Market volatility and balanced allocation concerns

Hi, been awhile since i dropped in. Just noticed the big market drop today and am interested in
any educated guesses on where we may be headed in '25, especially relative to those with a similar PF AA to mine. I'm 66, semi-retired, with no debt, investment assets (before today) just over 3M FWIW. Relatively low COLA. PF is 50/50 equity/bond ETFs. Large positions in ST bond (SCHO, SHY BILS ) TIPS and floating rate funds. I've reduced bond duration to mostly short term. Equities are mostly US based - Large cap dividend oriented, and recently boosted small cap exposure...

I'll be in the realm of 95k in div income for this year, roughly in line w/ 2023. I wasn't savvy enough to jump out of bonds ahead of the recent downturn so NAVs have been slow to recover. Bonds continue to frustrate me given that they no longer seem to behave inverse to equities. On days like this bonds AND equities are down in-tandem.

I have no idea what to expect in 2025 but hope we aren't due for panicky volatility for a sustained period. I'm already wary about my SS and ACA being unrightfully screwed with let alone any big market drawdown that could stall what's been pretty stable and steady growth in recent years.

Thanks for any thoughts: )
3.16% in dividends, 50/50 allocation. Total perfromance for the year has been something like RLBGX., maybe 15%?


RLBGX dropped from 37.22 to 34.27 over the last two days. That's -8.6% for NAV.

I would prepare for market volatility, SS and ACA scares. If you have $1.5M invested in equity funds, the past tells us that could drop quite a bit. As you know bond funds can also go wonky.

BlackRock is predicting that American Excellence will be the theme for 2025. JPM, Vanguard, Schwab, Fidelity and many more have 2025 projections that probably won't be 100% accurate.

My feeling about this time is that when most expect to reap even more rewards from their investments in a time of change, the outcome can differ, sometimes in an alarming way. Dot-com, Great Recession, COVID Recession...

Another opinion is that the post-2000 era really bothers the younger generations. There's a lot of unhappiness for various reasons. So I'm fine with having 10% allocation to cash at this time. If there are fewer rate cuts next year (a big IF), I'll be fine. If there are more cuts next year, we'll be fine.

But your question is really asking what the crystal ball sees for 2025. It could happen that your clients disappear. But I'm sure you have a plan to transition to full retirement under different scenarios.

Good luck, and enjoy life.
 
I'll be in the realm of 95k in div income for this year, roughly in line w/ 2023. I wasn't savvy enough to jump out of bonds ahead of the recent downturn so NAVs have been slow to recover. Bonds continue to frustrate me given that they no longer seem to behave inverse to equities. On days like this bonds AND equities are down in-tandem.

I have no idea what to expect in 2025 but hope we aren't due for panicky volatility for a sustained period. I'm already wary about my SS and ACA ...
It's a contentious topic on this Forum, but with your taxable dividend income, ACA subsidies aren't likely... but Medicare surcharges are. You raise some poignant questions about the travails and tremors of investing, but I'd respectfully aver, that the real problem isn't guessing where markets will go next year... the real problem is sustaining likely for the rest of your life, the penalty for having already invested "too well". Had you saved less, or had your investments been doing worse, you'd be in better financial shape for receiving more benefits and paying less in taxes. But because you were diligent and frugal and patient as an investor... well, let's leave the completion of this sentence, to our audience here.

Another opinion is that the post-2000 era really bothers the younger generations. There's a lot of unhappiness for various reasons. So I'm fine with having 10% allocation to cash at this time. If there are fewer rate cuts next year (a big IF), I'll be fine. If there are more cuts next year, we'll be fine.
Yes, and this one really confounds me. One cohort says that they missed-out on the heady gains that we've had in the 21st century so far... forgetting the "lost decade" that opened the century. Recency bias, anyone? Another laments missing the even greater bull market of 1982-2000, because they were too young... forgetting how lousy were the 1970s.

My own frustration is with the narrowness of the market. The S&P 500 has done well, but not small-caps... ex-US stocks have been doing perennially poorly. When will the market finally broaden?
 
It's a contentious topic on this Forum, but with your taxable dividend income, ACA subsidies aren't likely... but Medicare surcharges are.
I'm not sure what's contentious about that - depending on household size and other income/deductions, ACA subsidies aren't likely if the cliff returns and IRMAA charges are likely.

You raise some poignant questions about the travails and tremors of investing, but I'd respectfully aver, that the real problem isn't guessing where markets will go next year... the real problem is sustaining likely for the rest of your life, the penalty for having already invested "too well". Had you saved less, or had your investments been doing worse, you'd be in better financial shape for receiving more benefits and paying less in taxes. But because you were diligent and frugal and patient as an investor... well, let's leave the completion of this sentence, to our audience here.
The real problem is saving too much and investments doing too well? That someone is in better overall financial shape by saving less and investments doing worse? Seriously?
 
Yeah, not so much the 1 day but overall prospects for bonds especially... I became accustomed to bonds behaving inversely to stocks and that has not been the case for a few years...
Is there an explanation for why bonds and stocks are no longer behaving inversely? 2022 was very stressful for me and I'm concerned it could happen again. I was not retired and not drawing on my portfolio at the time, but that market behavior would trigger my worst fear at retirement: sequence of returns risk. Is there an alternative AA that would work? 2 years of cash? That would be palatable now, but it wasn't when interest rates on savings were near zero. Which seems unlikely in the near term based on fighting inflation. I have more thoughts and concerns, but I'll stop now. FWIW: I was planning to retire in October, but a hiccup in my job makes it look like an unplanned retirement in February (4 weeks from now) is likely. With no severance package, just a week of vacation payout.
 
If you look at US Government bond fund performance over the past decade, you’ll see it’s typically about 1.5% per year. I think it would be wise to dump the bond funds and invest in CD’s or Treasuries of 1-5 years. Money Market funds are currently paying about 4.4%.
 
Is there an explanation for why bonds and stocks are no longer behaving inversely? 2022 was very stressful for me and I'm concerned it could happen again.
In 2022 the effective federal funds rate went from .08% to 4.33%. [ Effective Federal Funds Rate Market Daily Insights: H.15 Selected Interest Rates | YCharts ] Short-term bond prices are primarily driven by the FFR, while long-term prices are a combination of interest rate changes (and the longer the bond duration, the more its price moves in response to interest rate changes) and investor sentiment. That huge FFR jump is the primary driver for the 2022 bond bloodbath.
 
Hi, been awhile since i dropped in. Just noticed the big market drop today and am interested in
any educated guesses on where we may be headed in '25, especially relative to those with a similar PF AA to mine. I'm 66, semi-retired, with no debt, investment assets (before today) just over 3M FWIW. Relatively low COLA. PF is 50/50 equity/bond ETFs. Large positions in ST bond (SCHO, SHY BILS ) TIPS and floating rate funds. I've reduced bond duration to mostly short term. Equities are mostly US based - Large cap dividend oriented, and recently boosted small cap exposure...

I'll be in the realm of 95k in div income for this year, roughly in line w/ 2023. I wasn't savvy enough to jump out of bonds ahead of the recent downturn so NAVs have been slow to recover. Bonds continue to frustrate me given that they no longer seem to behave inverse to equities. On days like this bonds AND equities are down in-tandem.

I have no idea what to expect in 2025 but hope we aren't due for panicky volatility for a sustained period. I'm already wary about my SS and ACA being unrightfully screwed with let alone any big market drawdown that could stall what's been pretty stable and steady growth in recent years.

Thanks for any thoughts: )
I assume you're more in growth equities since your dividends are rather thin for a 1.5MM portfolio. Perhaps a market fund like VONE/VTI/VOO would be a bit less volatile and be a tad less unnerving.

I think you're better with those ST bonds, etc. that you have than the traditionally better LT bonds to see-saw a balance a portfolio. Personally, I think laddering treasuries are the way to go as bond fund fluctuations freak me out and a dozen treasuries should be as rock solid as any bond fund.

I'd be interested in hearing your thoughts and funds you've liked re: the floating rates?
 
Back
Top Bottom