Stocks are going higher...

[HI Bill]

Millennials today, no doubt think that "this time it's different" and they have this stock market thing figured out. Just go 100% stocks, ride the wave. Even if it corrects, it'll get back to new highs soon. The mindset correction will come with the market correction.

I was 100% in domestic equities until 2 years ago, FIRE -2 years. The argument for a different AA is lost on me for someone with decades to retirement. So what if you lose 75% of the value? It will recover. And if your investments were diversified, and they don't recover, the world (and you) will have much larger issues than just the 75% loss.

Protection against something like that could involve Flag Theory, lots of $ (enought to spend, say, 10X what you will in your lifetime), citizenship in multiple countries, investments in gold, land, bonds, stocks, medicine and guns! Most of us don't have the kind of earning potential or time to protect against all forms of potential apocolypse.

 

[OldShooter]

... Millennials today, no doubt think that "this time it's different" and they have this stock market thing figured out. Just go 100% stocks, ride the wave. Even if it corrects, it'll get back to new highs soon. The mindset correction will come with the market correction.

I'm not sure what your point is. Assuming this time is not different, riding the wave with confidence that the market will eventually again achieve new highs is exactly what should happen. Just as it has been happening for 100 years or more.

New investors' "mindset correction" will be when they realize how hard it is to actually stay onboard the wave and not panic.

 

[Clone]

Are there any issues with bond funds investing in junk quality bonds so that they can advertise slightly higher yield and attract more investors? What I am rolling around in my head (and am challenged with expressing) is the concept that if a person wants to get out of equities, are we at risk of getting into bond funds that are really just junk.

Sort of like the crap mortgages that were bundled into securities, and then collapsed during the housing crisis. CDs don't pay much, gov bonds are very low, it seems like When bond yields get so low, equities become the only game in town. Until the whole thing implodes. I am not sure I like this Zirp thing, Sam I am...

 

[pb4uski]

Articles like this...

https://www.cnn.com/2020/02/08/investing/investing-retirement-stocks-bonds/index.html

lead me to believe a sizable correction is coming sooner than we think...

to paraphrase the article: Stocks are a no brainer right now, people in their 60's should invest like Millenials and not miss the returns by diluting your investments with bonds

What's woven into this article, the Millennial mindset, is the alarm bell to me. Generational mindsets of investments/savings are shaped by market conditions during key investments years (particularly heavy on our mindset is what happens in our 20's and 30's) as we assess what savings and investments can do for us. My great grandfather was was born in 1900 and lived to 2005, and I saw the lessons he learned from his 20's and 30's carry with him through his 90's...

Millennials today, no doubt think that "this time it's different" and they have this stock market thing figured out. Just go 100% stocks, ride the wave. Even if it corrects, it'll get back to new highs soon. The mindset correction will come with the market correction.

Did you read this part?

Still, there's a reason why bonds are a good, steady source of income for retirees -- they don't tend to fall as sharply as stocks in bear markets.

"If you need all the income you can get, you can't afford losses. If you want to plan for a longer retirement, you can't expect the money to magically make all the returns you need," said Lamar Villere, manager of the Villere Balanced Fund.

Villere's fund has a current asset allocation of 70% in stocks, 20% in bonds and 10% in cash. But he said that as you get older, you should pull back on stocks and bump up your weighting in bonds and cash.

"The right answer for an older investor is a less fun one to hear. It's that you need to be working for longer or spending less in retirement," he said. "The focus needs to be on lowering risk, not maximizing returns. Blindly chasing yield can create problems."

 

[audreyh1]

A minor quibble but I am mentioning it because maybe you know something I do not. Vanguard MM Prime is currently yielding 1.64%. And 5 year TIPS are at -0.20%. You have to go out 20 years to get a real rate of return on TIPS. So that seems like maybe a slightly negative real return now. Does not stop me from holding a fair amount of cash to cover some heavy expenses this year (big taxes, new car, etc.)

Anyway I agree that money is seeking a return and stocks are currently the "it" place.

You can find places to park cash at around 2% or a bit higher for under 18 months.

 

[Major Tom]

I don’t invest in bonds to beat inflation. They are there to reduce portfolio volatility from stocks.

This is exactly the reason why I hold bonds, and will continue to do so.

 

[target2019]

I must find an appropriate Asset Allocation.
I must set an appropriate Asset Allocation.
I must follow an appropriate Asset Allocation.
...

I love my 60/40 AA, but I'm not sure I like having stocks and bonds being expensive. I am considering moving my bond AA from total bond to stable value in my 401k.

I've been using Stable Value Fund in my 401(k) to rebalance, taking from equities (Small/Midcap Index) as they've been accelerating over the years.

 

[BeachOrCity]

Articles like this...

https://www.cnn.com/2020/02/08/investing/investing-retirement-stocks-bonds/index.html

lead me to believe a sizable correction is coming sooner than we think...

to paraphrase the article: Stocks are a no brainer right now, people in their 60's should invest like Millenials and not miss the returns by diluting your investments with bonds
.

The thesis of the article is to take greater risk when someone is most financially vulnerable (the years immediately preceding and following retirement) from a nest egg perspective.

The author and the editors and publishers do a great disservice writing this. This is probably the biggest single mistake unknowledgeable investors can make. The mistake is to let a need for more savings or money drive a shift to riskier investments.

The need for more savings or money should be met with higher and earlier saving or striving for more income. Taking on additional risk beyond your risk tolerance is simply gambling.

 

[timbervest]

Stocks are going higher. Throughout all the negative media publicity, impeachment, coronavirus, Iran, Russia, you name it, stocks Keep pushing higher. They will continue much higher for the next several years I believe as more and more folks pour money into the markets for fear of missing out....i think today is like 1998-2000 again...
Anyone else think this?

Yep pretty much called the top of the market on this one.