Did anyone's financial advisor see this coming?

[audreyh1]

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Originally Posted by Dtail Based on your past posts on Cape 10 reference AA investing, are you still considering increasing your equity exposure now?

Yes, I probably will eventually and I think I have plenty of time to do it and gradually too. The CAPE10 measure is somewhat delayed - it’s not very real time. Last time (2008-2009) CAPE10 was down for many months, and I think it could be true again.

Honestly, I’m too busy right now managing tax loss harvesting/cleaning up legacy funds to deal with more. And I don’t like to make big moves when everyone is still screaming fire.

[atmsmshr]

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Originally Posted by COcheesehead My Fidelity FA told me two years ago I had enough to retire and could scale back my risk. So I did. I went in capital preservation mode. 30/70 at the time. Maybe a couple years too early, but her advice is now greatly appreciated.

Like many, I am my own FA. However, this forum has provided so many references to read over the years running up to retirement that my eyes were opened to Sequence of Returns Risk. As a result, I started retirement journey at 40/60 last year with a 7 month cash reserve. (Not including cash balance pension not yet annuitized)

Did not see the virus impact in advance with any financial clarity, but having an AA matching my risk tolerance has protected our retirement to a large degree. Just another blind squirrel finding an acorn before the black swan picked it up.

Looks like I will have to readjust my signature line at the end of the month/quarter. At some point we will have to decide if we should keep with a rising equity glidepath or cash in the pension and flip to 60/40 allocation in the second half of this year.

[bobandsherry]

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Originally Posted by harley All you who are regretting not having sold equities a month ago are missing something. As long as you are in the market you will get what the market is doing. Before the 2008 meltdown I removed about 25% of our net worth from the market for a completely unrelated-to-the-economy reason. But it worked out brilliantly, and after the crash I was slapping myself on the back for my lucky/genius move. However, I could never bring myself to buy back in, especially as the market would gyrate wildly. I did get back in eventually, but in the long run I did no better, and maybe worse, than the ones who just rode it out. IMO it's more important to have a decent bucket of fixed income money available for use during bad times than it is to be able to get out of the market before a crash. I know some don't agree with keeping a significant fixed income allocation, but in a case like this one or 2009 or whatever, as long as you aren't forced to sell equities to live on during the bad times you haven't really lost anything but numbers on a spreadsheet. And unless it really is different this time, I'll be OK. I like 3 years of living expenses in fixed income, and I'm willing to take the loss of growth for the safety of being able to outlast the bad times. I was willing to work a little longer to build that up, and that makes me sleep much better at night with my current equities allocation. Plus, the asteroid missed us today, so it probably isn't really the end times.

So, with the that type of approach it would seem that an AA of 100/0 with just a slight cash/fixed income cushion to cover the downturn period is appropriate strategy?

[OldShooter]

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Originally Posted by dixonge Like most of us, I regret not getting out earlier. ...

I'll exclude myself from that group. I have long ago accepted the fact that no one knows the future, especially including me. So DW and I just ride the wave. We're in a trough right now and will probably be there for a while. Such is life in general and investing life in particular. YMMV, of course.

[dingo]

Believe it or not my advisor reached out to me in early February to move to a cash position. I had been using an advisor to handle some small amounts that my wife had from some previous employers. I retired on Jan 2 and was in the process of moving my 401K to an IRA with them but had yet to move it.

Even though their company was not managing the funds yet they knew the transfer was coming in a few weeks . He called me on my cell one day and advised me to take a safe position and referenced the SARS outbreak from years earlier and effect on markets. I was reluctant and waited because my balance was growing at a pretty good rate. I finally made the move on on February 12 to cash. It was the only time ever that I was ahead of something like this. He said later that a lot of his clients did not take his advise.

I came close to leaving this firm a couple of months ago because of an investment strategy that I did not like going in . They have regained my trust for now.

[harley]

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Originally Posted by bobandsherry So, with the that type of approach it would seem that an AA of 100/0 with just a slight cash/fixed income cushion to cover the downturn period is appropriate strategy?

I guess, if that's what you're comfortable with. For me, I try to stay at 60/35/5, with some slippage between the bonds and the cash. 5% of my portfolio in cash will carry me for three years, and probably more if I really hunker down and limit spending.

[OldShooter]

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Originally Posted by bobandsherry So, with the that type of approach it would seem that an AA of 100/0 with just a slight cash/fixed income cushion to cover the downturn period is appropriate strategy?

Roughly speaking, we think it is. We were 75/25 prior to the current excitement and we judged the 25 to be adequate money to ride for at least 5 years. We are now launched on that voyage and we'll see how long it lasts. Maybe some would not consider 5 years of reserve to be "slight" though.

[Spock]

anybody reading zerohedge got out in January (if they weren't already out from the steady stream of impending doom there). The issues in China were highlighted there starting Jan 2.
There is a picture of the front page of USAToday from Jan 27 with the headline
"Kobe Bryant, daughter among 9 killed in crash".
The article just to the left of Kobe's picture is: "Rush is on to develop vaccine for coronavirus".

[dixonge]

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Originally Posted by Spock anybody reading zerohedge got out in January (if they weren't already out from the steady stream of impending doom there).

I got out of that cesspool a long time ago. ZH is generally permabear in its approach. The founder is an ex-broker, ex- because he isn't allowed to trade any more. A rather sordid profile here:

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

[bobandsherry]

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Originally Posted by OldShooter Roughly speaking, we think it is. We were 75/25 prior to the current excitement and we judged the 25 to be adequate money to ride for at least 5 years. We are now launched on that voyage and we'll see how long it lasts. Maybe some would not consider 5 years of reserve to be "slight" though.

Guess depends on how big your portfolio is and how much you spend. The original person I quoted was 3 years, for me that would be more like 85/15. Five years would be 80/20. Might need to revisit those ratios now based on all the fun we had. [emoji20]

[harley]

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Originally Posted by bobandsherry Guess depends on how big your portfolio is and how much you spend. The original person I quoted was 3 years, for me that would be more like 85/15. Five years would be 80/20. Might need to revisit those ratios now based on all the fun we had. [emoji20]

Actually, the original person you quoted (me) intended the fixed income to mean cash money. My bad for conflating that with bonds. I have an allocation of bonds, but also want to keep 3 years worth of expenses in cash (CDs, MM, etc.) to be able to not have to sell either of the other two categories during a major downturn. As I said, some people consider holding cash a waste, and possibly over the long term it is. But if your overall portfolio is large enough to allow for it, it greatly increases the sleep-at-night quotient.

[bobandsherry]

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Originally Posted by harley Actually, the original person you quoted (me) intended the fixed income to mean cash money. My bad for conflating that with bonds. I have an allocation of bonds, but also want to keep 3 years worth of expenses in cash (CDs, MM, etc.) to be able to not have to sell either of the other two categories during a major downturn. As I said, some people consider holding cash a waste, and possibly over the long term it is. But if your overall portfolio is large enough to allow for it, it greatly increases the sleep-at-night quotient.

Ah, OK. So then more like 85/0/15?

[harley]

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Originally Posted by bobandsherry Ah, OK. So then more like 85/0/15?

Sure, if that floats your boat. I like the decrease risk of the mixed AA. If I was still working and single, I'd probably be right in line with your 85/0/15. But with DW along and being retired I still want some bonds.

[OldShooter]

Our bonds are mostly 2026 dated TIPS and we won't need to do any selling for a couple of years, so pretty much the same as cash and not really risky. No bond funds ever/family policy.

I have commented though that the 25 portion of our formerly 75/25 AA is starting to look to me less like an allocation and more like a bucket.

[youbet]

I've made few changes YTD. Mostly planning to just ride it out. With pensions, SS and some cash over at the local B and M bank, we have spending covered for several years.

But.....

1. Did manage to remember to cash our granddaughter out of enough of the VTI in her Coverdell ESA in January to cover her freshman year at college. (Thank goodness! I would have been Papa non-grata otherwise!)

2. Despite having enough income and cash for the moment, it's still gives me a bit of an acid stomach looking at the carnage to my now 48-42-10 FIRE portfolio. It seems like just yesterday (and it was only a few weeks ago) that it was more like 57-34-9 or so. Not to mention the 20%+ drop in value!

Sigh

[OldShooter]

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Originally Posted by youbet ... it's still gives me a bit of an acid stomach looking at the carnage to my now 48-42-10 FIRE portfolio. ...

Stop looking. I haven't looked at our AA since the excitement started. For sure I'll look during our annual portfolio review in December. Maybe not 'till then. It's a long-term plan, after all.

[youbet]

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Originally Posted by OldShooter Stop looking.

Good advise. But, in my case, easy to say and hard to do!

[OldShooter]

I can't give you the citation, but I read about research showing that investors that looked at their account frequently had poorer results than those who did not.

The behavioral finance explanation was human risk aversion; the investors kept seeing frequent zigs upwards and frequent zags downward, but the zags had more impact and caused them to play with their food too much.

[free2020]

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Originally Posted by OldShooter I can't give you the citation, but I read about research showing that investors that looked at their account frequently had poorer results than those who did not. The behavioral finance explanation was human risk aversion; the investors kept seeing frequent zigs upwards and frequent zags downward, but the zags had more impact and caused them to play with their food too much.

I don’t remember the citation but yes it is what it said. The report said that dead people’s accounts were included in the inactive list.

[rick55]

The only people I see who can predict market moves are members of congress...

I guess they can give investment advice when they get thrown out.