100% VTSAX until age 50?

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ivgrivchuck
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Re: 100% VTSAX until age 50?

Post by ivgrivchuck »

etfan wrote: Sat Jun 05, 2021 7:50 pm
ivgrivchuck wrote: Sat Jun 05, 2021 7:36 pm Yes, that is a very reasonable way of approaching the problem

Still Klangfool has a point. Going over 85/15 AA (15 can be your EF+bonds) is highly questionable. The increase in expected returns is very small and the risk increases a lot. It is not a good deal for most individuals.
This is probably a basic question: Why is the "EF+bonds" part a percentage of the AA and not just a fixed amount?

Suppose that I need $100K to survive for 2 years without a job, then my "bonds+EF" total should just be $100K, regardless of whether I have $100K or $1M in my portfolio.
People have very different views on this... I think you need to consider both.
A) Always have enough cash to get through an emergency.
B) Never go over 85/15 in your total AA (15 incl. your emergency fund). Say we hit a black swan and the stock market drops by 70%. Whether your AA is 100/0 or 85/15 makes an enormous difference in that scenario. While if it is just smooth sailing, the difference between 85/15 and 100/0 is hardly noticable. You have very little to win and much to lose.
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Re: 100% VTSAX until age 50?

Post by watchnerd »

I'm not putting all my equity bets in the US-only basket for 12 years.
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ivgrivchuck
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Re: 100% VTSAX until age 50?

Post by ivgrivchuck »

KlangFool wrote:
The average annual return of 70/30 is 9.4%
The average annual return of 100/0 is 10.3%

The difference is 0.9% per year. Aka, less than 1% per year.
I agree with your philosophy (even though I'm not as conservative as you).

But quoting historical returns is the wrong way to go...

Currently I expect stocks to return around 6% in the long term and long duration bonds to return around 2% in the long term...
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Re: 100% VTSAX until age 50?

Post by KlangFool »

etfan wrote: Sat Jun 05, 2021 7:50 pm
ivgrivchuck wrote: Sat Jun 05, 2021 7:36 pm Yes, that is a very reasonable way of approaching the problem

Still Klangfool has a point. Going over 85/15 AA (15 can be your EF+bonds) is highly questionable. The increase in expected returns is very small and the risk increases a lot. It is not a good deal for most individuals.
This is probably a basic question: Why is the "EF+bonds" part a percentage of the AA and not just a fixed amount?

Suppose that I need $100K to survive for 2 years without a job, then my "bonds+EF" total should just be $100K, regardless of whether I have $100K or $1M in my portfolio.
etfan,

<<Why is the "EF+bonds" part a percentage of the AA and not just a fixed amount?>>

1) I do not include EF in my portfolio. I do not include anything that I do not rebalance in my portfolio.

2) If you do not use fixed percentage, you cannot rebalance and achieve your goal of "Buy Low and Sell High".

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kevinf
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Re: 100% VTSAX until age 50?

Post by kevinf »

If you want Stocks & Bonds but only one fund, you can use an ETF such as NTSX which is a 90/60 equivalent. You get your stock exposure, you get your bond exposure, and you aren't toying with rebalancing anything. If you also want to have some international exposure, you can either buy a pure INT fund or use the NTSI ETF that just dropped. Unfortunately, WisdomTree is not yet offering a total world efficient core fund or I would be using that.
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Re: 100% VTSAX until age 50?

Post by KlangFool »

ivgrivchuck wrote: Sat Jun 05, 2021 8:12 pm
KlangFool wrote:
The average annual return of 70/30 is 9.4%
The average annual return of 100/0 is 10.3%

The difference is 0.9% per year. Aka, less than 1% per year.
I agree with your philosophy (even though I'm not as conservative as you).

But quoting historical returns is the wrong way to go...

Currently I expect stocks to return around 6% in the long term and long duration bonds to return around 2% in the long term...
ivgrivchuck,

<<But quoting historical returns is the wrong way to go...>>

If you agreed with this, then, the following statement has no meaning either.

<<Currently I expect stocks to return around 6% in the long term and long duration bonds to return around 2% in the long term...>>

1) The stock and bond return do not have to meet our expectation/prediction. It is unknowable.

2) More importantly, our actual individual return has no relationship with the long-term return. It is dependent on our own individual sequence of return. I use 5/25 band based rebalancing on my 60/40 portfolio. The drop in March 2020 (30%) and subsequent recovery was very profitable for me. But, for someone else that use annual rebalancing, they may do absolutely nothing in term of rebalancing.

In summary, we know nothing.

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ivgrivchuck
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Re: 100% VTSAX until age 50?

Post by ivgrivchuck »

KlangFool wrote: Sat Jun 05, 2021 8:19 pm
ivgrivchuck,

<<But quoting historical returns is the wrong way to go...>>

If you agreed with this, then, the following statement has no meaning either.

<<Currently I expect stocks to return around 6% in the long term and long duration bonds to return around 2% in the long term...>>

1) The stock and bond return do not have to meet our expectation/prediction. It is unknowable.
The fact that something is unknowable doesn't mean that our expectations/predictions are worthless.

I don't know that I wake up tomorrow (it's unknowable). I know that the probability of that is >99.99%. I use that expectation/prediction to plan my life accordingly.

Similarly the future returns of stocks are unknowable, but we can use statistics and mathematical models to guide our investing. All those efficient frontiers that you were referring to are based on these models as you fully well know.
2) More importantly, our actual individual return has no relationship with the long-term return.
Wrong. There is a relationship, it's not 1:1, but there is a correlation, as you should know. For the last 50 years there has been a lot of research in this area, known as "lifecycle investing".
In summary, we know nothing.
In summary, we know quite a bit. We also know that the future is uncertain.
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Re: 100% VTSAX until age 50?

Post by watchnerd »

ivgrivchuck wrote: Sat Jun 05, 2021 8:51 pm

In summary, we know quite a bit. We also know that the future is uncertain.
This board seems to have a real problem distinguishing between probabilistic outcomes and a total information null.

The future is not across the event horizon of a black hole.
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Re: 100% VTSAX until age 50?

Post by rob »

It's worked well in the past so let's assume it continues that way in the future also....
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drumboy256
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Re: 100% VTSAX until age 50?

Post by drumboy256 »

watchnerd wrote: Sat Jun 05, 2021 9:03 pm
ivgrivchuck wrote: Sat Jun 05, 2021 8:51 pm

In summary, we know quite a bit. We also know that the future is uncertain.
This board seems to have a real problem distinguishing between probabilistic outcomes and a total information null.

The future is not across the event horizon of a black hole.
Because of this board.... I've starting thinking it is. :sharebeer That said, I'm with KlangFool on the fact that we know nothing. However, planning or expecting is human nature.
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Re: 100% VTSAX until age 50?

Post by Trader Joe »

TylerK295 wrote: Sat Jun 05, 2021 12:34 am Hello Bogleheads, long time fan of the forum, first time making a post here,

I’m somewhat considering changing my fairly aggressive AA from 85/15 stocks/bonds to 100% stocks. I’m 38, married, and have a total of about $250K in our retirement accounts. We have zero debt other than our modest house which we are making double-payments on and will have paid off in 6 years. We have close to 12 months of living expenses in cash on hand and we both have very stable careers (healthcare IT for myself, wife is a CPA).

What’s really driving me to consider this, is that I just don’t see us needing to tap our retirement accounts for cash in the event of an emergency. We have more than enough in cash for a rainy day. I also know I won’t panic-sell or anything during the next downturn.

I would never want to be allocated 100% in stocks approaching retirement, but am I crazy to think that going all in on VTSAX for the next 12 years or so is a good idea?
Welcome to the forum. Your plan sounds excellent. I am in your exact same situation. I have been and I continue to be 100% invested in VTSAX/VFIAX and I am very happy with my investment results. As I approach retirement things may change. We will see.
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Re: 100% VTSAX until age 50?

Post by willthrill81 »

OP, your strategy is mathematically sound. Assuming you have the willingness and ability to take on the risks of a 100% stock allocation, it's likely to be superior to your existing 85/15 AA. A strong argument can be made for a 100% stock allocation leading up to around 10 years before one's anticipated retirement and then slowly ratcheting down to something like 70/30.
KlangFool wrote: Sat Jun 05, 2021 8:09 am 3) How much loss would you occur if you are wrong? Assuming a 50% stock market drop while you are unemployed, you would be selling your portfolio at a 50% loss.
The entire portfolio wouldn't be sold at a 50% loss, only enough to get through the emergency.
KlangFool wrote: Sat Jun 05, 2021 6:12 pmHence, the term, "efficient frontier" in term of AA is from 70/30 to 30/70.
You have said this many times, but it's still false. The efficient frontier has not been any and all allocations within that range.
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Re: 100% VTSAX until age 50?

Post by Marseille07 »

willthrill81 wrote: Sat Jun 05, 2021 9:30 pm OP, your strategy is mathematically sound. Assuming you have the willingness and ability to take on the risks of a 100% stock allocation, it's likely to be superior to your existing 85/15 AA. A strong argument can be made for a 100% stock allocation leading up to around 10 years before one's anticipated retirement and then slowly ratcheting down to something like 70/30.
KlangFool wrote: Sat Jun 05, 2021 8:09 am 3) How much loss would you occur if you are wrong? Assuming a 50% stock market drop while you are unemployed, you would be selling your portfolio at a 50% loss.
The entire portfolio wouldn't be sold at a 50% loss, only enough to get through the emergency.
KlangFool wrote: Sat Jun 05, 2021 6:12 pmHence, the term, "efficient frontier" in term of AA is from 70/30 to 30/70.
You have said this many times, but it's still false. The efficient frontier has not been any and all allocations within that range.
The focal point of the efficient frontier is something like 25/75. Anything else is just a point on the frontier.
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Re: 100% VTSAX until age 50?

Post by qwertyjazz »

Marseille07 wrote: Sat Jun 05, 2021 9:40 pm
willthrill81 wrote: Sat Jun 05, 2021 9:30 pm OP, your strategy is mathematically sound. Assuming you have the willingness and ability to take on the risks of a 100% stock allocation, it's likely to be superior to your existing 85/15 AA. A strong argument can be made for a 100% stock allocation leading up to around 10 years before one's anticipated retirement and then slowly ratcheting down to something like 70/30.
KlangFool wrote: Sat Jun 05, 2021 8:09 am 3) How much loss would you occur if you are wrong? Assuming a 50% stock market drop while you are unemployed, you would be selling your portfolio at a 50% loss.
The entire portfolio wouldn't be sold at a 50% loss, only enough to get through the emergency.
KlangFool wrote: Sat Jun 05, 2021 6:12 pmHence, the term, "efficient frontier" in term of AA is from 70/30 to 30/70.
You have said this many times, but it's still false. The efficient frontier has not been any and all allocations within that range.
The focal point of the efficient frontier is something like 25/75. Anything else is just a point on the frontier.
Please explain - this does not make mathematical sense to me
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Marseille07
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Re: 100% VTSAX until age 50?

Post by Marseille07 »

qwertyjazz wrote: Sat Jun 05, 2021 10:32 pm
Marseille07 wrote: Sat Jun 05, 2021 9:40 pm
willthrill81 wrote: Sat Jun 05, 2021 9:30 pm OP, your strategy is mathematically sound. Assuming you have the willingness and ability to take on the risks of a 100% stock allocation, it's likely to be superior to your existing 85/15 AA. A strong argument can be made for a 100% stock allocation leading up to around 10 years before one's anticipated retirement and then slowly ratcheting down to something like 70/30.
KlangFool wrote: Sat Jun 05, 2021 8:09 am 3) How much loss would you occur if you are wrong? Assuming a 50% stock market drop while you are unemployed, you would be selling your portfolio at a 50% loss.
The entire portfolio wouldn't be sold at a 50% loss, only enough to get through the emergency.
KlangFool wrote: Sat Jun 05, 2021 6:12 pmHence, the term, "efficient frontier" in term of AA is from 70/30 to 30/70.
You have said this many times, but it's still false. The efficient frontier has not been any and all allocations within that range.
The focal point of the efficient frontier is something like 25/75. Anything else is just a point on the frontier.
Please explain - this does not make mathematical sense to me
I'm just referring to this: https://ikeikokwu.com/2012/04/09/the-ef ... -frontier/

As you can see, there's no such "range" as 30/70 to 70/30 on the frontier.
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Re: 100% VTSAX until age 50?

Post by Triple digit golfer »

Marseille07 wrote: Sat Jun 05, 2021 10:34 pm
qwertyjazz wrote: Sat Jun 05, 2021 10:32 pm
Marseille07 wrote: Sat Jun 05, 2021 9:40 pm
willthrill81 wrote: Sat Jun 05, 2021 9:30 pm OP, your strategy is mathematically sound. Assuming you have the willingness and ability to take on the risks of a 100% stock allocation, it's likely to be superior to your existing 85/15 AA. A strong argument can be made for a 100% stock allocation leading up to around 10 years before one's anticipated retirement and then slowly ratcheting down to something like 70/30.
KlangFool wrote: Sat Jun 05, 2021 8:09 am 3) How much loss would you occur if you are wrong? Assuming a 50% stock market drop while you are unemployed, you would be selling your portfolio at a 50% loss.
The entire portfolio wouldn't be sold at a 50% loss, only enough to get through the emergency.
KlangFool wrote: Sat Jun 05, 2021 6:12 pmHence, the term, "efficient frontier" in term of AA is from 70/30 to 30/70.
You have said this many times, but it's still false. The efficient frontier has not been any and all allocations within that range.
The focal point of the efficient frontier is something like 25/75. Anything else is just a point on the frontier.
Please explain - this does not make mathematical sense to me
I'm just referring to this: https://ikeikokwu.com/2012/04/09/the-ef ... -frontier/

As you can see, there's no such "range" as 30/70 to 70/30 on the frontier.
Agreed on the range thing.

The goal should not be the highest risk adjusted return. That would result in most people being far too conservative.
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Re: 100% VTSAX until age 50?

Post by etfan »

watchnerd wrote: Sat Jun 05, 2021 9:03 pm This board seems to have a real problem distinguishing between probabilistic outcomes and a total information null.

The future is not across the event horizon of a black hole.
Maybe it's not a problem but simply different degrees of risk tolerance.

Someone with low risk tolerance might say, "We cannot know for sure the sun will rise tomorrow."

While technically right, that person is unreasonable, when it comes to the sun. But with the stock market, it's just someone with low risk tolerance.
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Re: 100% VTSAX until age 50?

Post by etfan »

ivgrivchuck wrote: Sat Jun 05, 2021 8:00 pm Never go over 85/15 in your total AA (15 incl. your emergency fund). Say we hit a black swan and the stock market drops by 70%. Whether your AA is 100/0 or 85/15 makes an enormous difference in that scenario. While if it is just smooth sailing, the difference between 85/15 and 100/0 is hardly noticable. You have very little to win and much to lose.
And that plan sounds reasonable (it's what I'm leaning towards).

That said, you seem to be comparing a 70% drop and a normal market (smooth sailing). What that doesn't capture is the possibility that the market goes up 70%. In that case, the 15% that is not invested in stocks will put a dent in potential earnings.

Obviously I'd rather be in the second situation than the first. But is a 70% drop drastically more likely than a 70% rise?

KlangFool wrote: Sat Jun 05, 2021 8:14 pm If you do not use fixed percentage, you cannot rebalance and achieve your goal of "Buy Low and Sell High".
I see. I did not consider this rebalancing factor.
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Re: 100% VTSAX until age 50?

Post by pokebowl »

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Re: 100% VTSAX until age 50?

Post by finite_difference »

I think 100% VTSAX, 100% VT, or 80/20 VTSAX/VTIAX is fine through 45 years of age.

I could see starting to add some bonds at 45, like 2.5% per year. So at 50 you’re 12.5% bonds, and at 61 you’re at 60/40, which you could hold forever.

If your risk tolerance is high, then you could hold 100% stock until 50 and move to 70/30 over time.

I guess we moved from

Age in Bonds to
Age - 20 in Bonds to
Age - 45 in Bonds to
Age - 50 in Bonds
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Re: 100% VTSAX until age 50?

Post by invest4 »

No one knows the future.

If you have the intestinal fortitude to handle the volatility and believe the "juice is worth the squeeze", then go ahead and do so. Importantly, go in with your eyes wide open. What some perceive as a sure thing given enough time may indeed discover the future is not like the past and experience outcomes that did not align with their expectations.
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Re: 100% VTSAX until age 50?

Post by Kaktus »

[quote=TylerK295 post_id=6048220 time=1622871283 user_id=175

I’m a total of about $250K in our retirement accounts. We have zero debt other than our modest house which we are making double-payments on and will have paid off in 6 years. We have close to 12 months of living expenses in cash on hand and we both have very stable careers (healthcare IT for myself, wife is a CPA).

What’s really driving me to consider this, is that I just don’t see us needing to tap our retirement accounts for cash in the event of an emergency. We have more than enough in cash for a rainy day. I also know I won’t panic-sell or anything during the next downturn.

I would never want to be allocated 100% in stocks approaching retirement, but am I crazy to think that going all in on VTSAX for the next 12 years or so is a good idea?
[/quote]
I think it is surprising noone brings in that agressive paying down of mortgage as part of the picture. It can be seen as part of your bond savings. Being debt free in your 40s means also that your house is a significant part of your net assets at that time. (I suppose you dont live in a cottage with no electricity). Perhaps you could mention the sums you put towards that debt and your savings rate.
To me this is at least as importatnt as the different suggested amounts of bond holdings.
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Re: 100% VTSAX until age 50?

Post by ruralavalon »

invest4 wrote: Sun Jun 06, 2021 5:36 am No one knows the future.

If you have the intestinal fortitude to handle the volatility and believe the "juice is worth the squeeze", then go ahead and do so. Importantly, go in with your eyes wide open. What some perceive as a sure thing given enough time may indeed discover the future is not like the past and experience outcomes that did not align with their expectations.
The problem is until the future happens we can only theorize about how we will react to the future.
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Re: 100% VTSAX until age 50?

Post by invest4 »

ruralavalon wrote: Sun Jun 06, 2021 9:22 am
invest4 wrote: Sun Jun 06, 2021 5:36 am No one knows the future.

If you have the intestinal fortitude to handle the volatility and believe the "juice is worth the squeeze", then go ahead and do so. Importantly, go in with your eyes wide open. What some perceive as a sure thing given enough time may indeed discover the future is not like the past and experience outcomes that did not align with their expectations.
The problem is until the future happens we can only theorize about how we will react to the future.
...and thus is life.
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Re: 100% VTSAX until age 50?

Post by LongTermInvestor88 »

KlangFool wrote: Sat Jun 05, 2021 8:09 am
TylerK295 wrote: Sat Jun 05, 2021 12:34 am
We have close to 12 months of living expenses in cash on hand and we both have very stable careers (healthcare IT for myself, wife is a CPA).

What’s really driving me to consider this, is that I just don’t see us needing to tap our retirement accounts for cash in the event of an emergency. We have more than enough in cash for a rainy day. I also know I won’t panic-sell or anything during the next downturn.
TylerK295,

1) What if you are wrong and you have an emergency bigger than your emergency fund?

2) How long do you think you would be unemployed in the coming recession over the next 12 years?

3) How much loss would you occur if you are wrong? Assuming a 50% stock market drop while you are unemployed, you would be selling your portfolio at a 50% loss.

https://investor.vanguard.com/investing ... allocation

4) Let's say you are right, what do you really gain?

The average annual return of 70/30 is 9.4%
The average annual return of 100/0 is 10.3%

The difference is 0.9% per year. Aka, less than 1% per year.

5) So, you are gaining less than 1% per year if you right. But, if you are wrong, you would be losing a lot more than 1%. Why is this a good bet?

<<We have more than enough in cash for a rainy day.>>

6) My niece's house was flooded in Houston. It suffered a 50K damage. We, uncles and aunties, pooled our money and gave her 50K to fix the house. Do you really have enough money for that kind of rainy day?

KlangFool

KlangFool

You really do have some misplaced faith in the expected returns of bonds in the future. Bonds do not have anything near the expected return they provided in the past yet you continue which I feel wrongly to advise others in early accumulation to hold a significant allocation of bonds.
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Re: 100% VTSAX until age 50?

Post by KlangFool »

LongTermInvestor88 wrote: Sun Jun 06, 2021 1:28 pm KlangFool

You really do have some misplaced faith in the expected returns of bonds in the future. Bonds do not have anything near the expected return they provided in the past yet you continue which I feel wrongly to advise others in early accumulation to hold a significant allocation of bonds.
LongTermInvestor88,

<<Bonds do not have anything near the expected return they provided in the past >>

Why do you think that the stock return will be significantly better in the future after 10+ years of bull market? Bond may not do well. But, the stock could be doing worst too.

We know nothing. Diversification protects us from our own ignorance.

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Re: 100% VTSAX until age 50?

Post by Toons »

I am 70 years young
70/30
Some aggressive funds.
Just have to figure out what your
"Sleep Well"Risk Tolerance Is,
Decades of long term investing has taught me that downturns are Nothing but
Opportunity
If you horizon is at least 10 years or longer
At your "young age',
I would consider All equity
If so ,be appreciative of downturns
That is when wealth is created.
Just don't know it "At The Time"


:wink:
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Re: 100% VTSAX until age 50?

Post by Grt2bOutdoors »

gubernaculum wrote: Sat Jun 05, 2021 10:58 am
TylerK295 wrote: Sat Jun 05, 2021 12:34 am Hello Bogleheads, long time fan of the forum, first time making a post here,

I’m somewhat considering changing my fairly aggressive AA from 85/15 stocks/bonds to 100% stocks. I’m 38, married, and have a total of about $250K in our retirement accounts. We have zero debt other than our modest house which we are making double-payments on and will have paid off in 6 years. We have close to 12 months of living expenses in cash on hand and we both have very stable careers (healthcare IT for myself, wife is a CPA).

What’s really driving me to consider this, is that I just don’t see us needing to tap our retirement accounts for cash in the event of an emergency. We have more than enough in cash for a rainy day. I also know I won’t panic-sell or anything during the next downturn.

I would never want to be allocated 100% in stocks approaching retirement, but am I crazy to think that going all in on VTSAX for the next 12 years or so is a good idea?
VTSAX for life. VTSAX are the new bonds.
Here we go.......the "it's different this time" post. Go back in history and tell us where equity is considered a bond. Equity is a call option on profits but is certainly not a put on losses. You most certainly can lose, including your entire position.

Bond - it's called a "bond" for a reason as in "your word is your bond" - it's a contractual promise to pay back both the principal and agreed upon interest rate coupon and it has substantial legal recourse in a court of law. Shareowners can pursue legal action for certain illegal behaviors but there is no contractual obligation to pay you anything, much less a coupon.

The top is in....equities are the new bond. :oops:
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Re: 100% VTSAX until age 50?

Post by Grt2bOutdoors »

LongTermInvestor88 wrote: Sun Jun 06, 2021 1:28 pm
You really do have some misplaced faith in the expected returns of bonds in the future. Bonds do not have anything near the expected return they provided in the past yet you continue which I feel wrongly to advise others in early accumulation to hold a significant allocation of bonds.
One thing bonds provide that equities can never promise, return of your principal. An equity is a call option on profits. The key to becoming a successful investor is being able to remain solvent long enough to remain in the game. There were plenty of CPA's and unemployed IT workers in past recessions, being young doesn't make you immune to those kind of events. So long as the OP is solvent enough to stay in the game, then go ahead. The only people I knew who were 100% equity were those with no debt, plenty of other means of financial liquidity/assets that provided cashflow. In other words, they did not place any reliance on those assets, they could have gone to zero and it would not affect their standard of living and/or their marriage. Those who will have a future defined benefit pension from say the federal government, they can be 100% equity, they have no risk with that source of income. Those who have a secure essential job, they can go 100% equity. Those who are risk takers, sure go 100% equity. Those who don't know their own risk tolerance? They should be holding some bonds because the worst way to find out your risk tolerance is when you wake up the next morning and the market is down 5,000 points with no end in sight and they are about to hit the "sell" button. If the OP needs to ask us, then he's not sure about doing it and he didn't write that his wife was in agreement with this strategy either.

Finance is personal, KlangFool speaks from his own experience as do we all, there will always be some who throw caution to the wind so the OP needs to weigh his own beliefs and that of his spouses. His spouse is a CPA, there are very few CPA's I know of who will go full tilt into anything especially for one who practices in a field which errs in conservatism. Thirteen years ago, we nearly came to the brink of the second Great Depression instead of the Great Recession we had, not many on this forum were privy to what was happening in real time, let's just say that if you did, you'd revisit your "equity is the new bond and cash is trash" thoughts. Giving up some return, is better than losing it all.
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Re: 100% VTSAX until age 50?

Post by Grt2bOutdoors »

rob wrote: Sat Jun 05, 2021 9:10 pm It's worked well in the past so let's assume it continues that way in the future also....
Yes, judging from the book, The Great Depression, A Diary - those who were 100% stock in 1929 at age 50 were quite happy folks :twisted:
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Re: 100% VTSAX until age 50?

Post by dogagility »

Risk tolerance and flexibility. There is no right or wrong. "That's why it's called personal finance." :beer
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Re: 100% VTSAX until age 50?

Post by DangerDad »

100% VTSAX until age 50 is reasonable in my opinion—especially if you have the following:
1. solid job security
2. conviction and fortitude to stay the course
3. a reasonable EF

Note that “reasonable” isn’t the same as recommended. There’s a fairly wide range of reasonable options—and within this range you’ll find varied opinions re ideal or recommended portfolios. Within this Boglehead community you’ll find a variety of views re the two basic AA questions: what % (if any) bonds and what % (if any) international? Often it comes down to personal preference and style.

Cheers,
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Re: 100% VTSAX until age 50?

Post by Marseille07 »

100% VTSAX (or something equivalent) in retirement accounts is fine. I'm doing this myself and aiming for 95/5(cash) overall.
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Re: 100% VTSAX until age 50?

Post by PowderDay9 »

So OP wants to switch from 85/15 to 100/0 after a huge run up in equities but won't panic sell (and change AA) during the next recession?

I vote to stay the course with your existing AA.
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Re: 100% VTSAX until age 50?

Post by PowderDay9 »

Grt2bOutdoors wrote: Sun Jun 06, 2021 2:40 pm
rob wrote: Sat Jun 05, 2021 9:10 pm It's worked well in the past so let's assume it continues that way in the future also....
Yes, judging from the book, The Great Depression, A Diary - those who were 100% stock in 1929 at age 50 were quite happy folks :twisted:
Such a great book. More people should be reading it right now.
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Re: 100% VTSAX until age 50?

Post by Triple digit golfer »

PowderDay9 wrote: Mon Jun 07, 2021 11:02 am So OP wants to switch from 85/15 to 100/0 after a huge run up in equities but won't panic sell (and change AA) during the next recession?

I vote to stay the course with your existing AA.
Agreed. OP has not answered yet what he did in March 2020.
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Re: 100% VTSAX until age 50?

Post by galawdawg »

Triple digit golfer wrote: Mon Jun 07, 2021 11:10 am
PowderDay9 wrote: Mon Jun 07, 2021 11:02 am So OP wants to switch from 85/15 to 100/0 after a huge run up in equities but won't panic sell (and change AA) during the next recession?

I vote to stay the course with your existing AA.
Agreed. OP has not answered yet what he did in March 2020.
Yep. I'm always curious about why someone joins Bogleheads, posts a question, and then doesn't return in a timely fashion (or doesn't return at all) to respond to any follow-up questions, comments or feedback....

Do they become intimidated by the replies or is it something else? :confused Very odd, whatever the reason.
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Re: 100% VTSAX until age 50?

Post by Somethingwitty92912 »

climber2020 wrote: Sat Jun 05, 2021 7:47 am
TylerK295 wrote: Sat Jun 05, 2021 12:34 am I would never want to be allocated 100% in stocks approaching retirement, but am I crazy to think that going all in on VTSAX for the next 12 years or so is a good idea?
It's a reasonable plan as long as you stick to it.

Question: why didn't you make the change in March or April 2020? That was a much better time to go aggressive compared to now.
Answer this question right here OP!

For real, you are not 85/15. You are 85/15 and a butt load of cash, which is part of your AA. I think you need to reevaluate your accounting. Update the post with that info.

If you can handle the swings through, your instincts are correct.
finite_difference
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Re: 100% VTSAX until age 50?

Post by finite_difference »

LongTermInvestor88 wrote: Sun Jun 06, 2021 1:28 pm
KlangFool wrote: Sat Jun 05, 2021 8:09 am
TylerK295 wrote: Sat Jun 05, 2021 12:34 am
We have close to 12 months of living expenses in cash on hand and we both have very stable careers (healthcare IT for myself, wife is a CPA).

What’s really driving me to consider this, is that I just don’t see us needing to tap our retirement accounts for cash in the event of an emergency. We have more than enough in cash for a rainy day. I also know I won’t panic-sell or anything during the next downturn.
TylerK295,

1) What if you are wrong and you have an emergency bigger than your emergency fund?

2) How long do you think you would be unemployed in the coming recession over the next 12 years?

3) How much loss would you occur if you are wrong? Assuming a 50% stock market drop while you are unemployed, you would be selling your portfolio at a 50% loss.

https://investor.vanguard.com/investing ... allocation

4) Let's say you are right, what do you really gain?

The average annual return of 70/30 is 9.4%
The average annual return of 100/0 is 10.3%

The difference is 0.9% per year. Aka, less than 1% per year.

5) So, you are gaining less than 1% per year if you right. But, if you are wrong, you would be losing a lot more than 1%. Why is this a good bet?

<<We have more than enough in cash for a rainy day.>>

6) My niece's house was flooded in Houston. It suffered a 50K damage. We, uncles and aunties, pooled our money and gave her 50K to fix the house. Do you really have enough money for that kind of rainy day?

KlangFool

KlangFool

You really do have some misplaced faith in the expected returns of bonds in the future. Bonds do not have anything near the expected return they provided in the past yet you continue which I feel wrongly to advise others in early accumulation to hold a significant allocation of bonds.
You could add some investment grade corporate bond funds, or use Wellington, to boost yield.

I agree with KlangFool though. We don’t know the future return of bonds over the next 30 years. Bonds add diversification and stability to your portfolio.
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Re: 100% VTSAX until age 50?

Post by crossbow »

etfan wrote: Sat Jun 05, 2021 7:50 pm
ivgrivchuck wrote: Sat Jun 05, 2021 7:36 pm Yes, that is a very reasonable way of approaching the problem

Still Klangfool has a point. Going over 85/15 AA (15 can be your EF+bonds) is highly questionable. The increase in expected returns is very small and the risk increases a lot. It is not a good deal for most individuals.
This is probably a basic question: Why is the "EF+bonds" part a percentage of the AA and not just a fixed amount?

Suppose that I need $100K to survive for 2 years without a job, then my "bonds+EF" total should just be $100K, regardless of whether I have $100K or $1M in my portfolio.
Good point.
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Re: 100% VTSAX until age 50?

Post by climber2020 »

etfan wrote: Sat Jun 05, 2021 7:50 pm This is probably a basic question: Why is the "EF+bonds" part a percentage of the AA and not just a fixed amount?

Suppose that I need $100K to survive for 2 years without a job, then my "bonds+EF" total should just be $100K, regardless of whether I have $100K or $1M in my portfolio.
Can do it either way, but as the portfolio grows toward its final goal (assuming you have a final goal and you're not trying to die with the most money possible), AA matters less.

If your goal is one million dollars and you have $800,000, the time difference it takes to get the last $200,000 is minimal between 90/10 and 70/30; however, having the bigger bond allocation is nice if the stock market crashes 6 months before you're scheduled to retire. Make up some hypothetical numbers for future stock and bond returns and run them through a compounding interest calculator and you'll see how insignificant the AA differences are once your investments hit a certain level.
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Re: 100% VTSAX until age 50?

Post by etfan »

climber2020 wrote: Mon Jun 07, 2021 12:17 pm Make up some hypothetical numbers for future stock and bond returns and run them through a compounding interest calculator and you'll see how insignificant the AA differences are once your investments hit a certain level.
So that means that, if we assume this "certain level" is X percent in bonds, then any allocation beyond X percent in bonds makes no significant difference?

Is there some resource on this?
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Re: 100% VTSAX until age 50?

Post by climber2020 »

etfan wrote: Mon Jun 07, 2021 1:15 pm
climber2020 wrote: Mon Jun 07, 2021 12:17 pm Make up some hypothetical numbers for future stock and bond returns and run them through a compounding interest calculator and you'll see how insignificant the AA differences are once your investments hit a certain level.
So that means that, if we assume this "certain level" is X percent in bonds, then any allocation beyond X percent in bonds makes no significant difference?
Once you get to around 60 to 70% of your target portfolio balance (not just bonds; the entire portfolio), a 10 or 20% difference in AA won't make much difference in how long it takes to hit your final goal.

Now if we're comparing 80/20 to something ridiculous like a super conservative 5/95, then yes, that's going to make a huge difference; but for something more realistic like 90/10 to 75/25, the difference is less than what you'd probably think.
etfan wrote: Mon Jun 07, 2021 1:15 pm Is there some resource on this?
Do the test yourself. Assume the following scenarios of future returns:
Stocks 10%, Bonds 2%
Stocks 7%, Bonds 2%
Stocks 4%, Bonds 1%

Now use the above scenarios to calculate hypothetical future returns for 90/10, 80/20, and 70/30 asset allocations using a compounding interest calculator and compare the lengths of time it takes to reach financial independence with each allocation.
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Re: 100% VTSAX until age 50?

Post by ivgrivchuck »

etfan wrote: Sun Jun 06, 2021 12:23 am Obviously I'd rather be in the second situation than the first. But is a 70% drop drastically more likely than a 70% rise?
No, but money has much more utility value when you are starving compared to situation when you need to decide between Ferrari and Lamborghini.

It's called downside protection.
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Re: 100% VTSAX until age 50?

Post by Grt2bOutdoors »

climber2020 wrote: Mon Jun 07, 2021 1:31 pm
etfan wrote: Mon Jun 07, 2021 1:15 pm
climber2020 wrote: Mon Jun 07, 2021 12:17 pm Make up some hypothetical numbers for future stock and bond returns and run them through a compounding interest calculator and you'll see how insignificant the AA differences are once your investments hit a certain level.
So that means that, if we assume this "certain level" is X percent in bonds, then any allocation beyond X percent in bonds makes no significant difference?
Once you get to around 60 to 70% of your target portfolio balance (not just bonds; the entire portfolio), a 10 or 20% difference in AA won't make much difference in how long it takes to hit your final goal.

Now if we're comparing 80/20 to something ridiculous like a super conservative 5/95, then yes, that's going to make a huge difference; but for something more realistic like 90/10 to 75/25, the difference is less than what you'd probably think.
etfan wrote: Mon Jun 07, 2021 1:15 pm Is there some resource on this?
Do the test yourself. Assume the following scenarios of future returns:
Stocks 10%, Bonds 2%
Stocks 7%, Bonds 2%
Stocks 4%, Bonds 1%

Now use the above scenarios to calculate hypothetical future returns for 90/10, 80/20, and 70/30 asset allocations using a compounding interest calculator and compare the lengths of time it takes to reach financial independence with each allocation.
Excellent suggestion.
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Re: 100% VTSAX until age 50?

Post by Grt2bOutdoors »

ivgrivchuck wrote: Mon Jun 07, 2021 1:41 pm
etfan wrote: Sun Jun 06, 2021 12:23 am Obviously I'd rather be in the second situation than the first. But is a 70% drop drastically more likely than a 70% rise?
No, but money has much more utility value when you are starving compared to situation when you need to decide between Ferrari and Lamborghini.

It's called downside protection.
Precisely, one may never understand the true utility of cash or bonds until they find all available credit has dried up along with their source of income.
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Re: 100% VTSAX until age 50?

Post by absolute zero »

climber2020 wrote: Mon Jun 07, 2021 1:31 pm Once you get to around 60 to 70% of your target portfolio balance (not just bonds; the entire portfolio), a 10 or 20% difference in AA won't make much difference in how long it takes to hit your final goal.

Now if we're comparing 80/20 to something ridiculous like a super conservative 5/95, then yes, that's going to make a huge difference; but for something more realistic like 90/10 to 75/25, the difference is less than what you'd probably think.
This is true, but by the same token, holding a 90/10 vs a 75/25 portfolio will make almost no difference regarding how long one’s retirement is delayed should the market crash. By holding 90/10 when a market crash occurs, you might have to work an extra 4 or 5 months compared to if you had instead held 75/25 leading up to retirement.

See post below for some examples I ran.

https://www.bogleheads.org/forum/viewt ... 5#p5547993
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Re: 100% VTSAX until age 50?

Post by Big Dog »

I was 100% equities (mostly Total Stock Index) until age 60....
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Re: 100% VTSAX until age 50?

Post by etfan »

climber2020 wrote: Mon Jun 07, 2021 1:31 pm Do the test yourself. Assume the following scenarios of future returns:
Stocks 10%, Bonds 2%
Stocks 7%, Bonds 2%
Stocks 4%, Bonds 1%

Now use the above scenarios to calculate hypothetical future returns for 90/10, 80/20, and 70/30 asset allocations using a compounding interest calculator and compare the lengths of time it takes to reach financial independence with each allocation.
I used a a rudimentary Excel sheet. The scenario is: I have $10,000 and my goal is to reach $25,000.

Your first case (10%/2%) takes 10 years for the first AA and takes 11.5 years using the 3rd AA.

The second case (7%/2%) takes 14 years for the first AA and 16 years for the 3rd AA.

The third case (4%/1%) takes 25 years for the first AA and 28 years for the 3rd AA.
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Re: 100% VTSAX until age 50?

Post by climber2020 »

absolute zero wrote: Mon Jun 07, 2021 3:27 pm This is true, but by the same token, holding a 90/10 vs a 75/25 portfolio will make almost no difference regarding how long one’s retirement is delayed should the market crash. By holding 90/10 when a market crash occurs, you might have to work an extra 4 or 5 months compared to if you had instead held 75/25 leading up to retirement.
Assuming you're able to stay employed and continue regular contributions all the way down and all the way up, I agree.

My plan is for an unlikely but possible scenario where I'm forced to retire and start withdrawing from my portfolio before I'm ready. In which case, having a higher bond allocation during the dot-com crash referenced in that example certainly helped.
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