pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
+1 When you are working and have a steady income your AA can be more aggressive.
Market timing?
- Thread starter garyt
- Start date
Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Reality is cash and your suggestion speaks. I went a little further...if you assume you will ride it up another 8% in gain through the Santa Clause rally, and then get a 25% drop in a January correction
, you would need to get at least a 23.5% ride up throughout 2018
again to have the same $$$ as you started with today. I have an easier time seeing a small gain in 2018 than another year like 2017. I also have an easier time seeing a correction, than another 12 months of low volatility. So it puts the risk in perspective. I am feeling a little greedy at my current 75/20/5 allocation and will likely take this back to a 65/30/5 once the global Wells admiral funds are off hold. I will use this as an opportunity to re-balance back to where I am more comfortable in risk.
Interesting thought, an 8% gain and then a 25% drop. Could happen. There are so many possible future paths.
My biggest fear is a "temporary" drop keeps growing as other future events lead us into deeper more permanent declines. Bad things can happen and they are not always connected. So, for example, the market declines -25% sharply, it goes up +15% and then a really bad war or recession kicks the hell out of it. But probably this will not happen and we will prosper.
I have a portfolio spreadsheet that calculates roughly how the portfolio would look 2 years out if we have a 25% equity decline and spend at our current spending rate. The overall drawdown for a 60/40 AA was -20%. So a $1M portfolio became $800,000. Bad but we would live nicely through it. This scenario has happened in the past.
flintnational
Thinks s/he gets paid by the post
"Would it make sense to drop down to 60% equities for a year or so?"
As others have stated, 60% is a reasonable allocation for a retiree. But I would not do it just for a year or so. I would find an allocation that provides acceptable risk (you define) and stick with it. It needs to be something you can stick with in up and down markets. Periodic scheduled rebalancing allows some adjustment to market values at the margins. IMO, its the only way to safely MT.
FN
As others have stated, 60% is a reasonable allocation for a retiree. But I would not do it just for a year or so. I would find an allocation that provides acceptable risk (you define) and stick with it. It needs to be something you can stick with in up and down markets. Periodic scheduled rebalancing allows some adjustment to market values at the margins. IMO, its the only way to safely MT.
FN
Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I think if one wants to get analytical about this instead of using gut feelings, one should use a tool like VPW. This takes into account your current balances and AA. VPW has become my tool of choice whenever I get nervous.
Look at a decline (the worst modern one) peakish year like that starting in 1966 with 3 following recessions (1969 and 1973-74 and 1980) plus inflation. Do a simulation for your current AA and the one you are thinking about. Look at how you would have done over the years in inflation adjusted terms with spending.
VPW applies it's own withdrawal strategy as a default. One can override this to show a modified sequence like a certain set % withdrawal. You have to be a bit comfortable with running a spreadsheet.
Look at a decline (the worst modern one) peakish year like that starting in 1966 with 3 following recessions (1969 and 1973-74 and 1980) plus inflation. Do a simulation for your current AA and the one you are thinking about. Look at how you would have done over the years in inflation adjusted terms with spending.
VPW applies it's own withdrawal strategy as a default. One can override this to show a modified sequence like a certain set % withdrawal. You have to be a bit comfortable with running a spreadsheet.
