(How) Have you changed your portfolio

[peggy]

... in the wake of the subprime mortgage mess, in addition to other factors in the economy?

The hubby wants to take a more conservative position at the moment, fearing the worst. I'm still in "ride it out" mode, though I will admit that being about 90% in stocks (a mix of foreign and domestic, as well as small, mid and large cap) is probably not the safest place to be. (I'll be 40 in January; he's 46; our target ER date at the moment is 2011.)

Any thoughts or musings?

 

[dex]

You are correct - the market is a forecaster of the future so much of the bad news has/is being reflected in recent market action.

 

[Cb]

I haven't done a thing, and will rebalance in Feb '08 per plan, likely selling a bit of international & buying domestic value.

Here's an interesting piece that Larry Swedroe wrote early this year on this topic:

http://gnobility.com/ER/Swedroe_Lessons_from_2006.pdf

Cb O0

 

[LOL!]

We haven't noticed any subprime mess at all. Also I heard yesterday that the economy is tooling along at 4.9% growth. I'm kinda wondering what you are writing about.

Stocks have only gone up and down by 10% this year providing wonderful rebalancing opportunities for our portfolio. This is less than in previous years. When the markets go up we rebalance out of stocks; when the markets go down we buy stocks.

Do you remember the late 1990's when stocks were going up and down by 20% a few times every year?

 

[2B]

I think your 90% in stocks is too aggressive unless you are in your 20's which you said you aren't or you have massive COLA'd pensions awaiting you in a few years. Your husband is saying he isn't comfortable with the level of risk in your portfolio.

Now is probably a good time to look at a more "comfortable" asset allocation. There are various places to take a "test" to set up your portfolio. I've pasted in a link to the Vanguard questionnaire below. It's pretty basic. Another, more detailed one, is available on Asset Builder. They are FI's but will let you do their on line detailed portfolio planner for free. Vanguard said I should be 30% bonds and AB said 45%.

https://personal.vanguard.com/VGApp...education/retirement/PEdPrepareRetContent.jsp

I am 56 years old and have 40% in fixed/30% US large cap/20% foreign/10% US small cap. I rebalance in August and strive for simplicity in the form of stock index funds. I do own individual CDs because I want to totally separate my principle from interest rate fluxuations. My 40% fixed is approximately 7 years of "high" living expenses. Retirement is "soon" but not quite yet.

I haven't done anything personally as a result of the current market fluxuations.

 

[lucija]

To answer your question - I have done nothing and plan to do nothing based on the current market performance. However, knee-jerk reaction to market movements it not the same thing as AA adjustment as your personal circumstances change.

I'm still in "ride it out" mode, though I will admit that being about 90% in stocks ..... is probably not the safest place to be. (I'll be 40 in January; he's 46; our target ER date at the moment is 2011.)

To each its own, but in my opinion, you're taking on too much risk. You're only 3 years away from bailing out. How would you feel if at the end of 3 yrs you have 60% of the current portfolio? Would that derail your ER plans?

You may be fine if you (1) have a substantial (stable) pension coming your way or if (2) you're willing to ride the roller-coaster to the bitter end and are prepared to work extra 3-5 yrs if the market tanks in the mean time.

 

[Dawg52]

I agree with 2B, 90% stocks is pretty strong. With retirement just a few years away for you, I would have a more balanced portfolio.

 

[dmpi]

I think 90% stocks is OK for you. You can just postpone ER and continue working if the stocks market takes a dive in the next couple of years. On the otherhand, if you and your hubby were around 60 then I think you have too much in equities.
It also depends on how much safety margin you have. If you barely have enough money to get by in your ER, then you might want to lower your risk by selling off some of your stocks.

 

[CyclingInvestor]

I am still 100% equities, all in top-quality domestic stocks with long histories of increasing dividends
and earnings and of good capital allocation. The dividends from these are more than enough to live
on (I am 49, retired last year), so I do not anticipate selling any, except to reposition from stocks
I percieve to be over-valued to others I percieve to be under-valued when the opportunity presents.
Large stock market moves (up OR down) are a gift to me, especially when different sectors of the
market move in different directions.

 

[Bikerdude]

No change. Rebalance in Jan.

 

[simple girl]

... in the wake of the subprime mortgage mess, in addition to other factors in the economy?

The hubby wants to take a more conservative position at the moment, fearing the worst. I'm still in "ride it out" mode, though I will admit that being about 90% in stocks (a mix of foreign and domestic, as well as small, mid and large cap) is probably not the safest place to be. (I'll be 40 in January; he's 46; our target ER date at the moment is 2011.)

Any thoughts or musings?

We are in a similar position, except our stock holdings aren't quite as aggressive (75% stocks). I too will be 40 in January, and DH is 44. We would like to retire in 3 to 4 years, but this is dependent on how the market does. DH has been feeling similar to your DH, and I have been feeling like you ("stay the course"). The quandry is, if you reduce your stock holdings, it likely will take longer than the 3 to 4 years to get to ER...but if you keep the higher stock %, and the market tanks, well then it certainly will delay ER.

I suggested that we wait until 2008 and then use our Roths to buy more bonds. This will slightly increase our bond allocation, but probably not enough, since we have been putting lots of $ into our taxable account into a total stock market fund. Not sure how we are going to proceed. I just did the Vanguard questionnaire posted by 2B (thanks!), and it said we should be 60% stock, 40% bond. I'm going to have DH do it, too, and see what it suggests for him.

 

[FIREd]

We haven't made much change to our portfolio since the subprime mess started. We are fairly conservative investors and keep only 65-70% of our portfolio in stocks, which is fairly low for our age (33). As of last night, we had 66% stocks / 34% bonds (66% US assets, 34% Intl). Because our asset allocation is so conservative, we don't feel the need to make major changes when the market tanks. For example when the S&P500 dropped about 10% in the past few weeks, our portfolio was down only 4.9%. I read an article calling for another 18% drop in the stock market to bring stock valuations "where they ought to be", so I figure our portfolio could drop another 9-10% if that scenario plays out. I could live with that. So right now I sit tight and keep investing my money for the long term.

But that being said, I also feel uneasy about the economy right now. But instead of modifying our portfolio, I am thinking about modifying our budget instead. I am planning some dicretionary expense cuts for next year if the situation deteriorates further. Not that we expect our own financial situation to worsen, but it just feels like the prudent thing to do right now: spend less and save even more. I am particularly concerned about the fact that our networth has increased at a significantly slower rate in the past six months. Last time we had such a slow rate of growth was 2002. And this despite the fact we are bound to save a record amount of money in 2007...

 

[ziggy29]

I don't. When some of my holdings fall enough to warrant trigger a rebalancing when it's time to look at it, I sell some of the better performing assets and buy some of the laggards.

I was sorely tempted to pull out at the end of October but I don't really want to start emotionally. My results have been much better since I stopped using my gut to make investment decisions.

 

[jIMOh]

... in the wake of the subprime mortgage mess, in addition to other factors in the economy?

The hubby wants to take a more conservative position at the moment, fearing the worst. I'm still in "ride it out" mode, though I will admit that being about 90% in stocks (a mix of foreign and domestic, as well as small, mid and large cap) is probably not the safest place to be. (I'll be 40 in January; he's 46; our target ER date at the moment is 2011.)

Any thoughts or musings?

risk tolerance should be a combined risk tolerance, not one spouse vetoing other... IMO.

I am 98% equity right now. I sell 1% of porfolio to bonds every 6 months as part of a gradual shift to a 90-10 or 80-20 portfolio. I am between 20-25 years to ER. Goal is 20% bonds the year I retire.

 

[peggy]

risk tolerance should be a combined risk tolerance, not one spouse vetoing other... IMO.

Oh, we're going to have a big discussion tonight -- a business meeting of sorts. I did not mean to imply that we haven't been on the same page before now; we have been. He's got concerns now, and we'll address them as a couple. I'm not sure exactly HOW yet, but I'm sure we'll figure it out tonight. Or else continue the discussion tomorrow.

 

[ziggy29]

Oh, we're going to have a big discussion tonight -- a business meeting of sorts. I did not mean to imply that we haven't been on the same page before now; we have been. He's got concerns now, and we'll address them as a couple. I'm not sure exactly HOW yet, but I'm sure we'll figure it out tonight. Or else continue the discussion tomorrow.

Definitely! If you plan to "get out" at 44, you probably need to plan for at least another 50 years of income! An overly defensive portfolio will not allow you to keep up with inflation for 50 years.

 

[haha]

We may be right, we may be wrong, but one thing we always are is certain.

Ha

 

[Dawg52]

I think 90% stocks is OK for you. You can just postpone ER and continue working if the stocks market takes a dive in the next couple of years.

Who here wants to postpone ER because of an overly aggressive portfolio?

 

[simple girl]

Definitely! If you plan to "get out" at 44, you probably need to plan for at least another 50 years of income! An overly defensive portfolio will not allow you to keep up with inflation for 50 years.

Ziggy,

I'm curious what you consider an overly defensive portfolio (% stock/bond), and why. Just trying to decide what allocation we want to transition to as we get closer to ER, planning for 50 or so years of retirement. I was leaning toward 60/40 but your comment made me question if this is too conservative when retiring so young. Other replies/opinions welcomed.

 

[Moemg]

I did lower my Reit funds at the beginning of the year .I just felt if the housing market were dropping these had to go down also.

 

[ziggy29]

I'm curious what you consider an overly defensive portfolio (% stock/bond), and why. Just trying to decide what allocation we want to transition to as we get closer to ER, planning for 50 or so years of retirement. I was leaning toward 60/40 but your comment made me question if this is too conservative when retiring so young. Other replies/opinions welcomed.

I think anything from 50/50 to 70/30 should provide at least a safe 3.5%.

 

[2B]

I'm curious what you consider an overly defensive portfolio (% stock/bond), and why. Just trying to decide what allocation we want to transition to as we get closer to ER, planning for 50 or so years of retirement. I was leaning toward 60/40 but your comment made me question if this is too conservative when retiring so young. Other replies/opinions welcomed.

There are lots of on line resources to create model portfolios. I worked with 10 or more and there seemed to be a clustering around 70 to 50% equities. Age had a tendency to raise equities but closeness to retirement lowered it. Length in retirement didn't have much impact.

I moved to 40% fixed to be able to handle major market swings. With 7 years of living expenses, I might let the percentage fall if equities continue to do well under the assumption 7 to 10 years of living expenses in cash can let me wait out a market downturn.

 

[vl4226]

Wife and I are 55 and will be pulling the trigger by next year this time. We have gone from 75% to 50% equity consisting of 35% US high quality and 15% foreign equity (The switch down was done very close to the highs in Oct.). The rest is fixed zeros (8%) I bought years ago, Bond funds and Money Market (15%). We will be withdrawing 6% per year for the next 7 years but than less than 3% after SS and Pensions kick in. My main goal is not use up too much of my nestegg in ER. If I can maintain a return of 6 or 7% or at least avoid a 20-25% hit I will be very happy. When SS and pensions kick in and/or if market conditions improve I may very well rebalance.

 

[haha]

risk tolerance should be a combined risk tolerance, not one spouse vetoing other... IMO.

If I were married and my wife wanted a much more agressive or conservative portfolio than what I wanted, I would push for a post-nup, and let each person do what they wanted to do. There is no such thing as a "combined risk tolerance". Risk tolerance is probably baked in the cake by the time you leave childhood. So each spouse is going to have his or her own. This doesn't mean that one might not be able to influence or dominate the other.

Ha

 

[mathjak107]

There are lots of on line resources to create model portfolios. I worked with 10 or more and there seemed to be a clustering around 70 to 50% equities. Age had a tendency to raise equities but closeness to retirement lowered it. Length in retirement didn't have much impact.

I moved to 40% fixed to be able to handle major market swings. With 7 years of living expenses, I might let the percentage fall if equities continue to do well under the assumption 7 to 10 years of living expenses in cash can let me wait out a market downturn.

im pretty close to you , im 55 my wifes 57. we may pull the plug in 2 -3 years. got 7 years in safe money, another 7 in bonds, unlisted reits and bond funds, rest in equities. we can handle almost 15 years of crappy markets without a flinch.