No bonds 100% stocks???

[aja8888]

Here's a prediction that I've already made (on ER.org) but I will repeat: The Fed will pivot by the end of the year. (As time goes on, I am inclined to think it might even be sooner.) Why? Because economic conditions are deteriorating quickly. Even though they have a dual mandate, there will be intense pressure on them when it becomes obvious (even to the dense) that we are in a recession. They will declare victory as inflation "moderates", and everyone will celebrate only to eventually see inflation kick higher.

That's why I am now up to 6.5% of my assets in PM's/commodities. Could I be wrong? Sure, that's why the % isn't 50% or 100%.

Yep, once everybody gets used to the high prices of everything, a celebration will be in order. Of course, everyone will be poorer so the celebrations will be low key and minimal cost! (I think we have done this before)

 

[Dtail]

Here's a prediction that I've already made (on ER.org) but I will repeat: The Fed will pivot by the end of the year. (As time goes on, I am inclined to think it might even be sooner.) Why? Because economic conditions are deteriorating quickly. Even though they have a dual mandate, there will be intense pressure on them when it becomes obvious (even to the dense) that we are in a recession. They will declare victory as inflation "moderates", and everyone will celebrate only to eventually see inflation kick higher.

That's why I am now up to 6.5% of my assets in PM's/commodities. Could I be wrong? Sure, that's why the % isn't 50% or 100%.

Generically agree that the Fed will not have 300 more basis points in increases, especially if it deteriorates the stock market.

 

[homestead]

In the last year how much has cash dropped in value vs bonds?

 

[wanaberetiree]

In the last year how much has cash dropped in value vs bonds?

Hmm

That's actually a great point.

So if cash's buying power is 8.5% down due to inflation and bonds 9%, but bonds pay ~1-5% in dividends then the picture is looking differently.

That's what you meant?

 

[homestead]

Hmm

That's actually a great point.

So if cash's buying power is 8.5% down due to inflation and bonds 9%, but bonds pay ~1-5% in dividends then the picture is looking differently.

That's what you meant?

yes, but I didn't know the actual numbers of how much they lost.

 

[Running_Man]

yes, but I didn't know the actual numbers of how much they lost.

Cash lost 10% less than bonds.

 

[wanaberetiree]

yes, but I didn't know the actual numbers of how much they lost.

The only correction - bonds lost 9% year to date, 5 months.

 

[TOOLMAN]

Sold all bond funds last year. Own some individual corp. bonds. The rest is T-Notes & some T-Bills. Waiting for rates to increase and then move more into T-Bonds ladder. 55% Stocks index ETF's, age 67

 

[daylatedollarshort]

Generically agree that the Fed will not have 300 more basis points in increases, especially if it deteriorates the stock market.

They said 6 - 7 increases for the year, so it wouldn't be an additional 300. They've already implemented 2 rate hikes.

(From March) Fed raises interest rates modestly, plans seven rate hikes in total this year -
https://www.washingtonpost.com/us-policy/2022/03/16/fed-rate-hike/

 

[RetiredAt49]

I have a CS degree with an emphasis in math and the reason my AA is 100% stock is due to having a ton of historical data (since 1920's) and there's never been a time where an all stock portfolio has lost money (if left alone) for 12 or more years and the returns are often higher than any other AA. Now, I get that I'm only 50 years old and I know/believe that I have at least 20-30 years to go if not more... If I were in my 80's I'd perhaps rethink my AA but I'm staying put for the next 25-30 years.

A website for reference: http://www.lazyportfolioetf.com/allocation/us-stocks-rolling-returns/

 

[Out-to-Lunch]

(if left alone)

But this is a vital caveat. In retirement, many (most?) people are withdrawing from the portfolio.

 

[arcyallen]

In 2008 I had about 80% stocks and 20% bonds, very little cash. The 2008 Great Recession was a terrible time for me, I could not sleep at night. I did not want to sell stocks at a huge loss so I had to cut way back one my spending. I held on and did not sell but I learned that I cannot tolerate a 80% in the stock market. After my stocks recovered I sold a chunk of stock and now have about 50% stocks, 20% bonds and 30% cash (primarily CDs). I do not even checking the markets now, I sleep much better.

IMO everyone needs to consider their risk tolerance and needs and come up with a plan they can live with without panicking. For me anyway I definitely could not tolerate 100% stocks.

You deserve double congrats here! You figured out your risk tolerance AND you didn't make a knee-jerk reaction. People often do both at the same time.

With the markets going practically straight up since then, do you ever get a tinge of FOMO?

 

[RetiredAt49]

But this is a vital caveat. In retirement, many (most?) people are withdrawing from the portfolio.

“If left alone” really means “don’t pull out of the stock market completely (or mostly)”.

 

[wanaberetiree]

Lots of great points.

Thanks to all!

Let me add one more variable to the initial mix - would a assets’ size make a difference in making decision of 0 bonds?

E.g. 2m vs 7m portfolios for example

 

[targatom2019]

Lots of great points.

Thanks to all!

Let me add one more variable to the initial mix - would a assets’ size make a difference in making decision of 0 bonds?

E.g. 2m vs 7m portfolios for example

yes, I was at 72x, age 53, retired and don't even have bonds.

 

[copyright1997reloaded]

I have a CS degree with an emphasis in math and the reason my AA is 100% stock is due to having a ton of historical data (since 1920's) and there's never been a time where an all stock portfolio has lost money (if left alone) for 12 or more years and the returns are often higher than any other AA. Now, I get that I'm only 50 years old and I know/believe that I have at least 20-30 years to go if not more... If I were in my 80's I'd perhaps rethink my AA but I'm staying put for the next 25-30 years.

A website for reference: US Stocks Portfolio: Rolling Returns

I have a MS in CS and a BS in CS and Econ (double major) and a minor in math.

For my kid (20), I have his allocation 100% equities. (Well, almost as I just bought him some i-Bond at 9.22%.)

An important factor in the reference you provided:

All the returns are calculated over the available historical serie, starting from January 1972 until April 2022

.

1972 isn't that long ago. You also need to adjust the returns for inflation, and finally there is an assumption in historical US centric data - that the USA returns in the future will be similar to the past. I am not so sure that will be true.

it is the real (after inflation) returns that we should be thinking about. Given my thoughts regarding how they will fight inflation (or really not fight it), if I were 20/30/40/ maybe even 50 I would maintain a much higher equity allocation that what I currently have (50% equities). The markets are falling because the Fed is taking the talk, bur I have my doubts as to whether they will be able to walk the walk. I also hope to (if I have the stomach for it) allocate more to equities when the Fed punts on fighting inflation and pivots to ease.

 

[audreyh1]

Lots of great points.

Thanks to all!

Let me add one more variable to the initial mix - would a assets’ size make a difference in making decision of 0 bonds?

E.g. 2m vs 7m portfolios for example

Not really.

What matters is your financial needs and your goals for the investments compared to your assets.

People you do not need to regularly withdraw from their investments for annual spending, generally can take much higher risks if they choose.

 

[Out-to-Lunch]

“If left alone” really means “don’t pull out of the stock market completely (or mostly)”.

I commented because (as I am sure you know) when one withdraws from a volatile portfolio, one introduces SORR that is easy to gloss over when looking at charts like the one you cited.

 

[RetiredAt49]

I commented because (as I am sure you know) when one withdraws from a volatile portfolio, one introduces SORR that is easy to gloss over when looking at charts like the one you cited.

Duly noted - which is why we use a variable withdrawal strategy partly because we have some built-in cushion and can withdraw less when the market is down.

 

[Digger1000]

I'm 100% stocks. I'm 56 and 5 years retired.

 

[harllee]

I'm 100% stocks. I'm 56 and 5 years retired.

Are you concerned about your portfolio? Losing any sleep over it? I was about your age in 2008 and had 80% stocks and it was a terrible time for me, lost a lot of sleep.

 

[24601NoMore]

OP - do you have other sources of income for retirement? If so, what percentage of your expenses do you cover with those?

Another key question - what's your NEED to take that level of risk? Do you need to take on that much risk to meet your retirement goals, legacy goals, etc?

If you're not close to 100% coverage on your expenses, there is no way on earth I'd be 100% stocks. What would you do, for instance, if we get to 50+% down on equities? Sell at 50% down to cover some of your expenses? If so..yikes.

I'm (late 50s, DW mid 60s) at ~25% equities and am looking for every chance I get to sell what we do have in equities at this point and move mostly to CDs and MYGAs. I spend a good part of every day following some pretty well respected financial experts and it's near universal among them that this market is headed a LOT lower - as in S&P 3,600 or even lower. (I've actually heard estimates from well known, very credible folks of SPX 3K all the way down to SPX 1,800).

There was a poll here recently that indicated (if I remember right) roughly 1/3 of ER members have a government pension, 1/3 have a corporate pension and 1/3 have notta (that'd include me and DW). I strongly suspect that influences how much risk ER members are willing to take with heavy stock allocations. But those of us who do not have those other sources of income tend to be much more conservative and have significantly lower allocations, FWIW..at least that's my casual observation.

I'd suggest thinking long and hard about how you'd feel if the wealth you've accumulated at this point drops another 30% (SPX 3K) or more from these levels. We're already down ~17% on the S&P for the year. And how you'd feel if we got to SPX 2K - roughly another 50% down from these levels. If you have any significant wealth accumulated, that's a big number in terms of $$s "lost" and potentially a very long time (more than a decade in all likelihood) to get back to "even"..

JMHO, but I don't know a single professional financial advisor who would recommend a client in their 60s to be 100% stocks. Asset Allocation is what you want to / should focus on - and even though bond funds have been hammered pretty good YTD also, all your eggs in the equities basket is not likely to end well.

 

[Digger1000]

Are you concerned about your portfolio? Losing any sleep over it? I was about your age in 2008 and had 80% stocks and it was a terrible time for me, lost a lot of sleep.

I dont lose sleep. I'm a weirdo in that I obsess over the market when its going up and I dont pay much attention when its going down. I'm very lucky that way.

In 2000 my portfolio went from 276k down to 15k. I was all in internet mutual funds. Now I'm in index funds.

When the market was at its high this January my annual wr was at 1.1% of my investable assets. If the market drops 67% my annual wr would be 3.3%. Well a little higher than 3.3% with inflation.

FWIW I am a poor man compared to most of the early retiree's on here.

 

[npage]

FWIW I am a poor man compared to most of the early retiree's on here.

There's a couple of us here

 

[mathjak107]

Over most time frames the last two decades , equites and gold beat equities and bonds in a 60/40