Very Conservative 'Chicken' Portfolio

[Blue_Bird]

Hi, I am new here. I retired a few years ago @58. I have a very conservative portfolio with about 75% in 3.25% brokered CDs good for 3 more years, 10% in total stock, and 15% cash. NW minus Real Estate is 43X annual spend.

I can't get used to not having 'for-sure' income. I guess when my pension and SS kick in... I will be less nervous going back to ~40% equities. Are there people here doing like me? FOMO is building. I want to be told to shut up and just be happy.

 

[pjigar]

Some here would say why play when you have already won? You seem to be in that category so I say stay put if that is your personality. My personality allows me to have higher equity exposure. To each of his own. But no matter what you do, DO NOT make "reactive" decisions. Pick an AA number and stick to it.

 

[JRon]

You titled your post very appropriately You’re probably just keeping ahead of inflation now, but you also have plenty of funds. If you’re not worried about leaving a big pile for someone else when you pass (agreed) then your system works for you so why worry about missing out? On the other hand, 40% in equities is still pretty conservative and will perform much better over the long run.

What do you plan to do when the CDs come due? You likely won’t get that return again and then you may lose the game to inflation.

 

[mystang52]

I never give specific financial advice here. But as a general concept: emotional comfort is a not-insignificant portion of any retirement income plan. For example, that is why some like me paid off their mortgage a long time ago while others believe their cash is better allocated elsewhere.
My entire life I was always a bit below "textbook" allocations, and I'm doing quite well in retirement. If your lifestyle is supported by your allocation - and you're comfortable that inflation will not change that - it's not necessary to go with an allocation you're uncomfortable with. My 2 cents.

 

[UnrealizedPotential]

My thought is that you need to do what lets you sleep at night. My opinion is put only as much money towards equities that will allow you to keep up with inflation when you are ready to do so. FOMO I understand, but there are not any guarantees this good market will continue. The reward of investing in stocks is real, but the risks are real too.

 

[Dawg52]

My portfolio is very similar to yours. Some will say they would never go below the classic 60/40 allocation. But that's them....not me. I do what I'm comfortable with.

 

[VanWinkle]

Sounds like you don't need more money and sleep is priceless if you're not getting any. I think you are just fine with what you have now. You may have to make a decision when the CDs come due.

VW

 

[Car-Guy]

Some here would say why play when you have already won? You seem to be in that category so I say stay put if that is your personality.

Yes, some would say (like me) that when you have won the game, why keep playing....

Now with that said, I still play the market regularly with bucket #1, but that's money I can afford to lose. Bucket #2 is enough for life and that's in fixed income.

You titled your post very appropriately You’re probably just keeping ahead of inflation now, but you also have plenty of funds.

I don't think it's chicken at all... I think if you are in your early 60's and have 43x your annual spend plus a pension and ss yet to come, why worry or gamble.

What do you plan to do when the CDs come due? You likely won’t get that return again and then you may lose the game to inflation.

Now that's an issue IMO... My high yield CD's have all expired so I'm not getting much from those anymore.... I'm still getting ~3.5% on my 401k in their fixed income fund but I'm not sure how long that rate will last. Now that I'm getting older I worry less and less about return rates.

 

[disneysteve]

I see no issue here. You said you retired "a few years ago" at 58, implying you're probably 61 or 62 now. You have both SS and a pension still to come. And you've got 43 x expenses right now. You're golden.



Why take any more risk with your money than necessary?

 

[OldShooter]

Hi, I am new here. I retired a few years ago @58. I have a very conservative portfolio with about 75% in 3.25% brokered CDs good for 3 more years, 10% in total stock, and 15% cash. NW minus Real Estate is 43X annual spend.

I can't get used to not having 'for-sure' income. I guess when my pension and SS kick in... I will be less nervous going back to ~40% equities. Are there people here doing like me? FOMO is building. I want to be told to shut up and just be happy.

Well, @JRon implicitly asks the important question #1: "What is the purpose of your large stash?" When Alice (in Wonderland) asked the Cat: "Would you tell me, please, which way I ought to go from here?" The answer was: "That depends a good deal on where you want to get to." If you have won the game and have no desire to leave an estate, that points to one investing strategy. If you want to leave a large estate for family and charity, that points to a different strategy.

Now, about that chicken ... My guess is that the chicken is confusing volatility with risk. That's very common. Here is a chart I use in my Adult-Ed investing class:

​

Note two things: First, equities are indeed more volatile than the alternatives. Second, they are quite reliably more profitable. A lot more profitable. Also, there has never been a drop from which the market hasn't recovered in a few years. Is this history predictive? It has been so far.

So, the investing problem for the chicken may be simply to invest so that she can ride out the dips but stay on the equity gravy train. How much? See question #1.

 

[harley]

No it didn't. It may have taken 25 years for the Dow to recover to it's previous high, but it only took 4.5 years for an investor to recover (assuming they stayed the course). The combination of dividends and deflation has to be taken into account. There's also an interesting piece of info about IBM being dropped from the Dow in 1939m and not added back in until 1979. They said it's likely the Dow would have been twice as high by '79 had IBM remained in the index.

https://www.nytimes.com/2009/04/26/... charts seem to,times in the current downturn.

Edit: Hmm. The post I was replying to seems to have been deleted. Still, it's an interesting short article regarding the market and the Great Depression.

Second edit: Now it appears I am replying to a post that comes after my post. I guess I'm prescient.

 

[UnrealizedPotential]

The 1929 stock market crash took 25 years to recover from. That certainly is many times longer than 2 years. Some might possibly think a 1929 crash couldn't happen again, yet what assurance do they have? What assurance can they give? Such a downturn could potentially take years to recover from, and investors could lose life savings. I have no idea how strong such a possibility is, but I believe it certainly exists and I personally wouldn't get too confident.

 

[Earl E Retyre]

Hi, I am new here. I retired a few years ago @58. I have a very conservative portfolio with about 75% in 3.25% brokered CDs good for 3 more years, 10% in total stock, and 15% cash. NW minus Real Estate is 43X annual spend.

I can't get used to not having 'for-sure' income. I guess when my pension and SS kick in... I will be less nervous going back to ~40% equities. Are there people here doing like me? FOMO is building. I want to be told to shut up and just be happy.

I am not too much different than you. We currently have about 20% stock, 10% real estate, and the remaining 70% in CDs/Bonds/Cash. Also about 43X annual spend. Still 12 years from planned SS. Also will get very small pension in 8 years. Whenever I sell my real estate investment, I will likely put that in the market putting it at 30%. If the market continues to perform as it historically has, we are more than golden. If the market takes a huge hit and does not return for many many years, we are still fine. I also like the "for-sure" income as you put it.

 

[Chuckanut]

I never give specific financial advice here. But as a general concept: emotional comfort is a not-insignificant portion of any retirement income plan.

+1

If you are not feeling good about your investments, then you may be tempted to do something foolish such as sell at the bottom and then wait until stocks hit a new high to buy back into the market. Amazingly, millions of people have done that in the past

I can't tell you what to do only what I did. I am a bit of a security freak also. So I decided to buy Uncle Sam's COLA'd annuity by delaying SS until I am 70 and thereby increasing my lifetime payments by 32%. 32% more at 70, and 32% more COLA year after year after year after year...... I funded those four years of no SS with CD's and some dividend income from investments.

My 2¢. Take what you wish and leave the rest.

 

[OldShooter]

No it didn't. It may have taken 25 years for the Dow to recover to it's previous high, but it only took 4.5 years for an investor to recover (assuming they stayed the course). The combination of dividends and deflation has to be taken into account. There's also an interesting piece of info about IBM being dropped from the Dow in 1939m and not added back in until 1979. They said it's likely the Dow would have been twice as high by '79 had IBM remained in the index.

https://www.nytimes.com/2009/04/26/... charts seem to,times in the current downturn.

Edit: Hmm. The post I was replying to seems to have been deleted. Still, it's an interesting short article regarding the market and the Great Depression.

Second edit: Now it appears I am replying to a post that comes after my post. I guess I'm prescient.

Yeah. I'm confused about the sequence of posts, too, but @UnrealizedPotential does draw attention to the whole problem of inductive reasoning.

To his point about 1929, I do mentally discount older events, just like we discount future cash flows to get an NPV. The older the data, the more the investing environment was different than today. So that's my excuse.

I think the bigger future risk is a black swan that inductive reasoning can't see. What black swan and what impact is by definition unknown, so I just plug along. But I still go back to my original point, that volatility is not risk and my encouraging that chicken to understand the difference. SORR is a risk associated with equity volatility but, like a house fire, it is a risk that we can insure for or at least substantially mitigate by holding "cash" to tide us over the dips.

 

[Sunset]

OP - I'm just going to jump right in with a suggestion, rather than tell you to invest more in stocks.

Given that you are chicken about stocks and want more sure bets.
I would suggest taking SS at age 70 , so that you get the most monthly payment for the rest of your life.

Lots of people argue to take SS at 62, but they then invest a lot (for you) in the stock market and hope to make up the difference or die young. Neither of which you would be interested in doing.

Just saw my post is saying something similar to Chuckanut

 

[UnrealizedPotential]

No it didn't. It may have taken 25 years for the Dow to recover to it's previous high, but it only took 4.5 years for an investor to recover (assuming they stayed the course). The combination of dividends and deflation has to be taken into account. There's also an interesting piece of info about IBM being dropped from the Dow in 1939m and not added back in until 1979. They said it's likely the Dow would have been twice as high by '79 had IBM remained in the index.

https://www.nytimes.com/2009/04/26/... charts seem to,times in the current downturn.

Edit: Hmm. The post I was replying to seems to have been deleted. Still, it's an interesting short article regarding the market and the Great Depression.

Second edit: Now it appears I am replying to a post that comes after my post. I guess I'm prescient.

4.5 years wouldn't account for the Dow dropping another 32.824% in 1937. It also wouldn't account for the Dow down almost 3% in 1939, the Dow down 12.574% in 1940, and the Dow down another 15.382% in 1941. Sorry, but I do not see how a quick recovery was possible. It may not have taken 25 years, but a 4.5 year recovery seems a fantasy .

 

[PussInBoots]

The 1929 stock market crash took 25 years to recover from. That certainly is many times longer than 2 years. Some might possibly think a 1929 crash couldn't happen again, yet what assurance do they have? What assurance can they give? Such a downturn could potentially take years to recover from, and investors could lose life savings. I have no idea how strong such a possibility is, but I believe it certainly exists and I personally wouldn't get too confident.

Sure but statistically you are much more likely to quadruple your s&p 500 investment in 24 years than to face Great Depression.

Didn't those 24 years include some with really high inflation? That was probably bad for CDs, bonds and cash.

 

[Montecfo]

In the short term equities are risky, in the long-term they are safe.

In the short term bonds are safe, in the long-term they are risky.

 

[OldShooter]

4.5 years wouldn't account for the Dow dropping another 32.824% in 1937. It also wouldn't account for the Dow down almost 3% in 1939, the Dow down 12.574% in 1940, and the Dow down another 15.382% in 1941. Sorry, but I do not see how a quick recovery was possible. It may not have taken 25 years, but a 4.5 year recovery seems a fantasy .

I don't have great interest in this, but are you working with total return numbers or just nominal Dow? IIRC dividends were a bigger factor in total return back then. Nominal really doesn't mean anything, never mind that it is easy to find.

 

[UnrealizedPotential]

I don't have great interest in this, but are you working with total return numbers or just nominal Dow? IIRC dividends were a bigger factor in total return back then. Nominal really doesn't mean anything, never mind that it is easy to find.

We can drop the subject. Let's see if we can get back on topic. I won't post anymore about it.

 

[jollystomper]

. Are there people here doing like me? FOMO is building. I want to be told to shut up and just be happy.

"FOMO" to me is just a "politically correct" way of saying "I'd rather keep up with the Joneses and pay attention to what others have or are doing to define my happiness than be content with the fact that I have met my financial needs" .

As others have said, if you feel that you have "won the game", go with an AA that lets you sleep at night, and do not look at anyone else. You might want to take a look at the "I'm getting out of the market now!" threads that were very popular back in the March-April timeframe, from those who thought they liked their AA - until they saw what it actually meant in terms of losses.

 

[PussInBoots]

Between 1927 and 1952 1/2 of years s&p 500 dividend was larger then in 1927. If you could live from dividend yield in 1927 you could survive those 24 years in comfort .

https://www.multpl.com/s-p-500-dividend/table/by-year

This is called "You won the game", not piling into cash that loses it's value every year.

 

[pb4uski]

.... Second edit: Now it appears I am replying to a post that comes after my post. I guess I'm prescient.

I sort of thought that you were a forward thinker.... but little did I know how good you really are!

 

[Chuckanut]

The 1929 stock market crash took 25 years to recover from. That certainly is many times longer than 2 years. Some might possibly think a 1929 crash couldn't happen again, yet what assurance do they have? What assurance can they give? Such a downturn could potentially take years to recover from, and investors could lose life savings. I have no idea how strong such a possibility is, but I believe it certainly exists and I personally wouldn't get too confident.

The Huge Bear Market of '73 and '74 took over 20 years to recover in real terms. That was a Mighty Bear.