I'll Show You Mine If You Show Me Yours

[gayl]

Mikey,

Been there done that! - I am a lousy stock picker! - Guess what - Most pros are too! Why should I think I can beat the index funds, if the pros can't?

I take it you have not read the 4 pillars of investing?

Lousy stock picker as charged! That's why I did not retire at 50 ... had to wait to 52. Recently I thought about doing more than the general acct & indexing... yet at yesterday's bond presentation, they were touting returns of 2-3%! Can't think of a single reason to give up 5.5% guaranteed to get 2-3%. At a recent stock diversification presentation (Schwab), they were touting returns less than their index fund. Indexing also diversifies the IRA w/o actually having to pick the stocks ... and yes, I give up 0.58% in fees. But then, I seem to be unmotivated in doing more.

 

[Nords]

The retirement portfolio--
3% in MM & 1-year CD (two years' expenses)
35% Tweedy, Browne Global Value (TBGVX)
30% Berkshire Hathaway "B" shares (BRK.B or BRK/B)
22% S&P 600/Barra Small-cap Value ETF (IJS)
9% Dow Jones Select Dividends ETF (DVY)
1% in a smattering of small-cap growth and the govt Thrift Savings Plan.

The 12-year-old's college portfolio--
55% Berkshire Hathaway (but what a great purchase price)
32% Tweedy, Browne
13% EE bonds.

 

[Trace]

Age 35 (still working)

401K:

S&P 500 Index: 38%
Mid-Cap Index: 13%
Small-Cap Index: 7%
MSCI EAFE Index: 7%
Bond Fund (Interest/Principal Guaranteed: Pays 5.35%): 35%

Roth IRA:

Total Stock Market Index Fund: 55%
REIT Index Fund: 10%
Short Term Corporate Bond Fund: 35%

529 Plans:

60% Total Stock Market Index Fund
40% Total Bond Market Index Fund

 

[Whakamole]

Age: 33

Cash: 38%
US Bonds: 14%
US Stock: 23%
Foreign Stock: 9%
Foreign Bonds: 2%
Gold: 4%
Commodities: 6%
REIT: 2%
Energy: 2%

 

[gindie]

Age: 45 (hope to retire @ 55)

My 401K

15%  Dodge and Cox Stock
15%  Vanguard PRIMECAP

15%  T. Rowe Price Mid-Cap Growth
15%  T. Rowe Price Mid-Cap Value

10%  Vanguard Explorer
10%  Longleaf Partners Small Cap

10%  PIMCO Total Return
10%  Vanguard Short Term Bond Index

Wife's (soon-to-be) Rollover IRA:

15%  Fidelity Contrafund
15%  Sound Shore

10%  Meridian Growth
10%  Weitz Value

10%  Buffalo Small Cap
10%  Fidelity Low-Priced Stock

10%  Fidelity Diversified International

10%  PIMCO Total Return
10%  Fidelity Short Term Bond

 

[cute fuzzy bunny]

All funds are vanguard, net expense ~.25%

Overall 45%/50%/5% stock/bond/cash

Stocks: 72% US, 28% foreign
Bonds: 95% US, 5% foreign/emerging; 50% short, 50% interm, all medium/high quality

Taxable fund:

35/65/5

5% Europe index
5% Pacific/japan index
60% Wellesley income (60% interm bond, 40% large cap val)
30% Short term corporate bond

IRA (wont be used for 20 years):

100/0/0

15% Healthcare
15% Emerging market
5% International explorer
50% REIT
15% Small cap value

 

[Michael]

I'm currently 65% equity, over weight in small cap, value, and international relative to the S&P.

 

[Zipper]

Equities 63.9%(Canada 26.1%, U.S. 19.7%, Global 16.7%). Canadian Fixed Income 37.5%. House and vehicles ('91 Acclaim, '03 Impala) paid for. I ER'd in 1997 and Mrs.Zipper still works at 55. I'll be 61 in October, draw 5% of whatever the portfolio value is each year, and receive Canada Pension Plan benefits (indexed). Will receive Old Age Security(indexed) at 65, and Mrs. Zipper follows with her CPP and OAS at 60 and 65. I do odd jobs, handyman specials, and short distance driving for about $1000/mo. mad money. :

 

[WilliamG]

Thanks for the thread. I'm always interested in how folks in retirement allocate their portfolios. Our current target (which we are close to) is 55/40/5 stock, bonds and cash. All mutual funds are Vanguard:

5% REIT Index
10% Total International Index
4% Small Cap Index
4% Small Cap Value Index
16% Value Index
16% Total Stock Market Index

15% Intermediate Bond (GNMA and IT Corp)
25% Short Bond (15% ST Corp,8% IBonds, 2% TNote)

5% Cash (Money Market, TBills)

Trying to use William Bernstein's asset classes, but have been a little timid as also try not to stray too far from overall market allocation. I like to look at Morningstar's xray tool which produces a 9 cell style box for you (value,blend,growth horizontal and large, mid, small vertical). Last time I looked at Total Stock Market Index it's box was:
24 24 23
07 06 07
03 03 03

Composite box for the equities in our portfolio:
30 19 12
15 06 04
07 04 03

Still a little value and small tilt.....

Regards, Bill

 

[wabmester]

I assume most of us initially came to this site to use FIREcalc, which suggests that 75% equities is close to optimal for long-term safe withdrawl.

Interestingly, relatively few of us have that much stock.  We have lots of bears here, especially those who are in retirement.

Some stats (20 data points):

average stocks = 55.8%, range =0 to 97%
average bonds = 26.8%, range = 0 to 52%
average real estate = 4.7%, range = 0 to 50%
average cash = 12.2%, range = 0 to 90%
average "other" = <1%

I had to make some assumptions since not everybody gave a clear-cut answer, but the above should be pretty close.

As expected, Nords and John Galt are the outliers  

 

[John Galt]

Hey Wabmester.......excellent post. Just to reconfirm that I
don't argue with the projections vis-a-vis equities,
it's just that I don't think in the "long term" except in terms of "survivability". Not mine, just my money.

John Galt

 

[johnblake]

Stocks/Bonds/Cash -- 49/33/17

Stocks 49.20%
Large Cap (>5B) 67.20%
Mid Cap (1-5B) 14.70%
Small Cap (<1B) 12.23%
International 5.87%

Bonds 32.92%
Short 44.25%
Intermediate55.56%
Long 0.19%

REIT 0.68%

Cash (saving for a house) 17.20%

 

[cute fuzzy bunny]

Hah...looks like I'm one of the bond fatties.

You can call me Bond...

My allocation to bonds makes sense for me though. I have fairly low and predictable expenses, dont want or need a lot of risk/volatility, and dont like current equity pricing.

Quite a turnabout from my investment history. I never owned a bond or any other fixed instrument except for two balanced funds I held in 2002/2003. Up until then it had all been mostly US growth. My primary trades were QQQ's bought on any dips and sold a week or two later. Which worked great until mid 2000 when I tried picking some up at nasdaq 3000 and then 2000 and rode them down to <1200 before riding them back up to 2000 and then dumping. The source of those 'capital losses' I'm dragging around that will fortunately make me tax free for at least a few more years...

It was weird for me having read all the traditional investing books as I was learning to invest back in the late 80's and early 90's. It became quickly apparent that such investing wasnt working at the time and the place to be was the high tech stock rocket ships.

How times change. I guess picking up on macroscopic investment trends and being able to take advantage of them, without getting burned when they're no longer trends, can be interesting.

For my IRA though, which is 20 year out, its largely "shoot the moon" with all equities, mostly very volatile, with half it it in REITS acting almost like a high yield bond anchor with capital price appreciation built in.

 

[Cut-Throat]

I assume most of us initially came to this site to use FIREcalc, which suggests that 75% equities is close to optimal for long-term safe withdrawl.

Wab,

Not sure where you got this 75% number. I remember fooling with this a while back and thought that around 40-60% Stocks was optimal.

Could be wrong though!

 

[cute fuzzy bunny]

Yeah, we went over it pretty good. My recollection was that 60 was about perfect. 50 gave you a little less return with a little less volatility and 70 gave you a little more of both. Less than 20% stock is counterproductive over long periods as you get much lower returns without any benefit in reduced volatility, and over 80 is equally insane.

75 would be fine if you're early in the accumulation phase, or for an IRA or 401k that you wont be tapping for a verrrry long time.

 

[Bob_Smith]

I believe the initial Retire Early safe withdrawal study mentioned an optimal stock allocation of around 75% for 30-40 year periods:

http://www.retireearlyhomepage.com/restud1.html

That may be where that number originated.

 

[wabmester]

Bob_Smith nailed it -- 75% stocks is close to optimal for most of us, but you can safely lower that percentage by using TIPS instead of other bonds.   This comes with the risk of a lower terminal value, of course.

Here's intercst's TIPS study:

http://www.retireearlyhomepage.com/safetips.html

(Note that his study was done when the TIPS real yield was 3.92%, though.)

 

[JOhn Galt]

In the spirit of this thread, I invite you folks to comment on this. My lowest yield on anything I own currently is 5% on a government backed note. 26 year maturity. I will not touch it, just cash the interest checks (this is currently in an IRA).
No COLA, but the APY goes to 6% after 5 years, 7%
after 6 years, and 8% after 7 years, callable any time after 2008, so there is some ramp up if it is not called.
My thinking was it was as safe as a CD, paid about 1% more than the banks (for a 5 yr.CD) and worst case I get the higher interest at the end of the 5 years.
Comments? Be candid, I can take it. BTW, I forget
the yield to maturity but you financial types can compute
it easily.

John Galt

 

[ShokWaveRider]

Well, You all will laugh at us:

Total: $1.5m USD

Wifes 401k Bond Fund Paying 4%
My 401K Bond Fund Paying 4%
CD $1.1m Paying 2.3 - 2.5%

GIC $15k Paying 3% (Canada)

We have NO Pensions, Or will ever get much. At the moment we are travelling and have no permanent home. We do not deplete capital and do not use all our interest to live. We have basic health care in Ontario Canada.

SWR.

 

[unclemick]

Looks fine to me - no need to rush. Remember the Terhorst's started out with fixed income instruments and gradually changed over time.

 

[haha]

Mikey,
Been there done that! - I am a lousy stock picker! - Guess what - Most pros are too! Why should I think I can beat the index funds, if the pros can't?
I take it you have not read the 4 pillars of investing?

Cut-Throat, In another thread you stated that you achieved 13-14% over a long period of time. Isn't that an index beating return?

Re: Four Pilllars, I have read it. Just feel that there are flaws, not in the data but in the reasoning from it.

Mikey

 

[db]

I thought I had responded to this, but guess not. Age 67; all in Vanguard IRAs.

40% Total Stock Market Index
20% Total International Stock Index
10% REIT Index
20% Short-Term Bond Index
5% High-Yield Bond Index
5% Cash

Plus two currently insignificant holdings in tech stocks, Cisco & Nuance, to be moved to a Roth IRA this year. Plan to move from short-term to intermediate or total bond fund perhaps near end of year.

db

 

[Bob_Smith]

My thinking was it was as safe as a CD, paid about 1% more than the banks (for a 5 yr.CD) and worst case I get the higher interest at the end of the 5 years. Comments?

But with a 5 year CD, at the end of five years you can get off the train if things get ugly (inflation takes off and rates rise significantly). It would appear the primary risk you face is that inflation will swamp the return built into that bond while long rates trample the price. Not likely in the short term. Long term I'm not so sure.

 

[Cut-Throat]

Cut-Throat, In another thread you stated that you achieved 13-14% over a long period of time. Isn't that an index beating return?

I'm not sure what a 100% s&P 500 idex returned over that time. I was almost 100% in stocks during my accumulation phase.

Also, my returns were bolstered by being able to purchase company stock at a 15% discount. My wife is still puchasing stock at her company at a 15% discount. This gives that investment a immediate 15% return for the first year.

But the money I invested outside of these programs, I am sure did not fare as well as a Index Fund. And since I did not have a 'plan' in place, I usually traded at the wrong time. Not to mention all the grief worrying about when to buy/sell etc.

Like Unclemick my best moves have been to do nothing.

 

[wabmester]

My lowest yield on anything I own currently is 5% on a government backed note.  26 year maturity.  I will not touch it, just cash the interest checks (this is currently in an IRA).
No COLA, but the APY goes to 6% after 5 years, 7%
after 6 years, and 8% after 7 years, callable any time after 2008, so there is some ramp up if it is not called.
My thinking was it was as safe as a CD, paid about 1% more than the banks (for a 5 yr.CD) and worst case I get the higher interest at the end of the 5 years.

Sounds like a slightly weird CMO to me.  Do you have a CUSIP so I can look it up?

It should be fine assuming you plan to hold it till it's called (which it almost certainly will be if market rates stay below 6%).   So, assuming you paid no fees or mark-up for it, then worst-case is that it acts like a CD, as you said.

I know that FNMA and GNMA are perceived as government entities, but they're private companies, and I honestly don't know if there's a formal backing by the government or if it's just assumed that the government wouldn't let them fail.

It does seem to me that home lenders are taking more risk than I can recall them ever taking before, and if we start seeing failures, a bailout could be very costly.   So, it may come down to the risk that something changes in how FNMA/GNMA operate in the next 26 years (the term of your note, and again assuming it's a CMO).