The Market is Now Fairly Valued

[Patrick]

I've become the semi-pro financial advisor at work for about a half a dozen people who are nearing retirement (2-5 years), semi-pro cuz I'm "semi-paid" . Over the last couple of years I've gotten them out of crappy variable annuities and overly risky investments with high fees and costs and into Vanguard funds - principally Wellesly and Wellington. The other day when a couple of them were concerned I was able to show them where they would have been compared to where they are and they felt a lot better. That bond and dividend aspect really helps smooth the bumps out and keep them calm, too. I've got another friend at work who despite wanting to retire in 5 years is still gambling on the high risk end of the market. I've got her to agree to meeting with me to change her allocation and put future contributions into less risky investments, and now I'm working to move her existing portfolio into a more conservative alignment. Problem is, with the huge drop recently, I don't want to "lock in" losses.

How do you compensate for the risk of the declining dollar, inflation, and reduced purchasing power over time?

 

[ziggy29]

How do you compensate for the risk of the declining dollar, inflation, and reduced purchasing power over time?

For the declining dollar? Gold and foreign securities that don't have currency risk hedged away.

Inflation? Possibly gold, possibly commodities, possibly energy, possibly TIPs. And in periods when there isn't a bursting housing bubble, REITs might be decent here, too.

Reduced purchasing power? Basically a consequence of the first two.

 

[W2R]

I've become the semi-pro financial advisor at work for about a half a dozen people who are nearing retirement (2-5 years), semi-pro cuz I'm "semi-paid" . Over the last couple of years I've gotten them out of crappy variable annuities and overly risky investments with high fees and costs and into Vanguard funds - principally Wellesly and Wellington. The other day when a couple of them were concerned I was able to show them where they would have been compared to where they are and they felt a lot better. That bond and dividend aspect really helps smooth the bumps out and keep them calm, too. I've got another friend at work who despite wanting to retire in 5 years is still gambling on the high risk end of the market. I've got her to agree to meeting with me to change her allocation and put future contributions into less risky investments, and now I'm working to move her existing portfolio into a more conservative alignment. Problem is, with the huge drop recently, I don't want to "lock in" losses.

It's a thorny problem, that's for sure! I have a similar problem in my TSP, in that I am trying to move from my (C,S,I) equity funds which I had during my accumulation phase into 100% G Fund (similar to government treasuries) as part of the fixed income in my ER asset allocation. I have just resigned myself to some loss, and I am moving about 2.5% per month from C,S, and I into G. Right now, 56% in G so I should be there in 18 months which would be a couple of months before ER.

 

[cute fuzzy bunny]

Well, you seem to have a rather intimate knowledge of his posts, his investing career and his home life.

Five minutes of reading the entire web site dedicated to people making fun of him and his investments pretty much produces that result.

I grant you that I know nothing other than that he was a bore-which I suppose could hardly be said to be grounds for banning -and that he advocated investing in TIPS until stocks were more cheaply priced.

He was a lot more than a bore. He's been banned from 13 different forums so far and his admission to two forums caused most of the members to leave that forum and form their own (diehards and raddrs page) and one site to cease operations altogether (nofeeboards).

He advocated TIPS at ~4%, and I'd buy them at that price as well. That you cant get them at that price and probably never will again makes that advice a little bit irrelevant. Based on his advice on investing in equities, one would not have owned stocks since the early 1990's.

Methinks that would have put a bit of a dent in some of our early retirements.

Oh, but heres the fun part. He reads all the forums he's banned from, cuts and pastes comments like ours, and then rolls them up into quotes that he puts on his own web site and in the books he writes and self publishes that nobody buys.

So in a few days or weeks Ha, you'll be listed as a Rob Bennett supporter!

 

[Art G]

I've become the semi-pro financial advisor at work for about a half a dozen people who are nearing retirement (2-5 years), semi-pro cuz I'm "semi-paid" . Over the last couple of years I've gotten them out of crappy variable annuities and overly risky investments with high fees and costs and into Vanguard funds - principally Wellesly and Wellington. The other day when a couple of them were concerned I was able to show them where they would have been compared to where they are and they felt a lot better. That bond and dividend aspect really helps smooth the bumps out and keep them calm, too. I've got another friend at work who despite wanting to retire in 5 years is still gambling on the high risk end of the market. I've got her to agree to meeting with me to change her allocation and put future contributions into less risky investments, and now I'm working to move her existing portfolio into a more conservative alignment. Problem is, with the huge drop recently, I don't want to "lock in" losses.

WOW! And based on your picture, you look so young!
Seriously though, if you aren't licensed, I hope you have lots and lots of insurance. People get awfully finicky about losing money, and it looks to me as if you are a lawsuit just waiting to happen. JMO.

 

[ziggy29]

He advocated TIPS at ~4%, and I'd buy them at that price as well. That you cant get them at that price and probably never will again makes that advice a little bit irrelevant.

Sort of like the I-bonds I bought with a fixed 3.4% above CPI in 2000. Sure would be nice to take the cash I have now, turn back the clock eight years and load up on them...

 

[Marquette]

I'm guessing this will fall on deaf ears, but Allianz Vision is the perfect product for a sideways market. Of course, you'd need to decide that for yourself. (I guess I need to get one of those permanent disclaimers in my posts.)

So why the Vision over, say, the Target Accelerator? Guaranteed fixed interest plus the opportunity for indexed interest. You're covered in all areas then, sideways, up, or down.

 

[HFWR]

About as far as I go, as if anyone listens, is to recommend low-cost index funds...

Boring...

 

[Art G]

So why the Vision over, say, the Target Accelerator? Guaranteed fixed interest plus the opportunity for indexed interest. You're covered in all areas then, sideways, up, or down.

Well, first off, because I've never heard of the target accelerator? What is it and how does it work?
I like Vision because
A) It has a quarterly reset.
B) It doesn't have to hit a high watermark to get a raise
C) Very liberal investment options
D) They don't take control and move you to money market
E) Automatic raises at age breaks

But in an up and down market, I believe (B) is going to be huge. JMO.

 

[ziggy29]

Over the last couple of years I've gotten them out of crappy variable annuities and overly risky investments with high fees and costs and into Vanguard funds - principally Wellesly and Wellington.

I've slowly been working my mom's account into Wellesley and Wellington, too.

For people who don't need absolute capital preservation (like my mom since this IRA is "extra money" she doesn't need), right now a portfolio of 50% Wellesley and 50% Wellington has a higher yield (3.70%) than the Vanguard Prime Money Market Fund (3.56%).

So if you can handle the volatility, you're basically getting the equity growth portion of the 50/50 mix "for free" and producing more income than the money market fund.

 

[saluki9]

I've become the semi-pro financial advisor at work for about a half a dozen people who are nearing retirement (2-5 years), semi-pro cuz I'm "semi-paid" . Over the last couple of years I've gotten them out of crappy variable annuities and overly risky investments with high fees and costs and into Vanguard funds - principally Wellesly and Wellington. The other day when a couple of them were concerned I was able to show them where they would have been compared to where they are and they felt a lot better. That bond and dividend aspect really helps smooth the bumps out and keep them calm, too. I've got another friend at work who despite wanting to retire in 5 years is still gambling on the high risk end of the market. I've got her to agree to meeting with me to change her allocation and put future contributions into less risky investments, and now I'm working to move her existing portfolio into a more conservative alignment. Problem is, with the huge drop recently, I don't want to "lock in" losses.

In all seriousness Laurence I would be very careful. If you're doing what you're saying you are positioning yourself as an advisor any completely throwing out any licensing issues you could very easily be sued. (being in the business at least give you that handy binding arbitration agreement)

 

[twaddle]

Were there any coworkers suing each other over dot-com picks?

I've never heard of a layperson getting sued for investment advice. If there's liability there, everybody on this board is in trouble.

 

[retire@40]

Were there any coworkers suing each other over dot-com picks?

I've never heard of a layperson getting sued for investment advice.

Investment advice is one thing.

PAID investment advice is something else.

 

[barbarus]

What's the old saying?

Where there's a lawyer, there's a way.

 

[haha]

So in a few days or weeks Ha, you'll be listed as a Rob Bennett supporter!

LOL! I never would have anticipated that.

Ha

 

[laurence]

In all seriousness Laurence I would be very careful. If you're doing what you're saying you are positioning yourself as an advisor any completely throwing out any licensing issues you could very easily be sued. (being in the business at least give you that handy binding arbitration agreement)

Well, it consists of helping them pick which vehicles of a small basket of choices to put there 401k money and then some advice on 4% rule and reading 4 pillars, things like that. Haven't presented myself as an FA or charged a cent. I hear what you are saying but I think I'm operating in a pretty safe zone. These people had things like tax-free investments in tax sheltered accounts, things like that. Anything above general information and the how tos for signing up for the 401k matching I've referred them to professionals. I should probably worry more about FA's suing me, since I'm taking food out of their children's mouths!

 

[megacorp-firee]

Well for the ones who just retired, not so good. Of course I will rebalance(again) if the market goes further down, but not what I wanted to see as a new retiree.

It's not the optimal (far from it) scenario, but if you have set up your 'buckets of money', as some of us have, one can weather a few years of down markets.

 

[Patrick]

It's not the optimal (far from it) scenario, but if you have set up your 'buckets of money', as some of us have, one can weather a few years of down markets.

How do you weather it when inflation and the declining dollar is eating up your purchasing power?

 

[cute fuzzy bunny]

LOL! I never would have anticipated that.

Yeah, well neither did a bunch of people who hate his guts, yet nevertheless had selected snippets of things they posted 6 years ago show up on his book jacket.

Which as far as I know sold about 6 copies.

 

[megacorp-firee]

Doggone it. The Dow is in the 11,000's and it's 8 more days until I planned to DCA any more of my inheritance into the market.

I SUPPOSE it would be smartest to follow my plan, despite temptation.

Yep plan your work and work your plan. Actually, in the long run (years from now), it probably won't make a big difference.

I measure things using the hand grenade scale, not the pin point scale, so 8 days would be close enough for me ... but that's the testosterone speaking Most people on this board seem to be more precision oriented. However, one of the things that kept me out of trouble in my w*rking life was to always remember to 'NOT exceed the precision of the model'.

 

[megacorp-firee]

I hope you are right! It would be just my luck for the market to go sideways in the long term for the next 40 years.

curious ... what is magic about 8 days from now?

 

[megacorp-firee]

How do you weather it when inflation and the declining dollar is eating up your purchasing power?

See my 'exceeding the precision of the model' thought on this thread. Also my personal inflation seems to be much lower than the oft quoted 3+%. We, as many on this board, are not lavish consumers.
The real answer is that I have a huge buffer in our budget. It includes funds for a lot of travel and fun. If the sh*t hits the fan, I can hunker down to a comfortable lifestyle and put the traveling on hold for a while. Although it does not seem to be a problem yet.
Yes 5 years or so of downward market would cause me some angst, but before then, I will be on plan B.

 

[W2R]

curious ... what is magic about 8 days from now?

Well, I suppose it isn't THAT magic. Right now I have 2/3 of my inheritance in hand, and certain amounts of what I have are planned for equity index funds. I decided to DCA one fifth of these amounts, at one month intervals for five months.

I started on February 14th, so one month from then is March 14th. Only 7 days, actually. (Then April 14th, May 14th, and June 14th). If I start market timing, it isn't technically DCA'ing. Or, maybe I am being a little obsessive/compulsive about it.

 

[DblDoc]

Well, I suppose it isn't THAT magic. Right now I have 2/3 of my inheritance in hand, and certain amounts of what I have are planned for equity index funds. I decided to DCA one fifth of these amounts, at one month intervals for five months.

I started on February 14th, so one month from then is March 14th. Only 7 days, actually. (Then April 14th, May 14th, and June 14th). If I start market timing, it isn't technically DCA'ing. Or, maybe I am being a little obsessive/compulsive about it.

maybe?

I think if you were to go ahead and put another 1/5th into your AA tomorrow you would still be DCA'ing. You would have to cop to being a dirty market timer though

DD

 

[megacorp-firee]

Well, I suppose it isn't THAT magic. Right now I have 2/3 of my inheritance in hand, and certain amounts of what I have are planned for equity index funds. I decided to DCA one fifth of these amounts, at one month intervals for five months.

I started on February 14th, so one month from then is March 14th. Only 7 days, actually. (Then April 14th, May 14th, and June 14th). If I start market timing, it isn't technically DCA'ing. Or, maybe I am being a little obsessive/compulsive about it.

IMO if you looked up obsessive/compulsive in the dictionary, you would see your picture there.
As they used to say when I was in the military ... close enough for government work ... although you are so close waiting wouldn't be the end of the world either ... as I have said ... in 20 years it won't make a difference.
LOL Decision making is tough isn't it? My major decision today was whether or not to eat that last dumpling at lunch today ... I love FIRE.