Gravy train ride over ? Time to reevaluate asset allocation

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HomerJ
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by HomerJ »

nigel_ht wrote: Sat Dec 04, 2021 2:46 pm Rationalize your AA change any way you like but if PE was low you wouldn’t be hoarding more cash even if you were retiring tomorrow.

You’d have stayed 50/50.
That is incorrect. I have never used PE/valuations to make any of my decisions.

Nice deflection by the way.

One can't just look for dark clouds on the horizon. There are always dark clouds on the horizon.

Greek debt crisis, Brexit, government shutdowns, elections, trade-wars, tariffs, natural disasters, riots, refugees, interest rates, pandemics, etc. etc. etc. etc.
Last edited by HomerJ on Sat Dec 04, 2021 3:47 pm, edited 2 times in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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HomerJ
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by HomerJ »

Fallible wrote: Sat Dec 04, 2021 3:06 pmStop thinking about when the market might crash and concentrate on what you might do when it does happen. Come as close as you can to understanding your decisions, why 60/40 feels right to you, or at least more right than wrong. Strive for "good enough" because that's really all any of us can do. Set an AA based on your own personal risk tolerance, on how steep a drop you can stomach before you lose sleep leading to panic and selling.
This.

Assume the market might start a 50% (or more) crash starting tomorrow.

Because it might.

This is ALWAYS true.

Visualize it. Throw in a job loss to be even more conservative. And then pick an Asset Allocation that you could comfortably hold through the next crash.

If you're young, 90/10 could be fine, because you don't have that much invested yet, and plenty of time for a recovery.
If you're closer to retirement, maybe 60/40 is the way to go for you. That gives you a large chunk in safer money that you could use to pay bills for many years, even the market takes a long time to recover.

Once you're prepared for the next crash, you don't have to worry about it anymore.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Jimsad
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Jimsad »

UpperNwGuy wrote: Sat Dec 04, 2021 2:20 pm
inbox788 wrote: Sat Dec 04, 2021 1:59 pm
UpperNwGuy wrote: Sat Dec 04, 2021 6:36 amWhy the sudden change in your thinking?
Are we due some reversion to the mean after a decade of 15% returns? Even higher since Q1 2020 (increasing slope).

https://www.google.com/finance/quote/.I ... window=MAX

You could say Jack Bogle was wrong about expected returns in the "4-6% range, well below the long-term average that falls in the 8-10% range", but I don't think were on a sustainable trajectory. It will take some time to grow our way out of this overvaluation, or a correction/crash will accelerate will quickly fix it. If you think about changing AA, consider whether and how your expectations have changed.

https://awealthofcommonsense.com/2016/0 ... n-formula/

FWIW, like OP, I've let equities drift up in AA, and didn't rebalance when my IPS probably should have called for it. My IPS is still a work in progress and has fuzzy rebalance bands. I've recently rebalanced and bought some bonds (intermediate/total) as the least of all evils (vs. equities, cash, other asset class). In the next 5 years, it has the best risk/reward profile for me. YMMV
You only quoted part of my post and left out the part where I reminded OP that only one week ago he posted that he was enthusiastically buying more stocks because the market was down that day. I asked him what has changed his thinking in the last week. Are you suggesting that OP had a "eureka" moment about mean reversion in the last few days?
The Fed meeting had not yet happened at that time signaling taper . This is one of the things that make me uneasy
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Jimsad
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Jimsad »

Marseille07 wrote: Sat Dec 04, 2021 3:10 pm
Jimsad wrote: Sat Dec 04, 2021 6:24 am
Blue456 wrote: Sat Dec 04, 2021 6:19 am
Jimsad wrote: Fri Dec 03, 2021 3:48 pm
I was 60/40 and let it drift to 75/25 due to greed and to take advantage of the roaring market .
But now am planning to dial down back to my target 60/40
So you were buying high and now are selling low?
I will not be doing any selling of stocks . I will do it by putting my new contributions more on fixed income side
This is sensible, but not sure why you weren't doing this the whole time. "Let it drift to 75/25" doesn't sound like drifting, it sounds like you were aggressively investing into equities?
Yes I was actually buying more equities due to greed as I saw the market keep going up
Marseille07
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Marseille07 »

Jimsad wrote: Sat Dec 04, 2021 4:06 pm
Marseille07 wrote: Sat Dec 04, 2021 3:10 pm
Jimsad wrote: Sat Dec 04, 2021 6:24 am
Blue456 wrote: Sat Dec 04, 2021 6:19 am
Jimsad wrote: Fri Dec 03, 2021 3:48 pm
I was 60/40 and let it drift to 75/25 due to greed and to take advantage of the roaring market .
But now am planning to dial down back to my target 60/40
So you were buying high and now are selling low?
I will not be doing any selling of stocks . I will do it by putting my new contributions more on fixed income side
This is sensible, but not sure why you weren't doing this the whole time. "Let it drift to 75/25" doesn't sound like drifting, it sounds like you were aggressively investing into equities?
Yes I was actually buying more equities due to greed as I saw the market keep going up
OK. The good news is that it's not too late to start padding the fixed income side. Just do that and it's a fine approach.
000
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by 000 »

Jimsad wrote: Sat Dec 04, 2021 4:06 pm
Marseille07 wrote: Sat Dec 04, 2021 3:10 pm
Jimsad wrote: Sat Dec 04, 2021 6:24 am
Blue456 wrote: Sat Dec 04, 2021 6:19 am
Jimsad wrote: Fri Dec 03, 2021 3:48 pm
I was 60/40 and let it drift to 75/25 due to greed and to take advantage of the roaring market .
But now am planning to dial down back to my target 60/40
So you were buying high and now are selling low?
I will not be doing any selling of stocks . I will do it by putting my new contributions more on fixed income side
This is sensible, but not sure why you weren't doing this the whole time. "Let it drift to 75/25" doesn't sound like drifting, it sounds like you were aggressively investing into equities?
Yes I was actually buying more equities due to greed as I saw the market keep going up
I would rebalance on Monday. You have exceeded your risk tolerance as evidenced by your posts here.
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Jimsad
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Jimsad »

Jimsad wrote: Sat Dec 04, 2021 4:02 pm
UpperNwGuy wrote: Sat Dec 04, 2021 2:20 pm
inbox788 wrote: Sat Dec 04, 2021 1:59 pm
UpperNwGuy wrote: Sat Dec 04, 2021 6:36 amWhy the sudden change in your thinking?
Are we due some reversion to the mean after a decade of 15% returns? Even higher since Q1 2020 (increasing slope).

https://www.google.com/finance/quote/.I ... window=MAX

You could say Jack Bogle was wrong about expected returns in the "4-6% range, well below the long-term average that falls in the 8-10% range", but I don't think were on a sustainable trajectory. It will take some time to grow our way out of this overvaluation, or a correction/crash will accelerate will quickly fix it. If you think about changing AA, consider whether and how your expectations have changed.

https://awealthofcommonsense.com/2016/0 ... n-formula/

FWIW, like OP, I've let equities drift up in AA, and didn't rebalance when my IPS probably should have called for it. My IPS is still a work in progress and has fuzzy rebalance bands. I've recently rebalanced and bought some bonds (intermediate/total) as the least of all evils (vs. equities, cash, other asset class). In the next 5 years, it has the best risk/reward profile for me. YMMV
You only quoted part of my post and left out the part where I reminded OP that only one week ago he posted that he was enthusiastically buying more stocks because the market was down that day. I asked him what has changed his thinking in the last week. Are you suggesting that OP had a "eureka" moment about mean reversion in the last few days?
The Fed meeting had not yet happened at that time signaling taper . This is one of the things that make me uneasy. Others can probably give a lot more reasons why it might start going down but for me the fact that I kept drifting away from my IPS 60/40 makes me increasingly uneasy as I do not really have a need to be more aggressive than 60/40 as I am still earning a good income and have real estate and other assets
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Beensabu
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Beensabu »

Jimsad wrote: Sat Dec 04, 2021 4:06 pm
Marseille07 wrote: Sat Dec 04, 2021 3:10 pm
Jimsad wrote: Sat Dec 04, 2021 6:24 am I will not be doing any selling of stocks . I will do it by putting my new contributions more on fixed income side
This is sensible, but not sure why you weren't doing this the whole time. "Let it drift to 75/25" doesn't sound like drifting, it sounds like you were aggressively investing into equities?
Yes I was actually buying more equities due to greed as I saw the market keep going up
Oh. That's not drift. That's a conscious AA change, made to chase recent performance. That's not good. You're not psychologically prepared. You'll do the bad thing if we drop from here. Get thee back to thy predetermined asset allocation, pronto.

Edit: You're not going to be able to rebalance through contributions to fixed income unless equities drop significantly, by which point the point will have departed.
Last edited by Beensabu on Sat Dec 04, 2021 4:37 pm, edited 1 time in total.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by 4nursebee »

Jimsad wrote: Fri Dec 03, 2021 3:48 pm Hi
I feel that the the huge returns we have been enjoying last 10 years will be ending .
Is it time to reassess one’s asset allocation?
I was 60/40 and let it drift to 75/25 due to greed and to take advantage of the roaring market .
But now am planning to dial down back to my target 60/40

I feel that especially those who have been investing <10 years and are 100% stocks may have a rude awakening and realize they do not have the stomach for 100% stocks ;this happened to me in 2008 when I went through the crash
I stopped reading at "I feel".
Pale Blue Dot
theorist
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by theorist »

arcticpineapplecorp. wrote: Sat Dec 04, 2021 8:14 am
Beensabu wrote: Sat Dec 04, 2021 12:03 am
arcticpineapplecorp. wrote: Fri Dec 03, 2021 8:32 pm then decide what your worst tolerable loss is, assuming a market decline of 50% (using 2008-2009 numbers):

Image

Then stay the course. always be prepared for a 50% decline in stocks and set your AA to your maximum paint point regardless of fear or greed.
I like your new table. :) It's a good one.
thanks. i had help from the bogleheads. and fortunately, i change my mind when the facts change.
Sorry, this may be a bit off topic of the thread, but I was looking at this a bit carefully. It is interesting and I like your general advice in this vein. But I am confused — how does the 70/30 come so close to the 60/40 in terms of maximal drawdown? Unless you’re doing some masterful timing in rebalancing, I would expect it to have about a 5% greater drawdown than 60/40. I could understand how details might lead to that being 4% or 6%, but here it is just .35% worse! Whats up with that? (Yes, my interest is because I tend to aim for 70/30 these days, though it may get more conservative in a few years…)
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arcticpineapplecorp.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by arcticpineapplecorp. »

theorist wrote: Sat Dec 04, 2021 4:39 pm
arcticpineapplecorp. wrote: Sat Dec 04, 2021 8:14 am
Beensabu wrote: Sat Dec 04, 2021 12:03 am
arcticpineapplecorp. wrote: Fri Dec 03, 2021 8:32 pm then decide what your worst tolerable loss is, assuming a market decline of 50% (using 2008-2009 numbers):

Image

Then stay the course. always be prepared for a 50% decline in stocks and set your AA to your maximum paint point regardless of fear or greed.
I like your new table. :) It's a good one.
thanks. i had help from the bogleheads. and fortunately, i change my mind when the facts change.
Sorry, this may be a bit off topic of the thread, but I was looking at this a bit carefully. It is interesting and I like your general advice in this vein. But I am confused — how does the 70/30 come so close to the 60/40 in terms of maximal drawdown? Unless you’re doing some masterful timing in rebalancing, I would expect it to have about a 5% greater drawdown than 60/40. I could understand how details might lead to that being 4% or 6%, but here it is just .35% worse! Whats up with that? (Yes, my interest is because I tend to aim for 70/30 these days, though it may get more conservative in a few years…)
good eye. don't know. it's just what portfolio visualizer numbers show. you can double check with the links (shortened, tiny urls) provided in the image.
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Firemenot
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Firemenot »

willthrill81 wrote: Sat Dec 04, 2021 3:09 pm
Jimsad wrote: Fri Dec 03, 2021 3:48 pm I feel that the the huge returns we have been enjoying last 10 years will be ending .
Making allocation decisions on the basis of 'feelings' is a very bad idea.
Sentence you quoted sounds like fear of heights.
nigel_ht
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

HomerJ wrote: Sat Dec 04, 2021 3:31 pm
nigel_ht wrote: Sat Dec 04, 2021 2:46 pm Rationalize your AA change any way you like but if PE was low you wouldn’t be hoarding more cash even if you were retiring tomorrow.

You’d have stayed 50/50.
That is incorrect. I have never used PE/valuations to make any of my decisions.

Nice deflection by the way.

One can't just look for dark clouds on the horizon. There are always dark clouds on the horizon.
No deflection at all. Your original course was 50/50. You even said you were deviating from your original course. It’s not like you didn’t already know that sometime in the next few years you were going to want to retire.

What changed? The highest valuations since dot bomb. Whether you use PE as a metric or not the rate of gain was unsustainable but TINA and FOMO was still pushing everything up as long as the fed was indicating easy money.

And storm clouds aren’t always present on the horizon. While a squall might come up unexpectedly there are times where the skies are clear and the seas calm where valuations are reasonable, the economy in good shape and the crisis du jour relatively minor.

If you let your AA drift up due to gains during these periods the risk relatively low.
nigel_ht
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

HomerJ wrote: Sat Dec 04, 2021 3:34 pm
Fallible wrote: Sat Dec 04, 2021 3:06 pmStop thinking about when the market might crash and concentrate on what you might do when it does happen. Come as close as you can to understanding your decisions, why 60/40 feels right to you, or at least more right than wrong. Strive for "good enough" because that's really all any of us can do. Set an AA based on your own personal risk tolerance, on how steep a drop you can stomach before you lose sleep leading to panic and selling.
This.

Assume the market might start a 50% (or more) crash starting tomorrow.

Because it might.

This is ALWAYS true.
It’s always true but the probabilities vary over time. When valuations are high the risks is higher. When it’s low, the risk is lower.

The probability that a 50% crash would happen in March 2009 was lower than in March 2008.

Why?

Because it had already crashed 50% by March 2009.

Was it possible?

Yes. We could have dropped another 50% if the Fed made the wrong move or we didn’t do a huge stimulus package and went austerity mode instead.

Was that likely?

No. If the Fed didn’t learn anything else from 1929 or the Nikkei crash it was what not to do in a crisis…and by March 2009, while later than hoped, the ARRA stimulus plan had finally passed.
Firemenot
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Firemenot »

I like that there’s a lot of pessimism about the future and lots of people thinking market is over-valued. That’s generally a good thing. No euphoria yet!
000
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by 000 »

Firemenot wrote: Sat Dec 04, 2021 7:02 pm I like that there’s a lot of pessimism about the future and lots of people thinking market is over-valued. That’s generally a good thing. No euphoria yet!
I tend to agree, but will we necessarily see euphoria if the next correction is due to technical factors like central banks removing liquidity from the system?
nigel_ht
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

Firemenot wrote: Sat Dec 04, 2021 7:02 pm I like that there’s a lot of pessimism about the future and lots of people thinking market is over-valued. That’s generally a good thing. No euphoria yet!
Other than in the soaring thread I suspect most of us are relatively conservative even when running 100/0.

If the bears here throw in the towel I’m buying a bunker since the armies of Mordor will be at our gates within the fortnight
Firemenot
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Firemenot »

000 wrote: Sat Dec 04, 2021 7:12 pm
Firemenot wrote: Sat Dec 04, 2021 7:02 pm I like that there’s a lot of pessimism about the future and lots of people thinking market is over-valued. That’s generally a good thing. No euphoria yet!
I tend to agree, but will we necessarily see euphoria if the next correction is due to technical factors like central banks removing liquidity from the system?
What’s kind of interesting is markets are not at all-time high valuations as many keep saying. Earnings have come up within the last year and P:E values have actually meaningfully fallen.

They’re still historically high in terms of trailing but if earnings keep rising there could be plenty of room for growth.

Not to mention who the heck knows what historically low interest rates will mean.
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HomerJ
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by HomerJ »

nigel_ht wrote: Sat Dec 04, 2021 6:14 pm
HomerJ wrote: Sat Dec 04, 2021 3:31 pm
nigel_ht wrote: Sat Dec 04, 2021 2:46 pm Rationalize your AA change any way you like but if PE was low you wouldn’t be hoarding more cash even if you were retiring tomorrow.

You’d have stayed 50/50.
That is incorrect. I have never used PE/valuations to make any of my decisions.

Nice deflection by the way.

One can't just look for dark clouds on the horizon. There are always dark clouds on the horizon.
No deflection at all. Your original course was 50/50. You even said you were deviating from your original course. It’s not like you didn’t already know that sometime in the next few years you were going to want to retire.

What changed? The highest valuations since dot bomb.
What changed was I hit my number (sooner than I expected), and my tolerance for B.S. at work dropped. Plus my wife developed some health issues which means we will be paying a good chunk in health care deductibles if I retire for the next 4 years until she turns 65 and gets on Medicare.

I suddenly saw the light at the end of the tunnel 4 years earlier than expected.

Lots of things changed. The fact that I have more money faster is tangentially related to valuations increasing I suppose, but at no time did I think about market predictions or valuations when deciding to try to save some bridge money to get me through the next 4 years just in case I retire before my planned retirement date.

Do me the service of believing I understand my motivations better than you. I've been 50/50 for 10 years regardless of valuations. Expected returns have been low for most of that period. I've ignored all that because 50/50 is a good allocation for me. Each time we've had a correction, that could have turned into a crash, I never blinked. I wasn't bothered at all in Dec 2018, and I wasn't bothered during March 2020.

That's the trick to successful investing. Not scanning the horizon constantly for a hint of clouds. But sticking with an AA that you can hold even during a crash/hurricane...

And then you don't have to worry about crashes/hurricanes any more.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
drummer
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by drummer »

I think "greed" is the wrong word here. Aren't we all doing this to make money? If you don't want to make the most you can then what's the point?

I think a better explanation is that you don't want to "risk" it as much as you used to...and that's fine.
nigel_ht
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

HomerJ wrote: Sat Dec 04, 2021 7:52 pm
nigel_ht wrote: Sat Dec 04, 2021 6:14 pm
HomerJ wrote: Sat Dec 04, 2021 3:31 pm
nigel_ht wrote: Sat Dec 04, 2021 2:46 pm Rationalize your AA change any way you like but if PE was low you wouldn’t be hoarding more cash even if you were retiring tomorrow.

You’d have stayed 50/50.
That is incorrect. I have never used PE/valuations to make any of my decisions.

Nice deflection by the way.

One can't just look for dark clouds on the horizon. There are always dark clouds on the horizon.
No deflection at all. Your original course was 50/50. You even said you were deviating from your original course. It’s not like you didn’t already know that sometime in the next few years you were going to want to retire.

What changed? The highest valuations since dot bomb.
What changed was I hit my number (sooner than I expected), and my tolerance for B.S. at work dropped. Plus my wife developed some health issues which means we will be paying a good chunk in health care deductibles if I retire for the next 4 years until she turns 65 and gets on Medicare.

I suddenly saw the light at the end of the tunnel 4 years earlier than expected.

Lots of things changed. The fact that I have more money faster is tangentially related to valuations increasing I suppose, but at no time did I think about market predictions or valuations when deciding to try to save some bridge money to get me through the next 4 years just in case I retire before my planned retirement date.

Do me the service of believing I understand my motivations better than you. I've been 50/50 for 10 years regardless of valuations. Expected returns have been low for most of that period. I've ignored all that because 50/50 is a good allocation for me. Each time we've had a correction, that could have turned into a crash, I never blinked. I wasn't bothered at all in Dec 2018, and I wasn't bothered during March 2020.

That's the trick to successful investing. Not scanning the horizon constantly for a hint of clouds. But sticking with an AA that you can hold even during a crash/hurricane...

And then you don't have to worry about crashes/hurricanes any more.
So your trick to successful investing is to claim 50/50 but actually be 40/60 or even more conservative by mentally bucketing extra cash as not part of your AA. Why not just set your AA to 40/60 or whatever?

By being 50/50 for the last 10 years meant you’ve lost more money preparing for the hurricane than what a “normal” hurricane/bear would have cost you. You’d have reached your number even earlier and been able to go into the protected harbor of a more conservative portfolio sooner than mid-2021.

If March 2020 ended up going down 50% and followed the 2008 timeline by dropping down through 2022 you wouldn’t have made your numbers 4 years early and would have been at risk of not making your number by 2025 since the market didn’t recover till 2013.

Like I said to the OP, you do you but don’t lecture me about “staying the course” when even you said you didn’t.
HomerJ wrote: Thu Jul 29, 2021 11:25 am So, I'm close to retirement, have made my number, and now I'm just locking in gains every few months lately, when the market hits new highs.

I'm not just rebalancing back to my original AA, I'm building up a cushion of cash, but this slowly changes my AA.

So look at me, I'm not staying the course!
It doesn’t matter whether the market will crash 50% because Trinity SWR calculations mean that historically you’ll be fine with around a slightly less than 4% SWR even if the market crashes 80%.

So why does SORR matter? 60/40 or 50/50 works in the historical worst case scenarios for a 30 year retirement.

Ironically you haven’t reduced risk but increased it because your conservative AA over the last decade means your portfolio smaller than it would have been because as you just said “my wife developed some health issues”.

The risk isn’t that the market will crash like in 1929. That’s accounted for in the SWR.

The risk is you’ve vastly underestimated your lifetime expenses.

My black swan isn’t 1929 or 1966. My 3% SWR has headroom for that.

My black swan is my wife or kid needing $10,000 a dose drug that insurance won’t cover or force us to go through months of less expensive treatments where they might die before getting approved?

https://www.goodrx.com/healthcare-acces ... ugs-period

If that’s too out there for you then just having enough money to be able to get on transplant waiting lists in places where the line is shorter.

That’s just the ability to fly around the country.

https://www.nytimes.com/2009/06/23/busi ... liver.html
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LilyFleur
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by LilyFleur »

Jimsad wrote: Fri Dec 03, 2021 3:48 pm Hi
I feel that the the huge returns we have been enjoying last 10 years will be ending .
Is it time to reassess one’s asset allocation?
I was 60/40 and let it drift to 75/25 due to greed and to take advantage of the roaring market .
But now am planning to dial down back to my target 60/40

I feel that especially those who have been investing <10 years and are 100% stocks may have a rude awakening and realize they do not have the stomach for 100% stocks ;this happened to me in 2008 when I went through the crash
Too much emotion going on here.

I've never viewed earnings as a "gravy train." Earnings aren't a freebie; they are earned because I saved and invested my money and because of overall market growth. I do enjoy a bit of a gamble, so 1.4% of my portfolio is in individual stocks. It doesn't make me anxious or make me look at my portfolio too often. The stocks are in taxable, so I can sell for a tax loss if I determine that is the better strategy, especially in a Roth conversion year.

We do not know the future. That is why an asset allocation is so important. If you cannot stick to your asset allocation when the market is going up or down, you probably do need someone managing your portfolio. We cannot advise you on your asset allocation. Do you have an investment plan? Do you have an investment policy statement?

You may benefit by either meeting with a fiduciary on a fee-per-hour basis or moving enough money into Schwab to meet with a fiduciary annually for a complementary financial plan.

But you really need to calm down and approach your investments in a businesslike manner. You might want to start by using the BH protocol for a portfolio review. I can't find the link at the moment, but I'm sure someone can help you on that.

It seems you got through 2008 unscathed. Perhaps you underestimate yourself.
skynjia
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by skynjia »

theorist wrote: Sat Dec 04, 2021 4:39 pm
arcticpineapplecorp. wrote: Sat Dec 04, 2021 8:14 am
Beensabu wrote: Sat Dec 04, 2021 12:03 am
arcticpineapplecorp. wrote: Fri Dec 03, 2021 8:32 pm then decide what your worst tolerable loss is, assuming a market decline of 50% (using 2008-2009 numbers):

Image

Then stay the course. always be prepared for a 50% decline in stocks and set your AA to your maximum paint point regardless of fear or greed.
I like your new table. :) It's a good one.
thanks. i had help from the bogleheads. and fortunately, i change my mind when the facts change.
Sorry, this may be a bit off topic of the thread, but I was looking at this a bit carefully. It is interesting and I like your general advice in this vein. But I am confused — how does the 70/30 come so close to the 60/40 in terms of maximal drawdown? Unless you’re doing some masterful timing in rebalancing, I would expect it to have about a 5% greater drawdown than 60/40. I could understand how details might lead to that being 4% or 6%, but here it is just .35% worse! Whats up with that? (Yes, my interest is because I tend to aim for 70/30 these days, though it may get more conservative in a few years…)
I thought of the same thing that 70:30 does not look very different to 60:40 but then this is when the markets are going down, is the difference just as little when the markets go up :confused
Northern Flicker
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Northern Flicker »

Jimsad wrote: Fri Dec 03, 2021 4:02 pm I let my portfolio drift and become more aggressive due to greed and complacency
But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
It really does not matter why your allocation has drifted from your target. It can happen due to barriers for rebalancing when doing so would realize taxable gains as well.

I would suggest discontinuing with the thought process about greed and whether this is a good time to rebalance. This is not a decision that should be based on where you think the market is going.

A major purpose of an asset allocation is to manage risk. Right now, you have the risk associated with 75% stocks. Did you set your allocation at 60/40 because that was an appropriate level of risk? If so, rebalancing back to allocation weight will reset the risk exposure of the portfolio back to that.

The market really does not care what we think future returns will be.
Marseille07
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Marseille07 »

Just start nudging your portfolio with new money. This isn't complicated and doesn't have to be complicated.

If your AA keeps getting more aggressive despite nudging, it means your equities are making money. Not a problem.
TheDDC
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by TheDDC »

Jimsad wrote: Fri Dec 03, 2021 4:02 pm I let my portfolio drift and become more aggressive due to greed and complacency
But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
Right. And we remember what happened after 2008, right? Stay the course. I would actually pile in and go 100/0. Here's the good news: You now have a chance for a "do over" to buy equities at a better discount that you should have bought before! 100/0 is my AA.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
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HomerJ
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by HomerJ »

TheDDC wrote: Sun Dec 05, 2021 11:28 pm
Jimsad wrote: Fri Dec 03, 2021 4:02 pm I let my portfolio drift and become more aggressive due to greed and complacency
But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
Right. And we remember what happened after 2008, right? Stay the course. I would actually pile in and go 100/0. Here's the good news: You now have a chance for a "do over" to buy equities at a better discount that you should have bought before! 100/0 is my AA.

-TheDDC
I guess you weren't investing from 1966-1982. There's more to history than 2008-2009.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
TheDDC
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by TheDDC »

HomerJ wrote: Sun Dec 05, 2021 11:40 pm
TheDDC wrote: Sun Dec 05, 2021 11:28 pm
Jimsad wrote: Fri Dec 03, 2021 4:02 pm I let my portfolio drift and become more aggressive due to greed and complacency
But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
Right. And we remember what happened after 2008, right? Stay the course. I would actually pile in and go 100/0. Here's the good news: You now have a chance for a "do over" to buy equities at a better discount that you should have bought before! 100/0 is my AA.

-TheDDC
I guess you weren't investing from 1966-1982. There's more to history than 2008-2009.
You're right. If what happened in 1966-1982 happens again, no one will be sitting around keeping money in equities since that would be stupid. Why sit around and lose money?

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
000
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by 000 »

TheDDC wrote: Mon Dec 06, 2021 12:13 am
HomerJ wrote: Sun Dec 05, 2021 11:40 pm
TheDDC wrote: Sun Dec 05, 2021 11:28 pm
Jimsad wrote: Fri Dec 03, 2021 4:02 pm I let my portfolio drift and become more aggressive due to greed and complacency
But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
Right. And we remember what happened after 2008, right? Stay the course. I would actually pile in and go 100/0. Here's the good news: You now have a chance for a "do over" to buy equities at a better discount that you should have bought before! 100/0 is my AA.

-TheDDC
I guess you weren't investing from 1966-1982. There's more to history than 2008-2009.
You're right. If what happened in 1966-1982 happens again, no one will be sitting around keeping money in equities since that would be stupid. Why sit around and lose money?

-TheDDC
So, tell us, at what point in a sideways or bear market would you pull out of equities? What signals would you use?
TheDDC
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by TheDDC »

000 wrote: Mon Dec 06, 2021 12:23 am
TheDDC wrote: Mon Dec 06, 2021 12:13 am
HomerJ wrote: Sun Dec 05, 2021 11:40 pm
TheDDC wrote: Sun Dec 05, 2021 11:28 pm
Jimsad wrote: Fri Dec 03, 2021 4:02 pm I let my portfolio drift and become more aggressive due to greed and complacency
But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
Right. And we remember what happened after 2008, right? Stay the course. I would actually pile in and go 100/0. Here's the good news: You now have a chance for a "do over" to buy equities at a better discount that you should have bought before! 100/0 is my AA.

-TheDDC
I guess you weren't investing from 1966-1982. There's more to history than 2008-2009.
You're right. If what happened in 1966-1982 happens again, no one will be sitting around keeping money in equities since that would be stupid. Why sit around and lose money?

-TheDDC
So, tell us, at what point in a sideways or bear market would you pull out of equities? What signals would you use?
Gee, I don’t know. Maybe after five years of not making any money at all in equities I’d get a clue and see what’s actually moving? Investing more in my business? Crypto? You know… actually watching money go to work… As opposed to what? Getting led to slaughter? It’s a good idea to at least check your account statement annually…

But I don’t expect the market to go sideways for that long in the first place. I’m not a permabear.

-TheDDC
Last edited by TheDDC on Mon Dec 06, 2021 12:35 am, edited 1 time in total.
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
000
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by 000 »

TheDDC wrote: Mon Dec 06, 2021 12:31 am Gee, I don’t know. Maybe after five years of not making any money at all in equities I’d get a clue and see what’s actually moving? Investing more in my business? Crypto? You know… actually watching money go to work… As opposed to what? Getting led to slaughter?

-TheDDC
Ah, yes, the good old 'sell the loser and buy the winner every five years' strategy. A time tested classic.
TheDDC
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by TheDDC »

000 wrote: Mon Dec 06, 2021 12:35 am
TheDDC wrote: Mon Dec 06, 2021 12:31 am Gee, I don’t know. Maybe after five years of not making any money at all in equities I’d get a clue and see what’s actually moving? Investing more in my business? Crypto? You know… actually watching money go to work… As opposed to what? Getting led to slaughter?

-TheDDC
Ah, yes, the good old 'sell the loser and buy the winner every five years' strategy. A time tested classic.
Okay. As opposed to… what? Sitting in losers for 5-10 years? Is that the Boglehead way?

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
000
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by 000 »

TheDDC wrote: Mon Dec 06, 2021 12:36 am
000 wrote: Mon Dec 06, 2021 12:35 am
TheDDC wrote: Mon Dec 06, 2021 12:31 am Gee, I don’t know. Maybe after five years of not making any money at all in equities I’d get a clue and see what’s actually moving? Investing more in my business? Crypto? You know… actually watching money go to work… As opposed to what? Getting led to slaughter?

-TheDDC
Ah, yes, the good old 'sell the loser and buy the winner every five years' strategy. A time tested classic.
Okay. As opposed to… what? Sitting in losers for 5-10 years? Is that the Boglehead way?

-TheDDC
Yes. I can't believe you are unaware that the forum's investment philosophy is 'buy & hold'. :oops:
TheDDC
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by TheDDC »

000 wrote: Mon Dec 06, 2021 12:37 am
TheDDC wrote: Mon Dec 06, 2021 12:36 am
000 wrote: Mon Dec 06, 2021 12:35 am
TheDDC wrote: Mon Dec 06, 2021 12:31 am Gee, I don’t know. Maybe after five years of not making any money at all in equities I’d get a clue and see what’s actually moving? Investing more in my business? Crypto? You know… actually watching money go to work… As opposed to what? Getting led to slaughter?

-TheDDC
Ah, yes, the good old 'sell the loser and buy the winner every five years' strategy. A time tested classic.
Okay. As opposed to… what? Sitting in losers for 5-10 years? Is that the Boglehead way?

-TheDDC
Yes. I can't believe you are unaware that the forum's investment philosophy is 'buy & hold'. :oops:
Yes, but not “buy and hide”. BTW I am invested in funds, not individual stocks to be clear.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
000
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by 000 »

TheDDC wrote: Mon Dec 06, 2021 12:38 am Yes, but not “buy and hide”. BTW I am invested in funds, not individual stocks to be clear.

-TheDDC
I don't how you got the idea that the investment philosophy of Bogleheads or Mr. Bogle was to flee an asset class after five years of poor performance.

Your comment about individual stocks appears to be a non sequitur.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by TheDDC »

000 wrote: Mon Dec 06, 2021 12:40 am
TheDDC wrote: Mon Dec 06, 2021 12:38 am Yes, but not “buy and hide”. BTW I am invested in funds, not individual stocks to be clear.

-TheDDC
I don't how you got the idea that the investment philosophy of Bogleheads or Mr. Bogle was to flee an asset class after five years of poor performance.

Your comment about individual stocks appears to be a non sequitur.
Seriously, though. Do you know what you’re advocating? How many would seriously ride an underperforming fund for 5-10 years? How about 10-20 years?

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by 000 »

TheDDC wrote: Mon Dec 06, 2021 12:42 am Seriously, though. Do you know what you’re advocating? How many would seriously ride an underperforming fund for 5-10 years? How about 10-20 years?

-TheDDC
Recent underperformance of an asset class would make me want to buy more, not less.

In response to your latter questions, probably not many, which is why performance chasing doesn't work in the long term.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

Northern Flicker wrote: Sun Dec 05, 2021 10:57 pm
Jimsad wrote: Fri Dec 03, 2021 4:02 pm I let my portfolio drift and become more aggressive due to greed and complacency
But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
It really does not matter why your allocation has drifted from your target. It can happen due to barriers for rebalancing when doing so would realize taxable gains as well.

I would suggest discontinuing with the thought process about greed and whether this is a good time to rebalance. This is not a decision that should be based on where you think the market is going.

A major purpose of an asset allocation is to manage risk. Right now, you have the risk associated with 75% stocks. Did you set your allocation at 60/40 because that was an appropriate level of risk? If so, rebalancing back to allocation weight will reset the risk exposure of the portfolio back to that.

The market really does not care what we think future returns will be.
But you care what future returns will be.

Historically the risk when valuations are high is higher and the probable rewards lower.

And of course the risk when valuations are low is lower and the probable rewards higher.

So a static AA means the amount of risk you are subjected to varies over time.

In accumulation drift upwards likely a wash if you don’t mind losing gains you wouldn’t have otherwise had anyway but I wouldn’t want to drift downwards too much.

Vice versa for retirement or after you hit your number.

Current the risk free rate of return is what? 1.35%? Inflation around 6%.

TINA for stocks until the current situation changes even with the current valuations and softness.

We’ll see what the Fed does in a few days.

There is level of risk you wish tolerate and there is risk you must take if you want a chance for your portfolio to grow to a size that will support more than a minimal retirement.
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burritoLover
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by burritoLover »

TheDDC wrote: Mon Dec 06, 2021 12:42 am
000 wrote: Mon Dec 06, 2021 12:40 am
TheDDC wrote: Mon Dec 06, 2021 12:38 am Yes, but not “buy and hide”. BTW I am invested in funds, not individual stocks to be clear.

-TheDDC
I don't how you got the idea that the investment philosophy of Bogleheads or Mr. Bogle was to flee an asset class after five years of poor performance.

Your comment about individual stocks appears to be a non sequitur.
Seriously, though. Do you know what you’re advocating? How many would seriously ride an underperforming fund for 5-10 years? How about 10-20 years?

-TheDDC
Did you know that a diversified portfolio of U.S. and international developed funds invested in 1970 would have had the U.S. fund underperform international for about 25 years? And that the S&P 500 has underperformed riskless 1-month t-bills for 3 periods of 13-17 consecutive years, about 45 years of 90 years of US stock data?

Stock funds involve a lot of risk - when risk shows up, it can be persistent over many years. Reacting to that is what causes a lot of investors to underperform.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

HomerJ wrote: Sun Dec 05, 2021 11:40 pm
TheDDC wrote: Sun Dec 05, 2021 11:28 pm
Jimsad wrote: Fri Dec 03, 2021 4:02 pm I let my portfolio drift and become more aggressive due to greed and complacency
But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
Right. And we remember what happened after 2008, right? Stay the course. I would actually pile in and go 100/0. Here's the good news: You now have a chance for a "do over" to buy equities at a better discount that you should have bought before! 100/0 is my AA.

-TheDDC
I guess you weren't investing from 1966-1982. There's more to history than 2008-2009.
Image

(From awealthofcommonsense.com)

The market was fine. The killer was inflation.

It wasn’t a bad time to invest as an accumulator…that’s the bulk of the best earning years for my parents. With income rising due to inflation they saved more and had a nice nest egg that took off after 1982.

So not a useful counterexample given the S&P was doing 6.8% even if it translated into 0% real.

I don’t think sitting in something generating 0% nominal for 15 years is very bright when inflation is 6%+.

That’s not sideways but hemorrhaging a lot of money.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

burritoLover wrote: Mon Dec 06, 2021 7:23 am
TheDDC wrote: Mon Dec 06, 2021 12:42 am
000 wrote: Mon Dec 06, 2021 12:40 am
TheDDC wrote: Mon Dec 06, 2021 12:38 am Yes, but not “buy and hide”. BTW I am invested in funds, not individual stocks to be clear.

-TheDDC
I don't how you got the idea that the investment philosophy of Bogleheads or Mr. Bogle was to flee an asset class after five years of poor performance.

Your comment about individual stocks appears to be a non sequitur.
Seriously, though. Do you know what you’re advocating? How many would seriously ride an underperforming fund for 5-10 years? How about 10-20 years?

-TheDDC
Did you know that a diversified portfolio of U.S. and international developed funds invested in 1970 would have had the U.S. fund underperform international for about 25 years? And that the S&P 500 has underperformed riskless 1-month t-bills for 3 periods of 13-17 consecutive years, about 45 years of 90 years of US stock data?

Stock funds involve a lot of risk - when risk shows up, it can be persistent over many years. Reacting to that is what causes a lot of investors to underperform.
Current tbills are what? 0.5? If S&P returns are below that for 20 years B&H indexing will be dead before we come out the other side given the current inflation rate.

The reason to stay in stocks is historically we know for 20 years we come out way ahead.

It’s all probability.

The odds of this scenario is actually relatively low and not 50-50 as implied by “45 years of 90 years” because of start date sensitivity.

Why is it 1929 to 1943 and 2000 to 2012? Gosh, maybe because it corresponds to freaking huge crashes?

But if you measured starting in 1933 or 2003?

Every time I’ve seen this “tbills beat S&P 500 45 out of 90 years” it’s associated with some shyster…excuse me, financial professional…trying to sell me his freaking newsletter.

The 1966 period counts because inflation pushed up TBills while the S&P was just meh.

If TBills were running 5% today instead of 0.5% I’d have half my portfolio there.
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burritoLover
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by burritoLover »

nigel_ht wrote: Mon Dec 06, 2021 7:46 am
burritoLover wrote: Mon Dec 06, 2021 7:23 am
TheDDC wrote: Mon Dec 06, 2021 12:42 am
000 wrote: Mon Dec 06, 2021 12:40 am
TheDDC wrote: Mon Dec 06, 2021 12:38 am Yes, but not “buy and hide”. BTW I am invested in funds, not individual stocks to be clear.

-TheDDC
I don't how you got the idea that the investment philosophy of Bogleheads or Mr. Bogle was to flee an asset class after five years of poor performance.

Your comment about individual stocks appears to be a non sequitur.
Seriously, though. Do you know what you’re advocating? How many would seriously ride an underperforming fund for 5-10 years? How about 10-20 years?

-TheDDC
Did you know that a diversified portfolio of U.S. and international developed funds invested in 1970 would have had the U.S. fund underperform international for about 25 years? And that the S&P 500 has underperformed riskless 1-month t-bills for 3 periods of 13-17 consecutive years, about 45 years of 90 years of US stock data?

Stock funds involve a lot of risk - when risk shows up, it can be persistent over many years. Reacting to that is what causes a lot of investors to underperform.
Current tbills are what? 0.5? If S&P returns are below that for 20 years B&H indexing will be dead before we come out the other side given the current inflation rate.
Well, current inflation rate <> the inflation rate over the next 20 years. The stock market could very well have negative returns over a 15-ish year period and given today's high valuations, not completely impossible either. This idea that both poor bond and stock returns over long periods is impossible - as if the market wouldn't allow your portfolio to completely suck, is baffling to me.
mbasherp
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by mbasherp »

In my handful of years as a boglehead, I’ve learned that my investing approach should be based on myself, not on the market.

While I can blab on for days about the negative real returns of bonds, the real reason I don’t own them (other than I bonds in emergency fund) is that, as someone in their 30’s, I would first like to buy all the stocks I expect to need to reach my goal, before buying the bond component. I haven’t hit that yet, so I’m still ~100% stocks.

The only other reason to buy bonds in my case would be if I couldn’t handle the volatility of an aggressive portfolio. Since I regularly plan for a 50% crash and I’m clear about my time horizon, that’s not an issue. (As I like to put it, you can’t ask to be a championship fighter without being punched in the face. You don’t need to dodge all the punches. Sometimes you’re just gonna take it square on - that’s part of it!)

Of course I can’t speak for you, OP, and your age/needs/circumstance, but putting some blinders on in relation to my own has made it very clear what I need to do. Wherever “the market” is isn’t nearly so relevant.
Topic Author
Jimsad
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Jimsad »

mbasherp wrote: Mon Dec 06, 2021 8:22 am In my handful of years as a boglehead, I’ve learned that my investing approach should be based on myself, not on the market.

While I can blab on for days about the negative real returns of bonds, the real reason I don’t own them (other than I bonds in emergency fund) is that, as someone in their 30’s, I would first like to buy all the stocks I expect to need to reach my goal, before buying the bond component. I haven’t hit that yet, so I’m still ~100% stocks.

The only other reason to buy bonds in my case would be if I couldn’t handle the volatility of an aggressive portfolio. Since I regularly plan for a 50% crash and I’m clear about my time horizon, that’s not an issue. (As I like to put it, you can’t ask to be a championship fighter without being punched in the face. You don’t need to dodge all the punches. Sometimes you’re just gonna take it square on - that’s part of it!)

Of course I can’t speak for you, OP, and your age/needs/circumstance, but putting some blinders on in relation to my own has made it very clear what I need to do. Wherever “the market” is isn’t nearly so relevant.
As Mike Tyson famously said “everybody has a plan until they get punched in the mouth”
This happened to me in 2008 crash when I realized I overestimated my true risk tolerance
2008 shook me which was a major crash unlike the minor ones which occurred later ; I hardly felt those
You may overestimate your risk tolerance without going through a true test
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

burritoLover wrote: Mon Dec 06, 2021 7:58 am
nigel_ht wrote: Mon Dec 06, 2021 7:46 am
burritoLover wrote: Mon Dec 06, 2021 7:23 am
TheDDC wrote: Mon Dec 06, 2021 12:42 am
000 wrote: Mon Dec 06, 2021 12:40 am

I don't how you got the idea that the investment philosophy of Bogleheads or Mr. Bogle was to flee an asset class after five years of poor performance.

Your comment about individual stocks appears to be a non sequitur.
Seriously, though. Do you know what you’re advocating? How many would seriously ride an underperforming fund for 5-10 years? How about 10-20 years?

-TheDDC
Did you know that a diversified portfolio of U.S. and international developed funds invested in 1970 would have had the U.S. fund underperform international for about 25 years? And that the S&P 500 has underperformed riskless 1-month t-bills for 3 periods of 13-17 consecutive years, about 45 years of 90 years of US stock data?

Stock funds involve a lot of risk - when risk shows up, it can be persistent over many years. Reacting to that is what causes a lot of investors to underperform.
Current tbills are what? 0.5? If S&P returns are below that for 20 years B&H indexing will be dead before we come out the other side given the current inflation rate.
Well, current inflation rate <> the inflation rate over the next 20 years. The stock market could very well have negative returns over a 15-ish year period and given today's high valuations, not completely impossible either. This idea that both poor bond and stock returns over long periods is impossible - as if the market wouldn't allow your portfolio to completely suck, is baffling to me.
Nice clipping and dodging the point.

Show me a 15 year period where the market trailed t-bills for next decade using every two week period of that 15 year period as a start date. Why two weeks? Because that's about the DCA period for folks doing automatic investment in 401Ks.

Show me that for your 15 year periods that if I START with $1 in 1929, 2000 and 1966 that my returns will trail TBills over that period if I'm investing in my 401K at the max rate.

I'll do the easy one for you:

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Nope.

US Large Cap:

Professor Kenneth French's Research Data1 1972-1976
Vanguard 500 Index Fund (VFINX) 1977+

Treasury Bills / Cash - Risk Free Return Benchmark:

3-month Treasury Bills (FRED Data) 1972+

Can we have a 15 year period where real returns are negative? Yes. If you pick the right start dates.

For early accumulators it doesn't matter. For late retirees it doesn't matter.

This is why folks worry about SORR but it's a 20 year window in your life and there isn't actually all that much you can do about it beyond save more, spend less and be a reasonable diversified. Or I guess retire later.

Bond tents, cash hoards, dividend shields, etc are tactical plays that have varying impact depending on what kind of negative outcome you have.

Better to be lucky.

Whether we have a hard or soft landing from current valuations are still TBD. IF we can avoid recession (great or otherwise) it'll be soft. Consumer expectations is soft so...it should be interesting to see December numbers.
keystone
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by keystone »

Jimsad wrote: Fri Dec 03, 2021 3:48 pm Hi
I feel that the the huge returns we have been enjoying last 10 years will be ending .
Is it time to reassess one’s asset allocation?
I was 60/40 and let it drift to 75/25 due to greed and to take advantage of the roaring market .
But now am planning to dial down back to my target 60/40

I feel that especially those who have been investing <10 years and are 100% stocks may have a rude awakening and realize they do not have the stomach for 100% stocks ;this happened to me in 2008 when I went through the crash
I graduated college in 1996 and like many here, I experienced two very major market drops (>50%). The first one didn't shake me because I was young and relatively poor, but 2008 left a similar impression on me as it did for you as I saw my assets seemingly vaporize before my eyes. That led me to be 60/40 for life and I have not waivered since because I will never forget what that time felt like.

Thirteen years later, I still feel good about my 60/40 decision so I know it is the right asset allocation for me.

I also believe fixed asset allocation funds like the Vanguard LifeStrategy lineup are perfect for anyone who has a tendency to second guess their asset allocation during good or bad times. It really helps to eliminate emotion from the equation.
nigel_ht
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

Jimsad wrote: Mon Dec 06, 2021 8:40 am
mbasherp wrote: Mon Dec 06, 2021 8:22 am In my handful of years as a boglehead, I’ve learned that my investing approach should be based on myself, not on the market.

While I can blab on for days about the negative real returns of bonds, the real reason I don’t own them (other than I bonds in emergency fund) is that, as someone in their 30’s, I would first like to buy all the stocks I expect to need to reach my goal, before buying the bond component. I haven’t hit that yet, so I’m still ~100% stocks.

The only other reason to buy bonds in my case would be if I couldn’t handle the volatility of an aggressive portfolio. Since I regularly plan for a 50% crash and I’m clear about my time horizon, that’s not an issue. (As I like to put it, you can’t ask to be a championship fighter without being punched in the face. You don’t need to dodge all the punches. Sometimes you’re just gonna take it square on - that’s part of it!)

Of course I can’t speak for you, OP, and your age/needs/circumstance, but putting some blinders on in relation to my own has made it very clear what I need to do. Wherever “the market” is isn’t nearly so relevant.
As Mike Tyson famously said “everybody has a plan until they get punched in the mouth”
This happened to me in 2008 crash when I realized I overestimated my true risk tolerance
2008 shook me which was a major crash unlike the minor ones which occurred later ; I hardly felt those
You may overestimate your risk tolerance without going through a true test
"No man ever steps in the same river twice. For its not the same river and he's not the same man." --Heraclitus

I hardly noticed 2008. If it happens next year, well, Im not the same man but 14 years older and 7 years from retirement.

It will suck a lot more.
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burritoLover
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by burritoLover »

nigel_ht wrote: Mon Dec 06, 2021 9:11 am
burritoLover wrote: Mon Dec 06, 2021 7:58 am
nigel_ht wrote: Mon Dec 06, 2021 7:46 am
burritoLover wrote: Mon Dec 06, 2021 7:23 am
TheDDC wrote: Mon Dec 06, 2021 12:42 am

Seriously, though. Do you know what you’re advocating? How many would seriously ride an underperforming fund for 5-10 years? How about 10-20 years?

-TheDDC
Did you know that a diversified portfolio of U.S. and international developed funds invested in 1970 would have had the U.S. fund underperform international for about 25 years? And that the S&P 500 has underperformed riskless 1-month t-bills for 3 periods of 13-17 consecutive years, about 45 years of 90 years of US stock data?

Stock funds involve a lot of risk - when risk shows up, it can be persistent over many years. Reacting to that is what causes a lot of investors to underperform.
Current tbills are what? 0.5? If S&P returns are below that for 20 years B&H indexing will be dead before we come out the other side given the current inflation rate.
Well, current inflation rate <> the inflation rate over the next 20 years. The stock market could very well have negative returns over a 15-ish year period and given today's high valuations, not completely impossible either. This idea that both poor bond and stock returns over long periods is impossible - as if the market wouldn't allow your portfolio to completely suck, is baffling to me.
Nice clipping and dodging the point.

Show me a 15 year period where the market trailed t-bills for next decade using every two week period of that 15 year period as a start date. Why two weeks? Because that's about the DCA period for folks doing automatic investment in 401Ks.

Show me that for your 15 year periods that if I START with $1 in 1929, 2000 and 1966 that my returns will trail TBills over that period if I'm investing in my 401K at the max rate.

I'll do the easy one for you:

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Nope.

US Large Cap:

Professor Kenneth French's Research Data1 1972-1976
Vanguard 500 Index Fund (VFINX) 1977+

Treasury Bills / Cash - Risk Free Return Benchmark:

3-month Treasury Bills (FRED Data) 1972+

Can we have a 15 year period where real returns are negative? Yes. If you pick the right start dates.

For early accumulators it doesn't matter. For late retirees it doesn't matter.

This is why folks worry about SORR but it's a 20 year window in your life and there isn't actually all that much you can do about it beyond save more, spend less and be a reasonable diversified. Or I guess retire later.

Bond tents, cash hoards, dividend shields, etc are tactical plays that have varying impact depending on what kind of negative outcome you have.

Better to be lucky.

Whether we have a hard or soft landing from current valuations are still TBD. IF we can avoid recession (great or otherwise) it'll be soft. Consumer expectations is soft so...it should be interesting to see December numbers.
So you are arguing that you should make changes based on 10-20 years performance of funds?
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quisp65
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by quisp65 »

I'm in your same allocation 75/25 and I have frequently thought about if it is guided too much by long bull market. I'm sure it is partly and I will have new emotions to deal with in a long bear. However ACA subsidies are sort of twisting my arm to have a low withdraw rate for the next 10 years. If I grow another mil I'll probably change my mind on my plan but until then. IMO an aggressive allocation makes the most sense with a low withdraw rate. I feel money in bonds is money out of the market and none of us got here by keeping money out of the market. At a low withdraw rate spending down your bonds and starting to spend equity just isn't much stress on your portfolio and the market has at least hit a high every 8 years even if it didn't grow a lot in all those times. That's plenty of time to refill your bond allocation.

However I can certainly understand someone wanting to be aggressive on spending and if a low spender decides to change their mind a long bear might make them think twice due to their limited fixed income.

https://en.wikipedia.org/wiki/Closing_m ... _S%26P_500
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HomerJ
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by HomerJ »

TheDDC wrote: Mon Dec 06, 2021 12:13 am
HomerJ wrote: Sun Dec 05, 2021 11:40 pm
TheDDC wrote: Sun Dec 05, 2021 11:28 pm
Jimsad wrote: Fri Dec 03, 2021 4:02 pm I let my portfolio drift and become more aggressive due to greed and complacency
But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
Right. And we remember what happened after 2008, right? Stay the course. I would actually pile in and go 100/0. Here's the good news: You now have a chance for a "do over" to buy equities at a better discount that you should have bought before! 100/0 is my AA.

-TheDDC
I guess you weren't investing from 1966-1982. There's more to history than 2008-2009.
You're right. If what happened in 1966-1982 happens again, no one will be sitting around keeping money in equities since that would be stupid. Why sit around and lose money?

-TheDDC
LOL. It doesn't work like that.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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