Agreed - having a specified asset allocation doesn't have to be age based.
Actually I'm fairly consistent with my post in the referenced thread. I have made some modifications and clarifications in my strategy since then though. At the time of the referenced thread, I wasn't really familiar with "buckets" and I was trying to fit my "bucket" like strategy into the AA mold. But even then you can see that I have buckets, I just called them "Cash", "Conservative portfolio", and "Aggressive portfolio". I didn't go into details in this thread, but there were a few different layers in my conservative portfolio (it included all my current bucket 1 and 2 portfolios) and a couple layers in my aggressive portfolio (my current buckets 3a and 3b).
One of the changes I made since then was instead of holding Cash for my emergency fund, I've now changed that to short term bonds. Also I've gone from 1-2 years cash to half that - but I've added more in way of conservative bonds to back it up. I guess as I'm getting close to pulling the trigger on leaving my J.O.B., I can't stand the thought of having that much money just sitting in cash - but short term bonds are not that far off from cash.
As far as Lucia rolling over in his grave - I don't thinks so. I agree that Lucia's bucket recommendations and time lines for the buckets are way more conservative than mine. But it seemed to me in his book that he had a lot of flexibility in the buckets so that you could customize them to your personal risk tolerances. He also gave some suggestions on moving money between buckets - but again there was a lot of flexibility on how to do this. I've only read one of his books and I've never heard his radio show - so I'm not expert on his suggestions and I'm certainly not a loyal follower, but my strategy seems to be lined up with his "bucket" way of thinking.
As far as the "buckets" being different than AA as far as the end result, you are partially right, that's why I tried to fit my buckets into the an AA range in the referenced thread. But even then I couldn't nail down an exact AA - just a range. And to do that I also had to assume a withdrawal rate.
Buckets are a different way of thinking. It's hard for me to tell you what I want my asset allocation to bonds to be for my entire portfolio. I can tell you for money I intend to use in the long term (10+ years) - I want 100% equities. And I can tell you that money I want to use for the next couple years I want all in Cash/ conservative Bonds. For the in between times, I'm comfortable with a mix of more aggressive (general) bonds, balanced funds, and conservative large cap stocks.
A bucket approach will have a variable allocation to bonds. In a really bad/long down stock market, the bond buckets could get spent down completely before dipping in the stock buckets.
Mathjak had some excellent points. I plan to rebalance once a year within each of my buckets, but moving money between the buckets is quite different.
there are just so many ways that you can rebalance the buckets. you can rebalance by years of money, by value averaging ,by date ,by performance or all of the above. the buckets only give you a rough outline. that outline can be as rigid and mechanical as you want to make it or as free and flexible as you like.
after a big downturn the flexibility is there to borrow money from buckets too. they can serve as a cash source to buy and then pay back later.
not something i would do but there is just not one way of doing it.
each one of us is comfortable in what we do ,what we know and what lets us sleep at night.
im not saying one way of AA is better than any other .buckets work for me because after being an aggressive investor since 1987 im a big chicken now.
i like looking at those 2 buckets with cash and bonds on those days we had those big drops and saying to myself okay ill look again in 15 years, ha ha ha
in my mind i looked at the drop more as a spectator than actually caught up in it.
it may only be a mind game ,no different than any other AA in the way it works out but it makes me more comfortable and thats what counts.
there are so many systems out there and ways to spend down a portfolio and i doubt anyone of them is really any better. the fact is i think the folks here are one of the smartest group of financially savey people you can find in any internet forums but the rest of the world lacks a plan, a strategy or knowledge of even what to do.
for most of america hope is their strategy. they just fling money blindley into their investments and they hope it works out.
its for them a system like using buckets is a way that will never hurt them anymore than any other method or noooo method but its a plan they can carry out and measure. most of success in investing is more about having a plan and strategy and sticking to it than about anything else.
heres a secreat about me. i consider myself fairly savy at investing. i try to understand as many ideas ,concepts and products out there as i can . i have done okay since 1987 with 1/2 my portfolio in the do it yourself permanent portfolio concept and the other 1/2 following the fidelity insight newsletter which since then is up around 1200% or so. nothing that spectacular but a decent return.
but the point is as savy as i think i am i keep everything nice and simple and as emotion free as possible and i still USE MY NEWSLETTER. why? i like structure and defined instructions. i like having discipline forced on me. i dont like to think about my next move and dwell on it all the time and wonder if its right. i try to keep my own emotions out of the process as much as i can.. i like to take the stress of what to do when the crap hits the fan off of myself because i know my logic will be flawed by my own brain beliveing my own -bullshi*..
my point is much of the success i had is because i use a newsletter and that forced a discipline and a plan to follow on me.. to boot i have had almost 25 years of stress and dwelling over whats next removed from my life. that to me was priceless.
its not that the newsletter has great models or always make correct moves . they dont. they are no better than any of us in that respect. they just put together nice balanced portfolios you can pick from to meet goals and risk level .they make minor changes every so ofton for the big picture..
but the discipline of doing what im led to do vs leaving me to my emotions is what won the game for me.
so many times i would have bailed,lost money and ran in some of our downturns. the strategy and plan i followed though kept me in the game and forced me to do the right thing. the fact that some other outside force was calling the shots took the emotional stress off me making those decisions and possibly wrong ones based on emotion..
thats where a strategy like buckets can help most folks.
it may not be better than any other less rigid structure but it gives them a plan they can follow while taking the emotions out of the equation and thats the key to their success. buckets gives them something to follow and protects them from themselves if they follow it.
they still have to fill it with good investments but at least the outline is in place with rules and structure..
the only point that has lots of wiggle room if you allow it is the rebalance points . but even that can be set into stone following just one of the ways.
of couse they still need to get an education on a bucket system and getting them to do that can be the failing point.