be happy.

Some folks are more than happy to sit on the money and run out the clock. For others, that's not what they want.

Football analogy, why didn't the Falcons (sorry Falcons fans) run, then kick the FG to ice the game? The end game was definitely in sight. But not how they rolled. A valid comparison, I think.

 

[Meadbh]

Welcome to the forum. A superficial glance at financial posts may give the impression that many forum members have a "high" allocation to equities. After participating in the forum for some time, you will become aware that (a) some posters are more vocal than others and (b) there is considerable variation in asset allocation. I myself currently have 30-33% each in real estate, equities and fixed income, and 5% in cash. In the past I have also had precious metals. Stick around and you will learn a lot. But please don't lecture.

 

[target2019]

We need a groupthink poll...

Some opinions are very dogmatic (and that's ok), but I'm sure most here are adapting to changing circumstances. I don't consider that groupthink.

 

[ERD50]

Then why this statement?
You barely even know this group, your first post was yesterday, yet you open this thread painting everyone else here with this broad brush that isn't even true. And declaring us all of group think - that was an accusation.

+1.

Now a question for the OP - when and how did you get "burned by the market" multiple times?

Every market drop our investing lifetimes has seen a pretty quick comeback. As others have pointed out, a buying opportunity for those sticking to a fixed AA. Those people did great, no one got burned.

What happened?

-ERD50

 

[Chuckanut]

Also, don't confuse chatter about equities with a high allocation in equities. Mulligan as a prime example.

A lot of people follow Mulligan's example. Proof is how happy people are when they "take a Mulligan". !!rimshot!!

From what I see there is a lot of agreement on index funds vs. managed funds . And even more negative agreement on Variable Indexed Partialy Recursive Limited Guarantee Reverse Payment Annuities with 65 pages of detailed legal jargon no buyer understands.

Other than the above two, I think we are all over the map. And sometimes the participants in a thread are using different maps!

 

[Ready]

I see no problem with having 30% in equity index funds. That should be enough to handle inflation while still presumably allowing you to sleep at night.

 

[Major Tom]

I don't understand what you are trying to accomplish, but showing up on a forum with minimal introduction and basically accusing the members of being naive rubes, smacks more of trolling than any real desire to become a respected participant.

That wasn't my read on it. Some folk have a more "direct" communication style that can come across the wrong way. I think he/she was just being straightforward without paying attention to the social niceties. I guess everyone has a different approach, and mine is usually to "read the mail" on a forum for quite a long time before beginning to post. That way, I can get the "lay of the land" before diving into it. But then, I am more of a reader/listener than poster/speaker.

Hey, you're here now, and welcome. There is quite a wide range of investment styles and degrees of knowledge here, which keeps it interesting. There are also a surprising number of knowledgeable and helpful folk who, along with the mods, keep us all on the straight and narrow. You've landed in a good spot!

PS - the title of this thread reminds me of my Dad, who once *gasp* invested in stocks. I don't know what the investment vehicle was - it was something offered through his bank in England (where I grew up). He described to me the guarded excitement at seeing the value of his investment go up over time, then the horror of seeing it, at some point, go down. He couldn't handle the "going down" part, so sold his investment, and never invested in stocks again. If he were still around, he'd probably have a heart attack if he saw how my money is invested! Each to their own - we all should do what we are comfortable with, though it doesn't hurt to push the boundaries of the comfort zone from time to time.

 

[Chuckanut]

FWIW, anybody who thinks this group or a sub-group is engaging in group think would be doing us all a great favor by offering another view and an argument to support it. We would owe that person a big Thank You.

That said the OP has a good question. If one has won the game, why keep playing and putting the prize at risk?

Of course, answering that question opens up a whole bag of issues on such topics as a person's individual risk tolerance, risk/reward ratios, and the long term uncertainties of life.

Good luck getting agreement on that.

 

[nash031]

As DashMan pointed out in a roundabout way, you can find a reason to doubt the future prospects of just about any asset class. He chooses to invest in individual stocks, largely, in order to avoid the impact of debt in the future as he's speculating on a global market crash sometime in the future which would affect the markets writ large, but take less a toll on his individually selected stocks. He accurately points out that bond prices are high, likely to decline in the future as interest rates increase. He also mentions that cash isn't safe in such a situation since it's all about good faith in the government which prints it.

Gold or physical assets like it are often hedges against this, but can be crippling against inflation. Real Estate can be a good hedge as well, if you're in the right market. Insurance "investments" are a drain due to fees and loads, but can provide guaranteed income which historically underperforms other asset classes in the long term...

Etc. Etc.

There are a whole slew of options, none of which is fool proof, otherwise everyone would be doing it... and then you'd see the groupthink.

That many of us have high allocations in equities is not indicative of groupthink, but rather a deliberate decision based on the information at hand respecting our individual situations. With a significant pension in the works, it makes little sense for me to be heavily invested in cash or perceived "safe" investments in the accumulation phase. Maybe when the game is won, I'll reevaluate that.

 

[Which Roger]

As Mr. Bogle points out, asset allocation should be based on one's willingness, need, and ability to take risk. We're all different in this regard, thus allocate our assets differently.

My observation on this forum is that our asset allocations more or less follow a bell curve: Most are somewhere in the middle with somewhere between a 60/40 and 40/60 allocation, but there are a few on the extremes - almost all stock or hardly any stock, but these are the ones who tend to stand out in our minds because they are different from the majority.

 

[Ready]

The main argument for having at least a modest investment in equities is to protect against runaway inflation. With 100% invested in CDs or other low yield investments, a significant runup in inflation could dramatically reduce spending power of the dollars saved. Without knowing the OP's situation, we have no idea how much cushion he has to protect against this.

 

[daylatedollarshort]

We can live mainly off SS, pensions and some side income so we decided to not have a high percent of our assets invested in the stock market in retirement. We always had a decent income most of our working lives, and if I had to do it over again I would have had not invested much in stocks at all even when we were younger. I prefer to have income and expenses I can control and I can't control the stock market. For inflation protection we use a matching strategy. I'm more concerned with avoiding big losses than I am with market gains in retirement.

We've noticed that the mantra from the mutual fund advisers is always "you need stocks for growth" even for those who do not. The last time we talked to reps from one of the big mutual fund companies for a portfolio review we pointed out that we would be fine even if we kept all our assets in short term fixed income based on their own retirement calculator.

 

[Gumby]

Personally, after a 35 plus years bond bull market with rates near zero, why would anyone have a large allocation in bonds? Bond funds are particularly risky if there is a sharp rise in rates. But the AA crowd sticks to their allocation when bonds have no where to go but down.

A very good point Dash man. We have some existing exposure to bonds through balanced funds (VWELX/OAKBX), but we are not putting new money into them for that very reason. So our bond allocation is gradually decreasing and has been for awhile.

 

[Midpack]

Personally, after a 35 plus years bond bull market with rates near zero, why would anyone have a large allocation in bonds? Bond funds are particularly risky if there is a sharp rise in rates. But the AA crowd sticks to their allocation when bonds have no where to go but down.

What would you suggest as a similar risk/return alternative to bonds/funds? CD's and other cash equivalents have provided returns from 0-1% unless you go long. And bond funds were declared dead beginning in 2009 when rates were slashed, and that clarion call has been repeatedly constantly since. Meanwhile many short and intermediate bond funds have returned 2-3% per year after dividends and NAV changes for 8 years.

Everyone holding bonds should know the relationship between bond fund NAVs and interest rates.

This has been discussed many times here an elsewhere, and no one has yet come up with a clearly better alternative that isn't just trading one type of risk for another. Unless I missed it.

 

[TJFogelberg]

I got involved with actively managed funds that underperformed the market and charged outsized fees. Even during roaring 90's built up a modest portfolio of CDs and also accelerated mortgage payments. Rode out '98 but pulled out in'12. Retirement is fully funded at net return of zero. Boring but works for us. Rebounds don't always occur (Nikkei 39,000). Also they can take 15 years from bottom. Nasdaq is 6K now but was 5000 in 2000.

 

[Ready]

What would you suggest as a low risk alternative to bonds/funds? CD's and other cash equivalents have provided returns from 0-1% unless you go long. And bond funds were declared dead beginning in 2009 when rates were slashed, and that clarion call has been repeatedly constantly since. Meanwhile most bonds have returned 2-3% per year after dividends and NAV changes for 8 years.

This has been discussed many times here an elsewhere, and no one has yet come up with a clearly better alternative that isn't just trading one type of risk for another. Unless I missed it.

I don't think there is any obvious answer to this question, which is why it comes up on the forum so frequently.

I have some five year CD's paying 2.25% in a taxable account. Every year when I do my tax returns I ask myself why did I buy these CDs? I do have some 3% PenFed CDs in an IRA, so at least those are tax deferred.

I have a lot of municipal bond funds in taxable accounts. The after tax equivalent yield is probably in the low 2% range.

I don't worry as much about interest rate sensitivity as others seem to. Interest rates have been stagnant for so long now, that even when they do eventually rise, I believe it will be so gradual that it just won't be any big deal. The higher yields will eventually help to offset the dropping NAV of the funds and it should all work itself out. We won't get rich off the yield, but it provides some cushion against bear markets.

Interest rates will rise at some point in our lifetime. And markets will crash. And then recover. And in the end, it always seems to work out fine.

 

[Midpack]

Personally, after a 35 plus years bond bull market with rates near zero, why would anyone have a large allocation in bonds? Bond funds are particularly risky if there is a sharp rise in rates. But the AA crowd sticks to their allocation when bonds have no where to go but down.

What would you suggest as a similar risk alternative to bonds/funds? CD's and other cash equivalents have provided returns from 0-1% unless you go long. And bond funds were declared dead beginning in 2009 when rates were slashed, and that clarion call has been repeatedly constantly since. Meanwhile many short and intermediate bond funds have returned 2-3% per year after dividends and NAV changes for 8 years.

Everyone holding bonds should know the relationship between bond fund NAVs and interest rates.

This has been discussed many times here an elsewhere, and no one has yet come up with a clearly better alternative that isn't just trading one type of risk for another. Unless I missed it.

I don't think there is any obvious answer to this question, which is why it comes up on the forum so frequently.

I agree. But if Dash Man thinks people holding bonds/funds are mistaken, presumably he has a better asset class(es) of similar risk/return to recommend.

 

[walkinwood]

I am surprised at the group think on this board that seems to have most fully invested in stocks. This is my question...if one has enough resources to fund retirement using a 'safe return' rate, why gamble with the bulk of one's assets in the stock market? (Doesn't anyone else remember '08?) We're planning to spend down. At 85 we can age in place and live comfortably on SS if we're still kickin. We're not planning on catastrophic LTC costs etc, hoping to be dust in the wind before that happens.

You either came in here with a preconceived notion or you haven't spent time reading the threads.

There are people with all sorts of investment philosophies and practices here, with a wide range of wealth & income, strategies on withdrawal and spending etc. etc.

 

[Lsbcal]

This thread is very entertaining. Lots of good ideas stated here plus plenty of silly ones.

I feel that at age 69 a 60/40 is good for us. But am willing to cut back on equities if certain well defined conditions materialize. The last time these showed up were in late 2007 and we are nowhere near now. One condition is an inverted yield curve.

 

[Gumby]

There are people with all sorts of investment philosophies and practices here, with a wide range of wealth & income, strategies on withdrawal and spending etc. etc.

That's what makes it an interesting place. It would be boring if we all did the same thing.

 

[RobbieB]

I am surprised at the group think on this board that seems to have most fully invested in stocks. This is my question...if one has enough resources to fund retirement using a 'safe return' rate, why gamble with the bulk of one's assets in the stock market? (Doesn't anyone else remember '08?) We're planning to spend down. At 85 we can age in place and live comfortably on SS if we're still kickin. We're not planning on catastrophic LTC costs etc, hoping to be dust in the wind before that happens.

If I was 85 I wouldn't be 65 % in the market either, but I'm 63 and the income is nice.

 

[Which Roger]

And bond funds were declared dead beginning in 2009 when rates were slashed, and that clarion call has been repeatedly constantly since. Meanwhile many short and intermediate bond funds have returned 2-3% per year after dividends and NAV changes for 8 years.

+1 Bond funds will tank someday. The stock market will crash someday. Inflation will return someday and lessen the value of our cash investments. We just don't know when. That's why it's important to understand one's risk tolerance and stick to an appropriate asset allocation.