100% equities, anyone?

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100% equities, anyone?

Postby jay22 » Fri May 10, 2013 7:43 am

Just curious, how many Bogleheads here are 100% in equities (or 90-95%, if not 100) and have no fixed assets. I am excluding cash out of it. It'll be good to know the ages as well. Thanks.
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Re: 100% equities, anyone?

Postby empb » Fri May 10, 2013 7:47 am

In my opinion, it's silly to exclude one's cash when talking about one's overall portfolio. "100% equities" is meaningless because no one is ever there without mental accounting unless you literally sell stock to pay your rent every month. If you eat through all your cash and need more liquidity, do you not spend down the rest of the portfolio as necessary?

FWIW: I'm 29 and 85/15/5 all-inclusive.
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Re: 100% equities, anyone?

Postby Grt2bOutdoors » Fri May 10, 2013 7:55 am

No and after today's WSJ article about the record levels of margin being used ($379.5 billion) just shy of the record reached in 2007 prior to the crash, I would decline to be that exposed.
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Re: 100% equities, anyone?

Postby nisiprius » Fri May 10, 2013 8:49 am

Not 100% equities. Age: in my sixties.

I don't think all cash holdings should be excluded. Cash for day-to-day expenses, yes. "Reserve for major expenses" that are more or less anticipated--real estate taxes, annual insurance premiums, home maintenance items--yes. Cash with withdrawal restrictions, like bank CDs, retirement accounts, savings bonds etc. should probably be included, because holding it in those form implies an intention to hold for a long time.
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Re: 100% equities, anyone?

Postby jay22 » Fri May 10, 2013 8:52 am

nisiprius wrote:Not 100% equities. Age: in my sixties.

I don't think all cash holdings should be excluded. Cash for day-to-day expenses, yes. "Reserve for major expenses" that are more or less anticipated--real estate taxes, annual insurance premiums, home maintenance items--yes. Cash with withdrawal restrictions, like bank CDs, retirement accounts, savings bonds etc. should probably be included, because holding it in those form implies an intention to hold for a long time.

Thank you. That's what I meant as well.

Apologies, should have worded it more clearly.
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Re: 100% equities, anyone?

Postby Johm221122 » Fri May 10, 2013 8:54 am

100 % stocks, no, try this post what you learned from last crash
viewtopic.php?f=1&t=116031
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Re: 100% equities, anyone?

Postby OverTheHill » Fri May 10, 2013 9:35 am

I think cash should be considered a part of your portfolio every bit as much as bonds or equities. If you want to exclude some minimal amount in your checking account, I don't see a problem there, but then again I don't see the reason for doing so either. I'm retired. I keep about three years worth of living expenses in a MM fund, which is the same as cash. I also have another 8 or more years in Vanguard's short-term investment grade. Taken together, these two sources of money, standing alone, would allow us to live for at least 12 years or more. The rest of our portfolio is divided between equities (SP500 and Total Market) and longer duration Vanguard bond funds (intermediate investment grade and high yield). Everything taken together produces a total portfolio allocation of about 50% equities and 50% fixed/cash. Even the MM money is earning something (about .2% right now). This is very conservative, but I like it that way.

Edit: I actually made a mistake, because I was just looking at my taxable acccount. I actually have more than 18 years of living expenses in short-term investment grade, plus another 2-3 years in MM. My overall portfolio allocation remains the same, which is about 50/50. I need to find a reasonable alternative for having so much in short-term investment grade. I also have intermediate investment grade and high yield, but the total of those two is less than what I have in short-term investment grade.
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Re: 100% equities, anyone?

Postby matjen » Fri May 10, 2013 9:40 am

89 equities/11 bonds with a scv tilt on the equities.

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Re: 100% equities, anyone?

Postby billern » Fri May 10, 2013 10:02 am

With the exception of my emergency savings and some spending money, I'm 100% equities and I have been since I started investing. I'm in my thirties and my experience has been that I can handle the risk. If you can't handle a 50% drop in the value of the equity part of your portfolio, you probably have too much exposure. I haven't experienced a 50% decrease but the fairly substantial decreases haven't bothered me too much.
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Re: 100% equities, anyone?

Postby Dieharder » Fri May 10, 2013 10:06 am

I have been around these forums for a long time, and these type of posts always comes up during a market run up, typically close towards a peak or in the middle of a very strong bull market. Not saying we are near a top or anything, I have no idea, and I stopped trying to guess.

No one is ever asking for 100% equities during a crash, everyone wants to get into long term treasuries at that time. Again not trying to generalize everyone, it may be a small vocal minority, but just sayin' these posts tend to follow the general market sentiment.

I am 80/20 equities / fixed income since 2005 or so, before that I was more conservative. I am comfortable in this zone, so will keep it.
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Re: 100% equities, anyone?

Postby OverTheHill » Fri May 10, 2013 10:07 am

billern wrote:With the exception of my emergency savings and some spending money, I'm 100% equities and I have been since I started investing. I'm in my thirties and my experience has been that I can handle the risk. If you can't handle a 50% drop in the value of the equity part of your portfolio, you probably have too much exposure. I haven't experienced a 50% decrease but the fairly substantial decreases haven't bothered me too much.

During my working years, particularly early on, I was 100% in equities. I never saw a reason for having bonds at that point, since I would have many years to regain lost ground from any crash, and went through a number of them during my working life. Now that I'm retired, I'm 50/50, which is probably more conservative that I need to be, but it helps me sleep better at night.
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Re: 100% equities, anyone?

Postby assumer » Fri May 10, 2013 10:09 am

Investing in Vanguard Target Retirement 2050 (VFIFX), which is 90% equities. This is excluding a small cash emergency fund which I am building up.
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Re: 100% equities, anyone?

Postby jay22 » Fri May 10, 2013 10:12 am

Dieharder wrote:I have been around these forums for a long time, and these type of posts always comes up during a market run up, typically close towards a peak or in the middle of a very strong bull market. Not saying we are near a top or anything, I have no idea, and I stopped trying to guess.

No one is ever asking for 100% equities during a crash, everyone wants to get into long term treasuries at that time. Again not trying to generalize everyone, it may be a small vocal minority, but just sayin' these posts tend to follow the general market sentiment.

I am 80/20 equities / fixed income since 2005 or so, before that I was more conservative. I am comfortable in this zone, so will keep it.

For what it's worth, I am not in 100% equities. I am 30 and my AA is 80/20 and plan to keep it that way for at least another 5 years.

I started this thread to get an idea of how many Bogleheads are not invested in bonds in particular. Didn't start this thread because the market is up and I want to be in 100% equities.
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Re: 100% equities, anyone?

Postby corner559 » Fri May 10, 2013 10:32 am

I'm in my late 30's and 95% in equities. When I hit 40 I'll dial it back to 90%.
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Re: 100% equities, anyone?

Postby am » Fri May 10, 2013 10:35 am

Some thoughts.

We all live by the notion that the market will go up in the long run otherwise we would not invest. So 100% equities will give us the highest return.

Having 20% bonds will not lessen the pain of a big bear for me.

Since we are all bogleheads and are all disciplined, we will not touch our portfolios during bear markets.

If we are in the accumulation phase, than we will continue to buy more shares during bear markets even as the rest of our portfolio drops.

If we are in stable professions like medicine, tenured professor, etc. than 100% equities makes more sense since our human capitol is like a bond.

After having paid off my house and having no debt, I am more comfortable taking more equity risk.

100% equities gives me the highest chance of attaining financial independence at the youngest age. If it does not work out than keep working. Bonds can only hurt me.

100% equities makes the portfolio easier to manage since there is less need to rebalance.
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Re: 100% equities, anyone?

Postby jeff1949 » Fri May 10, 2013 10:38 am

All my accounts at Vanguard are 100% equity. They keep telling me I am nuts at age 63. I keep trying to tell them I have a bunch of those 3.0% to 3.6% things called I-Bonds which accounts for about 40% of my total. We seem to have a failure to communicate. :oops:
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Re: 100% equities, anyone?

Postby dbr » Fri May 10, 2013 10:40 am

jeff1949 wrote:All my accounts at Vanguard are 100% equity. They keep telling me I am nuts at age 63. I keep trying to tell them I have a bunch of those 3.0% to 3.6% things called I-Bonds which accounts for about 40% of my total. We seem to have a failure to communicate. :oops:


Why are you even having a conversation with them? Do they call up on Sunday mornings and tell you they have concerns about your AA?
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Re: 100% equities, anyone?

Postby rkhusky » Fri May 10, 2013 10:41 am

am wrote:
If we are in the accumulation phase, than we will continue to buy more shares during bear markets even as the rest of our portfolio drops.


You only buy with new money? The advantage to having bonds is that you can buy stocks on the cheap during a bear market. On the other hand, with no bonds you don't have to worry about rebalancing, since whatever the market does, you will always be 100% in equities.
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Re: 100% equities, anyone?

Postby Random Musings » Fri May 10, 2013 10:44 am

Grt2bOutdoors wrote:No and after today's WSJ article about the record levels of margin being used ($379.5 billion) just shy of the record reached in 2007 prior to the crash, I would decline to be that exposed.


It will be different this time. Really. Margin is being used in a more responsible way.

My cab driver Ben told me.

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Re: 100% equities, anyone?

Postby UALflyer » Fri May 10, 2013 10:46 am

Dieharder wrote:I have been around these forums for a long time, and these type of posts always comes up during a market run up, typically close towards a peak or in the middle of a very strong bull market. Not saying we are near a top or anything, I have no idea, and I stopped trying to guess.

No one is ever asking for 100% equities during a crash, everyone wants to get into long term treasuries at that time. Again not trying to generalize everyone, it may be a small vocal minority, but just sayin' these posts tend to follow the general market sentiment.

I am 80/20 equities / fixed income since 2005 or so, before that I was more conservative. I am comfortable in this zone, so will keep it.
This is certainly true but we are also in a pretty strange environment. With the yields where they are, there is an overwhelming likelihood if not a certainty that bond prices are going to get crushed when interest rates go up and the yields are so low that even if you purchase individual bonds and hold them to maturity, the yields themselves are far too low to provide you with any meaningful downside protection. This, to me, means that in this environment there is actually more downside risk to holding bonds than equities.

Further, since bond yields are essentially the same as the yields that you can get through FDIC insured CD's, I see virtually no reason to maintain bond holdings. To me, if you want to have downside protection, things like bank CD's, which presently offer the same yields as bonds but do not expose you to the same risks, make way more sense than bonds. Hence, depending on your horizon, it seems perfectly reasonable not to hold any bonds, which doesn't necessarily mean that you wouldn't allocate the portion of your investments that would traditionally be reserved for bonds to cash/cash equivalents.
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Re: 100% equities, anyone?

Postby jeff1949 » Fri May 10, 2013 10:47 am

dbr wrote:
jeff1949 wrote:All my accounts at Vanguard are 100% equity. They keep telling me I am nuts at age 63. I keep trying to tell them I have a bunch of those 3.0% to 3.6% things called I-Bonds which accounts for about 40% of my total. We seem to have a failure to communicate. :oops:


Why are you even having a conversation with them? Do they call up on Sunday mornings and tell you they have concerns about your AA?


When I go to the website to check things they have a pie chart that shows 100% equity and then they have a pie chart that shows where they think I should be. No real conversation other than that. :happy
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Re: 100% equities, anyone?

Postby am » Fri May 10, 2013 10:54 am

rkhusky wrote:
am wrote:
If we are in the accumulation phase, than we will continue to buy more shares during bear markets even as the rest of our portfolio drops.


You only buy with new money? The advantage to having bonds is that you can buy stocks on the cheap during a bear market. On the other hand, with no bonds you don't have to worry about rebalancing, since whatever the market does, you will always be 100% in equities.



I buy mostly with new money since am in accumulation phase.

My rebalancing bands make it so that this would be a rare event.

As far as buying stocks on the cheap during bears unless you keep rebalancing, it always seems that they will go lower and it is not clear when to buy exactly. I remember that I was still excited to buy during the last bear until stocks went below 7000. I started thinking that the world was ending. Bonds did not help. I stayed disciplined and kept buying. Boy did those invested dollars pay off!
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Re: 100% equities, anyone?

Postby inbox788 » Fri May 10, 2013 11:24 am

110%!

viewtopic.php?t=85314&mrr=1320511084

I have a mortgage, so count it as a negative bond. I'm paying down mortgage instead of buying bonds and when the mortgage is payed off, will be at 100% equities.

The point being that I was comfortable with buying a home taking my equity plus real estate allocation to 200% initially, and now that the mortgage has been paid down substantially, represents a significant lessening of risk. Treatment of mortgage and equity in home is often ignored, but I believe very important.
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Re: 100% equities, anyone?

Postby rkhusky » Fri May 10, 2013 11:25 am

am wrote:I buy mostly with new money since am in accumulation phase.

My rebalancing bands make it so that this would be a rare event.

As far as buying stocks on the cheap during bears unless you keep rebalancing, it always seems that they will go lower and it is not clear when to buy exactly. I remember that I was still excited to buy during the last bear until stocks went below 7000. I started thinking that the world was ending. Bonds did not help. I stayed disciplined and kept buying. Boy did those invested dollars pay off!


If you are 100% equities, the only place to rebalance is between US and Int'l stocks. You don't have any bonds to rebalance between stocks/bonds.

Once you have a large enough portfolio, you won't be able to rebalance using only new money.

During a major decline, you rebalance when your bands are breached. You don't try to predict when the bottom has been reached.
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Re: 100% equities, anyone?

Postby danwhite77 » Fri May 10, 2013 11:33 am

I'm 100% equities. Age 36. I do own a house (no mortgage) and have a cash reserve. But more to the point - I don't own any bonds or other non-equity investments. I'm basically one of the "sitting bull" investors.
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Re: 100% equities, anyone?

Postby Call_Me_Op » Fri May 10, 2013 11:34 am

Currently about 32% equities, with various tilts.
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Re: 100% equities, anyone?

Postby czeckers » Fri May 10, 2013 11:47 am

Age 39. Am 80/20 until age 45 when will dial back to 70/30, then 60/40 at age 55, and so on.

Bonds don't look like a great investment at this time, but that will only hold true if there is no stock crash in the future. If there is a stock market decline of even -5%, then the 1% yield on bonds will still seem like a bargain. It is safe to say that sooner or later there will be a market decline, we just don't know when. Thus, I keep some bonds despite their not-so-great outlook at the moment.

Also, if/when bond yields go up, and the bond fund values go down, the decrease in value will be offset by the increased yield and the break even point will be around the time of the average bond duration. So, as long as you keep durations at 5 years or below, then in the long run, you shouldn't be hurt even if yields go up. I think a lot of people miss this point and end up not seeing the forest for the trees.

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Re: 100% equities, anyone?

Postby jay22 » Fri May 10, 2013 11:57 am

For those who have a 90-100% equities, what's your AA? Do you do major tilt of any nature?
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Re: 100% equities, anyone?

Postby SamGamgee » Fri May 10, 2013 12:03 pm

Age 30, about 70% equities. I'm not doing the age-in-bonds plan, but right now it coincides with my IP.
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Re: 100% equities, anyone?

Postby feh » Fri May 10, 2013 12:15 pm

I was 100% equities until age 44 (3 years ago). Currently 75/25.
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Re: 100% equities, anyone?

Postby UALflyer » Fri May 10, 2013 12:17 pm

czeckers wrote:Bonds don't look like a great investment at this time, but that will only hold true if there is no stock crash in the future.
Actually, no. What will happen to the value of your bond holdings when interest rates go up?

If there is a stock market decline of even -5%, then the 1% yield on bonds will still seem like a bargain. It is safe to say that sooner or later there will be a market decline, we just don't know when. Thus, I keep some bonds despite their not-so-great outlook at the moment.
When bonds are yielding in the 2% range, what is their upside, when you can own CD's which offer similar yields and, assuming that you stay under the FDIC limits, completely insulate you from issuer defaults?

Also, if/when bond yields go up, and the bond fund values go down, the decrease in value will be offset by the increased yield
Your existing bonds will not have any yield increases, so I don't understand your rationale. You are purchasing instruments now that you know will drop in price because future versions of these instruments will be more attractive? How does the fact that at some point in the future new bonds will be attractive cause you to conclude that current bonds are a good investment?

and the break even point will be around the time of the average bond duration. So, as long as you keep durations at 5 years or below, then in the long run, you shouldn't be hurt even if yields go up. I think a lot of people miss this point and end up not seeing the forest for the trees.
Speaking of not seeing the forest for the trees, aren't you buying riskier instruments now (bonds) when you can get the same yields without those risks (CD's). The decision that you make now regarding your bond purchases has nothing whatsoever to do with future bonds, which will presumably carry higher yields, which, if they are attractive, you'll be able to purchase at that time.
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Re: 100% equities, anyone?

Postby Carpe » Fri May 10, 2013 12:20 pm

jay22 wrote:Just curious, how many Bogleheads here are 100% in equities (or 90-95%, if not 100) and have no fixed assets. I am excluding cash out of it. It'll be good to know the ages as well. Thanks.


90-95% in equities is not at all close to 100% in this context. Turn it around. 5% fixed income or zero: the difference has to do with acknowledging the role of fixed income in a portfolio, even if you are young and starting out with mostly equities (e.g. starting a glide path on 5% income and ratcheting up as you get older). Going with 100% is just bad form to follow and bad form to suggest, not to mention an unhappy lesson waiting to happen. It has absolutely nothing to do with Boglehead doctrine. I can imagine that any financial advisor with fiduciary responsibility recommending 100% equities would find themselves on the wrong side of a legal action.

Makes me think of the concept of "elan" used by the French in WW1, which loosely translates in to a complete and utter desire to win. Some other common expression of the time included:

"The will to conquer is the first condition of victory."
"Offensive to the maximum!"
"Offensive without hesitation!"
"The offensive alone leads to positive results."

Overall, very gutsy, very brave, but for most a very unhappy outcome.

FYI, The French armed forces lost about 1.4Million between 1914 and 1918. Just like in the UK or Germany, anyone leaving school in 1913 would have few (if any) school friends left to meet up with after the war. Yet, they thought the war in 1914 would be over by Christmas.
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Re: 100% equities, anyone?

Postby UALflyer » Fri May 10, 2013 12:38 pm

Carpe wrote:5% fixed income or zero: the difference has to do with acknowledging the role of fixed income in a portfolio, even if you are young and starting out with mostly equities (e.g. starting a glide path on 5% income and ratcheting up as you get older). Going with 100% is just bad form to follow and bad form to suggest, not to mention an unhappy lesson waiting to happen. It has absolutely nothing to do with Boglehead doctrine. I can imagine that any financial advisor with fiduciary responsibility recommending 100% equities would find themselves on the wrong side of a legal action.
People have a tendency to strongly prefer avoiding losses to acquiring gains (that's the whole "loss aversion" phenomenon), which often means that during severe market downturns, investors freak out and sell, thereby locking in their losses. Having bonds in your portfolio helps to dampen that volatility, which then makes it less likely that people will sell at the bottom. In other word, if you are sufficiently disciplined to avoid panic during downturns and have a sufficiently long investment horizon that allows you to recover your losses, a higher equities allocation is more statistically likely to provide you with higher returns than the same portfolio with a greater allocation to bonds.

The above is especially true now, given the low bond yields, which means that you will be unable to use bonds to substantially insulate a portfolio from losses while still generating attractive returns, as you could in the past.
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Re: 100% equities, anyone?

Postby LRDave » Fri May 10, 2013 12:53 pm

Sorry - dumb question (but serious, in that I don't have a clue as to the answer): Who is investing in equities on margin these days? The general public?
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Re: 100% equities, anyone?

Postby Carpe » Fri May 10, 2013 1:50 pm

UALflyer wrote:
Carpe wrote:5% fixed income or zero: the difference has to do with acknowledging the role of fixed income in a portfolio, even if you are young and starting out with mostly equities (e.g. starting a glide path on 5% income and ratcheting up as you get older). Going with 100% is just bad form to follow and bad form to suggest, not to mention an unhappy lesson waiting to happen. It has absolutely nothing to do with Boglehead doctrine. I can imagine that any financial advisor with fiduciary responsibility recommending 100% equities would find themselves on the wrong side of a legal action.
People have a tendency to strongly prefer avoiding losses to acquiring gains (that's the whole "loss aversion" phenomenon), which often means that during severe market downturns, investors freak out and sell, thereby locking in their losses. Having bonds in your portfolio helps to dampen that volatility, which then makes it less likely that people will sell at the bottom. In other word, if you are sufficiently disciplined to avoid panic during downturns and have a sufficiently long investment horizon that allows you to recover your losses, a higher equities allocation is more statistically likely to provide you with higher returns than the same portfolio with a greater allocation to bonds.

The above is especially true now, given the low bond yields, which means that you will be unable to use bonds to substantially insulate a portfolio from losses while still generating attractive returns, as you could in the past.


Really! Vanguard disagrees, as do I. The following recent Vanguard article demonstrates that the ability of lower yielding bonds to cushion a 20% shock to the stock market remains substantial. The title of the article is "Reducing your bond allocation? Proceed with caution"

https://personal.vanguard.com/us/insights/article/reducing-bond-allocation_052013

I think you are missing the point of my argument. The point is, why 0 % fixed income? Why not even acknowledge the role of Fixed Income as a component for making an overall portfolio better? Even just a little bit? Why not care more about the combined return of the entire portfolio, rather than complain about the low yielding fixed income. You will find that there are many on this board that will advocate against getting caught up in the performance of an asset class (any asset class) in isolation.
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Re: 100% equities, anyone?

Postby UALflyer » Fri May 10, 2013 2:20 pm

Carpe wrote:Really! Vanguard disagrees, as do I. The following recent Vanguard article demonstrates that the ability of lower yielding bonds to cushion a 20% shock to the stock market remains substantial. The title of the article is "Reducing your bond allocation? Proceed with caution"

https://personal.vanguard.com/us/insights/article/reducing-bond-allocation_052013
Are we reading the same article? If you look at Vanguard's own study, which is linked to your article (https://personal.vanguard.com/pdf/s704.pdf), you'll see the following statement, which is hardly groundbreaking: "Investors have consistently shown a strong preference for avoiding losses, versus the benefits they acquire from realizing a gain. This phenomenon, first demonstrated by Amos Tversky and Daniel Kahneman in 1983, is called loss aversion and is why bonds remain an essential element of a
balanced portfolio."

In other words, if you are able to control your loss aversion and avoid selling during market downturns, assuming that your investment horizon is sufficiently long to allow you to recover from such downturns, lowering your bond allocation, particularly in this environment, will mean statistically higher chances of earning higher returns.

The point is, why 0 % fixed income? Why not even acknowledge the role of Fixed Income as a component for making an overall portfolio better? Even just a little bit?
What is "better" in this context? If having fixed income is needed so that you do not freak out during the next downturn and sell, then it is indeed "better." If you can maintain your course during market downturns and have enough time to recover, then your fixed income allocation is statistically more likely to result in lower returns.

Why not care more about the combined return of the entire portfolio, rather than complain about the low yielding fixed income.
I agree. Statistically, assuming that you do not sell during market downturns, the higher your fixed income allocation is, the lower your combined return is likely to be.
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Re: 100% equities, anyone?

Postby Meg77 » Fri May 10, 2013 2:34 pm

I'm 90% equities, 10% bonds, 0% cash in my retirement portfolio. I'm 29.
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Re: 100% equities, anyone?

Postby inbox788 » Fri May 10, 2013 3:03 pm

Carpe wrote:90-95% in equities is not at all close to 100% in this context. Turn it around. 5% fixed income or zero: the difference has to do with acknowledging the role of fixed income in a portfolio, even if you are young and starting out with mostly equities (e.g. starting a glide path on 5% income and ratcheting up as you get older).


Philosophically, there may be a gap, but practically, differences are minor. Adding fixed income requires a rebalancing plan and additional attention on something that's going to sit around for several decades. Life target date funds facilitate this, but begin with a more conservative allocation and some people are willing to assume more risk for chance of greater return.

Moreover, there are mitigating factors. Do you count the emergency fund in your asset allocation? Doesn't it matter if it has 3, 6, or 12 months? Is any consideration given to having a pension? Like the negative bond mortgage, pensions can count as positive fixed assets, but it is unclear to what degree. A life insurance policy cash value can have bond like behavior. viewtopic.php?f=2&t=110711 Other factors like reliable job, recession proof occupation, illiquid or intangible assets can also impact and play a part in fixed income needs in a portfolio.
Last edited by inbox788 on Fri May 10, 2013 3:32 pm, edited 1 time in total.
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Re: 100% equities, anyone?

Postby Carpe » Fri May 10, 2013 3:31 pm

inbox788 wrote:
Carpe wrote:90-95% in equities is not at all close to 100% in this context. Turn it around. 5% fixed income or zero: the difference has to do with acknowledging the role of fixed income in a portfolio, even if you are young and starting out with mostly equities (e.g. starting a glide path on 5% income and ratcheting up as you get older).


Philosophically, there may be a gap, but practically, differences are minor. Adding fixed income requires a rebalancing plan and additional attention on something that's going to sit around for several decades. Life target date funds facilitate this, but begin with a more conservative allocation and some people are willing to assume more risk for chance of greater return.


Yes, but I believe the philosophical step is an important one. Just as it is important to know where your limits are, and to match your investment risk-taking with your own personal circumstances. If rebalancing is too complex, then yes, I would agree that Life target date funds would be more appropriate.
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Re: 100% equities, anyone?

Postby Carpe » Fri May 10, 2013 4:15 pm

UALflyer wrote:
Carpe wrote:Really! Vanguard disagrees, as do I. The following recent Vanguard article demonstrates that the ability of lower yielding bonds to cushion a 20% shock to the stock market remains substantial. The title of the article is "Reducing your bond allocation? Proceed with caution"

https://personal.vanguard.com/us/insights/article/reducing-bond-allocation_052013
Are we reading the same article? If you look at Vanguard's own study, which is linked to your article (https://personal.vanguard.com/pdf/s704.pdf), you'll see the following statement, which is hardly groundbreaking: "Investors have consistently shown a strong preference for avoiding losses, versus the benefits they acquire from realizing a gain. This phenomenon, first demonstrated by Amos Tversky and Daniel Kahneman in 1983, is called loss aversion and is why bonds remain an essential element of a
balanced portfolio."

In other words, if you are able to control your loss aversion and avoid selling during market downturns, assuming that your investment horizon is sufficiently long to allow you to recover from such downturns, lowering your bond allocation, particularly in this environment, will mean statistically higher chances of earning higher returns.

The point is, why 0 % fixed income? Why not even acknowledge the role of Fixed Income as a component for making an overall portfolio better? Even just a little bit?
What is "better" in this context? If having fixed income is needed so that you do not freak out during the next downturn and sell, then it is indeed "better." If you can maintain your course during market downturns and have enough time to recover, then your fixed income allocation is statistically more likely to result in lower returns.

Why not care more about the combined return of the entire portfolio, rather than complain about the low yielding fixed income.
I agree. Statistically, assuming that you do not sell during market downturns, the higher your fixed income allocation is, the lower your combined return is likely to be.


UALflier, here is an extract from the Bond page of the Bogleheads wiki which is more represtnative of Boglehead philosophy:

"Bonds are a key part of any portfolio. For instance, Graham's timeless advice was to never hold less than 25% of your portfolio in bonds (or more than 75%). Bogle recommends "your age in bonds"; for instance, if you are 45, 45% of your portfolio should be in high-quality bonds. "

http://www.bogleheads.org/wiki/Category:Bonds

What you are advocating does not fit within this recommendation or profile.
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Re: 100% equities, anyone?

Postby Dieharder » Fri May 10, 2013 4:36 pm

Percentages are misleading and perhaps incorrect unit of measurement to judge risk tolerance. Although we all talk about percentages, it is also important IMHO to consider the actual dollar amount represented by that percentage.

In that context I do not keep fixed income / bonds with the only intent of dampening volatiity, which in fact do not matter to me very much, what does matter is the possibility of stocks going down 50% or more in value and staying down for a long time. In this case the bond money is the only money I have left over to liquidate in an emergency.

No matter how stable the job is currently, if someone if 100% stocks and they go down and take many years to recover, and for any unforseen reason they need to tap the retirement assets for immediate needs, where will they go to?

Of course this is a far fetched scenario, but not something that we can brush off. This is the reason I keep 20% in bonds, this is the money that will get me through instead of going completely broke.
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Re: 100% equities, anyone?

Postby UALflyer » Fri May 10, 2013 6:12 pm

Carpe wrote:
UALflyer wrote:
Carpe wrote:Really! Vanguard disagrees, as do I. The following recent Vanguard article demonstrates that the ability of lower yielding bonds to cushion a 20% shock to the stock market remains substantial. The title of the article is "Reducing your bond allocation? Proceed with caution"

https://personal.vanguard.com/us/insights/article/reducing-bond-allocation_052013
Are we reading the same article? If you look at Vanguard's own study, which is linked to your article (https://personal.vanguard.com/pdf/s704.pdf), you'll see the following statement, which is hardly groundbreaking: "Investors have consistently shown a strong preference for avoiding losses, versus the benefits they acquire from realizing a gain. This phenomenon, first demonstrated by Amos Tversky and Daniel Kahneman in 1983, is called loss aversion and is why bonds remain an essential element of a
balanced portfolio."

In other words, if you are able to control your loss aversion and avoid selling during market downturns, assuming that your investment horizon is sufficiently long to allow you to recover from such downturns, lowering your bond allocation, particularly in this environment, will mean statistically higher chances of earning higher returns.

The point is, why 0 % fixed income? Why not even acknowledge the role of Fixed Income as a component for making an overall portfolio better? Even just a little bit?
What is "better" in this context? If having fixed income is needed so that you do not freak out during the next downturn and sell, then it is indeed "better." If you can maintain your course during market downturns and have enough time to recover, then your fixed income allocation is statistically more likely to result in lower returns.

Why not care more about the combined return of the entire portfolio, rather than complain about the low yielding fixed income.
I agree. Statistically, assuming that you do not sell during market downturns, the higher your fixed income allocation is, the lower your combined return is likely to be.


UALflier, here is an extract from the Bond page of the Bogleheads wiki which is more represtnative of Boglehead philosophy:

"Bonds are a key part of any portfolio. For instance, Graham's timeless advice was to never hold less than 25% of your portfolio in bonds (or more than 75%). Bogle recommends "your age in bonds"; for instance, if you are 45, 45% of your portfolio should be in high-quality bonds. "

http://www.bogleheads.org/wiki/Category:Bonds

What you are advocating does not fit within this recommendation or profile.

Blindly following general statements without understanding the assumptions that go into them is hazardous to your financial health. The reason that in general bonds are recommended is because of the loss aversion phenomenon that's both explained in my posts and is explained in Vanguard's study that's linked to your own article above. Further, in the past bonds used carry yields in the 7% range, so that during downturns they still provded very meaningful returns. That's no longer the case. Not only that, but since interest rates are so amazingly low now, we already know that when they do rise, prices of existing bond portfolios will drop, so you have substantial downside risks associated with current bonds and virtually no interest income (not to mention the fact that the interest income can be replicated by CD's, which are offering the same yield and none of the downside risks associated with bonds).

You don't have to take my word for any of it. It's all referenced in Vanguard's study linked to your own article above and has been extensively discussed here.
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Re: 100% equities, anyone?

Postby inbox788 » Fri May 10, 2013 6:32 pm

Carpe wrote:"Bonds are a key part of any portfolio. For instance, Graham's timeless advice was to never hold less than 25% of your portfolio in bonds (or more than 75%). Bogle recommends "your age in bonds"; for instance, if you are 45, 45% of your portfolio should be in high-quality bonds. "


In this contex, having 5% isn't that far off zero. Not that there isn't a difference, but the difference is small compared to the mix portfolio. The efficiency frontier can be used to see theoretical targets or historic performance, but inversions in the curve seriously complicate things.

http://www.youngresearch.com/authors/ej ... -frontier/
viewtopic.php?f=10&t=94557

Dieharder wrote:... In this case the bond money is the only money I have left over to liquidate in an emergency.
... This is the reason I keep 20% in bonds, this is the money that will get me through instead of going completely broke.

Are you saying the emergency cash is counted in the asset allocation or is this for a longer term unemployment beyond the 6 month emergency fund? If stocks crash, rebalancing from remaining bond funds into stocks to restore the desired ratio is in theory, the right strategy, but when stocks fall 50%, do you have the discipline to sell nearly half the bonds to buy depressed stocks? Easier said than done, and arguably, if you're all in stocks, and paralyzed, it winds up being the right thing to do nothing and avoid panic selling at the bottom.
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Re: 100% equities, anyone?

Postby SC Hoosier » Fri May 10, 2013 6:34 pm

100% of invested dollars is in equities. Wife and I are 37 and 35. I have an emergency fund in cash. It's not invested. I will begin to gradually add fixed income when I near age 50. I chose this strategy because 50% of my net worth is my paid for house. I need more high risk high return assets. Also my portfolio is not that big. $50k, but I'm saving well over 40 percent of my income and accumulating quickly. My AA has nothing to do with the run up in the market. I must admit it is influenced by the high bond prices. I'll add Total Bond Market to my holdings when I'm older and interest rates rise.

I hope the market drops by 40% so I can get more shares for my money. So long as I don't lose my job. :wink:

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Re: 100% equities, anyone?

Postby jay22 » Fri May 10, 2013 6:44 pm

SC Hoosier wrote:100% of invested dollars is in equities. Wife and I are 37 and 35. I have an emergency fund in cash. It's not invested. I will begin to gradually add fixed income when I near age 50.


billern wrote:With the exception of my emergency savings and some spending money, I'm 100% equities and I have been since I started investing. I'm in my thirties and my experience has been that I can handle the risk. If you can't handle a 50% drop in the value of the equity part of your portfolio, you probably have too much exposure. I haven't experienced a 50% decrease but the fairly substantial decreases haven't bothered me too much.


Meg77 wrote:I'm 90% equities, 10% bonds, 0% cash in my retirement portfolio. I'm 29.


corner559 wrote:I'm in my late 30's and 95% in equities. When I hit 40 I'll dial it back to 90%.


What's your AA within the equities?
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Re: 100% equities, anyone?

Postby SC Hoosier » Fri May 10, 2013 6:49 pm

jay22 wrote:
SC Hoosier wrote:100% of invested dollars is in equities. Wife and I are 37 and 35. I have an emergency fund in cash. It's not invested. I will begin to gradually add fixed income when I near age 50.


billern wrote:With the exception of my emergency savings and some spending money, I'm 100% equities and I have been since I started investing. I'm in my thirties and my experience has been that I can handle the risk. If you can't handle a 50% drop in the value of the equity part of your portfolio, you probably have too much exposure. I haven't experienced a 50% decrease but the fairly substantial decreases haven't bothered me too much.


Meg77 wrote:I'm 90% equities, 10% bonds, 0% cash in my retirement portfolio. I'm 29.


corner559 wrote:I'm in my late 30's and 95% in equities. When I hit 40 I'll dial it back to 90%.


What's your AA within the equities?


30% Total International
70% split evenly between, TSM, Small Value Index, and Large Value Index

That's the way I like it.

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Re: 100% equities, anyone?

Postby steve r » Fri May 10, 2013 7:18 pm

SC Hoosier wrote:100% of invested dollars is in equities. ... I have an emergency fund in cash. It's not invested. ... I chose this strategy because 50% of my net worth is my paid for house ...


Circumstances matter ... Hoosier makes sense to me ... Mortgaging a home to the hilt (many discussions on this due to low rates) and being 100% in equities with emerging market and other tilts is a different matter.
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Re: 100% equities, anyone?

Postby am » Fri May 10, 2013 7:28 pm

If much of the reason for holding bonds is to make sure we do not sell at market lows, than it would be cheaper to just develop discipline or let someone else manage your money. Especially now when bonds have a negative real return.
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Re: 100% equities, anyone?

Postby lwfitzge » Fri May 10, 2013 7:42 pm

have not been near 100% equity since the tech (and my personal) meltdown... live and learn...60/40 is my mix now
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Re: 100% equities, anyone?

Postby zaboomafoozarg » Fri May 10, 2013 7:46 pm

Nope, 30 years old w/ a 75/25 stock/bond split, following age - 5 in bonds going forward. I'd rather just save more and have the diversification.
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