Should I increase stock%?

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am
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Joined: Sun Sep 30, 2007 9:55 am

Should I increase stock%?

Post by am » Sun Jan 10, 2016 11:59 am

I asked this in a thread below but wanted to start a new thread as well. I have 30% of my portfolio in TBM and muni intermed. but not sure why? I have a large risk tolerance and a fairly stable profession (MD). Bonds in no way will help me achieve my goal of financial independence asap but stocks can. Maybe I should go for broke and be 90%+ stocks? Notice how I am pondering this decision after a brutal week in the markets. Bonds have tempered losses but not anything significant. I will stay the course no matter what. 30 versus 50% loss shouldn't make much of a difference for me during a bear but potentially getting 1-2%+ higer returns over the next 15 years can be huge.

VGisforme
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Joined: Wed May 02, 2007 2:08 pm

Re: Should I increase stock%?

Post by VGisforme » Sun Jan 10, 2016 12:06 pm

Try posting your info in the correct format and be sure to list your goals etc. you don't give much info to base advice upon. Unless you just want some one to agree with you in which case sure go all equities. Heck go all out and bet it all on black... Or red :wink:

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nedsaid
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Re: Should I increase stock%?

Post by nedsaid » Sun Jan 10, 2016 12:07 pm

I would not do it. It sounds like you are maybe trying to make up for lost time by being more aggressive and I just don't think it is a good idea. 70% in stocks is aggressive enough. Markets will do what markets will do and could care less about your financial goals, dreams, or even needs. What if we went through another brutal bear market right at the time you wanted to put the pedal to the metal?

Markets are risky and there is nothing wrong with a natural caution.

I also get suspicious when people want to suddenly change their investment philosophy and investment plan.

It sounds like you are in a hurry to be financially independent but the markets don't care about that. In fact, they can be downright merciless. Greed is getting the best of you and you need to step back and take a breath. When people tell me they have a very high risk tolerance, sorry to say, I just don't believe them. After a seven year bull market, we are all heroes and have high risk tolerances.

Sorry to sound skeptical, but I don't think what you are considering is a good idea.
A fool and his money are good for business.

livesoft
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Re: Should I increase stock%?

Post by livesoft » Sun Jan 10, 2016 12:08 pm

Based on your past history of posts on this forum, I have figured out your personal investing psychology. My answer to you is: No, you should not increase your stock allocation. And here is a key observation: If you have to ask, then you shouldn't do it.
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neuro84
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Re: Should I increase stock%?

Post by neuro84 » Sun Jan 10, 2016 12:10 pm

A 5% drop is relatively modest compared to 2000 or 2008, for instance. Were you in the markets during those years? Did you feel the same way then?


Even if you did, risk tolerance is only half the equation. The other half is need to take risk. As someone in a high-earning profession, you can sock away quite a lot of dough during your earning years, and your need to take risk may be a little bit lower than if you made less. Something to consider.


I myself am 90/10 but I have no real assets to speak of (low five-figure portfolio) and I'm only 30yo. I think once I become an attending I'll go down to 80/20 and then dwindle down to 60/40 over twenty years.

SleepKing
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Re: Should I increase stock%?

Post by SleepKing » Sun Jan 10, 2016 12:35 pm

From a physician to a physician:
am wrote: Bonds in no way will help me achieve my goal of financial independence asap but stocks can
-I'd say stocks dealt a huge blow to those in the market in 2008. In fact, my program director at the time openly stated to us residents that if he "hadn't been so #*@! greedy with stock's he'd be retired on a beach". Just learned he retired last year (2015)....8 years later than he wanted.
am wrote:Maybe I should go for broke and be 90%+ stocks? Notice how I am pondering this decision after a brutal week in the markets.
-You are correct to step back, take a deep breath, and not make a knee jerk reaction.
am wrote:I will stay the course no matter what.
-Good idea. If you set your initial allocation based on realistic thought, stick with your plan. Come here for help and reassurance!
am wrote:30 versus 50% loss shouldn't make much of a difference for me during a bear but potentially getting 1-2%+ higer returns over the next 15 years can be huge.
-Past results do not guarantee future results. We could see the first ever 30 + year bear market in the USA during our careers.

If it makes you feel better, we went through the same thoughts last week too, then decided to rebalance back to our intended allocation (80/20 with 24% international, 8% small value, 8% REIT). That entailed a reasonable exchanged of bonds for total international.

Good luck!
Sleepy

jjface
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Re: Should I increase stock%?

Post by jjface » Sun Jan 10, 2016 12:50 pm

Leave it alone and try to save more if you want to be financially independent sooner. I imagine there is more scope there.

letsgobobby
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Re: Should I increase stock%?

Post by letsgobobby » Sun Jan 10, 2016 3:35 pm

The 5% decline is only important because it makes you think stocks are on sale. But that is a false anchoring point. Stocks are still up 150%+ in the last 7 years and psychologically you are still feeling pretty good about stocks' chances going forward.

The real question is whether you increased your stocks in 2008 or 2009 in the middle or just at the end of the bear market. When stocks were down 60% and seemed like they would keep falling forever. That was the best test of your risk tolerance and optimism.

Between the fall of 2007 and the summer of 2009, I increased my stock holdings from 25% to 70%. I made substantial purchases of stocks in January 2008, July 2008, October 2008, November 2008, Feburary 2009, and March 2009. Despite my 'bravery' (and non-Bogleheadism) at the time, in no way do I believe I have some incredibly high risk tolerance. A 50% decline in stocks would still be extremely painful and this time I wouldn't have the financial resources or the psychological reassurance of 75% fixed income to rebalance with.

Everyone thinks they have great risk tolerance until they lose money. In this sense I think Mike Tyson put it best: "Everyone has a plan 'til they get punched in the face."

Ask me about raising your stock exposure in the depths of our next bear market.

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