What is a good fixed income choice to hold in a taxable non ira account? Feel free to be specific. I’ve been buying total bond funds but still nowhere near enough fixed. I’m thinking of moving my roth and my former employer 401 k to vanguard and putting it all in wellington.
I like that rebalancing rule of not going below a certain amount of fixed income during a bear market for stocks. For me, I think 5 years of fixed income would work, but to each his/her own.
VW
What is a good fixed income choice to hold in a taxable non ira account? Feel free to be specific. I’ve been buying total bond funds but still nowhere near enough fixed. I’m thinking of moving my roth and my former employer 401 k to vanguard and putting it all in wellington.
I don't see how this makes any sense. If we're 2 years into a bear market and you've spent 2 years worth of bonds, when you go to bump it up to 5 years you do so by selling stocks. But isn't that the opposite of what we're trying to accomplish by keeping this minimum bonds allocation--selling stocks when they are down?
Every time I work through all the scenarios, the only thing that "works" in all conditions isto just maintain your chosen asset allocation.
I don't see how this makes any sense. If we're 2 years into a bear market and you've spent 2 years worth of bonds, when you go to bump it up to 5 years you do so by selling stocks. But isn't that the opposite of what we're trying to accomplish by keeping this minimum bonds allocation--selling stocks when they are down?
Every time I work through all the scenarios, the only thing that "works" in all conditions isto just maintain your chosen asset allocation.
We all have our different schemes. Psychology matters, and different people have different psychology.Like I said, I've run many different scenarios-----and the only thing that makes sense is keeping to your chosen asset allocation.
People come up with all sorts of different plans ... cash buckets, bond buckets, sell bonds/buy stocks, buy bonds/sell stocks, etc. etc. The thing is, two different people come up with the "best, makes sense" plans to do the opposite thing in the exact same market scenario. They can't both be right. That right there is a sign that these plans haven't been completely thought out.
What it amounts to is people come up with a scenario and design a plan that fits. But they ignore how their plan works in other scenarios. Hint: The market will not do what you plan for it to do. You cannot just assume that a bear market will last X years.
Sticking with your AA works in all scenarios. It will never be the best in any certain market conditions, but it will be the best when averaged over all market cycles.
I don't rebalance and really just watch what happens to my portfolio. I don't need my investments to live or retire on or too. The question asked in this post got a little off track but I have more in cash then most the way it looks. I'm talking cash as cd, savings accounts, etc.. I have enough at my present expenses to not ever have to touch equities or bonds in my life time. When I start taking SS I will have a WR of my cash funds of .3%.
This is the way I have planned for when I retired not sure if it is good or bad but I can say if the market hit a 10-20 bear market I still wouldn't have to sell any stock or bonds to live. To have that much in cash (which is make income) I did sacrifice 18% of my portfolio to live on in retirement. The other 82% is invested and working each day and always hoping it is working in the positive direction.
Like I said, I've run many different scenarios-----and the only thing that makes sense is keeping to your chosen asset allocation.
People come up with all sorts of different plans ... cash buckets, bond buckets, sell bonds/buy stocks, buy bonds/sell stocks, etc. etc. The thing is, two different people come up with the "best, makes sense" plans to do the opposite thing in the exact same market scenario. They can't both be right. That right there is a sign that these plans haven't been completely thought out.
What it amounts to is people come up with a scenario and design a plan that fits. But they ignore how their plan works in other scenarios. Hint: The market will not do what you plan for it to do. You cannot just assume that a bear market will last X years.
Sticking with your AA works in all scenarios. It will never be the best in any certain market conditions, but it will be the best when averaged over all market cycles.
The rule applies to rebalancing when selling bonds to buy stocks. Not to drawing on your bonds for income.
Why would you do that? Spending your non-equities (bonds, cash, etc.) is just another name for shifting your asset allocation more heavily toward equities.I think most people in this forum could handle 5-7 years of expenses without selling equities.
...I think most people in this forum could handle 5-7 years of expenses without selling equities.
Why would you do that? Spending your non-equities (bonds, cash, etc.) is just another name for shifting your asset allocation more heavily toward equities.
So you're 5 years into a bear market and you have spent all your non-equity money so you're now 100% equites and NOW you have to sell them. Is that a great plan or what? Instead of rebalancing on the way down and selling stocks at 10%-20% down, now you HAVE to sell them at 40%-50% down.
# $600,000 $400,000 $00,000 60% 40%
1 $540,000 $390,000 $10,000 58% 42%
2 $486,000 $380,000 $10,000 56% 44%
3 $437,400 $370,000 $10,000 54% 46%
4 $393,660 $360,000 $10,000 52% 48%
5 $354,294 $350,000 $10,000 50% 50%
6 $318,865 $340,000 $10,000 48% 52%
7 $286,978 $330,000 $10,000 47% 53%
# $600,000 $400,000 $00,000 60% 40%
1 $540,000 $370,000 $30,000 59% 41%
2 $486,000 $340,000 $30,000 59% 41%
3 $437,400 $310,000 $30,000 59% 41%
4 $393,660 $280,000 $30,000 58% 42%
5 $354,294 $250,000 $30,000 59% 41%
6 $318,865 $220,000 $30,000 59% 41%
7 $286,978 $190,000 $30,000 60% 40%
So you're 5 years into a bear market and you have spent all your non-equity money so you're now 100% equites and NOW you have to sell them. Is that a great plan or what? Instead of rebalancing on the way down and selling stocks at 10%-20% down, now you HAVE to sell them at 40%-50% down.
I don't get your point. If it is to say a dollar doesn't care whether you got it by selling stocks or bonds - I don't get that point. Investors probably care whether they are drawing funds from stocks while depressed or living off the fixed income portion of their portfolio.There is nothing magical about the interest paid by bonds. A dollar doesn't know where it came from, and it doesn't act any differently depending on where it came from.
If you had rebalanced more aggressively and sold more fixed income to buy stocks which are now down 50%, you would have run out of your fixed income sooner!So you're 5 years into a bear market and you have spent all your non-equity money so you're now 100% equites and NOW you have to sell them. Is that a great plan or what? Instead of rebalancing on the way down and selling stocks at 10%-20% down, now you HAVE to sell them at 40%-50% down.
Could you or somebody else provide 4-5 examples of when 5 years into a bear market, the market was 50% down?
I don't have the research to argue for the others, but 2000-2009 is two bear markets, not one, with a major recovery in between. So rebalancing would have you selling stocks again to buy bonds during part of that period and the portfolio would have increased overall until 2008 (depending on withdrawal rate, AA, etc.).Interesting question. It turns out that in REAL terms, without dividends, it is not rare (I'm a little surprised). Just eyeballing this graph (Inflation Adjusted S&P 500), depending how you want to define the zigs and zags in between, we're looking at:
- 1911-1922 (looks like any year from 1911-1915)
- 1929-1934
- 1937-1943 (or to 1950)
- 1966-1981 (again any year from '66 to about '71 qualifies)
- 2000-2009 (with a dead-cat bounce in the middle - this one is arguable)
So that is about a dozen cases in 4 or 5 bear markets where you are still ~50% down after 5 or more years in real terms. If you don't adjust for inflation most of these drop out, but you are still running out of money if you are in the decumulation stage. S&P 500 Historical Prices
Someone can do a more precise analysis with actual S&P numbers, the "Table" feature shows the actual numbers.