Anybody else 100% stocks, no bonds?

[swaneesr]

At the beginning of the week I was …

100% Stocks in my 401K.

Today 80% Stock, 17% Bonds, 3% Cash
Also activated automatic rebalancing every 6 months


I rode the 100% wave long enough, now many years. Now preparing for potential retirement as early as mid 2022.


DW and I are low expense index fund investors. Not market timers. Very boring. Not afraid of market swings, they are expected. I have no idea where the market is going. I have been wrong about everything COVID.

Our plan was/is 70%-25%-05% I am working that way.

I am not promoting this is the right way for everyone. I will have An avg Megacorp nonCOLA pension. Wife will have small COLA pension. No mortgage. This allows us to accept a little more risk.

YMMV

Swanee

 

[Koolau]

You're bringing in other variables that may or may not be true depending on the investor. My point is that if you look at the data over a couple decades there is a big "price" to pay for the "security" of having less % of your portfolio in stocks.

I might quibble with the word "big" but your point is well taken. MY point in all this is that a smooth ride may be something some are willing to pay for. A Geo Metro will get you where you are going, but a Cadillac is more comfortable. You have to pay more for the comfort. Is it worth it? We each have to decide.

In my case since I have decided that I've won the game, so I've decided not to play so hard - avoid fatigue, injuries, etc. YMMV and no aspersions cast.

 

[OldShooter]

... The primary point I am trying to make is that the US stock market is at near historic valuations. This is a fact ...
and that this knowledge may actually be useful to investors - which seems to be the point we disagree on. ...

True enough. That is the disconnect. There is a dip ahead. We know that. There is always a dip ahead. But history has shown that neither technical analysis nor attempts at market timing can be relied on to produce optimal results.

Warren Buffet:

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two."

“The only value of stock forecasters is to make fortune-tellers look good."
​

I've posted this link before but I'll do it again because reading it always makes me smile. Taylor Larimore's market timing quotes: https://www.bogleheads.org/wiki/Taylor_Larimore's_market_timing_quotes

 

[FREE866]

True enough. That is the disconnect. There is a dip ahead. We know that. There is always a dip ahead. But history has shown that neither technical analysis nor attempts at market timing can be relied on to produce optimal results.

Warren Buffet:

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two."

“The only value of stock forecasters is to make fortune-tellers look good."
​

I've posted this link before but I'll do it again because reading it always makes me smile. Taylor Larimore's market timing quotes: https://www.bogleheads.org/wiki/Taylor_Larimore's_market_timing_quotes

Some real gems in that quote list

 

[ERD50]

True enough. That is the disconnect. There is a dip ahead. We know that. There is always a dip ahead. But history has shown that neither technical analysis nor attempts at market timing can be relied on to produce optimal results.

Warren Buffet:

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two."

“The only value of stock forecasters is to make fortune-tellers look good."
​

I've posted this link before but I'll do it again because reading it always makes me smile. Taylor Larimore's market timing quotes: https://www.bogleheads.org/wiki/Taylor_Larimore's_market_timing_quotes

Some real gems in that quote list

My fav:

"The market timer's Hall of Fame is an empty room." (Jane Bryant Quinn, author, columnist)

That cuts deep!

-ERD50

 

[winyaz]

True enough. That is the disconnect. There is a dip ahead. We know that. There is always a dip ahead. But history has shown that neither technical analysis nor attempts at market timing can be relied on to produce optimal results.

NOTHING produces optimal results, certainly not a strategy that can lose 50-80% of principle at times. I prefer data to witty quotes, some of which are demonstrably false.
So I could show you more data and you could then explain why you find it flawed or unconvincing. We have different viewpoints. Let's leave it at that, I've got better things to do today.

 

[clifp]

The primary point I am trying to make is that the US stock market is at near historic valuations. This is a fact: https://www.multpl.com/shiller-pe
and that this knowledge may actually be useful to investors - which seems to be the point we disagree on.

And I'll leave it at that.

You are correct, and it should matter.

The confounding thing is that many people on the forum have been saying this for the last five, six, eight years and in a few cases a decade. Shiller PE ratio has been an oft-used metric to show how overvalued the market is.

My last attempt at market timing was at the beginning of the pandemic, I thought surely a once in a 100-year pandemic would stop the rise of equity. It did for a short period of time, and certainly, some stocks were really hurt.
I threw in the towel at the end of last year, for a low six-figure loss.

The problem with saying stocks are overvalued and suggesting people should sell is what do they buy? IMO bonds are even more over valued. As are most other assets, most real estate, bitcoin, probably even art, baseball cards, and wine. Cash pays nothing and inflation is raising its ugly head.

Yes, the stock market at some point is going to go down 30%, probably even 50%, possibly as much as 75%. The thing is between now and when it crashes it could go up 30-50%, maybe even more than 100%. That's the problem with market timing.

 

[ERD50]

You are correct, and it should matter.

The confounding thing is that many people on the forum have been saying this for the last five, six, eight years and in a few cases a decade. Shiller PE ratio has been an oft-used metric to show how overvalued the market is. ....

Yep. And it wasn't just "some people", it was some long term posters here who I had a great deal of respect for in regards to their financial acumen (even if I didn't always agree with them).

I'd read their thoughts on these high valuations, and I couldn't disagree with any of it. But I also felt that no one knew when, or how hard the bubble would burst, and if it just recovered (as it always has), it wouldn't make much difference anyhow. So I did nothing (other than a very occasional rebalance).

And I always had the feeling that it would happen as they expected, and I'd be sorry. But I stayed the course.

I've been tempted to go back and try to find dates on some of those posts, and calculate where they'd be today. I'm pretty confident that missing out on recent year gains have put them in a worse position to weather the eventual crash than if they had stayed the course.

And it wouldn't be to do an "I told you so". They could have been right. It would be to demonstrate that we don't know nuttin'.

-ERD50

 

[kgtest]

'''
I've been tempted to go back and try to find dates on some of those posts, and calculate where they'd be today. I'm pretty confident that missing out on recent year gains have put them in a worse position to weather the eventual crash than if they had stayed the course.

And it wouldn't be to do an "I told you so". They could have been right. It would be to demonstrate that we don't know nuttin'.

-ERD50

Sometime early in the year we had one of those S & P prediction threads. I would be curious to see how close we all were on that. Alas I have still yet to master the ER search function and likely will have no way to find that thread now.

 

[kgtest]

I stand corrected...I found it! I predicted S/P would be at 4500. It was a close guess considering.

https://www.early-retirement.org/fo...p-prediction-107513.html?highlight=Prediction

 

[tulak]

Yep. And it wasn't just "some people", it was some long term posters here who I had a great deal of respect for in regards to their financial acumen (even if I didn't always agree with them).

I'd read their thoughts on these high valuations, and I couldn't disagree with any of it. But I also felt that no one knew when, or how hard the bubble would burst, and if it just recovered (as it always has), it wouldn't make much difference anyhow. So I did nothing (other than a very occasional rebalance).

And I always had the feeling that it would happen as they expected, and I'd be sorry. But I stayed the course.

I've been tempted to go back and try to find dates on some of those posts, and calculate where they'd be today. I'm pretty confident that missing out on recent year gains have put them in a worse position to weather the eventual crash than if they had stayed the course.

And it wouldn't be to do an "I told you so". They could have been right. It would be to demonstrate that we don't know nuttin'.

I was one of those that reduced equity exposure significantly in early 2020. Went from over 70% to 50%. I'm over 80% right now. I never planned to permanently reduce equity exposure. The reduction was temporary and due to what I thought was a high-risk event that wasn't priced into the market.

On that part, I was right, but I freely admit it was a guess and I could have been wrong. In the end, I was more right than I expected. What I didn't expect was the rebound and how quickly it happened, not to mention how high it's gone. I would never have guessed.

I suspect that my change in equity allocation was mostly a wash and I was probably lucky that I got back in and didn't wait for a 'correction', even though getting back in was always part of my plan.

What did put me ahead were S&P500 puts that I bought before the big drop. I should have bought more and sold them sooner, but they were working really well as insurance while everything was going down.

If it was to happen again, I'd probably still do the S&P500 puts - it was a small amount in a play account - and not change my equity exposure. That was risky and even if I came out ahead, it could have easily went the other way. To your point, I agree it's best to stay invested and only gamble in the gambling account.

I could go back and calculate if what I did was better than staying the course (excluding the options), but I'm lazy and probably won't.

For an easier comparison, I had gains of 18.2% in 2020 and 18.5% in 2021 (ytd, XIRR). The S&P500 was 18.4% in 2020 (total) and 24.7% ytd (no divs). My allocation was around 70/30 at the start of 2021.

If I exclude the options play and adjust for my equity exposure, yep, mostly a wash.

 

[clifp]

Nice job.

Back in the early 2000 teens my S&P predictions were pretty decent. Starting around 2017 as I grew more bearish, they got worse and worse. I didn't make one last year, if I did it would have been flat.

 

[Chuckanut]

Yes, the stock market at some point is going to go down 30%, probably even 50%, possibly as much as 75%. The thing is between now and when it crashes it could go up 30-50%, maybe even more than 100%. That's the problem with market timing.

IMHO, the big problem with market timing is when to get back in. And then doing it.

I have a few minor concessions to market timing. For example, if the market is bumping up against all time highs late in the current year, I may make next year's withdrawal early. Sometimes it works, sometimes it doesn't. I doubt if it has made much difference since I retired. But I sleep well.

 

[clifp]

Yep. And it wasn't just "some people", it was some long term posters here who I had a great deal of respect for in regards to their financial acumen (even if I didn't always agree with them).

I'd read their thoughts on these high valuations, and I couldn't disagree with any of it. But I also felt that no one knew when, or how hard the bubble would burst, and if it just recovered (as it always has), it wouldn't make much difference anyhow. So I did nothing (other than a very occasional rebalance).

And I always had the feeling that it would happen as they expected, and I'd be sorry. But I stayed the course.



-ERD50

It also wasn't just folks on the forum. Virtually every wise old money man from Warren Buffett, to Peter Lynch, Mohamed El Erian, were saying the same thing. Michael Burry, of the Big Short fame, just this week warned.

Market speculation has reached its highest level in a century, and asset valuations are more excessive today than during the dot-com bubble, Michael Burry warned in a tweet on Thursday.
"More speculation than the 1920s," he said, referring to the years leading up to the Great Crash in 1929. "More overvaluation than the 1990s."
The investor of "The Big Short" fame highlighted a Wall Street Journal story about Rivian, an electric-vehicle startup that has only made 156 vehicles and generates virtually no revenue. Regardless, it commands a market capitalization north of $100 billion after going public this week.

It appears that my (and Burry's) hypotheses are wrong, everything can't be overvalued. The market is working correctly and so nothing is particularly overvalued.

On the other hand that also means that all the metrics we've used to value stocks, real estates, bond, much less bitcoin are no longer applicable and we are basically flying blind.

Folks who've internalized buy stocks for the long run, but have no idea, who any of the guys I've mentioned or Shiller are and think CAPE is something superhero wear, are actually at an advantage in investing in today's environments because they are not encumbered by the past.

It is a weird world.

 

[tulak]

It is a weird world.

It is a weird world.

I've given up trying to be clever.

Five years of safe money in case SHTF, everything else into equities. History says that this works and if it doesn't, I'm sure it won't fail completely and I'll somehow manage.

 

[RetiredHappy]

Talk about market timing, our close friends sold a significant amount of equities before the 2020 election and decided that the market would drop significantly after the election and they would get back in then. They are still waiting....

 

[clifp]

Talk about market timing, our close friends sold a significant amount of equities before the 2020 election and decided that the market would drop significantly after the election and they would get back in then. They are still waiting....

At the risk of derailing the thread...
Ever since I've retired in 99/2000 I see this a lot. My older sister and hubby retired about 6 years ago. Their 401K was mostly Vanguard Windsor, and Wellington. Given their familiarity, when I was asked for recommendations, I had them do a roll over, and also suggested they add forum fav, Wellesley.

For some reason, they got spooked sold the W funds and talked to a financial advisor (aka annuity salesmen) sold most all of it and ended up with 2/3 of their assets in an annuity. I know people who bailed in 2007/8 and are still sitting on the sidelines.

I think what's even worse is the nearly 1/2 the population who doesn't have stocks at all. The media reports are these are all poor folk who are living paycheck, but I'm starting question it.

My BIL has Parkinson, and my sister has been hiring care givers. She pays them between $20-$25, but the also work for agencies and often earn $15/hour, one is about 30 and the other mid 40s. They are both Filipino and have some family responsibilities. We both assume they are probably living paycheck My sister recently discovered they both have significant savings. The 30-year-old has nearly 50K, split between a checking account, in hiding place in her house. If she had been investing the market the last decade or so she would have least doubled her money. I'm going to be talking to her during the holiday about finances and I'm really curious to see why none of the money was invested.

 

[RetiredHappy]

At the risk of derailing the thread...
Ever since I've retired in 99/2000 I see this a lot. My older sister and hubby retired about 6 years ago. Their 401K was mostly Vanguard Windsor, and Wellington. Given their familiarity, when I was asked for recommendations, I had them do a roll over, and also suggested they add forum fav, Wellesley.

For some reason, they got spooked sold the W funds and talked to a financial advisor (aka annuity salesmen) sold most all of it and ended up with 2/3 of their assets in an annuity. I know people who bailed in 2007/8 and are still sitting on the sidelines.

I think what's even worse is the nearly 1/2 the population who doesn't have stocks at all. The media reports are these are all poor folk who are living paycheck, but I'm starting question it.

My BIL has Parkinson, and my sister has been hiring care givers. She pays them between $20-$25, but the also work for agencies and often earn $15/hour, one is about 30 and the other mid 40s. They are both Filipino and have some family responsibilities. We both assume they are probably living paycheck My sister recently discovered they both have significant savings. The 30-year-old has nearly 50K, split between a checking account, in hiding place in her house. If she had been investing the market the last decade or so she would have least doubled her money. I'm going to be talking to her during the holiday about finances and I'm really curious to see why none of the money was invested.

If they are being paid under the table, i.e. $20-$25 per hour by your sister, they are also likely to not be reporting taxes and paying into SS with the money. Hence, they hide the the money under the pillow.

 

[clifp]

If they are being paid under the table, i.e. $20-$25 per hour by your sister, they are also likely to not be reporting taxes and paying into SS with the money. Hence, they hide the the money under the pillow.

Actually, she is giving them 1099, as is their agency.

 

[UnrealizedPotential]

Actually, she is giving them 1099, as is their agency.

My guess would be because they do not know how to invest their money. I applaud you for trying to help them, however it's been my experience that trying to help people is easier said than done for a variety of reasons that are too long . So now I only try to help myself. But I wish you luck!

 

[RetiredAt49]

Timing the market is impossible which is why I just leave it alone because the math and historical trends trump anything else.

 

[clifp]

My guess would be because they do not know how to invest their money. I applaud you for trying to help them, however it's been my experience that trying to help people is easier said than done for a variety of reasons that are too long . So now I only try to help myself. But I wish you luck!

When I was more active on the forum, I, along with many others, use to do this a lot. If people were serious, I think we helped at least 1/2 the time.

In real-life it is a bit more hit of miss. I have a friend that's constantly asked my advice and then never takes it. But, my parents, one of my sisters have taken my advice for many years. Even the other sister and BIL took some of the advice.

Generally, women are more receptive than men. I know both Vanguard and Schwab have four customers cause I've steered them to them and index funds. If they are still doing I don't know.

 

[VanWinkle]

I have 4 couples that have asked me to "handle" their investments. They want easy, uncomplicated, conservative investments. It is all IRA accounts they can draw from and all are retired. Wellesley Income was the choice each one of them made and have been thrilled with the results. No re-balancing, no multiple funds, a fairly smooth ride even in down markets.

They asked me for help, I didn't push them into it.

VW

 

[Magus]

You are correct, and it should matter.

The confounding thing is that many people on the forum have been saying this for the last five, six, eight years and in a few cases a decade. Shiller PE ratio has been an oft-used metric to show how overvalued the market is.

My last attempt at market timing was at the beginning of the pandemic, I thought surely a once in a 100-year pandemic would stop the rise of equity. It did for a short period of time, and certainly, some stocks were really hurt.
I threw in the towel at the end of last year, for a low six-figure loss.

The problem with saying stocks are overvalued and suggesting people should sell is what do they buy? IMO bonds are even more over valued. As are most other assets, most real estate, bitcoin, probably even art, baseball cards, and wine. Cash pays nothing and inflation is raising its ugly head.

Yes, the stock market at some point is going to go down 30%, probably even 50%, possibly as much as 75%. The thing is between now and when it crashes it could go up 30-50%, maybe even more than 100%. That's the problem with market timing.

Bonds are indeed more overvalued than stocks. I'm not sure I'd agree with real estate though. I can still get 7% cap rates here with 30%+ returns levered on real estate. But with the money supply up nearly 40% in the last 20 months and inflation just getting going, I'm still long equities, although I've added more RE exposure in the last 12 months than stocks.

 

[Dtail]

Talk about market timing, our close friends sold a significant amount of equities before the 2020 election and decided that the market would drop significantly after the election and they would get back in then. They are still waiting....

I also made some timing errors in 2020, but did go back in and still fine thankfully long term according to the calculators.