FOMO

[dobig]

I used a number of tools (FICalc, FireCalc, Fidelity’s retirement planner) to help me determine what was the lowest level of equities I would need to have a 100% chance of my plan outlasting me. Turns out it was 0%. I don’t have to stick a dime in equities. I do, however, have about 25% in today for a hedge.
I would suggest to the OP to see exactly how much you need to make your plan work.
I get about 143% of our needed income from bond ladders. I have no heirs, only charities so that is a minor consideration for me. I sleep well at night and don’t worry about the stock market.

Glad you chimed in COcheesehead as I've followed your threads closely on the fixed income threads. Like you, we do not need our equities for retirement according to the FireCalc but it would not be a very enjoyable retirement. By my calculations, if we went all fixed income we would have an additional 200% of our needed yearly income by next year. The problem is even though that would be way more than we need according to our current lifestyle, I'd like more after the frugal lifestyle we've lived these past 30 years. We're not the type of people who would ever spend money on lavish travel or high end goods or even eating out. Just not us. We're WalMart people. But some time in the future we'd like to be in the position where if we found that perfect waterfront home down in Virginia, I'd like to be able to buy it, get a decent fishing boat and call it a day. I figure if that's what we want, we're going to have to be in some percentage of equities sooner or later.

 

[dobig]

3 times, I authorized someone else to "invest" for me. I was too busy and/or too lazy. NEVER did they invest as well as I do now. Makes sense. They get paid whether I do or not. What could possibly go wrong. I vowed "never again."

This past Decemeber we finally went to our first ever financial planner. Options are limited in our more rural area. The best rated planner turned out to be a younger guy in his late 20's or early thirties. Seemed to know his stuff and were impressed with his graphs and charts. Said we were in great shape and we were very happy to hear that as we just didn't know where we stood. When we were finishing we talked investing and at that time S&P was around 3,800 - 3.900. Said we were thinking of putting 1/3 of our money into VTI and then another third if it dropped to the October lows. He looked at us like we were crazy and said indicators he was looking at said the S&P could go down to 2,600 - 2,800.


Can't do anything about it now but it's extremely difficult for someone like me to start moving in now after this pretty hefty runnup the past few months. The DCA suggestion is something I'm trying to convince myself to do. Sounds good. Just need to pull the trigger and come up with a monthly allocation.

 

[38Chevy454]

I agree with DCAing into equites. The 2% per month is a good suggested rate. Right now you are getting decent fixed income returns. When will that change to lower? Being early 50s, you can withstand higher equities for your longer term money. Think of the near, mid and long term as increasing equities allocation. Even if you have it it one account, the overall mix is like the three subsets.

You can't rely on successful market timing. Might be lucky, but DCA is a good way to balance out the volatility.

 

[RetiredAt49]

This past Decemeber we finally went to our first ever financial planner. Options are limited in our more rural area. The best rated planner turned out to be a younger guy in his late 20's or early thirties. Seemed to know his stuff and were impressed with his graphs and charts. Said we were in great shape and we were very happy to hear that as we just didn't know where we stood. When we were finishing we talked investing and at that time S&P was around 3,800 - 3.900. Said we were thinking of putting 1/3 of our money into VTI and then another third if it dropped to the October lows. He looked at us like we were crazy and said indicators he was looking at said the S&P could go down to 2,600 - 2,800.





Can't do anything about it now but it's extremely difficult for someone like me to start moving in now after this pretty hefty runnup the past few months. The DCA suggestion is something I'm trying to convince myself to do. Sounds good. Just need to pull the trigger and come up with a monthly allocation.

It’s all relative… sure, the S&P 500 has increased since then but that’s no reason not to get in now. Look at the historical charts of VTI (or VOO). We just sold some rental properties and plan to pile most of it into VOO/VTI/QQQ.

 

[eytonxav]

I've been very conservative for much of my life. Had I been more aggressive with my allocation I would certainly have considerably more money, but probably would have fretted a lot more than I did, and therefore have never suffered from FOMO. Since I'm 74, my current allocation is closer to Wellesley, although no bonds at the moment.

 

[marko]

I've shared this chart a few times here.
It's a bit dated but I think it's fairly relevant (until you factor the current bond yields, which may turn out to be short lived) as the chart seems to portray bonds at about 3% or so.

You can see that 100% bonds have just about the same risk, but lower returns than a 60/40

 

[richardf]

I've been very conservative for much of my life. Had I been more aggressive with my allocation I would certainly have considerably more money, but probably would have fretted a lot more than I did, and therefore have never suffered from FOMO. Since I'm 74, my current allocation is closer to Wellesley, although no bonds at the moment.

I had FOMO in 2021 and am still down. I almost put $100,000 in VWENX in Jan 2022 but stopped the transaction. It’s still down 17%. I’m out of the market , into CDs. My advice to you is get out and stay out.
especially at 71.

 

[davidfin]

Honestly, is there a problem with getting 5+% risk free returns?

 

[kjpliny]

The indexes look OK but they are essentially being propped up by like 10 mega tech stocks. It's not healthy. Looks a lot like the dot com bubble era to me.

 

[Car-Guy]

I’m out of the market , into CDs. My advice to you is get out and stay out. especially at 71.

Sounds like good advice to me...Oh wait, I'm doing/done that too.

 

[FREE866]

The indexes look OK but they are essentially being propped up by like 10 mega tech stocks. It's not healthy. Looks a lot like the dot com bubble era to me.

How does this look a lot like the dot com bubble?

 

[Koolau]

Honestly, is there a problem with getting 5+% risk free returns?

No problem 2 years ago. Last 2 years, it's better than check-book interest, but has lost value against inflation. Having said that. I've had some 5% on some financial vehicles that I've held for many years. NOW they're behind the eight ball, but for many years they were money makers (not like stocks, but way ahead of pass-book or "high yield" checking.) YMMV

 

[aja8888]

Sounds like good advice to me...Oh wait, I'm doing/done that too.

Ditto!

 

[waynezo]

My asset allocation has always been, currently still is, and will always be 100% equities. Since they started tracking historical data in 1927, every rolling 30 year period has produced solid annualized returns (believe the worst 30 year rolling period was 7.2% annualized) and a 100% stock portfolio has generated better returns than all other asset allocation over long time horizons.

My portfolio is already up over 20% YTD and it’s almost back to where it was prior to the bear market.

Me Too Also retired at 49

 

[davidfin]

How does this look a lot like the dot com bubble?

Many of the dot.com bubble casualties were startups without profits.

 

[FREE866]

Many of the dot.com bubble casualties were startups without profits.

Again....how does that apply to what is happening today?


There are a lot of startups without profits in the NASDAQ and S & P?

 

[TheWizard]

You need a certain frame of mind to avoid both market timing and significant emotional feelings when the stock market is either way down or way up.
I'm not sure the OP has that frame of mind, from reading his/her followup posts.

So I would recommend only a moderate allocation to stock index funds, maybe 40% of total portfolio...

 

[Koolau]

My asset allocation has always been, currently still is, and will always be 100% equities. Since they started tracking historical data in 1927, every rolling 30 year period has produced solid annualized returns (believe the worst 30 year rolling period was 7.2% annualized) and a 100% stock portfolio has generated better returns than all other asset allocation over long time horizons.

My portfolio is already up over 20% YTD and it’s almost back to where it was prior to the bear market.

I certainly understand this point of view and especially when you are young and accumulating, high equity positions make all kinds of sense to me. But at some point in one's life, one realizes that 30 years time frame no longer applies. I quit using 30 years some time back. My plan goes out to 99 years and that's significantly less than 30 years. SO having some ballast (in several cash-like/bond-like forms) makes sense to me.

I understand some folks are okay with 100% equities even when they are uh, a bit older. I am not but YMMV.

 

[Lsbcal]

Here is the Morningstar performance data for the Vanguard 500 Index fund (https://www.morningstar.com/funds/xnas/vfiax/performance )

As you can see the return YTD = 12.8% . Yes, a partial recovery from 2022. But it has been pretty stable over the longer periods. Also I would note that the SP500 has a high allocation to tech at present. Conclusion: this is not really a barn burner that one might have missed. Of course, no guarantees going forward.

Personally I am nearly fully invested and anyone in their 50's I think should own some balanced combination of equities and fixed income. I tend to the 60/40 mix now but I do some market timing which is not for everyone. Yields on short term bonds may come down at some point. I think TIPS are a good investment if one has money available in a retirement account.

 

[Koolau]

Here is the Morningstar performance data for the Vanguard 500 Index fund (https://www.morningstar.com/funds/xnas/vfiax/performance )

As you can see the return YTD = 12.8% . Yes, a partial recovery from 2022. But it has been pretty stable over the longer periods. Also I would note that the SP500 has a high allocation to tech at present. Conclusion: this is not really a barn burner that one might have missed. Of course, no guarantees going forward.

Personally I am nearly fully invested and anyone in their 50's I think should own some balanced combination of equities and fixed income. I tend to the 60/40 mix now but I do some market timing which is not for everyone. Yields on short term bonds may come down at some point. I think TIPS are a good investment if one has money available in a retirement account.

Is that a TIPS fund or individual TIPS? If individual, how do you do that in a retirement account (such as in a Roth at Vanguard.) Thanks.

 

[Lsbcal]

Is that a TIPS fund or individual TIPS? If individual, how do you do that in a retirement account (such as in a Roth at Vanguard.) Thanks.

I use individual TIPS. Currently you can get them at 1.79% for the 5 year TIPS. That is close to the historical real yield for 5 year Treasuries. So the risk one faces is reinvestment risk 5 years out. I have a short ladder of TIPS to take care of my RMD's and reduce my worries of an inflationary future.

At Vanguard you can buy individual TIPS. They can be a bit confusing I think. A rep at the bond desk (fixed income) can walk you through the screens. There is a good source of fixed income planning at this site: https://tipswatch.com/

 

[Koolau]

I use individual TIPS. Currently you can get them at 1.79% for the 5 year TIPS. That is close to the historical real yield for 5 year Treasuries. So the risk one faces is reinvestment risk 5 years out. I have a short ladder of TIPS to take care of my RMD's and reduce my worries of an inflationary future.

At Vanguard you can buy individual TIPS. They can be a bit confusing I think. A rep at the bond desk (fixed income) can walk you through the screens. There is a good source of fixed income planning at this site: https://tipswatch.com/

I've bookmarked that site to see what questions to ask V.

Thanks and aloha.