winners who quit after winning

Are stocks the best hedge for inflation? I have read more articles along these lines: "broad equity returns have not intrinsically provided a good hedge against inflation."
Source: https://www.pimco.com/en-us/insight...-equities-to-hedge-inflation-tread-with-care/

The mutual fund advisor we talked to said we needed stocks for growth, but his own planning tool showed we would be fine with all short term fixed income. And I presume TIPS and I-bonds would perform even better but they weren't option choices in their planner.
 
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We think we won but we don't see any reason to totally stop playing. We try to play less but the market keeps going up so fast.
 
I'm following a glide path, reducing stocks and increasing bonds as I age (figure I'm best following the advice of good CFPs and groups like Vanguard).

Maybe, in a way, winning means that you can move to more conservative asset mixes earlier in life.
 
I asked myself a different question: “would I still retire early if the stock market dropped 50 percent”. I then adjusted my AA until the answer was Yes.

This is another approach to win the game /stop playing.
 
We only need a 1.5% WR to spend pretty freely. I have reduced our AA from 80+% a few years before RE to about 59% now.
 
Same answer to this question, as always, but maybe different words this time. I would have probably not ER'd when I did if I had to depend on the equity market returns to fund my retirement in the lifestyle I wanted.

However, I guess I'm still greedy, to a point. Bucket one has zero equities (just fixed income investments), never has and probably never will. It's more than enough to last me and the DW the rest of our lives in a comfortable lifestyle, barring any economic collapse, and is inflation adjusted "on my books". Bucket two is for investing, speculating, hobbies, travel, general living expenses, etc. If bucket two were all lost, I'd be PO'd, but I'd still be okay.

Maybe I'd reconsider how bucket one is invested, if I lost all of bucket two. Never thought much about it.
 
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Having read through all of the replies, as I see in many comments these days, both here and other on-line communities I participate in, there is currently a tremendous under-appreciation for risk and the markets.

I believe many folks are over-exposed to the markets and unfortunately it is going to come back and bite at some point. It's been long enough since the financial crisis that memories have faded and many folks are making the same mistakes as last time around.

I'm sorry to be the squeaky wheel on this thread, but with the markets continuing to head relentlessly higher, folks that are looking at large gains need to take a step back and have an extremely objective look at their situation. Revisit your risk tolerance and investment objective. I was particularly moved by the one comment earlier in the thread which stated "I could easily live with a 50% permanent “haircut”". If that's really true, it's wonderful that you have done extremely well and your personal situation allows for this. I personally find it difficult to believe that anyone could honestly/sincerely make the statement.

Back in 2008/2009 many folks in/at/near retirement had their situations permanently changed for the worse because they had not been prudent in this regard.

There is nothing wrong with taking money off the table or even pushing back and walking away from the table.
 
njhowie said:
I'm sorry to be the squeaky wheel on this thread, but with the markets continuing to head relentlessly higher, folks that are looking at large gains need to take a step back and have an extremely objective look at their situation. Revisit your risk tolerance and investment objective. I was particularly moved by the one comment earlier in the thread which stated "I could easily live with a 50% permanent “haircut”". If that's really true, it's wonderful that you have done extremely well and your personal situation allows for this. I personally find it difficult to believe that anyone could honestly/sincerely make the statement.
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I believe some folks here have done well enough and/or have so much of their essential expenses covered by pension/SS or such a low withdrawal rate that they can make such a statement.

The individual who stated they could handle a 50% permanent haircut was not kidding. There are some very wealthy posters on this forum.

For the rest of us, being able to handle a 50% drop in equities, hopefully not permanent, is a good test of the appropriateness of our AA.
 
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I stay in the equity market because of inflation. Needed to offset a non COLA pension.
 
njhowie said:
I was particularly moved by the one comment earlier in the thread which stated "I could easily live with a 50% permanent “haircut”". If that's really true, it's wonderful that you have done extremely well and your personal situation allows for this. I personally find it difficult to believe that anyone could honestly/sincerely make the statement.
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I believe there are many people here that could weather a 50% correction in the market, maybe even a permanent haircut but nothing is ever permanent in a market. That might be a good poll.
 
audreyh1 said:
being able to handle a 50% drop in equities, hopefully not permanent, is a good test of the appropriateness of our AA.
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Agree 100%. I’m 55 and if I live another 30 years (big if but for the sake of discussion) I would expect to see drops of 25-50%. I saw 2008-2009 when the s&p dropped about 50% and then the dot com implosion saw the nasdaq drop well over 70% and in 1987 I saw the Dow lose 25% in one day. The dog days don’t last forever. I’ve also seen the market rise over 100% (2009 to now) and the good days don’t last forever either....allocate accordingly.
 
Danmar said:
I don’t really acknowledge it as a game so I wouldn’t even consider quitting. We have by most measures “more than enough” so in reality I’m really investing for my daughter. I could easily live with a 50% permanent “haircut”. So why not keep going? For sure, It helps to have a high risk tolerance, and I do. Inflation, as Braumeister says will always be a risk.

Boils down to the question. “should I take more risk because I can afford to or less risk because I dont need to.” The answer to this question is quite personal and will depend on your risk tolerance and spending utility function. Ie do you have a productive use for more wealth/income?

Do you think people who are mega rich ie billionaires, ever consider “quitting the game”? Not sure, but I doubt it.
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I like your thinking as well. Your comment on a 50% lose and still be able to live well is something everyone should ask themselves before retiring. If you can weather the storm I see no need to stop playing the game. I would of thought with the great savers and money minds on this site more would have a higher risk level and would never stop playing even if you won the game.
 
HawkeyeNFO said:
This is hilarious!

https://en.wikipedia.org/wiki/Whip_inflation_now

It's like "voodoo" economics! Thanks for making me (in my 40s) look it up!
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It is hilarious in retrospect. But for those who lived through it, it was unpleasant. I was just old enough to understand the cost and value of things, somewhat. I remember shopping for a car with mom and dad, and there was the same car on the lot with the same options, and one was hundreds more than the other (when cars were costing $6k or so). The salesguy was pushing dad to the cheaper one as part of the negotiation, of course. They were raising prices 2 or 3 times a year, by big chunks (4% or so).

Also remember Dad getting big raises during the time, but mentioning it was just to keep up.

We haven't seen inflation that eats people alive in a while. As retirees, I hope we don't anytime soon.
 
njhowie said:
Having read through all of the replies, as I see in many comments these days, both here and other on-line communities I participate in, there is currently a tremendous under-appreciation for risk and the markets.

I believe many folks are over-exposed to the markets and unfortunately it is going to come back and bite at some point. It's been long enough since the financial crisis that memories have faded and many folks are making the same mistakes as last time around.

I'm sorry to be the squeaky wheel on this thread, but with the markets continuing to head relentlessly higher, folks that are looking at large gains need to take a step back and have an extremely objective look at their situation. Revisit your risk tolerance and investment objective. I was particularly moved by the one comment earlier in the thread which stated "I could easily live with a 50% permanent “haircut”". If that's really true, it's wonderful that you have done extremely well and your personal situation allows for this. I personally find it difficult to believe that anyone could honestly/sincerely make the statement.

Back in 2008/2009 many folks in/at/near retirement had their situations permanently changed for the worse because they had not been prudent in this regard.

There is nothing wrong with taking money off the table or even pushing back and walking away from the table.
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I was the person that made that post. The reason it is true (for me) is that I have an extremely generous pension and a very large portfolio. My idea was a 50% permanent haircut might be the worst case, yet I could still carry on with a very well funded retirement. Also, taking money off the table would be quite expensive for me given my imbedded cap gains and the high tax rates in Canada.

I have a very high tolerance for risk (see my post about being ready for the Great Recession) and really view my portfolio as mostly going to my daughter, ie investing for her. You may be correct about people underestimating risk with the market performance recently. I haven’t really participated in this performance, though, as my portfolio is Canadian. As well, I am a fairly sophisticated investor (have a CPA, MBA, CFA). I make no recommendations for others, simply expressing my personal approach. In fact I would probably say, dont do what I’m doing.
 
I recall an "All in the Family" episode where this topic arose. Mike and Gloria teased Archie about Ford's WIN buttons and Archie yelled back at them about how good they were.
 
street said:
I like your thinking as well. Your comment on a 50% lose and still be able to live well is something everyone should ask themselves before retiring. If you can weather the storm I see no need to stop playing the game. I would of thought with the great savers and money minds on this site more would have a higher risk level and would never stop playing even if you won the game.
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Particularly those with very low WR’s? Ie if you take a sub 2% WR because you are concerned about the market, a 50% decline would still have you under 4% WR with no change to your lifestyle after the decline. Not sure why you would want to “stop playing “ in that case?
 
With enough assets in our portfolio to generate a healthy annual six figure dividend income (that's much more than our WR), we keep our equity ratio at 65-70%. So, there's no 'quitting' because I stick with a allocation model that works for us.

Anything else IS timing.
 
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njhowie said:
Back in 2008/2009 many folks in/at/near retirement had their situations permanently changed for the worse because they had not been prudent in this regard.

There is nothing wrong with taking money off the table or even pushing back and walking away from the table.
Click to expand...


And people forget that those who were all bonds and non-cola annuities / pensions in the 1970s were eating cat food by the 80s.

Agree - Nothing wrong with taking money off the table. That's what rebalancing is for.
 
Recently, there are many more bullish posts here and on bogleheads, I guess that is the norm. People didn't have the 2000 and 2008 experience or they think this time is different. Comments like "PE does not matter anymore" sounds very familiar to me.
 
Maybe I should add that another reason for my extreme fear of inflation is that I lived in South America for a while, during the years of ultra-mega-hyperinflation. In some places, people were actually being paid almost hourly, so they could run out to the store with a bag full of money and buy something. In a largely cash economy, coins virtually disappeared and the smallest bill in my wallet was generally a 5,000.
 
I have a name for people who completely quit investing in equities (or other growth investments). I call them gamblers. They are gambling that historically low inflation rates will prevail in the long term. That’s too risky a strategy for me. At least until I’m 90.
 
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