flyingaway
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You need to consider what to do with all the money you will have.
Anybody else 100% stocks, no bonds?
- Thread starter BeFrank
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You need to consider what to do with all the money you will have.
I'm 60, retired 5 years, and I'm currently 80/20, equities/cash, with 70% in individual equities and 45% of that in IT stocks. We could change our lifestyle at the drop of a hat and live off cash/pension until the market comes back. My cash rises when things are frothy and I buy in the dips. Would never sell on the way down. Who can believe that all this liquidity (and printing press is still running wide open) would ever stay on the sidelines for very long? It's a ponzi scheme and we are the early-ins, the winners. I don't think it's a good situation, but that's what it is.
We will always be okay (and I do mean always, as in eternity, if YKWIM). I tell myself that selling our farm for a couple mil (current prices) would be a backup plan, but if we go broke, everybody else is broke too, and real estate won't bring that much. Doesn't even sound plausible right now, does it? I was in the market in '87, so I've experienced every plunge since then. I just could never stand to watch bond performance when stocks are running.
Forgive the ramble, please. I don't post much and I don't discuss my finances with anybody but my wife, so I get pent up in my own head. I just released. Thanks.
We will always be okay (and I do mean always, as in eternity, if YKWIM). I tell myself that selling our farm for a couple mil (current prices) would be a backup plan, but if we go broke, everybody else is broke too, and real estate won't bring that much. Doesn't even sound plausible right now, does it? I was in the market in '87, so I've experienced every plunge since then. I just could never stand to watch bond performance when stocks are running.
Forgive the ramble, please. I don't post much and I don't discuss my finances with anybody but my wife, so I get pent up in my own head. I just released. Thanks.
F.I.R.E User
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When did you go to Bonds and what was/is your AA?
As others have said, your pension/SS effectively acts to some degree like bond allocation. If it covers 100% of your spend, then why not put on everything on black?!
One thing I am considering doing once I get my sea legs in "retirement" aka living 100% off my investments, is setting up 2 portfolios: 1) Lifestyle Portfolio... supports my planned spend with a 3-4% WR at 60/40, 2) Legacy Portfolio... 100% equities for crazy big spends when the market is hot and eventually for my kids/G Kids/charity when I hit the dirt nap.
As much as I want to be an optimizer of my returns, I have come to realize bonds have a role as a ballast. Like my Dawgs, I believe in a good defense!
One thing I am considering doing once I get my sea legs in "retirement" aka living 100% off my investments, is setting up 2 portfolios: 1) Lifestyle Portfolio... supports my planned spend with a 3-4% WR at 60/40, 2) Legacy Portfolio... 100% equities for crazy big spends when the market is hot and eventually for my kids/G Kids/charity when I hit the dirt nap.
As much as I want to be an optimizer of my returns, I have come to realize bonds have a role as a ballast. Like my Dawgs, I believe in a good defense!
SecondCor521
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Pretty much what I do, except your 60/40 is my 90/10 because that's the most survivable AA for my timeframe, and I keep my two virtual portfolios in a single actual portfolio. The latter saves me having to move money back and forth if my spending rate changes.
That was my initial plan too, but I just can't do it
I've just always been a stock guy although I know fixed income exposure could mitigate the volatility a little bit.
We're 100% stocks in our late 40s. Our "retirement" will be unusually long as it includes our disabled son's eventually lifetime, so there's very little point investing in bonds for us, given that our nest egg needs to last until 2089.
We both do worry about the risk but there's no other option, so 100% stocks it is and will be.
That was my initial plan too, but I just can't do it
I've just always been a stock guy although I know fixed income exposure could mitigate the volatility a little bit.
Yea, the pickle sometimes is telling yourself you have “won the game, why keep playing” when you are used to growing a portfolio. I find my desire to “ run up the score” often screws with me.
I don't look at it as running up the score though. I just look at the numbers. If I went from 100% stock to say 80% and the market went down 50% , the portfolio would go down ~40%. Its really not significant difference. I should also add I have 1-2 years in expenses in cash. And given the increase since retiring almost 5 years ago my buffer has really thickened.
Why use euphemisms like "run up the score" or "won the game, why keep playing"?
Why shouldn't an investor stick with the investment strategy that has been successful thus far?
If there are heirs, I suggest this is the reason to keep on truckin. If there are no heirs, fuelling a high cost lifestyle will be helped by an aggressive AA. So an aggressive AA benefits most people imo.
Why shouldn't an investor stick with the investment strategy that has been successful thus far?
If there are heirs, I suggest this is the reason to keep on truckin. If there are no heirs, fuelling a high cost lifestyle will be helped by an aggressive AA. So an aggressive AA benefits most people imo.
dixonge
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ERD50
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But unless you are in a position like OP, where their pension/SS exceeds their spend, so no need to pull from portfolio at all, some allocation to bonds historically has helped with portfolio survival for the long run.
It doesn't need to be much, even 5 or 10% in bonds provides a cushion to draw from over a few down years in the market. You can see that in FIRECalc with the 'investigate AA' option. I prefer to move a little further away from the edges of the curve, so I shoot for ~ 70/30~75/25 AA long term.
-ERD50
GTFan
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I'm boring, went with the traditional 60/40 about a year before ER (age 50). Stuck with it ever since with annual rebalancing (with a brief drop down to 50/50 last year after the flash crash).
I know I've left money on the table since ER, but I sleep fine and portfolio has almost doubled in 7 years anyway. We could actually jack it up to 80/20 and be fine at this point since a 50% drop will still leave us with plenty to live on, but money is not the issue anymore.
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Koolau
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Ballhawker
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Pretty much yes. We're about 85% stocks, 10% cash, 5% bonds. I chose to go with some high dividend stocks for income rather bonds to supplement my pension income. Since we don't rely on our stock investment for draw down income, we can just let them sit there through a downturn.
Interesting- I was just reviewing 2020 returns, SPX vs. TLT and found them to be nearly identical, both with about a 15% return and similar yields. So unless you needed to sell in 2020, bonds really didn't help you.
Interesting- I was just reviewing 2020 returns, SPX vs. TLT and found them to be nearly identical, both with about a 15% return and similar yields. So unless you needed to sell in 2020, bonds really didn't help you.
Yes I am. 31 years of age 100% stocks across TSP, Roth IRA and brokerage with some options trading in a play around account. The reason I do it is because #1 I have time on my side and #2 I will have a pension either when I reach my MRA of 57 or 62 if I leave before my MRA as I’m a federal employee. My pension will be worth either 16% of my high 3 salary or 38% depending on when I exit federal service.
@BeFrank what’s your take on the comments so far?
I'm 97.5% stocks 2.5% bonds. However, I have some land, some cash and other assets that have about 25% of the value of the stocks and bonds.
If I had put the bond money into VTI, I would have doubled it, instead it is only a few thousand dollar higher.
If I had put the bond money into VTI, I would have doubled it, instead it is only a few thousand dollar higher.
clifp
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I really wish there was a reason to invest in bonds.
But ever since Buffett, call bonds "return free risk". That was back in 2008 when the 30 year was yielding 2.34% now that it is below 2%, I'd say there is even less of a reason.
Fundamentally, if you are trying to withdraw 3-4% of your nest egg, bonds are a drag on your portfolio.
When I retired in 2000, only a couple of years after the Trinity study was published, 10-year were are. 6.7%, TIPS were just under 4%. Even iBond were 3.6% (plus inflation) and Muni were 5%. Meaning that if you were looking at 4% SWR bonds were actually neutral to positive.
I'm currently 95% stock and 5% cash. But I have a lot of assets in higher-risk venture debt (10-20%) and hard money lending for House flips 10-12%. There is certainly a large element of risk but at least I'm getting respectable returns.
I also handle my mom's investments (96 years old) and do I have 30% of her assets in Wellsley, Wellington, and Vangurd Short Term bond fund.
But ever since Buffett, call bonds "return free risk". That was back in 2008 when the 30 year was yielding 2.34% now that it is below 2%, I'd say there is even less of a reason.
Fundamentally, if you are trying to withdraw 3-4% of your nest egg, bonds are a drag on your portfolio.
When I retired in 2000, only a couple of years after the Trinity study was published, 10-year were are. 6.7%, TIPS were just under 4%. Even iBond were 3.6% (plus inflation) and Muni were 5%. Meaning that if you were looking at 4% SWR bonds were actually neutral to positive.
I'm currently 95% stock and 5% cash. But I have a lot of assets in higher-risk venture debt (10-20%) and hard money lending for House flips 10-12%. There is certainly a large element of risk but at least I'm getting respectable returns.
I also handle my mom's investments (96 years old) and do I have 30% of her assets in Wellsley, Wellington, and Vangurd Short Term bond fund.
There is a good reason to invest in bonds, it protects your nest egg from some the effects of a large market drop. Earning 2% is better than losing 25%.
Are you feeling lucky!
Koolau
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Following the discussion and knowing that I've left money on the table by my relatively high bond/cash position, I'm not willing to go heavier on equities. I fear losses more than desiring gains. Also I have "enough." YMMV
