Crazy Not to Own Stocks?

[Badger]

Nailed it. Once I figured out I would never run out of money. Swinging for the fence was all of a sudden, 100% un important.

+1
I do have quite a bit of investment money (for us) in the stock market but more than likely will never use any of it. We don't have many "wants" and still have a frugal lifestyle that is mostly covered by SS and small pensions and are happy. The tIRA gives off dividends that goes to a IRA MM account that we use for taking RMD. Once that is taken for RMD it stays in cash. If we needed more money we would use that. Otherwise the rest of the stocks are left in the market for distribution when we are gone. We don't need it and don't want to pay Capital Gains if we sell. The grown children will be able to sell them at the higher price without the taxes.

Cheers!

 

[almost there]

There's a lot of space between "swinging for the fence" and a 100% cash/fixed portfolio. Why are you choosing such an extreme AA? History shows a more diversified approach has less risk over the long run and over various marco-economic and political scenarios.

There are other investments, ways to generate money / income besides stocks.
After over 30 years in the market, am happier being out of it. True or not, I feel more in control. And that makes me happy. Rather than things hanging on every news story, political screw up etc. / that effects my retirement.
Some in ret. are still after high returns. And thats fine. Others are not, thats fine too.

For some, the market is a good hobby, for others, w way to generate needed income.
For me, it was just a part of my ret. plan. That I no longer need.

 

[Koolau]

0% stocks since turning 51. And am somehow OK!
10 yrs later.
Sleep like a rock every night.
Your call.

Are you willing to share the types of investments you use? Bonds/bond funds? MYGAs? GIF/SVF? CDs? Others?

I would like to do this myself, but keep about 1/3 in equities to hopefully smooth the ride. So far so good though YMMV.

 

[Koolau]

Well, this year TIPS are returning around 9 - 10%, depending on the real yield, compared to -17% YTD loss for the S&P. So there's that.

True, but the run up in the past 12 years or so in equities probably covers those losses - not guaranteed going forward, of course. I'm not making a case for lots of equities - just maybe 1/3 or so. Always a YMMV situation.

 

[ShokWaveRider]

I'm sure you've mentioned your investments a dozen times, but would you be willing to share what has allowed your relatively good results without equities?

I would call it a lot of it luck. In the 80 & 90's We put our savings in 10 year CDs with high, never to be seen again for a long time (compared to these days) returns. Then all the way through the 90's we did the same. There a no 10 year CDs anymore. We only averaged ~3% during the low interest rate years.

We are lining up to do the same thing now as interest rate rise. We will not get as much but should maintain our 4% goals. I should note not all these investments were in the USA as we have lived in 3 different countries during that time.

 

[Koolau]

There's a lot of space between "swinging for the fence" and a 100% cash/fixed portfolio. Why are you choosing such an extreme AA? History shows a more diversified approach has less risk over the long run and over various marco-economic and political scenarios.

I think that's where I'm coming from. I don't really like the uncertainty of equities (and watching the large corrections/bears) but all the theory I've read suggests the sweet spot of equities begins around 1/3 and goes to about 2/3 to both maximize results and provide a relatively smooth ride at the same time.

My real concern at this point when it comes to zero equities is dealing with inflation. For those who are all non-equities, how does the 15% or so hit of inflation over the past 2 years affect your thinking about the subject? I look at my non-equities and realize that, even though the numbers have gone up some (and I have not lost any numerical dollars) the dollars I have are worth 15% or so less than a couple of years ago. It's a different kind of loss - but it's a loss all the same.

Not trying to stir the pot but wondering how folks deal with the realities of inflation in their fixed income/bonds/ec. portion of portfolios.

 

[almost there]

"Not trying to stir the pot but wondering how folks deal with the realities of inflation in their fixed income/bonds/ec. portion of portfolios."

Its just that / reality. I accept it as I cant fight it. LOL LOL. Its been around forever, and while I am no longer in the working world, not much I can do about it. Its going to cut into the value of my dollars Simple fact. My Real-estate, and SS might keep up. But not my savings. Again, just reality. You asked earlier about my personal situation, Rental income (1) 4 bd. rm. home, took an annuity from a cash ball. plan yrs ago. Jan 2023 @ 62 will start pulling $$ from my non Roth IRA. Plan to completely drain over it a 20-25 year period, and take SS at the same time. And can easily put much of it back into my non IRA accounts. Past 10 yrs have averaged around 3% on my cash. 3 1/2% the past 5 years, a bit more over that the next 5 years. The new 4 1/2% 10 yr CD's as Schwab looks inviting. Just know they will not beat inflation. Will see if CD's hit 5-6% next year. Might be an option for you. But its all up to you. I accept my buying power / net worth will not be higher in 30 years. And the dollar will be worth much less than today. But don't really care. As fighting it with riskier investments seems futile. My Ret. is all about my hobbies. Rather than trying to continuously get ahead. 60 yrs of that was enough. My personal philosophy has changed. And that helps quite a bit.

 

[daylatedollarshort]

True, but the run up in the past 12 years or so in equities probably covers those losses - not guaranteed going forward, of course. I'm not making a case for lots of equities - just maybe 1/3 or so. Always a YMMV situation.

We have always had a small allocation to equities for diversification purposes. But like others have posted, SS and pensions cover most of our retirement expenses so we don't need to take any risks on the portfolio. If we can get 1% or 2% on TIPS and our withdrawal rate is under 1%, we can keep the TIPS part of the portfolio intact or have it grow a little with no worries.

 

[daylatedollarshort]

My real concern at this point when it comes to zero equities is dealing with inflation. For those who are all non-equities, how does the 15% or so hit of inflation over the past 2 years affect your thinking about the subject? I look at my non-equities and realize that, even though the numbers have gone up some (and I have not lost any numerical dollars) the dollars I have are worth 15% or so less than a couple of years ago. It's a different kind of loss - but it's a loss all the same.

Inflation isn't a fixed income portfolio killer, it is the negative real interest rates that are currently the problem. If inflation was 15% and bonds were paying 17%, nominal fixed income investments would be fine. The Fed seems to be jacking up interest rates so that issue should be taken care of in the next year or two.

Also owning bond funds without a maturity date in a period of rising interest rates will likely lead to NAV losses and lower yields. But that isn't a problem with owning a bond ladder, short term individual bonds or a fund with maturity dates.

 

[Koolau]

Inflation isn't a fixed income portfolio killer, it is the negative real interest rates that are currently the problem. If inflation was 15% and bonds were paying 17%, nominal fixed income investments would be fine. The Fed seems to be jacking up interest rates so that issue should be taken care of in the next year or two.

Also owning bond funds without a maturity date in a period of rising interest rates will likely lead to NAV losses and lower yields. But that isn't a problem with owning a bond ladder, short term individual bonds or a fund with maturity dates.

True, but until one can earn more on fixed income than they lose on inflation, a true loss is baked into the fixed income portion of the AA. If one is all fixed income, one is almost certainly losing right now - I know I am (on my fixed income portion.) Thanks for the insights and discussion. I have no special insights but am a very interested participant due to being more or less 2/3 (+/-) fixed income right now.

 

[daylatedollarshort]

True, but until one can earn more on fixed income than they lose on inflation, a true loss is baked into the fixed income portion of the AA. If one is all fixed income, one is almost certainly losing right now - I know I am (on my fixed income portion.) Thanks for the insights and discussion. I have no special insights but am a very interested participant due to being more or less 2/3 (+/-) fixed income right now.

TIPS and I bonds bought at positive yields are earning more than CPI inflation right now, but as long as stocks are not doing great and real interest rates are low there isn't much to be done to not lose to inflation on those right now. But negative interest rates likely won't last that long because the Fed usually has to raise interest rates higher than inflation in order to curb it. Still 4% on one year Treasuries with no principal loss beats out a 2.5% yield and -12% (or more if rate go higher) NAV loss by a 13.5% spread.