Sold All My Stocks

[aja8888]

Well he would have been up 3.3%...

I recall when Bitcoin was a hat size!

 

[Stormy Kromer]

I apologize if my comments above were rude, that was not my intention.

I only wanted to point out that being in only fixed income, low yielding, safe investments can lead you to the poor house. I have watched too many older friends and relatives who would only invest in FDIC insured instruments, even recently when cd's were under 1%. It wasn't that long ago.

My dad was born in 1925 and scolded me forever for "gambling in the stock market, you'll go broke someday just like those big shot bankers!" Well, I Invested in quality stocks for 40 years and am just fine. I do have adequate more conservative investments to ride me through the bear markets that we all know will happen.

Equities are not riskier than fixed income investments, but they are a whole lot more volatile in the short term.

Everyone here is smarter than anyone else on their own finacial picture.

 

[Beststash]

The biggest issue for me is the "time element". No one can predict the future, but at almost age 75 it is pretty obvious (to me) that the odds are against me in that regard. I am at the point to where money does not have the same value to me as it did even 10 years ago. Having been retired now 22 years - I realize how quickly time passes......

 

[Al18]

In the past 30 years, I don’t ever recall getting less than 1.9% interest on a multi year CD. Compared to inflation, I lost a small amount. I think it’s always wise to invest some $ in equities, just to keep up with inflation.

 

[TheWizard]

...My dad was born in 1925 and scolded me forever for "gambling in the stock market, you'll go broke someday just like those big shot bankers!" Well, I Invested in quality stocks for 40 years and am just fine. I do have adequate more conservative investments to ride me through the bear markets that we all know will happen...

I don't think you were rude.
I wasn't around in the 1920s, 30s, or 40s, but things were different back then, I think.
No mutual funds, more speculation, more pump and dump.

I have a tendency to believe the broad stock market is better regulated nowadays. There will always be some volatility but that's not a bad thing...

 

[Stormy Kromer]

Glad we're all friends.

Everyone's situation is different and I have no business telling others how to invest. I only want to point out to others what I have seen others do that didn't work.

 

[bada bing]

Does anybody here really think that 100% cash.... cd's and bonds are the way to go long term ? I'm talking three or four years. No equities at all ?

Good luck.

Absolutely not. Not because I don't have an appreciation for wanting to minimize risk - won the game and all that. Because zero equities is not the lowest risk position you can have. We just experienced a minor inflation blip which fostered the worst year for bond performance on a relative basis, ever. Diversification, the efficient frontier, basic portfolio theory, blah, blah blah. Less than 20% equities in a retirement portfolio has been a relative loser on both risk and reward since "the modern era" began.

All that said, no one ever said you can't plot out a successful financial retirement while being 100% bonds. Obviously millions have done it. They would have done better, both a smoother ride and bigger ending portfolio with a modest equity position. But they "made it". There is a reason why "psst, Wellesley" is good lowest common denominator advice for those that aren't going to delve further into matching their savings investments with their goals.

 

[Stormy Kromer]

Absolutely not. Not because I don't have an appreciation for wanting to minimize risk - won the game and all that. Because zero equities is not the lowest risk position you can have. We just experienced a minor inflation blip which fostered the worst year for bond performance on a relative basis, ever. Diversification, the efficient frontier, basic portfolio theory, blah, blah blah. Less than 20% equities in a retirement portfolio has been a relative loser on both risk and reward since "the modern era" began.

All that said, no one ever said you can't plot out a successful financial retirement while being 100% bonds. Obviously millions have done it. They would have done better, both a smoother ride and bigger ending portfolio with a modest equity position. But they "made it". There is a reason why "psst, Wellesley" is good lowest common denominator advice for those that aren't going to delve further into matching their savings investments with their goalsPayn

Wow. Thanks for the summary.

My grandma retired with her life savings in some bonds in the late 1980's. Paying around 9% in a very safe investment, the salesman said. Interest rates started going down and pretty soon my grandma's bonds started getting call called in. Soon she had cash that she invested in CD's yielding under 3%. Her "safe" income was cut in half.

At the same time, the stock market went up around 20% a year. I'm guessing it was around 1997 or so.

Don't anybody here tell me that she should have purchased non-callable bonds. She was 80 and trusted the salesman from IDS and Ameriprise who promised her a "safe bond investment" The highest paying bond is the one that gets sold. The hell explains callable and non callable bonds to an old lady looking for income.....Do you think an 80 year old lady can understand a bond from a callable bond....... Don't blame me for not being there...... nobody should sell an old lady something without telling her the truth.

Don't call her greedy for taking the highest paying bond. She was sold the highest yield.

I helped her pay her bills in her later years. So, not everybody "made it" like you state above. My grandma died broke, with a bunch of bonds paying next to nothing. If they had paid her the 9% the salesman "guaranteed" in a safe bond she would have been fine. If she would have invested half her money in the "big old risky stock market" she would have died with a pile of money, instead of broke.

 

[TheWizard]

Wow. Thanks for the summary.

My grandma retired with her life savings in some bonds in the late 1980's. Paying around 9% in a very safe investment, the salesman said. Interest rates started going down and pretty soon my grandma's bonds started getting call called in. Soon she had cash that she invested in CD's yielding under 3%. Her "safe" income was cut in half.

At the same time, the stock market went up around 20% a year. I'm guessing it was around 1997 or so.

Don't anybody here tell me that she should have purchased non-callable bonds. She was 80 and trusted the salesman from IDS and Ameriprise who promised her a "safe bond investment" The highest paying bond is the one that gets sold. The hell explains callable and non callable bonds to an old lady looking for income.....Do you think an 80 year old lady can understand a bond from a callable bond....... Don't blame me for not being there...... nobody should sell an old lady something without telling her the truth.

Don't call her greedy for taking the highest paying bond. She was sold the highest yield.

I helped her pay her bills in her later years. So, not everybody "made it" like you state above. My grandma died broke, with a bunch of bonds paying next to nothing. If they had paid her the 9% the salesman "guaranteed" in a safe bond she would have been fine. If she would have invested half her money in the "big old risky stock market" she would have died with a pile of money, instead of broke.

Sounds like elder abuse to me...

 

[copyright1997reloaded]

All your worries are gone.

Except for

Reinvestment risk
Interest rate risk
Call risk
Inflation risk
Concentration risk
Liquidity risk

This post says it all - and why selling all isn't usually a good idea.

I've never understood the thought process that investing has to be a binary decision - if you are uncomfortable with your equity exposure, sell a little, and then sit back for a while and decide again later (incrementally).

 

[aja8888]

Wow. Thanks for the summary.

My grandma retired with her life savings in some bonds in the late 1980's. Paying around 9% in a very safe investment, the salesman said. Interest rates started going down and pretty soon my grandma's bonds started getting call called in. Soon she had cash that she invested in CD's yielding under 3%. Her "safe" income was cut in half.

At the same time, the stock market went up around 20% a year. I'm guessing it was around 1997 or so.

Don't anybody here tell me that she should have purchased non-callable bonds. She was 80 and trusted the salesman from IDS and Ameriprise who promised her a "safe bond investment" The highest paying bond is the one that gets sold. The hell explains callable and non callable bonds to an old lady looking for income.....Do you think an 80 year old lady can understand a bond from a callable bond....... Don't blame me for not being there...... nobody should sell an old lady something without telling her the truth.

Don't call her greedy for taking the highest paying bond. She was sold the highest yield.

I helped her pay her bills in her later years. So, not everybody "made it" like you state above. My grandma died broke, with a bunch of bonds paying next to nothing. If they had paid her the 9% the salesman "guaranteed" in a safe bond she would have been fine. If she would have invested half her money in the "big old risky stock market" she would have died with a pile of money, instead of broke.

Stormy, whether you die broke or with a pile of money doesn't matter too much as you are still dead.

And, it's the Amerprise guy's job to fleece old women and men. My sister-in-law was getting fleeced by them (EJ) and I got her out of there with only a 30% loss in bonds and equities.

 

[Drifter]

I take all investing advice as something to think about.It really depends if you are accumulating or have successfully already accumulated whether one investment is better or not, in my mind. I will however move a percentage of proceeds to less risky investments in the future but right now I am still playing the game.

 

[pb4uski]

... I only wanted to point out that being in only fixed income, low yielding, safe investments can lead you to the poor house. I have watched too many older friends and relatives who would only invest in FDIC insured instruments, even recently when cd's were under 1%. It wasn't that long ago. ...

Equities are not riskier than fixed income investments, but they are a whole lot more volatile in the short term. ...

It's situational. If your WR is low, the being in only fixed income, low yielding, safe investments is fine. Our WR in 2026 forward is 1% or less, so no real risk that we'll end up in the poor house. I would agree that at higher WR that there is more risk on running out of money.

FIRECalc suggests that an all bond portfolio could support 2.8% of inflation-adjusted withdrawals at 95% success. 60/40 is 4.06%, consistent with the Trinity Study conclusion.

WADR to claim that "Equities are not riskier than fixed income investments" is silly. Why does you think that equity investors generally get higher total returns than fixed income.e investors? Hint: Higher risk, higher return is the operative phrase.

 

[Stormy Kromer]

It's situational. If your WR is low, the being in only fixed income, low yielding, safe investments is fine. Our WR in 2026 forward is 1% or less, so no real risk that we'll end up in the poor house. I would agree that at higher WR that there is more risk on running out of money.

FIRECalc suggests that an all bond portfolio could support 2.8% of inflation-adjusted withdrawals at 95% success. 60/40 is 4.06%, consistent with the Trinity Study conclusion.

WADR to claim that "Equities are not riskier than fixed income investments" is silly. Why does you think that equity investors generally get higher total returns than fixed income.e investors? Hint: Higher risk, higher return is the operative phr

 

[Stormy Kromer]

It's situational. If your WR is low, the being in only fixed income, low yielding, safe investments is fine. Our WR in 2026 forward is 1% or less, so no real risk that we'll end up in the poor house. I would agree that at higher WR that there is more risk on running out of money.

FIRECalc suggests that an all bond portfolio could support 2.8% of inflation-adjusted withdrawals at 95% success. 60/40 is 4.06%, consistent with the Trinity Study conclusion.

WADR to claim that "Equities are not riskier than fixed income investments" is silly. Why does you think that equity investors generally get higher total returns than fixed income.e investors? Hint: Higher risk, higher return is the operative phrase.

No way an all fixed income portfolio can keep up with inflation. Equities are not riskier than fixed income investments over time. More volatile, but not more risky. One will keep up with inflation, the other won't. Back test it for 200 years.

 

[Stormy Kromer]

It's situational. If your WR is low, the being in only fixed income, low yielding, safe investments is fine. Our WR in 2026 forward is 1% or less, so no real risk that we'll end up in the poor house. I would agree that at higher WR that there is more risk on running out of money.

FIRECalc suggests that an all bond portfolio could support 2.8% of inflation-adjusted withdrawals at 95% success. 60/40 is 4.06%, consistent with the Trinity Study conclusion.

WADR to claim that "Equities are not riskier than fixed income investments" is silly. Why does you think that equity investors generally get higher total returns than fixed income.e investors? Hint: Higher risk, higher return is the operative

Stormy, whether you die broke or with a pile of money doesn't matter too much as you are still dead.

And, it's the Amerprise guy's job to fleece old women and men. My sister-in-law was getting fleeced by them (EJ) and I got her out of there with only a 30% loss in bonds and equities.

You're right, what you die with is nobody's business. But when an Ameriprise guy fleeces your grandmother (how did you guess) it becomes my business. She had to move out of her house because her income was cut in half.....bonds suck. He promised her great returns,,,,,didn't happen. At the same time the SP index plugged along at 10% annual average return.

 

[TheWizard]

You're right, what you die with is nobody's business. But when an Ameriprise guy fleeces your grandmother (how did you guess) it becomes my business. She had to move out of her house because her income was cut in half.....bonds suck. He promised her great returns,,,,,didn't happen. At the same time the SP index plugged along at 10% annual average return.

Important point is: there are different kinds of "risk".
A lot of people have no idea what I'm talking about and that doesn't bother me at all...

 

[Stormy Kromer]

Important point is: there are different kinds of "risk".
A lot of people have no idea what I'm talking about and that doesn't bother me at all...

You are right. Wizard. You are right. I need to mind my own business, if others loose a pile it isn't my business. Bothers me a lot, but its not my business.

 

[Diogenes]

I remember the 1970's and early 1980's when folks were buying CD's at 12% or so thinking they had it made forever. Then interest rates went down and people who were relying on 12% returns were soon getting below water returns and they didn't know what hit them.

In all fairness, if we moderns had a time-machine and returned to circa 1968, we'd likely eschew stocks and concentrate on FDIC-insured savings-vehicles. Well... assuming that we didn't pick individual stocks, of course. That would have worked just fine, throughout the 1970s. And because we have a time-machine, we'd switch back into stocks in 1982.

There is also the concept of once you won the game - do you continue to play conservatively for preservation or try to run up the score?

An eternal question! But it largely depends on... what exactly is the game?

No one can predict the future, but at almost age 75 it is pretty obvious (to me) that the odds are against me in that regard.

Of course. But imagine if you were a full generation younger, as are some of us fresh-retires or pre-retirees. Then the risk/reward calculation is starkly different.

I wasn't around in the 1920s, 30s, or 40s, but things were different back then, I think.

Agreed. The notion that "equities are just rank speculation" is not a serious argument today. But 100 years ago, it was considerably more weighty. Regulation was lax, corruption was rife, index funds didn't exist, buy/sell transactions were costly, information was guarded and hoarded, and the markets were far less efficient. Today, it's not so much that we're wiser than our forebears, or more risk-tolerant... but that our world is just different. A different world requires different adaptation!

We just experienced a minor inflation blip which fostered the worst year for bond performance on a relative basis, ever. Diversification, the efficient frontier, basic portfolio theory, blah, blah blah. ..

I too remain dismayed and disgusted by the "blip" in bonds. So much for safety, low volatility or negative correlation with stocks! Lesson learned. But to another point of yours, we all desire (or should desire) to be on the efficiency frontier. 0% stocks just isn't anywhere close to the efficiency frontier! The trick would be to design a portfolio that maximizes return for the desired low amount of risk... recognizing that "risk" includes both inflation risk (rates of return being too low, and overwhelmed by inflation) and the aforementioned "blips" in seemingly safe(ish) investments.

 

[Stormy Kromer]

In all fairness, if we moderns had a time-machine and returned to circa 1968, we'd likely eschew stocks and concentrate on FDIC-insured savings-vehicles. Well... assuming that we didn't pick individual stocks, of course. That would have worked just fine, throughout the 1970s. And because we have a time-machine, we'd switch back into stocks in 1982.

An eternal question! But it largely depends on... what exactly is the game?

Of course. But imagine if you were a full generation younger, as are some of us fresh-retires or pre-retirees. Then the risk/reward calculation is starkly different.

Agreed. The notion that "equities are just rank speculation" is not a serious argument today. But 100 years ago, it was considerably more weighty. Regulation was lax, corruption was rife, index funds didn't exist, buy/sell transactions were costly, information was guarded and hoarded, and the markets were far less efficient. Today, it's not so much that we're wiser than our forebears, or more risk-tolerant... but that our world is just different. A different world requires different adaptation!

I too remain dismayed and disgusted by the "blip" in bonds. So much for safety, low volatility or negative correlation with stocks! Lesson learned. But to another point of yours, we all desire (or should desire) to be on the efficiency frontier. 0% stocks just isn't anywhere close to the efficiency frontier! The trick would be to design a portfolio that maximizes return for the desired low amount of risk... recognizing that "risk" includes both inflation risk (rates of return being too low, and overwhelmed by inflation) and the aforementioned "blips" in seemingly safe(ish) investments.

Wow. Good post.

 

[TheWizard]

You are right. Wizard. You are right. I need to mind my own business, if others loose a pile it isn't my business. Bothers me a lot, but its not my business.

I didn't mean it quite that way.
I meant there's risk in holding all fixed income investments when interest rates fall and your income declines.

And there's certainly risk in individual stocks which can go bust.

But I find stock index funds to be a sort sweet spot. I think there's more VOLATILITY than RISK with them but others can choose their own words.
I'm 95+% in stock index funds so we'll see how that goes over the next few decades...

 

[Stormy Kromer]

I didn't mean it quite that way.
I meant there's risk in holding all fixed income investments when interest rates fall and your income declines.

And there's certainly risk in individual stocks which can go bust.

But I find stock index funds to be a sort sweet spot. I think there's more VOLATILITY than RISK with them but others can choose their own words.
I'm 95+% in stock index funds so we'll see how that goes over the next few decades...

I agree and couldn't have stated it better. Volatility and Risk are not the same thing. I am also heavily invested, long term, in stock index funds. I keep enough cash around to tide me over if there is a down turn.

To put it simply, brokers who tell people how "safe" bonds and CD's are....well. They might be for a year or two. Let's look at a 10 or 20 plus year horizon.

 

[Rianne]

I agree and couldn't have stated it better. Volatility and Risk are not the same thing. I am also heavily invested, long term, in stock index funds. I keep enough cash around to tide me over if there is a down turn.

To put it simply, brokers who tell people how "safe" bonds and CD's are....well. They might be for a year or two. Let's look at a 10 or 20 plus year horizon.

I bought high coupon/non callable CDs and high coupon treasuries for income and to preserve capital in my tIRA. I'm Roth converting in kind. Still have 45% in the taxable markets. The coupons pay 4-5% and give me a better idea where I'll be at 73 when RMDs hit. I think it's a nice balance, better than bond funds. I will pay ordinary taxes on @ $63,000 interest income/year from the tIRA, but it was meant to replace a pension. We took the pension buy-out and went the bond route. These are long-term (5-10 year bonds). I'm thinking interest rates will go down.

 

[pb4uski]

No way an all fixed income portfolio can keep up with inflation. ...

Not sure what you mean by the above but this is what FIRECalc says for a 100% bond portfolio over 30 years with a 2.8% WR that I provided in a prior post.

"FIRECalc looked at the 125 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 125 cycles. The lowest and highest portfolio balance at the end of your retirement was $-91,668 to $3,092,889, with an average at the end of $673,752. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 5 cycles failed, for a success rate of 96.0%."

So it is very possible for a retiree to have a successful retirement with all bonds even after considering inflation as long as their WR is low enough, which is what I previously wrote.

You prefer stocks? Fine, invest in stocks. If those here who chose to invest in bonds insults your sensibilities, too bad.

 

[pb4uski]

You are right. Wizard. You are right. I need to mind my own business, if others loose a pile it isn't my business. Bothers me a lot, but its not my business.

Exactly.