anybody else super conservative?

[frayne]

I usually chuckle a bit when someone asks, "do you play the markets?" My reply is always, nope, I invest in them. The question is usually posed by the same person who doesn't understand how someone can retire at age 54 without a pension and whose eyes start to glaze over when you talk about rolling over a lump sum pension settlement and 401K into a self directed T-IRA and investing in index funds.

 

[Happyras]

Interesting example. I retired in 1999, but not with 100% stocks for my retirement portfolio so I didn’t experience this personally. I was rebalancing. Yeah by March 2009 things looked bleak, but recovery was swift and by mid 2010 staying invested I was well out of the hole. 2010-2020 was a huge long bull market that got me way ahead of inflation growth wise.

Using life expectancy from birth is way off base for talking about death rate for older/retired folks.

Maybe not what you hope to see, but here is the link for what you want for older folks. https://www.ssa.gov/oact/STATS/table4c6.html

A man 69 YO now should see 14.24 more years with a probability of death within one year of 0.024325..... Not so far or way off, this makes him 83.24 average at death living those 14 more years as suspected.

 

[twirler]

To OP

Okay, let's play the devil advocate. Where else would you go to live an earn better than here and why haven't you gone there?

Why would you hold bonds if you don't trust the gov? in your 50's assuming you have no reason to assume your health will take a down turn soon, id say yes you are conservative too much so for my opinion.

The reason why I say this is the possibility of not keeping pace with inflation is as much a risk as recession. Should you wish to maintain your quality of living a certain amount of aggression is required.

Also, what does your trust level of gov. country the fed ect... have to do with wall streets greed. At the end of the day they are going to try to earn as much money as possible(corps) and this translates to higher share prices for the share holders, so don't worry about competency, because that is cured by experience, instead look to the greed and power they wish to hold on to.

 

[jldavid47]

Having a zero equity allocation really requires you to have truckloads of money, which apparently many on this board do so lucky for them.

Not necessarily. If your expenses are low and Social Security covers most if not all of them you can easily afford a zero equity allocation, especially at 5% interest rates.

 

[Koolau]

Weird that you don't trust all the politicians, but invest in bonds or anything at all. If I didn't trust the political system of a Country, I'd be in gold and silver and leave.

I think the same "danger" of politics affects stocks and bonds pretty equally, so no difference there.
For example when a Country nationalized a company, all it's stock holdings and bond holdings would become worthless. So no change in political risk by buying bonds vs stock.

Have you lived in another Country ?
I have and I can say that the Capitalistic system here of free enterprise is much more alive and thriving than elsewhere.

I'm about 80% stock.

I have my areas of doubt about the people running our system. But not the system itself. AND it's our fault if the people we chose are not up to the task. That can be changed. SO... I'm able to trust enough to keep an equity position of about 1/3. Heh, heh, my PMs are much less than the 100% you suggest for those who don't trust. Maybe between 2% and 5% from time to time.



As far as leaving - where would one go? No. I think I'm here for the duration and hoping/praying for the best for our amazingly formed nation. YMMV

 

[dheb]

I'm not that conservative. On a cynical day, I might say that big business runs the country (by 'owning' the government), and the huge corporations that donate large sums to politicians have a strong interest in not letting the whole system collapse.

 

[rk911]

We sleep just fine. Our AA is in our investment accounts...

- Domestic bonds 43.25%
- Large Cap 28.22%
- Cash 13.14%
- Small Cap 12.29%
- Intl Stocks 2.17%
- Other/Unclassified .93%

Cash is cash but we also have laddered CD's and laddered municipal bonds (included in the above). The above does not include cash in our retail bank checking or savings accounts.

 

[JJpop]

We are, but have zero equities. I believe that if you have won the game, why keep playing, the retirement portfolio game that is.

Personally, I am at a quandary right now, being exclusively in CDs and MM, I am not sure where to go next. Based on my life expectancy I have another 10 years of return needed. I am not really happy going over 5 years in CDs at the moment and 5% is my minimum acceptable return before I jump in. MM is paying 5.4% right now, yes, I know that will not last long but anything over 5% in CDs is acceptable. I am tempted to throw a big chunk in at 5% into monthly paying CDs and let SS and RMDs take care of the rest. Decisions, Decisions.

I am similar but in MYGA’s, CDs treasuries, muni’s, IBonds and some corporates as well.
Just curious you say 5% is your minimum return. So what were you invested in from say 2015 to 2022?

 

[JJpop]

I'm of similar ilk. Currently 0% equities. Not that I don't believe in stocks but me that I thought that they were overvalued and got out since our retirement is overfunded so we don't "need" stocks.

Currently mostly (88%) brokered CDs/UST/Agency issues along with some I-Bonds (7%) and some investment grade bank preferred shares (4%) and money market (1%) with a weighted average yield of 5.2%. Over the next 6-12 months I will probably expand the preferreds to 20% or so with proceeds from maturities. If/when equity valuations seem more sensible then I may tip-toe back in some.

Not a trust issue for me. I think the Fed has handled things pretty well after a dubious start. I have no confidence in Congress.

Same question to you?
Brokered CD’s have not even sniffed 5% until very recently so how do you have such a high rate?

 

[JJpop]

I see so many possible black swan events with the chaos in the government.
Add in Russia, the advent of AI and all the bad actors that can wreak havoc from their keyboards.
We don’t need stocks and hope the fixed income returns stay decent for a few years which will really be beneficial.
If I could get a safe 5% across the board going forward it would be nirvana.

 

[craigbro63]

I retired at 56, now 60. I have a similar conservative position without real estate, roughly 70% (401k Stable Value, cash/CDs) 30% (401K US Equity, a few taxable stocks/Funds) and Roth 70% equities.
75% of everything is in 401k and when it reaches 35% equities I rebalance. Has done this 3 times since I've retired. Never has hit my negative rebalance point yet.
I sleep great with this setup. Plan on starting 401k withdrawals at 65 and collecting SS at 70, both sides generally live into their 90s and I live a lifestyle as I always have...actually better!

 

[Gearhead Jim]

^^^^^
To my thinking, the black swan events can effect stocks or bonds or gold or everything.
Very few people expected 911 or Covid or 10% inflation.

 

[Car-Guy]

I see so many possible black swan events with the chaos in the government.
Add in Russia, the advent of AI and all the bad actors that can wreak havoc from their keyboards.
We don’t need stocks and hope the fixed income returns stay decent for a few years which will really be beneficial.
If I could get a safe 5% across the board going forward it would be nirvana.

All true from my POV, particularly the bold text. Finally the war on savers seems to have ended, at least for a while. I'm getting an average of ~5% on my fixed income investments in my IRA and close to 8% in my 401k where I have my big bucks. Like everything though, it can be a double edged sword. RMD's start for me next year and it's going to be close on hitting the lower IRMAA tier.

 

[COcheesehead]

I see so many possible black swan events with the chaos in the government.
Add in Russia, the advent of AI and all the bad actors that can wreak havoc from their keyboards.
We don’t need stocks and hope the fixed income returns stay decent for a few years which will really be beneficial.
If I could get a safe 5% across the board going forward it would be nirvana.

I just ran a bond screen at Fidelity. All high investment grade, non callable going out up to 30 years, paying at least 5%. So pretty much guaranteed 5% for 30 years. I got 2977 results. What are you waiting for?

 

[GaryInCO]

I’d be nervous locking everything into 5% bonds, considering you needed 10% in the 70s to stay ahead of inflation. 5% looks good today, but…

 

[JJpop]

I just ran a bond screen at Fidelity. All high investment grade, non callable going out up to 30 years, paying at least 5%. So pretty much guaranteed 5% for 30 years. I got 2977 results. What are you waiting for?

Well we are very early 70’s.
What do I do with all the stuff we have that matures in 6 months to 3 years?
If you have a brokered CD you bought a few years ago and is yielding 3 % do you dump it for a big loss now?
I have a MYGA that matures in a year and another in 2 years, etc.

 

[maestro]

I'm 54, have had a good career and built up a decent net worth. FireCalc and NewRetirement say I can retire and be in good shape 99%. But....I am a very conservative investor. Portfolio is roughly 45% bonds (pretty short term, with almost half maturing over next year), 15% preferred stocks (including half that have maturities in 3-5 years), 10% common equities, 15% cash/money market, and 15% real estate (rental property). I am educated, MBA in finance, have worked in the investment industry for 25+ years. I know all the statistics and strategies on equities, asset allocation, historical returns, etc.

But.... I just cannot hold a big allocation to equities. I fundamentally don't trust the people running the country (or states or locals, for that matter), don't trust the Fed, etc. Maybe "don't trust" is not the best word, a better description is that I believe they are all incompetent, or the system is so entrenched that its impossible to make any real change. (This is not political, it seems to be the case no matter which party is in power.) [Mod Edit]

Curious as to other people feel like this? How do you hold 60% equities in this kind of world and sleep? Like I said, I know that long term historical returns, etc etc etc. but it seems very likely the next 30 years are going to be very different from the last 30 years. Am i wrong? Do I need a therapist? What am I missing? Or do we just hold our nose and invest in 60/40 because that has worked for the last 30 years?

You sound like me 8 years ago, and I totally get your feelings. Back then, I said, '...nah, it can't be true.... 60% equities is the way to go...." Oh, and the "don't time the market theory"... is also pounding you in the head. Melatonin helps me sleep, by the way. I totally hate equities, and I've been in the 'game' by following the so-called 'expert' advice on balances based on age....blah, blah, blah..." You're not so deep in equities at 10%, so that's good IMO, because I believe we are going WAY lower now. If we can only hope our (also insane recommendations on BONDs) may come back at some lightyear in my life. Peace.

 

[maestro]

The Lost Decade, Revisited - AMG Funds
The term “Lost Decade for Stocks” refers to the ten-year period from 12/31/1999 through 12/31/2009, when the S&P 500® generated an annualized total return of -0.9% over the period. This was only the second time that the market actually had a negative total return over a decade period. Let see if a third time is coming?

+1 ...and what were the possible underlying events causing this?!? The 'dot-com bust' and '9/11', perhaps....are you ready for any more of those events? Conservative 'investing' is in my portfolio. I don't want to deal with either of those again, and in IMO, another is coming. Peace.

 

[indiajust]

I adopted a new product from Schwab, put about 10% in a managed direct eft account. Personalized portfolio. It mimics SCHK, the schwab 1000 index, but it buys all the positions direct! So the account has about 400 positions. Computer trades to tax loss harvest and reduce risk by repositioning longs, supposedly earning its fee and then some. We shall see.

With regard to allocation, I went back and looked for my last allocation post from Feb:
---
about 160 positions across accounts (with some repeats), 25 of them are ETF's, 11 REITS, 2 currency/debt hedges in silver and gold. 10% in private lending. I try to manage my combined P/E by owning a mix of much riskier than average stocks with a much much less risky dividend payers and steady freddy stocks. My international exposure is around 40%. I always keep a year in cash plus anticipated expenses.
---

So my stock total is up, my ETF's are gone, and I now have a 10% anchor in SCHK-like behavior, 10% in private mortgage. I am moving my dividend payers to the IRA. I hope to live on capital gains amended by tax loss harvesting. Stop paying taxes on dividends.

I do own some MSTR and Sprott to provide insurance for currency destruction, bitcoin/gold/silver.

All told, I am closer to 85 stock/5 commodity/10 mortgage. I am told I sleep well, even noisily well.

 

[COcheesehead]

Well we are very early 70’s.
What do I do with all the stuff we have that matures in 6 months to 3 years?
If you have a brokered CD you bought a few years ago and is yielding 3 % do you dump it for a big loss now?
I have a MYGA that matures in a year and another in 2 years, etc.

You ladder.

 

[Exwallstguy]

How many times annual spend do you have

The firecalc 99% is contingent on a decently high equity allocation. How many times your annual spend are your investments? If it’s not at least 30, I’d be concerned inflation is going to do a number on you. Fyi I’m conservative as well so I’m 45 and retired a few years w only 25% equities, but over 50 percent private equity (fixed income/ real estate related).

 

[Koolau]

I am similar but in MYGA’s, CDs treasuries, muni’s, IBonds and some corporates as well.
Just curious you say 5% is your minimum return. So what were you invested in from say 2015 to 2022?

I was wondering the same thing. I have a couple of SPDAs (precursor to MYGAs) that earn about 5%. But those are ancient! I'm thinking one of them dates to the late 80s. Nothing like that was available in the last few years until inflation made them all but inevitable.

 

[Koolau]

I retired at 56, now 60. I have a similar conservative position without real estate, roughly 70% (401k Stable Value, cash/CDs) 30% (401K US Equity, a few taxable stocks/Funds) and Roth 70% equities.
75% of everything is in 401k and when it reaches 35% equities I rebalance. Has done this 3 times since I've retired. Never has hit my negative rebalance point yet.
I sleep great with this setup. Plan on starting 401k withdrawals at 65 and collecting SS at 70, both sides generally live into their 90s and I live a lifestyle as I always have...actually better!

Are you Roth converting before RMDs? I'm glad we did as it reduced RMDs and gave us a lot of tax flexibility going forward. YMMV

 

[Koolau]

^^^^^
To my thinking, the black swan events can effect stocks or bonds or gold or everything.
Very few people expected 911 or Covid or 10% inflation.

With just a little luck and a lot of diversity, not everything will go down (or up, for that matter) all at once. With wide enough diversity, SOMETHING is almost bound to be up while other stuff is down. That doesn't guarantee your NW will not go down, but it could make a difference in how much it goes down when financial stuff is under pressure (like 9/11, etc.)

 

[pb4uski]

Same question to you?
Brokered CD’s have not even sniffed 5% until very recently so how do you have such a high rate?

• 38% of the portfolio are brokered CDs at a weighted average of 5.0%... range is 4.5% to 5.4%
  
• 32% are Agency bonds at a weighted average yield of 5.4%... range is 4.4% to 6.5%
  
• 18% of the portfolio are corporate bonds at a weighted average yield of 5.2%... range is 4.8% to 6.0%
  
• 7% are i-bonds with a weighted average yield of 4.1%
  
• 4% are preferred stock with a weighted average yield of 7.3%... range 6.3% to 8.0%
  
• 1% are money market funds with a 5.2% yield

ALL/PRB	ALLSTATE CORP	8.000
C/PRJ	CITIGROUP INC	7.125
C/PRK	CITIGROUP INC	6.875
MET/PRA	METLIFE, INC	6.286