Hi! Asset allocation help for 39-year-old - managing risk if want to retire early

[Oakster]

NgineEr - Thanks for the links to the calculator and blog post!

Aerides, Skipro - Thank you for the advice - it is very helpful!

Aerides - Your comment #2 is the risk mitigation perspective I did not understand until now - thank you!

I became risk-averse during the 2008-09 downturn. I didn't have much then, so I didn't have much to lose, but I saw so many others lose so much of their portfolios. I decided at that time that I preferred not losing my savings, rather than having the potential for much larger gains. I even bought $100K in gold, thinking the market would collapse...still beating myself up over that gold purchase!

However, now that the market has rebounded, it is really hitting home how much I gave up by investing so conservatively. Now that it is a decade later (and I have saved so much since getting my first higher-income job a decade ago), retirement seems so much closer, and I guess the combination of those factors have caused me to realize the need to change my thinking.

I truly wish I would have reached out for help years ago, but I was paralyzed by the fear of losing my savings if I invested in equities.

It is so helpful to hear about others' asset allocations being so aggressive, even though you are close to FIRE or already there. This is such great perspective for me. I guess I didn't realize how aggressively FIRE'ers invest, just from perusing these boards.

You only lose it if you sell

 

[2177V]

You only lose it if you sell

I agree with Oakster 100%. I strongly recommend investor google "Recovery times after a stock market crash" ...or after a bear market.

Beginner investors worry about market crashes and a bear market. They panick and then they sell. However, this locks in their losses.

Seasoned investors NEVER sell stocks because stock market crashes and bear markets comes with the territory. It is the recovery time that are more important because a stock market crash or a bear market "freezes" your stock investments and you cannot sell stock investment until the market recovers. However, the market ALWAYS recovers but it is the recovery time that should be considered in your strategy.

In order to hold you over until the stock market recovers, you need an asset class that holds it value such as cash or short term treasury bonds. After you read about the "Recovery times after a stock market crashes or bear market" on google......you will realize that a smart investor takes all of these factors into account.

This means "liquidity" becomes important during a stock market crash or bear market. If you do NOT have sufficient liquidity, you may be forced to sell stock assets at a loss. If you DO have sufficient liquidity as I discussed in a previous comment #50, then you avoid this problem.

This is why I stress liquidity and making sure some of your assets will hold their value during a crash or during bear market. You can then simply wait until the market recovers. i stating this as my personal opinion based on years of investment experience.

 

[kgtest]

1. Given that my retirement date could be as soon as 7-8 years away, what changes to my portfolio do you recommend? What if my retirement date is 11 years away?
2. Do you recommend exchanging all or some portion of the stable value in my 401Ks for equity index funds (using the dollar cost averaging approach described above)? If so, how much should I exchange? Should I start now or wait?
3. I will probably save $60-70K (after-tax) annually (in addition to contributing the annual max to the retirement accounts). Should I continue to put those after-tax savings in high-yield savings accounts? I was thinking it would be better to put my after-tax savings in high-yield savings accounts, and put the higher-risk equities in my pre-tax accounts, since those accounts would have more time to recover from a downturn.
4. Should I keep the bonds (BND), if they have more risk than the stable value/high-yield savings accounts, yet have been yielding similar returns?

If there is any additional information needed, please let me know. Thank you in advance for your input!

Oi, alot here but you nailed it, you are too risk averse. Although you've done quite well for having that stance. Your numbers make me bleed with envy. paid off house, 500k in cash, NO KIDS lol...yeah you actually just depressed my independent FIRE journey haha.