Updates: 60/40 VS 30/70 Allocation: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2022?

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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by sperry8 »

littlebird wrote: Fri Jul 26, 2019 11:52 am The late 70’s person I am now is a very different one from the mid-40’s person I was at early retirement. Retirement is far from a static state. In fact, the changes that occur in old age are nearly of the same magnitude as the changes that occur in youth. Our (now my) finances are very different also.

I’m no longer thinking of possibly 40+ years of traveling, mountain biking and discovering new restaurants, with the potential of resuming work if our shoe-string finances go awry. Now, 31 years later, with my (much -older) late spouse’s long term care needs having been successfully met - with surprisingly little damage to our asset base - with travel and restaurants largely behind me, due to non-serious, but restricting health issues, my concerns are far different. Why would my asset allocation be the same?

Of course it isn’t. Early in retirement, our modest assets were in invested approximately 80/20, I also took advantage of serious dips to temporarily ”over-rebalance”. Later, I even took advantage of the drop in housing prices to buy a rental property and to buy a more -expensive -than -we needed primary home. I even had, and still have, a non-trivial allocation to high-yield bonds. That was then. Now, with only my own current comforts and potential long term care needs to consider, and with what I think are adequate assets to meet those needs ( probably due in large part to my somewhat aggressive earlier investing behaviors) and no particular unmet legacy wishes, my main goal is preservation. To this end, I would not be more aggressive than about 20/80. (In fact I am quite a bit less aggressive even than that right now, for reasons I consider unique to this particular era, and which cannot be discussed on this board.) The fixed income portion is more heavily in money market funds and CDs than bonds.

I’m not even spending my entire SS and annuity payment, but living very well in my ammenity-rich, but low cost “active senior community”. I even have no need to sell this now very overly large, but lovely home. My only financial wish right now is that there was some way - akin to investing in one’s own home- to both enjoy spending the money and yet having the potential for it still to be there when it’s needed. :greedy
xxd091 wrote: Fri Jul 26, 2019 1:47 pm Great post littlebird -we are both now 73-bucket list of countries all done
Nothing medically serious happened yet but lots of intimations-teeth,wombs,backs and feet!
Plus lots of our friends have one partner heavily compromised re walking etc
Pulling in the horns-visiting children and grandchildren more often-“Timor mortis conturbat me”in the words of the poet!
Asset Allocation 30/70 -this will do to the finish
No complaints-had a great run-hopefully to go for many years yet but who knows(rather like the stock market!)
xxd091
Great post littlebird. My fave quote "I’m no longer thinking of possibly 40+ years of traveling, mountain biking and discovering new restaurants, with the potential of resuming work if our shoe-string finances go awry."

I too retired young and am now 12 years into it. I have the perspective of life that it will head down a path not too dissimilar to yours. That is, while young I'll have different wants and desires than when I'm older. Even now I can see a difference in basic body health in 50s vs 30s. I'm sure it continues in that direction as we age. This is not to say we can't stay healthy and lead productive lives - just saying the body changes as we age. So too do our desires. So I set my AA to enable me to spend and live now which requires a different (more aggressive) AA while trying to accomplish these things. I realize as I age, my desire to mountain bike, travel extensively, and go to every new restaurant will wane. In fact, after 12 years of doing it and almost 90 countries later, it already has. Thus, I've begun to dial back my AA from what began at 80/20 and is now 65/35. I imagine eventually it'll get to 50/50. While I've attempted to live my life knowing how it'll go - it is comforting to hear my perspective is the correct one for me. Perhaps it's confirmation bias - but your post is the perspective I had on how it would likely go. So thanks for sharing it.
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by beehivehave »

30/70 good starting point in retirement.
If you need more expected appreciation, then maybe you should keep working a bit.
If you need less and want to leave a legacy, then maybe you should increase stock holdings.
If you need less and don't care about the legacy, then maybe 30/70 is fine.
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by djmbob »

I thought this would be a good post to resurrect based on how retirees may have felt about the market over the last 3 months. The previous last post was in January. Have any 60/40 allocation folks changed their approach??
Cheers,
Ray
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by Chip »

djmbob wrote: Sun Jun 07, 2020 4:13 pm I thought this would be a good post to resurrect based on how retirees may have felt about the market over the last 3 months. The previous last post was in January. Have any 60/40 allocation folks changed their approach??
Cheers,
Ray
Not me. Mid-60s, retired 19 years. 60/40 since 2015. 70/30 or more before that.

I hit my 5% rebalance bands once in March and was very close one more time.

I personally don't believe that we're close to being out of this, but that won't affect what I do with the portfolio.
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by Ron »

No change a/o yesterday's close; 59/41 actual vs. 60/40 target AA.

60/40 has been our target for over a decade in retirement (both age 72).

The market goes up, the market goes down; same thing that has happened since we started investing for retirement in 1982, 38 years ago.

- Ron
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by Sandtrap »

Broken Man 1999 wrote: Sat Jan 11, 2020 4:02 pm 50/50 works well for us.

I have some legacy desires, so most of our bond allocation is in treasuries or other forms of U.S. Govt. obligations.

Certainly for the last few years a 50/50 AA has given us plenty of growth to plump up our retirement portfolio.

Our helping of bonds can provide a very long period of retirement expenses coverage, should equities slump.

So, at the end of the day, asset allocation decisions do have another important consideration, that being portfolio size.

Broken Man 1999
+1
Total asset size VS allocation in retirement is an uncommon topic.
IE: Allocation of 50/50 with 25X in “Fixed” at age 65 is a game changer.

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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by KEotSK66 »

as things stand today...

i'll likely be 100% wellesley in retirement

i think i can get away with a 2% draw and assuming 3% inflation that means i need a return of 5.10%

if i get that return (annualized over short periods because of volatility) i'll get my inflation-adjusted draw and my portfolio will grow with inflation
"i just got fluctuated out of $1,500", jerry
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by smitcat »

KEotSK66 wrote: Wed Jun 10, 2020 9:27 am as things stand today...

i'll likely be 100% wellesley in retirement

i think i can get away with a 2% draw and assuming 3% inflation that means i need a return of 5.10%

if i get that return (annualized over short periods because of volatility) i'll get my inflation-adjusted draw and my portfolio will grow with inflation
Curious - what are your plan(s) for the funds left over?
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by LilyFleur »

KEotSK66 wrote: Wed Jun 10, 2020 9:27 am as things stand today...

i'll likely be 100% wellesley in retirement

i think i can get away with a 2% draw and assuming 3% inflation that means i need a return of 5.10%

if i get that return (annualized over short periods because of volatility) i'll get my inflation-adjusted draw and my portfolio will grow with inflation
I'm a big fan of streamlined efficiency, but part of my strategy involves withdrawing from fixed-income if equities crash. (AA is 50/50). I can go about ten years without dipping into equities if necessary (have a pension and will start a small SS draw at age 62). How does it work for you if the market goes low and stays low for a few years?
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by xxd091 »

Hopefully Keot5K66 has a large pot aka Warren Buffet,s spouse and is therefore insulated from market downturns
Buffet,s wife’s savings remember were to be 90% S&P 500 and 10% Government Treasuries as advised by him
xxd091
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by IndexCore »

I wonder if the 30/70 portfolio came from back testing 2004-2012. For that specific range, CAGR is very close: 60/40 grew 6.17%/year while 30/70 grew 6.04%/year. The Sharpe/Sortino ratios also look great for that range of years.
https://www.portfoliovisualizer.com/bac ... allocation

Going back 30 years (1990-2019) still has high ratios, but the CAGR gap grows larger: 8.72% vs 7.44%. That winds up with the 30/70 portfolio ending -30% lower overall than the 60/40 portfolio, but with less volatility (stdev 5.11% vs 8.57%).

It might be a good suggestion for someone with a lower risk tolerance, who needs stocks to make their retirement assets last.
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by KEotSK66 »

smitcat wrote: Wed Jun 10, 2020 1:16 pm
KEotSK66 wrote: Wed Jun 10, 2020 9:27 am as things stand today...

i'll likely be 100% wellesley in retirement

i think i can get away with a 2% draw and assuming 3% inflation that means i need a return of 5.10%

if i get that return (annualized over short periods because of volatility) i'll get my inflation-adjusted draw and my portfolio will grow with inflation
Curious - what are your plan(s) for the funds left over?
whatever money I have left will probably go to my children
"i just got fluctuated out of $1,500", jerry
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by Sandtrap »

djmbob wrote: Sun Jun 07, 2020 4:13 pm I thought this would be a good post to resurrect based on how retirees may have felt about the market over the last 3 months. The previous last post was in January. Have any 60/40 allocation folks changed their approach??
Cheers,
Ray
Great idea!!

DW and I were fine with 50/50 as new senior retirees.
We learned that we did not care for the paper losses of the recent market drop.
Solution: The market shifted our allocation to 40/60. We were going to glide path to that in 2 years anyway, so decided to leave it alone and not rebalance.

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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by KEotSK66 »

LilyFleur wrote: Wed Jun 10, 2020 2:57 pm
KEotSK66 wrote: Wed Jun 10, 2020 9:27 am as things stand today...

i'll likely be 100% wellesley in retirement

i think i can get away with a 2% draw and assuming 3% inflation that means i need a return of 5.10%

if i get that return (annualized over short periods because of volatility) i'll get my inflation-adjusted draw and my portfolio will grow with inflation
I'm a big fan of streamlined efficiency, but part of my strategy involves withdrawing from fixed-income if equities crash. (AA is 50/50). I can go about ten years without dipping into equities if necessary (have a pension and will start a small SS draw at age 62). How does it work for you if the market goes low and stays low for a few years?
i'll just spend down my portfolio/vwiax, taking my inflation-adjusted draw each year

i think i can do that for at least 30 years with zero return in 6% inflation
"i just got fluctuated out of $1,500", jerry
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by KEotSK66 »

xxd091 wrote: Thu Jun 11, 2020 3:41 am Hopefully Keot5K66 has a large pot aka Warren Buffet,s spouse and is therefore insulated from market downturns
Buffet,s wife’s savings remember were to be 90% S&P 500 and 10% Government Treasuries as advised by him
xxd091
i'm not insulated from downturns, my portfolio will drop but i'll still have to take my inflation-adjusted draw

i do have 65% in bonds and 3% income to help with downturns, but even a 35/65 portfolio lost about 20% a few months ago

like i said in a previous post, i think i can go for at least 30 years with zero return in 6% inflation
"i just got fluctuated out of $1,500", jerry
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by KEotSK66 »

IndexCore wrote: Thu Jun 11, 2020 8:00 am I wonder if the 30/70 portfolio came from back testing 2004-2012. For that specific range, CAGR is very close: 60/40 grew 6.17%/year while 30/70 grew 6.04%/year. The Sharpe/Sortino ratios also look great for that range of years.
https://www.portfoliovisualizer.com/bac ... allocation

Going back 30 years (1990-2019) still has high ratios, but the CAGR gap grows larger: 8.72% vs 7.44%. That winds up with the 30/70 portfolio ending -30% lower overall than the 60/40 portfolio, but with less volatility (stdev 5.11% vs 8.57%).

It might be a good suggestion for someone with a lower risk tolerance, who needs stocks to make their retirement assets last.
my guess is anything from 30/70 - 40/60 comes from 35/65 being close to the minimum variance portfolio on the long-term efficient frontier

on the other end, 60/40 - 70/30 maybe comes from the efficient frontier flattening out at about 65/35, this isn't always obvious on plots though like the 35/65 portfolio is
"i just got fluctuated out of $1,500", jerry
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by smitcat »

KEotSK66 wrote: Thu Jun 11, 2020 8:03 am
smitcat wrote: Wed Jun 10, 2020 1:16 pm
KEotSK66 wrote: Wed Jun 10, 2020 9:27 am as things stand today...

i'll likely be 100% wellesley in retirement

i think i can get away with a 2% draw and assuming 3% inflation that means i need a return of 5.10%

if i get that return (annualized over short periods because of volatility) i'll get my inflation-adjusted draw and my portfolio will grow with inflation
Curious - what are your plan(s) for the funds left over?
whatever money I have left will probably go to my children
A good plan they will have much to be thankful for.
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by Sandtrap »

KEotSK66 wrote: Thu Jun 11, 2020 8:41 am
IndexCore wrote: Thu Jun 11, 2020 8:00 am I wonder if the 30/70 portfolio came from back testing 2004-2012. For that specific range, CAGR is very close: 60/40 grew 6.17%/year while 30/70 grew 6.04%/year. The Sharpe/Sortino ratios also look great for that range of years.
https://www.portfoliovisualizer.com/bac ... allocation

Going back 30 years (1990-2019) still has high ratios, but the CAGR gap grows larger: 8.72% vs 7.44%. That winds up with the 30/70 portfolio ending -30% lower overall than the 60/40 portfolio, but with less volatility (stdev 5.11% vs 8.57%).

It might be a good suggestion for someone with a lower risk tolerance, who needs stocks to make their retirement assets last.
my guess is anything from 30/70 - 40/60 comes from 35/65 being close to the minimum variance portfolio on the long-term efficient frontier

on the other end, 60/40 - 70/30 maybe comes from the efficient frontier flattening out at about 65/35, this isn't always obvious on plots though like the 35/65 portfolio is
That's interesting.

I thought Bernstein (not the bears) had this pegged at 25/75 in "Ages of the Investor: Lifecycle Investing" ??

Can't remember.
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by sean.mcgrath »

Sandtrap wrote: Fri Jul 19, 2019 11:35 pm Question:

1. Considering Berstein's 2002 recommendation for a 60/40 allocation and also, R. Ferri's suggestion of a 30/70 allocation as the better "center of gravity" for retirees, what do you feel is the best allocation for a retiree? Why

2. If you are not yet a retiree, which allocation would you consider best when you do retire? Why?

3. If you are already retired, assuming familiarity with both Berstein and Ferri's suggestions, what allocation has been working best for you? Why
Nice -- I hadn't seen this post before. Very interesting to read some of the longer-retired folks replies. To answer the questions:

1. Agree with the many replies that it is highly personal and varied.

2. Plan to retire in 2-4 years (a bit before 60). We expect to be about 90/10, and plan on keeping it there. Since I believe that the only purpose of bonds is to smooth out swings at the cost of returns, it just seems "wasteful" to put money into bonds. I've never been bothered by the swings, and we will have enough in savings that the cFIREsim simulations give a 100% success rate. Besides, a huge part of our spend is discretionary, and we would adapt if need be.
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by KEotSK66 »

Sandtrap wrote: Thu Jun 11, 2020 9:24 am
KEotSK66 wrote: Thu Jun 11, 2020 8:41 am
IndexCore wrote: Thu Jun 11, 2020 8:00 am I wonder if the 30/70 portfolio came from back testing 2004-2012. For that specific range, CAGR is very close: 60/40 grew 6.17%/year while 30/70 grew 6.04%/year. The Sharpe/Sortino ratios also look great for that range of years.
https://www.portfoliovisualizer.com/bac ... allocation

Going back 30 years (1990-2019) still has high ratios, but the CAGR gap grows larger: 8.72% vs 7.44%. That winds up with the 30/70 portfolio ending -30% lower overall than the 60/40 portfolio, but with less volatility (stdev 5.11% vs 8.57%).

It might be a good suggestion for someone with a lower risk tolerance, who needs stocks to make their retirement assets last.
my guess is anything from 30/70 - 40/60 comes from 35/65 being close to the minimum variance portfolio on the long-term efficient frontier

on the other end, 60/40 - 70/30 maybe comes from the efficient frontier flattening out at about 65/35, this isn't always obvious on plots though like the 35/65 portfolio is
That's interesting.

I thought Bernstein (not the bears) had this pegged at 25/75 in "Ages of the Investor: Lifecycle Investing" ??

Can't remember.
j :happy
i suspect part of the rationale for wellesley's 35/65 and wellington's 65/35 comes from the long-term efficient frontier, if i recall correctly the long-term efficient frontier plot I saw covered 7 decades up to about 2010, you could see the "reasoning"

regarding that same plot/data, along with the 70-year EF the authors also plotted the individual decade EFs on the same plot, maybe using decades was a somewhat artificial partitioning but the plots for each decade were all over the place, showing the need for a long horizon to avoid a "coin-flip"

maybe WB used a different time frame
"i just got fluctuated out of $1,500", jerry
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by rascott »

Tons of backward looking thought processes in these posts. How would these high bond allocation portfolios performed if they started at an era where 10 year bonds were yielding 0.6%?
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by willthrill81 »

rascott wrote: Thu Jun 11, 2020 10:05 am Tons of backward looking thought processes in these posts. How would these high bond allocation portfolios performed if they started at an era where 10 year bonds were yielding 0.6%?
From 1941-1970, intermediate-term Treasuries had a real annualized return of -.80%. So negative real bond yields definitely aren't a new thing.

Over that period, a 30/70 had a real return of 2.26%, while a 60/40 had a real return of 5.08%.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by Engaging in sloth »

I rather have CD's than bonds- seems safer and returns are close enough
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by protagonist »

Sandtrap wrote: Fri Jul 19, 2019 11:35 pm

1. Considering Berstein's 2002 recommendation for a 60/40 allocation and also, R. Ferri's suggestion of a 30/70 allocation as the better "center of gravity" for retirees, what do you feel is the best allocation for a retiree? Why

2. If you are not yet a retiree, which allocation would you consider best when you do retire? Why?

3. If you are already retired, assuming familiarity with both Berstein and Ferri's suggestions, what allocation has been working best for you? Why
1. I don't do percentages. I keep what I need to live on in safe investments like CDs and I-bonds. The rest I gamble in the stock market. Allocation percentages are irrelevant.
I've read here that Bernstein advocates a similar approach. Perhaps I am wrong, or if so, perhaps he changed his mind since 2002.
2. N/A
3. See #1 above.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by afan »

This is ideal if you have enough in safe fixed income. Consider that your retirement nest egg and invest the rest. Thus, as your assets grow but your required safe amount does not, your effective allocation.becomes more aggressive. But the allocation was never based on a target percent in stocks.

Unfortunately, many people need the growth in their portfolios to fund their retirement. Their assets do not permit them to cover all expenses from low or zero growth investments like safe fixed income.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by IndexCore »

willthrill81 wrote: Thu Jun 11, 2020 10:23 am
rascott wrote: Thu Jun 11, 2020 10:05 am Tons of backward looking thought processes in these posts. How would these high bond allocation portfolios performed if they started at an era where 10 year bonds were yielding 0.6%?
From 1941-1970, intermediate-term Treasuries had a real annualized return of -.80%. So negative real bond yields definitely aren't a new thing.

Over that period, a 30/70 had a real return of 2.26%, while a 60/40 had a real return of 5.08%.
Where I can get data on intermediate-term treasuries for 1941 - 1970?

(Portfolio Visualizer seems to stop in the 1970s, while treasury.gov doesn't even go back that far, that I've seen)
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by convert949 »

protagonist wrote: Thu Jun 11, 2020 12:15 pm
Sandtrap wrote: Fri Jul 19, 2019 11:35 pm

1. Considering Berstein's 2002 recommendation for a 60/40 allocation and also, R. Ferri's suggestion of a 30/70 allocation as the better "center of gravity" for retirees, what do you feel is the best allocation for a retiree? Why

2. If you are not yet a retiree, which allocation would you consider best when you do retire? Why?

3. If you are already retired, assuming familiarity with both Berstein and Ferri's suggestions, what allocation has been working best for you? Why
1. I don't do percentages. I keep what I need to live on in safe investments like CDs and I-bonds. The rest I gamble in the stock market. Allocation percentages are irrelevant.
I've read here that Bernstein advocates a similar approach. Perhaps I am wrong, or if so, perhaps he changed his mind since 2002.
2. N/A
3. See #1 above.
Similar approach here... always have 10-15 years ahead of me in safe investments, rest in equities. Investments broken down by when they might be needed (liability matching). Not quite bucketing but similar... I do recall Bernstein saying that “safe” investments could include cash, bonds and 50% of equities to come up with your 25 year target. FYI, 70 retired, no pension...
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by willthrill81 »

IndexCore wrote: Fri Jun 12, 2020 6:23 am
willthrill81 wrote: Thu Jun 11, 2020 10:23 am
rascott wrote: Thu Jun 11, 2020 10:05 am Tons of backward looking thought processes in these posts. How would these high bond allocation portfolios performed if they started at an era where 10 year bonds were yielding 0.6%?
From 1941-1970, intermediate-term Treasuries had a real annualized return of -.80%. So negative real bond yields definitely aren't a new thing.

Over that period, a 30/70 had a real return of 2.26%, while a 60/40 had a real return of 5.08%.
Where I can get data on intermediate-term treasuries for 1941 - 1970?

(Portfolio Visualizer seems to stop in the 1970s, while treasury.gov doesn't even go back that far, that I've seen)
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by protagonist »

convert949 wrote: Fri Jun 12, 2020 7:08 am
protagonist wrote: Thu Jun 11, 2020 12:15 pm
Sandtrap wrote: Fri Jul 19, 2019 11:35 pm

1. Considering Berstein's 2002 recommendation for a 60/40 allocation and also, R. Ferri's suggestion of a 30/70 allocation as the better "center of gravity" for retirees, what do you feel is the best allocation for a retiree? Why

2. If you are not yet a retiree, which allocation would you consider best when you do retire? Why?

3. If you are already retired, assuming familiarity with both Berstein and Ferri's suggestions, what allocation has been working best for you? Why
1. I don't do percentages. I keep what I need to live on in safe investments like CDs and I-bonds. The rest I gamble in the stock market. Allocation percentages are irrelevant.
I've read here that Bernstein advocates a similar approach. Perhaps I am wrong, or if so, perhaps he changed his mind since 2002.
2. N/A
3. See #1 above.
Similar approach here... always have 10-15 years ahead of me in safe investments, rest in equities. Investments broken down by when they might be needed (liability matching). Not quite bucketing but similar... I do recall Bernstein saying that “safe” investments could include cash, bonds and 50% of equities to come up with your 25 year target. FYI, 70 retired, no pension...
68 yo, retired since 55 y o, also no pension other than IRA.

IMHO It's good to respect knowledgeable people like Bernstein, Ferri, Bogle et al. Its counterproductive to treat them as gurus. We all have to think for ourselves and come to our own conclusions.
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Re: 60/40 VS 30/70 "Center Of Gravity"@@ Allocation for Retirees ??? Bernstein VS Ferri ?? -- What Would You Do?

Post by azanon »

Sandtrap wrote: Thu Jun 11, 2020 9:24 am
KEotSK66 wrote: Thu Jun 11, 2020 8:41 am
IndexCore wrote: Thu Jun 11, 2020 8:00 am I wonder if the 30/70 portfolio came from back testing 2004-2012. For that specific range, CAGR is very close: 60/40 grew 6.17%/year while 30/70 grew 6.04%/year. The Sharpe/Sortino ratios also look great for that range of years.
https://www.portfoliovisualizer.com/bac ... allocation

Going back 30 years (1990-2019) still has high ratios, but the CAGR gap grows larger: 8.72% vs 7.44%. That winds up with the 30/70 portfolio ending -30% lower overall than the 60/40 portfolio, but with less volatility (stdev 5.11% vs 8.57%).

It might be a good suggestion for someone with a lower risk tolerance, who needs stocks to make their retirement assets last.
my guess is anything from 30/70 - 40/60 comes from 35/65 being close to the minimum variance portfolio on the long-term efficient frontier

on the other end, 60/40 - 70/30 maybe comes from the efficient frontier flattening out at about 65/35, this isn't always obvious on plots though like the 35/65 portfolio is
That's interesting.

I thought Bernstein (not the bears) had this pegged at 25/75 in "Ages of the Investor: Lifecycle Investing" ??

Can't remember.
j :happy
That's my understanding as well - 20-30% is more the range of efficient frontier and if that's off, it's probably a bit on the high side. As an example, the Federal TSP was 20% for the longest time, and I believe the main (only?) reason it is now being moved to 30% is to move it "more in line" with other Retirement income funds, ... read, not because they think the efficient frontier really changed.

Unlevered risk parity allocations also tend to be 15-30% for the same reason, and never over 30% anywhere I've seen (Mebane Faber, for instance, used an example unlevered risk parity fund in certain presentations at the 15% equity level).

If you define risk as volatility, definitely moving above 30% equity gives you proportionally less return per unit of "risk", where stocks and bonds are the only asset classes used. That might get a bit more tricky if you add in certain alternatives, like gold. Throw gold in there, and there'll be certain proponents that will support as high as 40% equity (such as Tyler over at portfoliocharts.com) for maximum efficiency.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by Engaging in sloth »

convert949 wrote: Fri Jun 12, 2020 7:08 am
protagonist wrote: Thu Jun 11, 2020 12:15 pm
Sandtrap wrote: Fri Jul 19, 2019 11:35 pm

1. Considering Berstein's 2002 recommendation for a 60/40 allocation and also, R. Ferri's suggestion of a 30/70 allocation as the better "center of gravity" for retirees, what do you feel is the best allocation for a retiree? Why

2. If you are not yet a retiree, which allocation would you consider best when you do retire? Why?

3. If you are already retired, assuming familiarity with both Berstein and Ferri's suggestions, what allocation has been working best for you? Why
1. I don't do percentages. I keep what I need to live on in safe investments like CDs and I-bonds. The rest I gamble in the stock market. Allocation percentages are irrelevant.
I've read here that Bernstein advocates a similar approach. Perhaps I am wrong, or if so, perhaps he changed his mind since 2002.
2. N/A
3. See #1 above.
Similar approach here... always have 10-15 years ahead of me in safe investments, rest in equities. Investments broken down by when they might be needed (liability matching). Not quite bucketing but similar... I do recall Bernstein saying that “safe” investments could include cash, bonds and 50% of equities to come up with your 25 year target. FYI, 70 retired, no pension...
I agree with you guys on this. CD's offer 100% safety and I know EXACTLY how much $ it is/will be.
I have small % in market...bond funds go down in value sometimes- no as safe to me as CDs
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by KEotSK66 »

not able to c+p the plot

for 1950-2014 anything below 30% stocks sacrificed return

the sweet spot was between 30 and 40% stocks
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by tomd37 »

I had been following this post since its inception in 2019 and its last updates about a year ago. We have now reached our mid-80s (86) and I have been giving consideration to reducing our 40/60 asset allocation to somewhere around 30/70. I went back and located Rick Ferri's "The Center of Gravity for Retirees" which I had read several years ago and am beginning to think like that more and more each year.

I think we have "enough" as our SS, pension, and RMDs meet our annual needs and we have good long-term care insurance if it should be needed. We are not necessarily concerned about leaving to our one heir as they have what they may need.

Just posting this to bring up the original post for anyone that might be interested in the subject.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by Sandtrap »

tomd37 wrote: Sat Jun 25, 2022 10:44 am I had been following this post since its inception in 2019 and its last updates about a year ago. We have now reached our mid-80s (86) and I have been giving consideration to reducing our 40/60 asset allocation to somewhere around 30/70. I went back and located Rick Ferri's "The Center of Gravity for Retirees" which I had read several years ago and am beginning to think like that more and more each year.

I think we have "enough" as our SS, pension, and RMDs meet our annual needs and we have good long-term care insurance if it should be needed. We are not necessarily concerned about leaving to our one heir as they have what they may need.

Just posting this to bring up the original post for anyone that might be interested in the subject.
Good points
Well said

With the volatility and drop since 2020 and lately...
i would think many retirees here might be pondering AA adjustments.

Rick Ferri's missive on 30/70 is certainly worth revisiting.

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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by Barkingsparrow »

Sandtrap wrote: Sat Jun 25, 2022 10:57 am
With the volatility and drop since 2020 and lately...
i would think many retirees here might be pondering AA adjustments.

Rick Ferri's missive on 30/70 is certainly worth revisiting.

J🌺
I've been considering just this kind of move - but I'm hesitant to make asset allocation changes in a down market, selling at lows.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by Sandtrap »

Barkingsparrow wrote: Sat Jun 25, 2022 11:44 am
Sandtrap wrote: Sat Jun 25, 2022 10:57 am
With the volatility and drop since 2020 and lately...
i would think many retirees here might be pondering AA adjustments.

Rick Ferri's missive on 30/70 is certainly worth revisiting.

J🌺
I've been considering just this kind of move - but I'm hesitant to make asset allocation changes in a down market, selling at lows.
true
all the more important to look at ones cost basis when shifting funds.

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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by rkhusky »

Barkingsparrow wrote: Sat Jun 25, 2022 11:44 am I've been considering just this kind of move - but I'm hesitant to make asset allocation changes in a down market, selling at lows.
Worrying about selling at a low is a sign of a classic cognitive bias - Anchoring. Your AA should be determined irrespective of the current (or recent past) market conditions. Once your desired AA is determined, implement it promptly, irrespective of current market conditions.

https://en.wikipedia.org/wiki/List_of_cognitive_biases
https://en.wikipedia.org/wiki/Anchoring ... tive_bias)
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by r.walker »

I'm 67, single, still working, but expect to retire between 68-70. SS at 70.

I'm at 98/2 equities/cash. Equities are about 84/16 domestic/ international. I've never owned bonds during my decades of investing. I'm fortunate that taxable dividends, currently reinvested, along with SS at 70, should substantially exceed expenses. If ones taxable number is high enough, IMO holding bonds doesn't make sense.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by bertilak »

r.walker wrote: Sun Jun 26, 2022 9:20 am I'm 67, single, still working, but expect to retire between 68-70. SS at 70.

I'm at 98/2 equities/cash. Equities are about 84/16 domestic/ international. I've never owned bonds during my decades of investing. I'm fortunate that taxable dividends, currently reinvested, along with SS at 70, should substantially exceed expenses. If ones taxable number is high enough, IMO holding bonds doesn't make sense.
I have been thinking about that myself. If one has "enough" is the volatility of an all-stock portfolio a non-problem? I have slowly moved from 50/50 to 65/35 based on the idea that I can afford more risk, aka volatility. In my case, "enough" is a result of having plenty of guaranteed income (pension+SS), making the size of my nest-egg more than adequate to cover expenses, even considering inflation, so how important are bonds anyway?
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by Rick Ferri »

For clarity, once again, I never “recommended” a 30/70 portfolio for retirees. I wrote that 30/70 was a good starting point for a retiree to think about because it was a conservative point on the efficient frontier, and go up in equity from there based on your need and ability to handle risk. Start here - go up. This is different the the 60/40 accumulation center of gravity where you could go higher OR lower in equity.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by marcopolo »

rkhusky wrote: Sat Jun 25, 2022 11:59 am
Barkingsparrow wrote: Sat Jun 25, 2022 11:44 am I've been considering just this kind of move - but I'm hesitant to make asset allocation changes in a down market, selling at lows.
Worrying about selling at a low is a sign of a classic cognitive bias - Anchoring. Your AA should be determined irrespective of the current (or recent past) market conditions. Once your desired AA is determined, implement it promptly, irrespective of current market conditions.

https://en.wikipedia.org/wiki/List_of_cognitive_biases
https://en.wikipedia.org/wiki/Anchoring ... tive_bias)
While I agree with your point, I would caution that "determining" that you all of a sudden want to be at a much lower equity allocation during a significant draw down might actually be a behavioral error that might be mitigated by the anchoring bias that keeps you from selling low, to only decide later (when markets are performing well again) that you really wanted the higher allocation.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic RBD 3/2020?

Post by rkhusky »

marcopolo wrote: Fri Jul 29, 2022 7:52 pm
rkhusky wrote: Sat Jun 25, 2022 11:59 am
Barkingsparrow wrote: Sat Jun 25, 2022 11:44 am I've been considering just this kind of move - but I'm hesitant to make asset allocation changes in a down market, selling at lows.
Worrying about selling at a low is a sign of a classic cognitive bias - Anchoring. Your AA should be determined irrespective of the current (or recent past) market conditions. Once your desired AA is determined, implement it promptly, irrespective of current market conditions.

https://en.wikipedia.org/wiki/List_of_cognitive_biases
https://en.wikipedia.org/wiki/Anchoring ... tive_bias)
While I agree with your point, I would caution that "determining" that you all of a sudden want to be at a much lower equity allocation during a significant draw down might actually be a behavioral error that might be mitigated by the anchoring bias that keeps you from selling low, to only decide later (when markets are performing well again) that you really wanted the higher allocation.
True. One needs to be careful of chasing the market. I would advise that if one makes an AA change, that one should plan on never going back to the original AA, unless it was part of pre-determined plan (e.g. bond tent) and not in response to current market conditions. Flipping back and forth between different AA's in response to market conditions is not likely to end well.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by willthrill81 »

The last 3 years haven't changed my views on the concepts at all.

But the last 3 years have demonstrated that the downside protection of a 30/70 probably wasn't as much as many thought it would be. Since this thread began, the maximum monthly drawdown of a 60/40 was -17%, and it was -13.75% for a 30/70. And over this same period, the 60/40 had a 3% higher annualized return.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by xxd091 »

30/ 70 did it for me-now retired 18 years and aged 76
Retired at 57
Travelled the world but now slowing down
Confession portfolio has moved from 30/65/5 to 33/62/5 and I might let stock % go a little higher but probably not
Why alter a good plan when the game is nearly over
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by Engaging in sloth »

We are retired a few yrs, DH 61, DW 62. We were AA: 35/65 (cash), now 40/60 because I liked the equity sale price recently. We like cash over bonds
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by Sandtrap »

willthrill81 wrote: Fri Jul 29, 2022 9:29 pm The last 3 years haven't changed my views on the concepts at all.

But the last 3 years have demonstrated that the downside protection of a 30/70 probably wasn't as much as many thought it would be. Since this thread began, the maximum monthly drawdown of a 60/40 was -17%, and it was -13.75% for a 30/70. And over this same period, the 60/40 had a 3% higher annualized return.
+1
Good points
Well said

9 years ago DW and I were content at 30/70 in a basic 2 fund LMP portfolio. As you say, the later trends show that the supposed “security” of that 70% fixed doesnt match the past hype.
We’re glad we changed the glide path to 50/50 then 60/40 over time.

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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by Sandtrap »

Engaging in sloth wrote: Sat Jul 30, 2022 12:06 pm We are retired a few yrs, DH 61, DW 62. We were AA: 35/65 (cash), now 40/60 because I liked the equity sale price recently. We like cash over bonds
Does this mean all of your “fixed” at 60% of total is not in bond fonds or bond like , but in cash or cash like?

thanks for sharing.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by Engaging in sloth »

Sandtrap wrote: Sun Jul 31, 2022 11:06 am
Engaging in sloth wrote: Sat Jul 30, 2022 12:06 pm We are retired a few yrs, DH 61, DW 62. We were AA: 35/65 (cash), now 40/60 because I liked the equity sale price recently. We like cash over bonds
Does this mean all of your “fixed” at 60% of total is not in bond fonds or bond like , but in cash or cash like?

thanks for sharing.
j🌴
Yes, our fixed income is all cash: HYSA,CD's, checking account
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by Sandtrap »

Engaging in sloth wrote: Sun Jul 31, 2022 12:09 pm
Sandtrap wrote: Sun Jul 31, 2022 11:06 am
Engaging in sloth wrote: Sat Jul 30, 2022 12:06 pm We are retired a few yrs, DH 61, DW 62. We were AA: 35/65 (cash), now 40/60 because I liked the equity sale price recently. We like cash over bonds
Does this mean all of your “fixed” at 60% of total is not in bond fonds or bond like , but in cash or cash like?

thanks for sharing.
j🌴
Yes, our fixed income is all cash: HYSA,CD's, checking account
Would imagine that you’re doing far better ytd with cash instead of bond funds.

Good move that’s worked well for you.
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Re: Updates: 60/40 VS 30/70 Allocation for Retirees: Bernstein VS Ferri ? What Did You Do Post Pandemic 3/2020? or YTD 2

Post by Engaging in sloth »

Sandtrap wrote: Sun Jul 31, 2022 7:08 pm
Engaging in sloth wrote: Sun Jul 31, 2022 12:09 pm
Sandtrap wrote: Sun Jul 31, 2022 11:06 am
Engaging in sloth wrote: Sat Jul 30, 2022 12:06 pm We are retired a few yrs, DH 61, DW 62. We were AA: 35/65 (cash), now 40/60 because I liked the equity sale price recently. We like cash over bonds
Does this mean all of your “fixed” at 60% of total is not in bond fonds or bond like , but in cash or cash like?

thanks for sharing.
j🌴
Yes, our fixed income is all cash: HYSA,CD's, checking account
Would imagine that you’re doing far better ytd with cash instead of bond funds.

Good move that’s worked well for you.
J🌴
Yes thank you, cash has worked out better this year at least. We believe we have enough $ in fixed income to cover any remaining expenses into our mid-90's or longer if needed. We have a pension that covers our basic expenses currently(typically), then of course eventually SS. Our equity portion of portfolio is bonus $ (hopefully) :sharebeer
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