15% stock exposure for a 65yo retiree?

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helloyou
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15% stock exposure for a 65yo retiree?

Post by helloyou »

My mother is 65 and her monthly income from her pension fund largely covers her spending needs. Besides, she also earns real estate revenue originating from 2 properties in rent. She saves approximately 2000-2500€ per month on average. Healthcare is taken care of by the government hence no expensive insurance to buy. However a specialize home is something that we need to consider if she was to require special care one day (however the pension fund should cover this cost, let alone the rental properties revenue hence I am not too concerned about this).

Her net worth represents approximately 1,200,000 EUR:
- 65% of which is real estate (her house + rental properties bought a while ago and which are profitable so she has no desire to sell for now)
- 15% will be invested in stocks soon (world tracker)
- 15% in high quality bonds (generated 1.3% in 2020 before tax)
- Rest in cash/high yield saving account

I was wondering if the stock exposition was okay. The stock investment has a time frame of 10-15 years or more. If any emergencies were to happen needing a lot of available cash besides her monthly revenue, she still has €40k available in cash and €200k in bonds.

What do you think of this exposure?
DJN
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Re: 15% stock exposure for a 65yo retiree?

Post by DJN »

Hi,
What does the investor think, and what is her approach to risk?
Otherwise 15% exposure to stocks is fine in those circumstances.
DJN
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helloyou
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Re: 15% stock exposure for a 65yo retiree?

Post by helloyou »

DJN wrote: Mon Jul 12, 2021 5:37 am Hi,
What does the investor think, and what is her approach to risk?
Otherwise 15% exposure to stocks is fine in those circumstances.
DJN
Thanks DJN.

She is aware of the risk associated, and what a 30 to 50% drop would mean in euro value. She also knows that in the event of a downturn, she is prepared to wait it out; and if possible invest more during the downturn (a bit from bonds but not too much). I do not know if we should rebalance until she is 80, unless stocks appreciated aggressively
jg12345
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Re: 15% stock exposure for a 65yo retiree?

Post by jg12345 »

It looks ok to me! Some thoughts/reflections/pointers:

1) Location? If in EU, as it seems to be the case, I would consider switching bonds for CDs (raisin.com) given returns and volatility of bonds vs. CDs.

2) You may have thought this already: maybe Lifestrategy 40-60 or 60-40 (I get your portfolio is a 50-50 which is not a LS option) thereby avoiding any re-balancing, could be a good idea.

3) At first sight it looks risky... However, I'm pretty sure it's ok because of the pension covering her expenses. A pension can be thought as an annuity. Take her pension monthly, see how much does it cost to get that amount monthly via an inflation-linked annuity today, and you can make up the hypothetical worth of the pension. Once you add that to her net worth, the % dedicated to RE (beyond the house she lives in) and stocks (the risky part) will go down quite significantly. In addition, she stated that she's ok with RE and stocks. The only other thing that comes to mind is that RE volatility is usually under-estimated by older folks.
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helloyou
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Re: 15% stock exposure for a 65yo retiree?

Post by helloyou »

jg12345 wrote: Mon Jul 12, 2021 7:32 am It looks ok to me! Some thoughts/reflections/pointers:

1) Location? If in EU, as it seems to be the case, I would consider switching bonds for CDs (raisin.com) given returns and volatility of bonds vs. CDs.

2) You may have thought this already: maybe Lifestrategy 40-60 or 60-40 (I get your portfolio is a 50-50 which is not a LS option) thereby avoiding any re-balancing, could be a good idea.

3) At first sight it looks risky... However, I'm pretty sure it's ok because of the pension covering her expenses. A pension can be thought as an annuity. Take her pension monthly, see how much does it cost to get that amount monthly via an inflation-linked annuity today, and you can make up the hypothetical worth of the pension. Once you add that to her net worth, the % dedicated to RE (beyond the house she lives in) and stocks (the risky part) will go down quite significantly. In addition, she stated that she's ok with RE and stocks. The only other thing that comes to mind is that RE volatility is usually under-estimated by older folks.
1. Got it; most of the bonds product through a life insurance which is heavily regulated. The returns are 1.3% in 2020. The capital is also guaranteed (meaning no loss)

2. True, however most of this money is invested through a specific life insurance product that is a tax shelter. The LifeStrategy ETF is not available, only Amundi MSCI World. There are caps to these products but as they are soon to be exceeded in this case, I will consider the Lifestrategy but it might hard to keep track of this alongside the Amundi MSCI World.

3. Thank you for the tip, I did not think of calculating it as an annuity! You are right, with this annuity over 15 years it represents 35-40% of the current net worth
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Re: 15% stock exposure for a 65yo retiree?

Post by Valuethinker »

helloyou wrote: Mon Jul 12, 2021 5:01 am My mother is 65 and her monthly income from her pension fund largely covers her spending needs. Besides, she also earns real estate revenue originating from 2 properties in rent. She saves approximately 2000-2500€ per month on average. Healthcare is taken care of by the government hence no expensive insurance to buy. However a specialize home is something that we need to consider if she was to require special care one day (however the pension fund should cover this cost, let alone the rental properties revenue hence I am not too concerned about this).

Her net worth represents approximately 1,200,000 EUR:
- 65% of which is real estate (her house + rental properties bought a while ago and which are profitable so she has no desire to sell for now)
- 15% will be invested in stocks soon (world tracker)
- 15% in high quality bonds (generated 1.3% in 2020 before tax)
- Rest in cash/high yield saving account

I was wondering if the stock exposition was okay. The stock investment has a time frame of 10-15 years or more. If any emergencies were to happen needing a lot of available cash besides her monthly revenue, she still has €40k available in cash and €200k in bonds.

What do you think of this exposure?
I think 15% in stocks is entirely reasonable.

Given her savings rate, she could probably afford to be 20% in stocks without blinking. She's basically running a financial surplus on her rent + pensions?

The insurance company "bonds" that have been issued depend, presumably, on the solvency of the insurance companies? That's not necessarily a worry (if we are talking Axa or the like it's hard to see how the French economy, say, would survive if it collapsed). But just checking.
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Re: 15% stock exposure for a 65yo retiree?

Post by nisiprius »

I personally think it's very conservative, but reasonable. Investors should know themselves and what their risk tolerance really is, and not let themselves make the behavioral economics error of unconsciously "anchoring" to other numbers that they see bruited about. What matters is what her risk tolerance is, not what someone else thinks it "should" be.

There seem to be an increasing number of studies that show an association between changes in wealth and physical health. One that made a splash in the news is Wealth & Health: How Big Financial Changes Affect your Heart.
"Low wealth is a risk factor that can dynamically change over a person's life and can influence a person's cardiovascular health status," said study author Dr. Muthiah Vaduganathan, from the division of cardiovascular medicine at Brigham and Women's Hospital, in Boston.

"So, it's a window of opportunity we have for an at-risk population. Buffering large changes in wealth should be an important focus for health policy moving ahead," he said in a hospital news release.
Last edited by nisiprius on Mon Jul 12, 2021 8:21 am, edited 1 time in total.
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randomguy
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Re: 15% stock exposure for a 65yo retiree?

Post by randomguy »

Sounds a lot riskier than holding 25-40% in stocks but it also sounds like she is in a position to take on this added risk because she doesn't need the money. If she loses 1/3rd of it because of low returns, it doesn't really matter. Maybe she prefers this higher risk/lower volatility approach of holding her money in bonds/cash to the higher volatility/lower risk approach of holding stocks. If you have gone through life without being a stock owner, loading up on them at 65 is going to be hard for most people.
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David Jay
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Re: 15% stock exposure for a 65yo retiree?

Post by David Jay »

Separating out her portfolio from her real estate, she has (in very round numbers): 40% stocks, 40% bonds and 20% cash. Well within the range that is appropriate for a 65 year old with no regular withdrawal requirement for living expenses.
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helloyou
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Re: 15% stock exposure for a 65yo retiree?

Post by helloyou »

Thank you very much for the inputs here.

Indeed she does not need the money from the stock part as the recurring income (pension + real estate comfortably covers her expenses). She also has 30k in savings accounts + 200k in bonds which can be taken out rapidly for any unexpected events. What would be the maximum stock exposure you would recommend? 20-25% considering of her allocation?
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Re: 15% stock exposure for a 65yo retiree?

Post by Valuethinker »

helloyou wrote: Mon Jul 12, 2021 10:52 am Thank you very much for the inputs here.

Indeed she does not need the money from the stock part as the recurring income (pension + real estate comfortably covers her expenses). She also has 30k in savings accounts + 200k in bonds which can be taken out rapidly for any unexpected events. What would be the maximum stock exposure you would recommend? 20-25% considering of her allocation?
Of that order.

But those who have not habitually invested in stock markets are often not mentally prepared for the roller coaster ride.

It's very rare that you wake up and think "heh, this house is worth half what I paid for it". Hopefully that never happens with a bond investment or bank account. Inflation is a much more insidious threat.

But stocks? Movement of 50% are entirely possible - in the space of days. Imagine if the US and North Korea had been in the middle of a military confrontation and then Covid-19 had hit? Imagine if the world governments had not moved swiftly to inject equity into the banks post Lehman -- for a period of several weeks, in fact, the conventional wisdom was that what financial institutions needed was liquidity (cash) not solvency (equity) ie that there were no net losses on the mortgage backed securities they were holding. Until Gordon Brown (UK Prime Minister) and Alistair Darling (Chancellor ie Minister of Finance) stood up on the steps of Reuters and announced that the UK would bail out its banks, the thing was imploding - Royal Bank of Scotland, which was something like the world's 4th largest bank by assets at that point, was essentially bust - Darling's officials had told him one weekday "if we don't do something, the bank machines (ATMs) will be empty by Sunday night" -- you could smell the raw fear in everyone working in finance**).

Similar sorts of things happened in the March April 2020 time frame in Covid - the world's Central Banks flooded the system with liquidity and made it clear that no financial institution would be allowed to go bust.

So markets dropped roughly 35%, and then started to recover. Blink and you missed it.

And stocks also do the long, painful thing. From 2000-2003, nearly 3 years, the Tech Media Telecoms bust drove the index down by c 30%. There were plenty of false rallies, before finally it turned.

That kind of market volatility freaks people out. You wouldn't believe the number of people we get posting who write "I panicked out in 2008/ March 2020 etc and I didn't get back in, now what do I do?"

And it's quite common for people less interested in stocks and investing to buy after the market has gone up a lot, when it's all in the news, the state of the market has spilled from the business pages to the main pages of the newspaper.

Then they buy, and the market has one of its periodic corrections (it dropped more than 20% in Dec 2018-Jan 2019 I believe), they are showing a loss, and they forswear ever buying stocks again.

Saddam invades Kuwait in the middle of a Middle Eastern summer, and bang we are in the 1990 bear market.

The daily "mark to market" of a stock portfolio is quite a shocking thing, if you are not used to it. I've lost track of how many bear markets I've been in (things like Emerging Markets 1994-96 and 1997-98) and I am still not used to it. Rebalance? No. Shut off the computer and do something else - that's how I cope.

Move to that weighting with caution, would be my advice. The next bear market is only an undiscovered virus, or a geopolitical confrontation, or a financial blowup (hello, crypto?) away.


** the bailout cost the taxpayer (ie me) roughly £28bn. On RBS we are still down 50% on our money (we own about 70% of it, still). The US actually managed to make money on its bailout funds, but the UK was in a lot deeper, it turned out. That would have bought a lot of new hospitals.

I view it as a kind of Dunkirk. In the midst of a ghastly strategic defeat, Britain pulls off a moral victory-- and survives to fight another day.
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helloyou
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Re: 15% stock exposure for a 65yo retiree?

Post by helloyou »

Valuethinker wrote: Tue Jul 13, 2021 3:54 am
helloyou wrote: Mon Jul 12, 2021 10:52 am Thank you very much for the inputs here.

Indeed she does not need the money from the stock part as the recurring income (pension + real estate comfortably covers her expenses). She also has 30k in savings accounts + 200k in bonds which can be taken out rapidly for any unexpected events. What would be the maximum stock exposure you would recommend? 20-25% considering of her allocation?
Of that order.

But those who have not habitually invested in stock markets are often not mentally prepared for the roller coaster ride.

It's very rare that you wake up and think "heh, this house is worth half what I paid for it". Hopefully that never happens with a bond investment or bank account. Inflation is a much more insidious threat.

But stocks? Movement of 50% are entirely possible - in the space of days. Imagine if the US and North Korea had been in the middle of a military confrontation and then Covid-19 had hit? Imagine if the world governments had not moved swiftly to inject equity into the banks post Lehman -- for a period of several weeks, in fact, the conventional wisdom was that what financial institutions needed was liquidity (cash) not solvency (equity) ie that there were no net losses on the mortgage backed securities they were holding. Until Gordon Brown (UK Prime Minister) and Alistair Darling (Chancellor ie Minister of Finance) stood up on the steps of Reuters and announced that the UK would bail out its banks, the thing was imploding - Royal Bank of Scotland, which was something like the world's 4th largest bank by assets at that point, was essentially bust - Darling's officials had told him one weekday "if we don't do something, the bank machines (ATMs) will be empty by Sunday night" -- you could smell the raw fear in everyone working in finance**).

Similar sorts of things happened in the March April 2020 time frame in Covid - the world's Central Banks flooded the system with liquidity and made it clear that no financial institution would be allowed to go bust.

So markets dropped roughly 35%, and then started to recover. Blink and you missed it.

And stocks also do the long, painful thing. From 2000-2003, nearly 3 years, the Tech Media Telecoms bust drove the index down by c 30%. There were plenty of false rallies, before finally it turned.

That kind of market volatility freaks people out. You wouldn't believe the number of people we get posting who write "I panicked out in 2008/ March 2020 etc and I didn't get back in, now what do I do?"

And it's quite common for people less interested in stocks and investing to buy after the market has gone up a lot, when it's all in the news, the state of the market has spilled from the business pages to the main pages of the newspaper.

Then they buy, and the market has one of its periodic corrections (it dropped more than 20% in Dec 2018-Jan 2019 I believe), they are showing a loss, and they forswear ever buying stocks again.

Saddam invades Kuwait in the middle of a Middle Eastern summer, and bang we are in the 1990 bear market.

The daily "mark to market" of a stock portfolio is quite a shocking thing, if you are not used to it. I've lost track of how many bear markets I've been in (things like Emerging Markets 1994-96 and 1997-98) and I am still not used to it. Rebalance? No. Shut off the computer and do something else - that's how I cope.

Move to that weighting with caution, would be my advice. The next bear market is only an undiscovered virus, or a geopolitical confrontation, or a financial blowup (hello, crypto?) away.


** the bailout cost the taxpayer (ie me) roughly £28bn. On RBS we are still down 50% on our money (we own about 70% of it, still). The US actually managed to make money on its bailout funds, but the UK was in a lot deeper, it turned out. That would have bought a lot of new hospitals.

I view it as a kind of Dunkirk. In the midst of a ghastly strategic defeat, Britain pulls off a moral victory-- and survives to fight another day.
Thanks for sharing this great post, full of experience and wisdom :D

I agree that I think no matter how many economics or financial cycles you experience, you never really get used to it... 2008 must have been something too.

Most if not all people would have a hard time stomaching this, especially when your life savings depend on it... I shared with my mom the losses in euro amount that a -30 or -50% drop would represent. It seems to me she is fine with this exposure (at 16%) but I think she would also be fine with 20%. I hope this 17 to 20% allocation sounds fine overall
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Watty
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Re: 15% stock exposure for a 65yo retiree?

Post by Watty »

helloyou wrote: Mon Jul 12, 2021 5:01 am My mother is 65 ......


Her net worth represents approximately 1,200,000 EUR:
- 65% of which is real estate (her house + rental properties bought a while ago and which are profitable so she has no desire to sell for now)
One thing that she should consider is how owning the rental properties will work when she is older and may be less financially capable.

Even if she hires a property manager to take care of the property someone will still need to overseas them to make sure they are doing a good honest job. She will also need to periodically hire a new property manager if there is a problem with the old one or if something happens like they retire.

I don't know what the tax implications would be or how strong the housing market is where you live but since she owns several properties she might want to reconsider selling the least desirable property just to make it easier to manage 10 or 20 years from now.
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helloyou
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Re: 15% stock exposure for a 65yo retiree?

Post by helloyou »

Watty wrote: Tue Jul 13, 2021 11:18 pm
helloyou wrote: Mon Jul 12, 2021 5:01 am My mother is 65 ......


Her net worth represents approximately 1,200,000 EUR:
- 65% of which is real estate (her house + rental properties bought a while ago and which are profitable so she has no desire to sell for now)
One thing that she should consider is how owning the rental properties will work when she is older and may be less financially capable.

Even if she hires a property manager to take care of the property someone will still need to overseas them to make sure they are doing a good honest job. She will also need to periodically hire a new property manager if there is a problem with the old one or if something happens like they retire.

I don't know what the tax implications would be or how strong the housing market is where you live but since she owns several properties she might want to reconsider selling the least desirable property just to make it easier to manage 10 or 20 years from now.
Thank you for the suggestion indeed in 10 years or so she might want to sell some of this real estate. For now there are two properties being rented (house and a a studio apartment). They are both located in a “hot” city that are desirable hence property prices have increased extensively in the past 5 years. (It’s a top 5 city).

For now it’s fine but she is not ruling out selling the rental house as it can be time consuming (repairs etc).
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Re: 15% stock exposure for a 65yo retiree?

Post by ronno2018 »

Don't take this wrong but sometimes these types of posts seem like they are asking for one generation to take more risk in order to benefit the next generation.

I think this is a bad take or idea -- what is most important is to make sure the person you love is safe and secure.

In this case I think you are on the right track and all will be well. :sharebeer
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Re: 15% stock exposure for a 65yo retiree?

Post by helloyou »

ronno2018 wrote: Wed Jul 14, 2021 1:12 am Don't take this wrong but sometimes these types of posts seem like they are asking for one generation to take more risk in order to benefit the next generation.

I think this is a bad take or idea -- what is most important is to make sure the person you love is safe and secure.

In this case I think you are on the right track and all will be well. :sharebeer
Thank you. I want her to be safe and not take too much take risk but at the same time she wants to maximize the assets she wants to pass down. Hence I was looking for the perfect balance between safety and risks. I trust the 17-25% exposure in stock is fine (if I add the annuity from her pension fund it goes down to ~12%). Now she has less than 20k EUR in stocks. The planned Investment is 150-170k. Would you recommend a lump sum or DCA over 6-12 months? If lump sum and there is a major crash I assume she can use the bond part to buy on the low side… I know that nobody knows what the future holds but still :D
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Re: 15% stock exposure for a 65yo retiree?

Post by Valuethinker »

helloyou wrote: Wed Jul 14, 2021 1:34 am
ronno2018 wrote: Wed Jul 14, 2021 1:12 am Don't take this wrong but sometimes these types of posts seem like they are asking for one generation to take more risk in order to benefit the next generation.

I think this is a bad take or idea -- what is most important is to make sure the person you love is safe and secure.

In this case I think you are on the right track and all will be well. :sharebeer
Thank you. I want her to be safe and not take too much take risk but at the same time she wants to maximize the assets she wants to pass down. Hence I was looking for the perfect balance between safety and risks. I trust the 17-25% exposure in stock is fine (if I add the annuity from her pension fund it goes down to ~12%). Now she has less than 20k EUR in stocks. The planned Investment is 150-170k. Would you recommend a lump sum or DCA over 6-12 months? If lump sum and there is a major crash I assume she can use the bond part to buy on the low side… I know that nobody knows what the future holds but still :D
I would phase the investment over say 12 months, or even 18. That is not the theoretically correct answer (which says you cannot time markets, so if you have a target weighting, and no bad tax consequences, you invest in it right away). The theoretically correct answer says if you can't then deal with a big market drop, you had too risky an allocation in the first place.

The reason being is if you buy, and the market drops, there's a tendency to panic out (or freeze). What you want to do is keep on investing.
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Re: 15% stock exposure for a 65yo retiree?

Post by David Jay »

randomguy wrote: Mon Jul 12, 2021 8:21 amIf you have gone through life without being a stock owner, loading up on them at 65 is going to be hard for most people.
This is such an important point. The only portfolio statement that your mother will receive each month is for her portfolio. There is no monthly statement showing her net worth. The real estate and pension/annuity are not shown.

As I said above, she is already 40% stocks in her portfolio. If the market has a severe decline she will see a 20% drop in her monthly statements. That is pretty steep: my rule of thumb is that an unsophisticated investor has a pain threshold of 10% and a capitulation threshold of 15%. A 20% drop will cause an almost irresistible urge for her to “get out”.

Now you want to take her portfolio to 25% of net worth which corresponds to 62.5% of portfolio. Now a 50% market downturn is a 30% loss on her monthly statement. Even a 30% market downturn like March 2020 will be a 20%+ loss, well above the capitulation threshold. This will create terrible fear for an elderly, unsophisticated investor.

I’m sorry, but this is a terrible idea for a 65 year old, inexperienced investor.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: 15% stock exposure for a 65yo retiree?

Post by helloyou »

David Jay wrote: Wed Jul 14, 2021 11:47 am
randomguy wrote: Mon Jul 12, 2021 8:21 amIf you have gone through life without being a stock owner, loading up on them at 65 is going to be hard for most people.
This is such an important point. The only portfolio statement that your mother will receive each month is for her portfolio. There is no monthly statement showing her net worth. The real estate and pension/annuity are not shown.

As I said above, she is already 40% stocks in her portfolio. If the market has a severe decline she will see a 20% drop in her monthly statements. That is pretty steep: my rule of thumb is that an unsophisticated investor has a pain threshold of 10% and a capitulation threshold of 15%. A 20% drop will cause an almost irresistible urge for her to “get out”.

Now you want to take her portfolio to 25% of net worth which corresponds to 62.5% of portfolio. Now a 50% market downturn is a 30% loss on her monthly statement. Even a 30% market downturn like March 2020 will be a 20%+ loss, well above the capitulation threshold. This will create terrible fear for an elderly, unsophisticated investor.

I’m sorry, but this is a terrible idea for a 65 year old, inexperienced investor.
I think she would rather want to comprehend what a loss of -30 or 50% represents in euro value instead of just a percentage. I ran down the numbers and a 17-22% exposition is about the upper limit of her risk tolerance. I would lean towards 17-18% now. If equities goes up to 22% it will be fine for her.

I
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Re: 15% stock exposure for a 65yo retiree?

Post by dboeger1 »

You briefly mentioned she is trying to maximize her legacy, but I guess my only input would be to really nail down exactly what her priorities are. She clearly has enough that she can afford to take more or less risk, as the properties and pension cover her current expenses. Some retirees just want to make sure they're leaving something, some specifically earmark a portion of their portfolio for inheritance, and yet others only intend to leave an inheritance if they happen to not spend their entire portfolio. There are different ways for her to approach this. Maybe she can set aside a fixed amount for inheritance and increase her spending to start drawing down on the rest. Maybe she is willing to take more risk and adjust her spending up or down based on the returns the portfolio generates. Maybe she wants to let her heirs decide the asset allocation for themselves for the amounts to be inherited. Having a surplus is its own challenge because even if she doesn't intend to increase her personal spending, it's still up to her to decide how that money is invested and where it will ultimately go. I don't think it's enough to just consider risk tolerance by itself the way one does during the accumulation phase. Jeff Bezos doesn't allocate capital because he's worried about a 50% market drop impacting his ability to buy breakfast cereal, he allocates it based on his life priorities. Your mother may not be Jeff Bezos, but she has some similar things to consider.
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Re: 15% stock exposure for a 65yo retiree?

Post by David Jay »

helloyou wrote: Wed Jul 14, 2021 12:39 pm
David Jay wrote: Wed Jul 14, 2021 11:47 am
randomguy wrote: Mon Jul 12, 2021 8:21 amIf you have gone through life without being a stock owner, loading up on them at 65 is going to be hard for most people.
This is such an important point. The only portfolio statement that your mother will receive each month is for her portfolio. There is no monthly statement showing her net worth. The real estate and pension/annuity are not shown.

As I said above, she is already 40% stocks in her portfolio. If the market has a severe decline she will see a 20% drop in her monthly statements. That is pretty steep: my rule of thumb is that an unsophisticated investor has a pain threshold of 10% and a capitulation threshold of 15%. A 20% drop will cause an almost irresistible urge for her to “get out”.

Now you want to take her portfolio to 25% of net worth which corresponds to 62.5% of portfolio. Now a 50% market downturn is a 30% loss on her monthly statement. Even a 30% market downturn like March 2020 will be a 20%+ loss, well above the capitulation threshold. This will create terrible fear for an elderly, unsophisticated investor.

I’m sorry, but this is a terrible idea for a 65 year old, inexperienced investor.
I think she would rather want to comprehend what a loss of -30 or 50% represents in euro value instead of just a percentage. I ran down the numbers and a 17-22% exposition is about the upper limit of her risk tolerance. I would lean towards 17-18% now. If equities goes up to 22% it will be fine for her.
You don’t appear to have absorbed what I said. You are still quoting equities as a percentage of net worth. This does not reflect the volatility that she will see in her monthly statements.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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