Gradual Changes in Asset Allocation

[jIMOh]

Quote:

Originally Posted by Dawg52 Right, so why go over 40-50%?

I assume this is for someone in draw down mode. As time mitigate volatility, once a person loses the time aspect of the equation (less than 20 year horizon), bonds make sense.

I was 100% equity from 1997-2006. 2007 was the first time I added bonds to my portfolio, and I am around 15-25 years from retirement (25 for sure, 15 if I can FIRE).

[Dawg52]

Quote:

Originally Posted by REWahoo If you can handle greater volatility, odds are you will die with a larger portfolio than those of us with weaker stomachs.

Weak stomach?

[ziggy29]

Quote:

Originally Posted by Dawg52 Right, so why go over 40-50%?

Probability of avoiding failure and maximizing expected portfolio growth are not one and the same. If one's goal is ONLY to minimize the chances of failure, you may be right, but if you also have a secondary goal of maximizing the expected value of your estate upon your passing, you may want to increase your exposure to equities a bit.

[Dawg52]

Quote:

Originally Posted by jIMOh I assume this is for someone in draw down mode. As time mitigate volatility, once a person loses the time aspect of the equation (less than 20 year horizon), bonds make sense.

Yes. But some considers their pension as part of their bond allocation. Therefore they may be able to stomach a higher allocation to stocks. Just depends on your situation.

[Dawg52]

Quote:

Originally Posted by ziggy29 Probability of avoiding failure and maximizing expected portfolio growth are not one and the same. If one's goal is ONLY to minimize the chances of failure, you may be right, but if you also have a secondary goal of maximizing the expected value of your estate upon your passing, you may want to increase your exposure to equities a bit.

True. I'm single with no children so not a big desire for me. Again, just depends on your situation.

[audreyh1]

IF most of your investments are taxable, then a higher equity exposure is more tax efficient - less "ordinary" income, more appreciation in unrealized cap gains.

This certainly has become more appealing to me over time!

Note: The studies don't take into account tax effects. A non-issue if the bulk of your retirement portfolio is tax-deferred.

Audrey

[REWahoo]

Quote:

Originally Posted by ziggy29 If one's goal is ONLY to minimize the chances of failure, you may be right, but if you also have a secondary goal of maximizing the expected value of your estate upon your passing, you may want to increase your exposure to equities a bit.

I would have sworn that's what I was saying here...

Quote:

Originally Posted by REWahoo Al, outside the sleeping well at night factor, I think you might be over thinking your equity percentage if your main concern is portfolio survival.

...and here:

Quote:

Originally Posted by REWahoo If you can handle greater volatility, odds are you will die with a larger portfolio than those of us with weaker stomachs.

But mebbe not...

[TromboneAl]

Thanks for the input, guys. I'm going to think about this some more.

As happens every year, I'm just about to do rebalancing, etc, then a big storm hits and knocks out the power. The lights just came on an hour ago, and boy is it nice. Easy to take electricity and Internet for granted.

[REWahoo]

Al, you got whacked hard by a storm a couple of years back. How did this one compare?

[TromboneAl]

I just rebalanced to 57%, but I plan to stay at that level for years, perhaps indefinitely. It was very hard not to wait for a big up day, but if I'm not going to be a dirty market timer, I gotta put my money where my mouth is.

Quote:

Al, you got whacked hard by a storm a couple of years back. How did this one compare?

This was much less severe. Two years ago we had 90 MPH winds, no power for a week, and no Internet for two weeks. This time only about 40 MPH, with power out for only two days.