Gravy train ride over ? Time to reevaluate asset allocation

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

Post by Jimsad »

dcabler wrote: Sat Dec 04, 2021 6:38 am
Jimsad wrote: Sat Dec 04, 2021 6:10 am
dcabler wrote: Sat Dec 04, 2021 6:01 am I also went through the same gut wrench as many here on the forum did back in 2008. I learned from it and set an AA I could live with.

Multiple times since 2008 there was noise about large corrections that were about to happen. I ignored them and kept my AA and rebalancing according to my IPS. OP: Did you do likewise all along the way or did you make changes every time you thought it didn't feel like the party was going to continue? Did it work out for you? Do you have an IPS (a contract to yourself) that tells you exactly what to do?

I have only a vague inkling of what the next 10 years might look like, but the error bars are probably huge. So huge, in fact, that I see no way to act on it in any reasonable way. So.... staying the course.

Cheers.
My IPS is 60/40 but sticking to it is a bit like losing weight - Easy in theory( eat less , exercise more ) but hard in practice .
But I am trying….
Completely understandable. Many words written here on the forum which discuss how to prevent behavioral issues. For many people, going with a 1-fund portfolio is the answer. Both Vanguard and ishares have relatively cheap options in this space with a selection of AA's to choose from. Pretty easy to set-and-forget and just plow money into them. They're not for everybody, but they suit many. Best of luck!

viewtopic.php?t=287967

Cheers.
Good suggestion . Will think about it .
Thanks
nigel_ht
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

Jimsad wrote: Fri Dec 03, 2021 5:45 pm
delamer wrote: Fri Dec 03, 2021 4:53 pm
Jimsad wrote: Fri Dec 03, 2021 4:18 pm
delamer wrote: Fri Dec 03, 2021 4:09 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 .
Then make a change.

But you seem to imply that others on this forum have made the same mistakes (greed and complacency). And that isn’t necessarily (or even likely to be) true.
I am not sure why you thought I was implying others are greedy .
I am trying to warn myself and also others to be more vigilant
I can only give you my interpretation of your comments.

As one of the moderators asked above, what question did you have?
My question is how many others feel the way ?
Probably many but hesitant to catch flack for “timing”.

Trust your instinct to go back to the AA in your IPS. For you, it’s time to go defensive.

The whole AA thing is subjective anyway. Risk tolerance malleable and changes with the environment.

I may have the risk tolerance and skill to ski a certain difficulty run but if the weather conditions change I might not. Did my risk tolerance or skills change or am I prudently responding to different environmental conditions?

Some folks here would say plow on regardless.
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TomatoTomahto
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by TomatoTomahto »

000 wrote: Fri Dec 03, 2021 5:50 pm
HomerJ wrote: Fri Dec 03, 2021 5:46 pm The only trick is picking an AA that you can hold long-term. If you're young, that still might be 100/0 or 90/10. If you're closer to retirement, some of your money is short-term money, and not long-term money, so you should go more conservative.
I'm not sure it's a good idea for anyone to be 100% stocks.
I share with HomerJ the view that aside from an emergency fund, for those young people whose personal capital exceeds their financial capital, 100% equities is appropriate. Perhaps an EF is a way of saying that they’re not 100/0, but what if the “parental safety net” is their EF?

I’m curious why you think 100/0 for youngsters is a bad idea.
I get the FI part but not the RE part of FIRE.
wrongfunds
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by wrongfunds »

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?
How would that be buying high and selling low?
Silverado
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Silverado »

Jimsad wrote: Fri Dec 03, 2021 4:02 pm But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
This is the part that I don’t understand. It feels better to buy on the way down to me than the way up ( though both feel pretty darn good). Any stress I feel when things are going down come from uneasy feelings around job security. If money is coming in, it always feels good to invest in VTSAX.
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vanbogle59
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by vanbogle59 »

Jimsad wrote: Fri Dec 03, 2021 3:48 pm Is it time to reassess one’s asset allocation?
For me, it comes down to when I "need" the money.
In my 30s-40s, it was pretty easy to ignore my investments and just let them ride. I didn't have much yet and retirement was decades away.
Turned 50 during GFC. :shock: Found BH-ism soon thereafter. Tried to stay the course since then. Reasonably successful at it.
But as the size of the pot grew and I got closer to "needing" to spend it, I felt the pressure grow.

Now, quickly approaching retirement, I lean on my decision to always have 10X in fixed. IOW, nothing that I have "at risk" is money I will spend for at least 10 years. There is a lot of news that fails to meet this test: "Will that matter in 10 years?" And if it doesn't pass that test, it shouldn't affect my investments. Which means it's time to get busy doing nothing again.
Wannaretireearly
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Wannaretireearly »

80/20 but with a recently paid off house. I’m good with my AA but have been actively buying CA taxable bonds to beef up my EF. My real target will be 70/30 over the next few years. TRD’s really help me automate the gradual trickle in the 401ks.

Kids 529 accounts are in the vanguard age glide path, and I’m glad I’ve stuck to that despite being tempted to play with it and increase risk/stocks. I’ll need this to pay tuition in 4 years time!

I think I’ll actively need to stop my AA at 70/30. Perhaps get out of the TRDs etc. From what I’ve seen from the BH senior lords, 70/30 is an AA you could stick with forever.
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
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arcticpineapplecorp.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by arcticpineapplecorp. »

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

Post by Wannaretireearly »

The other observation is, even with a small amount in play stocks, it forces you to watch the markets too much.

One reason I now sell espp quickly and don’t put small amounts into individual stocks. I get tempted, but then think if I put $10k in what’s the max I’m gonna get before I sell anyway? $20k if I’m lucky? Won’t move the needle, so no point.

Perhaps get out of those individual stocks and become a classical boglehead 🤓
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
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Jimsad
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Jimsad »

Silverado wrote: Sat Dec 04, 2021 7:33 am
Jimsad wrote: Fri Dec 03, 2021 4:02 pm But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
This is the part that I don’t understand. It feels better to buy on the way down to me than the way up ( though both feel pretty darn good). Any stress I feel when things are going down come from uneasy feelings around job security. If money is coming in, it always feels good to invest in VTSAX.
Have you been through 2008/2009? When the market keeps going down and nobody knows if and when it will recover , you need nerves of steel to hang on .
I held on and kept buying but It was nerve wracking .
Also my portfolio is much bigger now and I have more to lose! !
Nowizard
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Nowizard »

End of year is always a good time to evaluate holdings, regardless of what the market has done. If it is your opinion that rebalancing is called for, go for it. After all, research says there is more regret for decisions resulting in real or paper losses than those that result in less gain. Personally, we have goals for appreciation and keep a running total annually of where that stands. The last years have us significantly ahead of that goal. Comparing how we are doing over longer time periods aids in keeping us from getting overly excited in good years or overly concerned in down ones based on recognition that there will be up and down years regardless of our unquestionably wise decisions ( :oops: ). That approach might work well for others who have experienced better than projected results in the last decade. Rather than considering it a gravy train, the possibility is simply that there has been an unusually long run of upward results just as the reverse has occurred.

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

Post by Shallowpockets »

How come people only think this way when the market is up in their mind? Why don’t they think of a rebalance when it has been down for years? It’s FOMO. Suppose OP had drifted to 40/60, would these same thoughts be spinning around?
Which is the stronger emotion, FOMO or fear?
autopeep
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by autopeep »

Based on this and other threads, op should probably hire a financial planner.
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goingup
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by goingup »

Jimsad wrote: Fri Dec 03, 2021 5:48 pm
Vtsax100 wrote: Fri Dec 03, 2021 5:25 pm
Jimsad wrote: Fri Dec 03, 2021 4:18 pm
delamer wrote: Fri Dec 03, 2021 4:09 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 .
Then make a change.

But you seem to imply that others on this forum have made the same mistakes (greed and complacency). And that isn’t necessarily (or even likely to be) true.
I am not sure why you thought I was implying others are greedy .
I am trying to warn myself and also others to be more vigilant
Be more vigilant? So change our AA? Or just rebalance?
I will try to rebalance with new money going more on fixed income side
It is a good idea to pare your equities if you've drifted to 75% but prefer 60%. Depending on the size of your portfolio and your cash flows, it can be difficult to move the needle with only new contributions.Personally, I'm a slow-to-act incrementalist, but you seem certain of impending doom AND you have drifted quite a bit.

Maybe start with swapping 5% equity for bonds then assess. :beer
Firemenot
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Firemenot »

You’ve set yourself up for some really hard psychology. Unless you rebalance like a robot (i.e., on a set frequency or once you hit a certain band) you’re dabbling in market timing. Now — if you choose to do nothing and let it ride you’ll beat yourself up over not rebalancing to 60/40 if there’s a decent market correction. However, if you rebalance to 60/40 and stocks continue their march upward and/or bonds flounder (which could very well happen if rates go up), you’ll have regret.

For me, I just stay 100% stock indexes and ride the rollercoaster. Long-term I know I’ll be significantly better off without the drag of bonds. Short-term or medium-term, I may well do worse.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Firemenot »

autopeep wrote: Sat Dec 04, 2021 8:43 am Based on this and other threads, op should probably hire a financial planner.
that was my first thought too.
RetiredAL
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by RetiredAL »

Jimsad wrote: Fri Dec 03, 2021 5:43 pm
Not sure why - higher inflation , new COvid law of averages catching up ? Just a bad feeling
Is this synopsis you have yours through careful economic analysis you've done?

Or is this the financial news brought to you by Talking Heads that "know nothing" other than how to make noise that attracts!

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

Post by andypanda »

I nearly panicked and bailed out in '73, but I got over it and finished grad school and got a real job and a new girlfriend and restarted my fishing hobby among other things.

https://en.wikipedia.org/wiki/1973%E2%8 ... rket_crash

I constantly reevaluate my asset allocation and look at what else I could be doing with the money other than investing it. The secret to success so far has been to not actually do anything after looking at the options.
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Jimsad
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Jimsad »

Firemenot wrote: Sat Dec 04, 2021 9:35 am
autopeep wrote: Sat Dec 04, 2021 8:43 am Based on this and other threads, op should probably hire a financial planner.
that was my first thought too.
I am hoping to avoid doing that by posting here
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vanbogle59
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by vanbogle59 »

Jimsad wrote: Sat Dec 04, 2021 9:46 am
Firemenot wrote: Sat Dec 04, 2021 9:35 am
autopeep wrote: Sat Dec 04, 2021 8:43 am Based on this and other threads, op should probably hire a financial planner.
that was my first thought too.
I am hoping to avoid doing that by posting here
Not to be rude, but....
If you can't adhere to your IPS in a raging bull market, what happens when the xxxx hits the fan?
Know thyself. :beer
chassis
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by chassis »

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
Ending? Why?

Look at the SPY chart for any time frame greater than 1 year and add 50 day and 200 day moving average lines to the chart.

Then please explain the thesis for your views.
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winterfan
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by winterfan »

I don't feel the same way about the market, but my hunches aren't that great. I was nervous about investing a big chunk of money back in fall of 2019, but thankfully, I just invested it.

I don't have a problem with a 75/25 portfolio. We are 80/20. We used to be 70/30 but increased it because that 20% will get us to Social Security.
Silverado
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Silverado »

Jimsad wrote: Sat Dec 04, 2021 8:19 am
Silverado wrote: Sat Dec 04, 2021 7:33 am
Jimsad wrote: Fri Dec 03, 2021 4:02 pm But today I remembered again 2008 when I felt like I was throwing my money in to a furnace or a bottomless pit .
This is the part that I don’t understand. It feels better to buy on the way down to me than the way up ( though both feel pretty darn good). Any stress I feel when things are going down come from uneasy feelings around job security. If money is coming in, it always feels good to invest in VTSAX.
Have you been through 2008/2009? When the market keeps going down and nobody knows if and when it will recover , you need nerves of steel to hang on .
I held on and kept buying but It was nerve wracking .
Also my portfolio is much bigger now and I have more to lose! !
I’ve invested monthly into an equity fund since before the dot com crash, so yep, I’ve plowed money into the market and watched it dive down and down and down. And I plowed money all the way up. I don’t need nerves of steel, it’s all on autopilot. A bunch of our 401k money is in Target Date Funds, so even rebalancing takes care of itself somewhat.

It is good to ‘evaluate your jitters' now though, so great you are having these conversations. Way better than all the ‘I’ve been in cash since 2010…' threads.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Ron Ronnerson »

If you’ve strayed too far from your desired asset allocation, just adjust it. You’re right in that the gravy train could be over. However, it may just be getting started too.

You mentioned the word “feel” twice in the OP and later said you felt like you were tossing money into a furnace in 2008. It turns out that you were instead throwing your money into a machine that would turn each dollar bill into a five dollar bill over the next dozen years. If you’d relied on your feelings, where would that have gotten you?
delamer
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by delamer »

nigel_ht wrote: Sat Dec 04, 2021 7:06 am
Jimsad wrote: Fri Dec 03, 2021 5:45 pm
delamer wrote: Fri Dec 03, 2021 4:53 pm
Jimsad wrote: Fri Dec 03, 2021 4:18 pm
delamer wrote: Fri Dec 03, 2021 4:09 pm

Then make a change.

But you seem to imply that others on this forum have made the same mistakes (greed and complacency). And that isn’t necessarily (or even likely to be) true.
I am not sure why you thought I was implying others are greedy .
I am trying to warn myself and also others to be more vigilant
I can only give you my interpretation of your comments.

As one of the moderators asked above, what question did you have?
My question is how many others feel the way ?
Probably many but hesitant to catch flack for “timing”.

Trust your instinct to go back to the AA in your IPS. For you, it’s time to go defensive.

The whole AA thing is subjective anyway. Risk tolerance malleable and changes with the environment.

I may have the risk tolerance and skill to ski a certain difficulty run but if the weather conditions change I might not. Did my risk tolerance or skills change or am I prudently responding to different environmental conditions?

Some folks here would say plow on regardless.
Not the analogy I would use.

The long run goal is to 1) get to FI or 2) get to the bottom of the slope in one piece.

With skiing, you do need to adapt to short-run conditions to achieve that goal.

With investing, reacting to short run market conditions gets in the way of FI. When your age and/or personal circumstances change, those are the only times it’s appropriate to change your allocation.

The OP has been lucky. He let his allocation drift, and hasn’t been burned.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Engaging in sloth
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Engaging in sloth »

We are retired with an AA of 36/64 (cash not bonds). We are heavy in cash because we want to move into a larger house soon. Eventually we will be in the AA equity range of 50-60%. But I figure on a worse case of a 50% drop when I figure my AA as I have learned from BH.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Kenkat »

Ron Ronnerson wrote: Sat Dec 04, 2021 10:06 am If you’ve strayed too far from your desired asset allocation, just adjust it. You’re right in that the gravy train could be over. However, it may just be getting started too.

You mentioned the word “feel” twice in the OP and later said you felt like you were tossing money into a furnace in 2008. It turns out that you were instead throwing your money into a machine that would turn each dollar bill into a five dollar bill over the next dozen years. If you’d relied on your feelings, where would that have gotten you?
I felt like I was throwing money into a furnace in 2008 as well. I did it anyway.

And I have thought over the last couple of years that it would have been nice to have more in US equities vs. bonds / stable value and international. But all my new money has been going into bonds / stable value and international because I have a plan and that plan has worked for me for many years.

As stated above, get the feelings out of it. You’ve gotten started by directing new contributions to fixed. Now put a plan in place to rebalance back to 60/40. You could do 5% increments every 6 months for example.

These feelings you are having are telling you that you are not supposed to be at 75/25. It feels great when the market is up, sure. But there will come a day when you will wish you hadn’t deviated from your IPS.

This is a test. You know the answer, you’ve just got to do the last part.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by mikejuss »

I feel the same way too, OP. But as neither you nor I know when the gravy train will be ending, our feelings are not actionable. I'd advise you only to make sure that you're comfortable with your asset allocation--i.e., that you won't change it if there's a sustained dip in the equities market.
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Candor
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Candor »

You were greedy and it paid off. Now you are uncomfortable with the 'drift' in your AA and want to start allocating more new money to FI. Hardly a drastic change.
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
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HomerJ
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by HomerJ »

vanbogle59 wrote: Sat Dec 04, 2021 7:45 am
Jimsad wrote: Fri Dec 03, 2021 3:48 pm Is it time to reassess one’s asset allocation?
For me, it comes down to when I "need" the money.
In my 30s-40s, it was pretty easy to ignore my investments and just let them ride. I didn't have much yet and retirement was decades away.
Turned 50 during GFC. :shock: Found BH-ism soon thereafter. Tried to stay the course since then. Reasonably successful at it.
But as the size of the pot grew and I got closer to "needing" to spend it, I felt the pressure grow.

Now, quickly approaching retirement, I lean on my decision to always have 10X in fixed. IOW, nothing that I have "at risk" is money I will spend for at least 10 years. There is a lot of news that fails to meet this test: "Will that matter in 10 years?" And if it doesn't pass that test, it shouldn't affect my investments. Which means it's time to get busy doing nothing again.
Great way to look at it.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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billyo44
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by billyo44 »

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?
Jimsad: I believe the first question should be "what is the quality/liquidity of bonds in your portfolio." According to the current CNN Fear and Greed Index concerning Junk Bond Demand: 'Investors in low quality junk bonds are accepting 1.85 percentage points in additional yield over safer investment grade corporate bonds. While this spread is historically high, it is low compared to recent history and suggests that investors are pursuing higher risk strategies".

My two cents: Risk should be taken on the equity side...bond/cash holdings should be risk-averse - cash, cash equivalents, short-term TIPS, and a short-term Treasury index fund. When it comes to bonds think 'quality', not 'reaching for yield'. I have a previous post on this subject...VFSUX (Vanguard Short-Term Investment Grade Admiral Shares) portfolio consists of approximately 53% 'BBB' rated bonds but until recently rated the fund a number '1' on the 'Risk Potential' scale meaning it's a low-risk bond fund. They currently rate it as a '2'.

I don't know about you but for me holding this type of fund wouldn't make me feel all warm and fuzzy if we have a 'financial meltdown'.
Independence = Financial assets working for you versus you working for them. | "Own an Index Fund, Get a Life Outside of Finance, and Relax"...John C. Bogle
nigel_ht
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

delamer wrote: Sat Dec 04, 2021 10:19 am
nigel_ht wrote: Sat Dec 04, 2021 7:06 am
Jimsad wrote: Fri Dec 03, 2021 5:45 pm
delamer wrote: Fri Dec 03, 2021 4:53 pm
Jimsad wrote: Fri Dec 03, 2021 4:18 pm
I am not sure why you thought I was implying others are greedy .
I am trying to warn myself and also others to be more vigilant
I can only give you my interpretation of your comments.

As one of the moderators asked above, what question did you have?
My question is how many others feel the way ?
Probably many but hesitant to catch flack for “timing”.

Trust your instinct to go back to the AA in your IPS. For you, it’s time to go defensive.

The whole AA thing is subjective anyway. Risk tolerance malleable and changes with the environment.

I may have the risk tolerance and skill to ski a certain difficulty run but if the weather conditions change I might not. Did my risk tolerance or skills change or am I prudently responding to different environmental conditions?

Some folks here would say plow on regardless.
Not the analogy I would use.

The long run goal is to 1) get to FI or 2) get to the bottom of the slope in one piece.

With skiing, you do need to adapt to short-run conditions to achieve that goal.

With investing, reacting to short run market conditions gets in the way of FI. When your age and/or personal circumstances change, those are the only times it’s appropriate to change your allocation.

The OP has been lucky. He let his allocation drift, and hasn’t been burned.
Luck matters more than skill…especially since there is essentially no skill required for passive investing beyond the ability to fog a mirror.

I also find the whole “you should hire a planner” thing here obnoxious…as if the posters really know how well or poorly they would react in a black swan scenario. March 2020 wasn’t a test. 2008 was a test but 13 years ago. How well or poorly anyone behaved back then is history. Today is 13 years worth of more gains and 13 years less of human capital.

And finally sailors know that the course in “Stay the course” isn’t some laser straight line but a zig zag dependent on the wind and sea. “Ignore the noise” isn’t “Ignore all warnings and data”.

Following your course is great…unless it’s pointing you into a hurricane. Then a course change is warranted.

And even ignoring huge storms, every decade or two the financial winds change and you may have trim sails or put out more.

Going back to his AA is simply adjusting for local weather conditions.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by mikejuss »

nigel_ht wrote: Sat Dec 04, 2021 1:00 pmLuck matters more than skill…especially since there is essentially no skill required for passive investing beyond the ability to fog a mirror.

I also find the whole “you should hire a planner” thing here obnoxious…as if the posters really know how well or poorly they would react in a black swan scenario. March 2020 wasn’t a test. 2008 was a test but 13 years ago. How well or poorly anyone behaved back then is history. Today is 13 years worth of more gains and 13 years less of human capital.

And finally sailors know that the course in “Stay the course” isn’t some laser straight line but a zig zag dependent on the wind and sea. “Ignore the noise” isn’t “Ignore all warnings and data”.

Following your course is great…unless it’s pointing you into a hurricane. Then a course change is warranted.

And even ignoring huge storms, every decade or two the financial winds change and you may have trim sails or put out more.

Going back to his AA is simply adjusting for local weather conditions.
So what, exactly, do you think the OP should do? Define what "black swan scenario," "warnings," and "hurricane" you see ahead of us. We're all ears.
Last edited by mikejuss on Sat Dec 04, 2021 1:15 pm, edited 2 times in total.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by HomerJ »

nigel_ht wrote: Sat Dec 04, 2021 1:00 pm And finally sailors know that the course in “Stay the course” isn’t some laser straight line but a zig zag dependent on the wind and sea. “Ignore the noise” isn’t “Ignore all warnings and data”.

Following your course is great…unless it’s pointing you into a hurricane. Then a course change is warranted.
You use this analogy a lot, but it's very flawed. We can't see the hurricanes ahead of time, AND, so far, even sailing RIGHT INTO A HURRICANE, you still got rich over the long run.

Stop fearing crashes. Pick an AA so that you can withstand a temporary stock crash and a job loss, and then you no longer have to worry about it.

Long term, even sailing right into the hurricane, so far, no one has sunk, and indeed, you still end up with the treasure chest not long after coming out the other side.

As long as you stayed the course. Trying to anticipate hurricanes has never worked very well. There's no weather map.

That is why we give that advice.
Last edited by HomerJ on Sat Dec 04, 2021 1:12 pm, edited 2 times in total.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Tom_T »

OP: Try to take a long-term view. The Dow just closed at 34,508. Ten years ago, it was around 12,000.

Maybe 75/25 is not your "sleep at night" allocation, and given that you drifted away from 60/40, it's perfectly reasonable to rebalance back to that level. Sometimes we need to go through some market gyrations to learn what allocation we are really most comfortable with.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

mikejuss wrote: Sat Dec 04, 2021 1:05 pm
nigel_ht wrote: Sat Dec 04, 2021 1:00 pmLuck matters more than skill…especially since there is essentially no skill required for passive investing beyond the ability to fog a mirror.

I also find the whole “you should hire a planner” thing here obnoxious…as if the posters really know how well or poorly they would react in a black swan scenario. March 2020 wasn’t a test. 2008 was a test but 13 years ago. How well or poorly anyone behaved back then is history. Today is 13 years worth of more gains and 13 years less of human capital.

And finally sailors know that the course in “Stay the course” isn’t some laser straight line but a zig zag dependent on the wind and sea. “Ignore the noise” isn’t “Ignore all warnings and data”.

Following your course is great…unless it’s pointing you into a hurricane. Then a course change is warranted.

And even ignoring huge storms, every decade or two the financial winds change and you may have trim sails or put out more.

Going back to his AA is simply adjusting for local weather conditions.
So what, exactly, do you think the OP should do? Define what "black swan scenario," "warnings," and "hurricane" you see ahead of us. We're all ears.
As I said he should go back to his default AA of 60/40. 75/25 was fine as long as things were sunny and the seas calm.

The warnings today are the fed feeling the need to address inflation and indicating that it may tighten up and taper faster. Whatever actually happens the market is reacting the end of the gravy train because it fears liquidity is going to dry up.

FOMO ends if sentiment is weak. TINA ends if yields increase.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by inbox788 »

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

Post by nigel_ht »

HomerJ wrote: Sat Dec 04, 2021 1:10 pm
nigel_ht wrote: Sat Dec 04, 2021 1:00 pm And finally sailors know that the course in “Stay the course” isn’t some laser straight line but a zig zag dependent on the wind and sea. “Ignore the noise” isn’t “Ignore all warnings and data”.

Following your course is great…unless it’s pointing you into a hurricane. Then a course change is warranted.
You use this analogy a lot, but it's very flawed. We can't see the hurricanes ahead of time, AND, so far, even sailing RIGHT INTO A HURRICANE, you still got rich over the long run.

Stop fearing crashes. Pick an AA so that you can withstand a temporary stock crash and a job loss, and then you no longer have to worry about it.

Long term, even sailing right into the hurricane, so far, no one has sunk, and indeed, you still end up with the treasure chest not long after coming out the other side.

As long as you stayed the course. Trying to anticipate hurricanes has never worked very well. There's no weather map.

That is why we give that advice.
You know, I'm just not in the mood today to be lectured about staying the course by the guy that started holding more cash because of his feelings.

We all make our own course corrections as we go along and Im not advocating anything that Bogle hasn't in the past:

“Well, I think that is a weapon that should be used sparingly.
..
I’d say, never be out of the stock market. It just makes no sense to me whatsoever. But maybe you can trim taking 15 percentage points off the table or something like that.”

75/25 back to 60/40. Seems reasonable for current conditions.

As for hurricanes...if the US dollar loses its status as the reserve currency my course WILL dramatically change. It would be exceedingly stupid not to. The pound sterling losing premier reserve currency status was a clear indicator that the dominance of the British Empire had ended.

We haven't had a hurricane since Bretton Woods. The 1966 time period was more drought than the 1929/1932 hurricane causing 89% devastation on a portfolio.

And Bear Stearns was a canary in a coal mine indicator in March 2008.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by HomerJ »

nigel_ht wrote: Sat Dec 04, 2021 1:34 pm The warnings today are the fed feeling the need to address inflation and indicating that it may tighten up and taper faster. Whatever actually happens the market is reacting the end of the gravy train because it fears liquidity is going to dry up.
There were warnings in 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020. Most of which didn't pan out, and even when we did a correction, like always, so far, in history, just holding through the correction/crash still made great overall returns.

Why don't you predict the next couple of stock market crashes for us, if it's so easy to read the weather?
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by UpperNwGuy »

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

Post by HomerJ »

nigel_ht wrote: Sat Dec 04, 2021 2:07 pmYou know, I'm just not in the mood today to be lectured about staying the course by the guy that started holding more cash because of his feelings.
Nope, life situation.. I'm 0-2 years away from retirement (note the zero). Not because of my "feelings". That cash is short-term money.

Try reading more carefully. You don't feel like being lectured because you don't like the idea of being wrong. We're all wrong sometimes. If you've never admitted you're wrong on these boards, then you're not learning.

Are you really stating here that how one "feels" about the stock market is a good way to pick an AA?

The OP wanted to increase his stock allocation a week ago.
Last edited by HomerJ on Sat Dec 04, 2021 2:31 pm, edited 2 times in total.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by HomerJ »

nigel_ht wrote: Sat Dec 04, 2021 2:07 pmAs for hurricanes...if the US dollar loses its status as the reserve currency my course WILL dramatically change. It would be exceedingly stupid not to.
So are you going to predict when that is going to happen ahead of time, or change your course AFTER it happens (AFTER you've sailed into the hurricane).

If you're going to predict it ahead of time, please do so here, and let us know.
We haven't had a hurricane since Bretton Woods. The 1966 time period was more drought than the 1929/1932 hurricane causing 89% devastation on a portfolio.

And Bear Stearns was a canary in a coal mine indicator in March 2008.
And again, riding right through those hurricanes with no course correction still made one wealthy over the long run.

Look, you don't have to agree with the advice "stay the course", but you should be able to understand the logic behind it.

Hurricanes are hard to predict, and even when they do happen, going right through them, no one, so far, has sunk, and everyone still ended up rich on the other side. If they were able to stay the course, and didn't panic inside the hurricane.

Sure, if you can avoid them, that would be even better, but that's hard. There are ALWAYS dark clouds on the horizon. ALWAYS.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by nigel_ht »

HomerJ wrote: Sat Dec 04, 2021 2:28 pm
nigel_ht wrote: Sat Dec 04, 2021 2:07 pmAs for hurricanes...if the US dollar loses its status as the reserve currency my course WILL dramatically change. It would be exceedingly stupid not to.
So are you going to predict when that is going to happen ahead of time, or change your course AFTER it happens (AFTER you've sailed into the hurricane).

If you're going to predict it ahead of time, please do so here, and let us know.
We haven't had a hurricane since Bretton Woods. The 1966 time period was more drought than the 1929/1932 hurricane causing 89% devastation on a portfolio.

And Bear Stearns was a canary in a coal mine indicator in March 2008.
And again, riding right through those hurricanes with no course correction still made one wealthy over the long run.

Look, you don't have to agree with the advice "stay the course", but you should be able to understand the logic behind it.

Hurricanes are hard to predict, and even when they do happen, going right through them, no one, so far, has sunk, and everyone still ended up rich on the other side. If they were able to stay the course, and didn't panic inside the hurricane.

Sure, if you can avoid them, that would be even better, but that's hard. There are ALWAYS dark clouds on the horizon. ALWAYS.
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.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by Fallible »

Jimsad wrote: Sat Dec 04, 2021 6:10 am ...
My IPS is 60/40 but sticking to it is a bit like losing weight - Easy in theory( eat less , exercise more ) but hard in practice. ...
It's like the Warren Buffett quote repeated often by John Bogle: "Investing is simple, but not easy." The "not easy" part is the "hard in practice" you refer to, where, after an AA is set, what is required is patience, discipline, emotional control, and common sense.

Stop 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.

I have a helpful IPS, but I don't expect it to eliminate the uncertainty of the stock market's future because nothing can. I mainly want it to remind me of the reasons for my decisions when I set an AA in calmer times before a crash. It's based largely on my experience in crashes, so your experience in 2008 can be a guide.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by srt7 »

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
Why do you think it will be ending? I am not questioning your belief but just looking to get some insight in to what made you come to that conclusion?

Also, ending as in a recession (meaning it will be back to these levels in a few years) OR is it ending for ever (USA is done etc.)?
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by willthrill81 »

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

Post by Marseille07 »

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

Post by inbox788 »

UpperNwGuy wrote: Sat Dec 04, 2021 2:20 pmYou 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?
I'm just guessing, but OP seems like a market timing BH, while you're more like a pure BH. Do you prefer ETFs or mutual funds (VTI vs VTSAX; nanotiming)? If you're on the high end equities of your AA band, must you buy bonds to get centered? Would it be wrong (non BH) to add more equities until you hit the rebalance band (higher risk/higher return/higher volatility; microtiming)?

As far as the eureka moment, there are traders who believe in support levels, and a small drops are buying opportunities where they bounce right back up, while larger drops breakdown and continue falling. IMO, sometimes this happens and sometimes they don't, but you can always see it looking back when it's pointed out. A 12% drop in the Russell 2000, the VIX breaking 30 or some other threshold might have triggered some concern.

https://www.google.com/finance/quote/.I ... SELL%3ARUT
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by surfstar »

Wannaretireearly wrote: Sat Dec 04, 2021 8:15 am The other observation is, even with a small amount in play stocks, it forces you to watch the markets too much.

One reason I now sell espp quickly and don’t put small amounts into individual stocks. I get tempted, but then think if I put $10k in what’s the max I’m gonna get before I sell anyway? $20k if I’m lucky? Won’t move the needle, so no point.

Perhaps get out of those individual stocks and become a classical boglehead 🤓
This is my same thought process regarding individual stocks, crypto, and similar bets / play money. In order to move the needle, I'd use more $$/% than would make rational sense - so unless you need to scratch a gambling itch, there isn't much point.
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Re: Gravy train ride over ? Time to reevaluate asset allocation

Post by 000 »

TomatoTomahto wrote: Sat Dec 04, 2021 7:20 am I share with HomerJ the view that aside from an emergency fund, for those young people whose personal capital exceeds their financial capital, 100% equities is appropriate. Perhaps an EF is a way of saying that they’re not 100/0, but what if the “parental safety net” is their EF?

I’m curious why you think 100/0 for youngsters is a bad idea.
Well if they have a cash allocation they're not 100% stocks.

That aside, there are two main reasons: (1) they may need to access their funds sooner than anticipated and (2) stocks are a risk asset class and could plausibly (not even considering black swans here) underperform bonds or gold or something else for decades.

Personal capital exceeding financial capital can change at any time, and there are limitations to the insurability of disability.

Parental safety net is just another way of saying their effective AA is something other than what their account statements would indicate.
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