Questioning the 60/40 AA guideline, suggesting 60/20/20?

[OK EE]

I think my signature says 100% equities... I can't totally recall, but that will be my plan for life. Edit to add I am likely gonna be fat fire not not FIREd yet, so maybe that context is important.

I get that if you had say 600k in equities and it dropped 35% like it did during COVID the month before you were about to put a down payment on your new dream home that might be bad...

But anyone in this forum should be able to whether whatever history has thrown at us due to diligent and re-occurring planning and strategizing! I am just not a total fan of bonds for some reason.

Context is definitely important. As FatFIRE I suspect you could easily absorb a 25% market dip and not notice much of a difference in your lifestyle or retirement age target if you are planning that way. But someone that's right on the edge (IE has $1M liquid, $40K spend, retire at 50) definitely can't absorb that kind of hit.

For most people not at FatFIRE (I'm chubby myself and I'm not taking the risk with 100% equities) I would suggest that a bond tent or buckets is a good way to sleep at night in a volatile market.

 

[CRLLS]

That is not fatfire. Planning on a 25% drop is historically in every back-tested planner that I know of. . AI says there have been 9 such corrections since 1950. That averages about every 8-9 years.

 

[RetireBy90]

That is not fatfire. Planning on a 25% drop is historically in every back-tested planner that I know of. . AI says there have been 9 such corrections since 1950. That averages about every 8-9 years.

Only one I had funds to participate in was 2007-09. Bought rental house and upgraded to fond that was bank owned and had been over a year.
Mostnof adult life didn’t have resources to take advantage before then.

 

[TickTock]

Since you're happy with 65/35, stick with it. If you're worried about an inflation hedge, consider moving some of the bond allocation into TIPS.

I also suspect that his goals are different than mine. He is probably interested mostly in accumulating wealth. I'm interested mostly in preserving it, not having it go *poof* in a crash. I'm a fairly conservative investor, and he's probably more comfortable with a riskier strategy because he has a longer timeline.

An excellent insight. "Never assume the other guy is playing the same game as you." (Don't remember the source...)

I think you're fine.

 

[ER Eddie]

Just read that gold suffered its worst drop in 12 years...

 

[tutan]

Yesterday's WSJ had an article with discussion on up and downs of gold over past 50 years or so. It pointed out that after last 2 times it has doubled in a short time (year or two) it dropped again and took many years to recover previous high. Nothing wrong with gold except it costs to store and doesn't pay a dividend, so doesn't go to work for you.
Gold miners can be a way around that as they tend to follow gold prices and can pay a dividend from earnings.

Instead of buying and storing gold youself, you can buy gold ETFs, such as GLD, IAU, etc.

 

[tulak]

Somebody here posted one of those pics that show various stages of where we are at in the investment cycle. I don’t remember which thread. It’s one of those comical pics depicting investors at a different points in time.

Right now we are at gold.

ETA: Found it: Post in thread 'Stock Market Resilience?

Well, sharing here doesn’t work well. I’m probably doing it wrong, but if I click to share and copy, I should get a link, not a ‘Post in thread…’ Rant for today done.

And here’s the link: Stock Market Resilience?

 

[COcheesehead]

Somebody here posted one of those pics that show various stages of where we are at in the investment cycle. I don’t remember which thread. It’s one of those comical pics depicting investors at a different points in time.

Right now we are at gold.

ETA: Found it: Post in thread 'Stock Market Resilience?

Well, sharing here doesn’t work well. I’m probably doing it wrong, but if I click to share and copy, I should get a link, not a ‘Post in thread…’ Rant for today done.

I think it got killed today though. Biggest drop since 2020.

 

[earlierme]

Some analysts think that some people are taking some profit on gold to cover their margin calls similar to what happened in 2008.

Who knows?

 

[yakers]

I think a lot of retired users on this forum have a large percentage of their investments in Vanguard Wellington VWELX or Fidelity Balanced FBALX. These are both 60/40 funds who have been around 39+ years and shown impressive growth while smoothing out the bumps of a 100% stock portfolio. Over the past 10 years, VWELX has averaged 10.11% growth per year and FBALX has averaged 11.22% growth per year.

My AA is anything from 70/30 to 50/50. Current largest fund is VG Global Wellington VGWAX in taxable and Wellesley in tIRAs.

 

[HI Bill]

Some folks say "to heck with it. I'm just going for 100% equity and live with the wild ride." Others can't sleep with this choice and go all bonds.

After watching my abysmal bond funds lose $ for more than a decade, I went to 80/0/20 in ER, with the latter in a Vanguard money market fund. I’m not convinced that government bonds are going to perform anywhere close to historical returns as government debt increases.

 

[Koolau]

I think it got killed today though. Biggest drop since 2020.

Yeah, it dropped as much as I paid for mine.