FireCalc Dips in Net Worth - Anyone Scared?

[Marquette]

I've talked about Larry Swedroe's approach a couple times before. 70% bonds to preserve wealth and lower volatility. Plus 30% of the most volatile uncorrelated assets you can find.

His approach has intrigued me but I've always wondered if it's more suitable for a larger egg. Reminds me of a math joke... 1==2 for sufficiently large values of 1 (or, if you prefer, 2+2=5 for sufficiently large values of 2).

 

[twaddle]

His approach has intrigued me but I've always wondered if it's more suitable for a larger egg.

Definitely not a one-size fits all approach, but I think it makes sense for a risk averse retiree. For somebody who is considering an annuity, or putting their money under their mattress, the implied suggestion is to "encapsulate" your risk-taking in a relatively small contained portion of your portfolio and aim for the bleachers.

In a sense, this isn't much different than Nords' approach. His basic expenses are covered by his pension, so he can go way out on the risky end of the curve for his remaining portfolio.

When I was working, I expected my salary to meet my expenses. I wasn't willing to reduce my expenses or sacrifice my lifestyle in bad times. And I wanted to be pleasantly surprised by bonuses and raises on the upside.

I want my portfolio to act similarly when I'm retired.

 

[Lsbcal]

I've talked about Larry Swedroe's approach a couple times before. 70% bonds to preserve wealth and lower volatility. Plus 30% of the most volatile uncorrelated assets you can find.

I'm not sure who actually holds this portfolio beside perhaps Larry. He has sold most or all of his TIPS now with the low rates. So with the TIPS he's moving between them and short term bonds. Now what's he doing with the rest?

He's a high net worth guy still in the accumulation stage. Is he advocating this type portfolio for retirees?

 

[unclemick]

I'm not sure who actually holds this portfolio beside perhaps Larry. He has sold most or all of his TIPS now with the low rates. So with the TIPS he's moving between them and short term bonds. Now what's he doing with the rest?

He's a high net worth guy still in the accumulation stage. Is he advocating this type portfolio for retirees?

Right now over at the Bogleheads forum Swedroe, Ferri et al are having great fun debating whether CCF's(commodities) help as an asset class in a slice and dice portfolio.

Between rounds - you might ask Larry if he still recommends this type of portfolio - and his accumulation vs distribution phase thoughts.

Beware - he writes books! . Hmmm - so does Ferri.

heh heh heh - you know a curmudgeon certificate holder couldn't resist!

 

[haha]

I'm not sure who actually holds this portfolio beside perhaps Larry. He has sold most or all of his TIPS now with the low rates. So with the TIPS he's moving between them and short term bonds. Now what's he doing with the rest?

He's a high net worth guy still in the accumulation stage. Is he advocating this type portfolio for retirees?

I've been hunting around diehards for a post in which Swedroe details his posture. I've only found snippets, maybe some out of date. Could you point me to some relevant and recent info?

Thanks

By the way, John Hussman is another guy who has recently sold TIPS in favor of short term T-bills and notes.

Ha

 

[twaddle]

Not sure what you're looking for, Ha. But here is where Swedroe's approach to "concentrated risk" is discussed:

Bogleheads :: View topic - Larry Swedroe: concentrating risks/minimizing dispersion

He also talks a lot about a tiered rate approach to buying and selling TIPS vs nominals. For example, he'd suggest 100% TIPS if they ever hit 3% real again, and 0% below 1.5% real.

 

[samclem]

Off topic: I followed Mel's advice on the Diehards forum and got some I-Bonds when they were at 3.5% real. I was lucky to do it, and don't know if we'll pass that way again anytime soon. The rules surrounding I-bonds have created an interesting ratcheting mechanism preventing the real rate from going back up: Since bondholders can redeem their bonds and buy new ones after a relatively brief holding period, people will cash them in and get new ones if the real portion of the rate ever went up appreciably, which would cost the government a lot of money. Due to this potential avalanche of folks wanting to "trade-up" if the real rates climb, I expect the I-bond real rates to stay low.

 

[haha]

Not sure what you're looking for, Ha. But here is where Swedroe's approach to "concentrated risk" is discussed:

Bogleheads :: View topic - Larry Swedroe: concentrating risks/minimizing dispersion

He also talks a lot about a tiered rate approach to buying and selling TIPS vs nominals. For example, he'd suggest 100% TIPS if they ever hit 3% real again, and 0% below 1.5% real.

Yes, this is what I was looking for. I appreciate the link and the note about his TIPS/nominals breakover.

Now I feel like fly on the wall at a faculty meeting of the Harvard Economics Department. Some of these old boys sure talk fancy.

Ha