Is it ok to have 100% stocks, 15 years+

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jjmaddison
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Is it ok to have 100% stocks, 15 years+

Post by jjmaddison » Mon Oct 23, 2017 8:18 am

Hello,

I plan to retire after 15 years.
Is it ok to have 100% in stocks, or 95% stocks/5% bonds in that case?

I'm kind of tolerant to risk, but was not invested in 2007 and the 1929, so don't know for sure ;)

Looks like most people talk about 80-/20+ here.

rantk81
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Re: Is it ok to have 100% stocks, 15 years+

Post by rantk81 » Mon Oct 23, 2017 8:21 am

I think this is a question you need to ask yourself. It's highly personal and dependent on your own tolerance for risk.
For what it's worth, I'm probably less than 5 years away from retirement, and I'm about 66% in equities and 33% in real estate investments.

msk
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Re: Is it ok to have 100% stocks, 15 years+

Post by msk » Mon Oct 23, 2017 8:23 am

18 years post retirement, and I am still 100% in stocks :mrgreen:

jjmaddison
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Re: Is it ok to have 100% stocks, 15 years+

Post by jjmaddison » Mon Oct 23, 2017 8:24 am

If I planned to retire in 5 years, I'd have 50/50 or kind of.
But 15 years is so much more vague.

BlackStrat
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Re: Is it ok to have 100% stocks, 15 years+

Post by BlackStrat » Mon Oct 23, 2017 8:29 am

msk wrote:
Mon Oct 23, 2017 8:23 am
18 years post retirement, and I am still 100% in stocks :mrgreen:
Whoa! Really?

That's awesome!

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stemikger
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Re: Is it ok to have 100% stocks, 15 years+

Post by stemikger » Mon Oct 23, 2017 8:30 am

jjmaddison wrote:
Mon Oct 23, 2017 8:18 am
Hello,

I plan to retire after 15 years.
Is it ok to have 100% in stocks, or 95% stocks/5% bonds in that case?

I'm kind of tolerant to risk, but was not invested in 2007 and the 1929, so don't know for sure ;)

Looks like most people talk about 80-/20+ here.
The only person who can answer this is you. 95/5 and 80/20 are not a huge difference when you look at the long term returns, go with 85/15. You really have to know your risk tolerance and know what living through a correction or crash feels like. In index investing close enough also wins. It's not about getting the highest returns, it's about investing in such a way where you can stay the course, sleep at night and retire with dignity.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

student
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Re: Is it ok to have 100% stocks, 15 years+

Post by student » Mon Oct 23, 2017 8:31 am

I agree with others who said this is personal. I would not do it based on the size of the portfolio and my risk tolerance. My own personal number would be 60%-70%.

Gauntlet
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Re: Is it ok to have 100% stocks, 15 years+

Post by Gauntlet » Mon Oct 23, 2017 8:35 am

OP, in my opinion, if you did not experience the bear of 2009, which I believe you are alluding to, then I don't believe that you should be 100% stocks. We have had a 9-year-bull market which makes it easy to think that the party will last forever. I am about 20 years from retirement and I have 65% equity. Of course, I lived through 2000-2002 and 2008-2009.

As an aside, and this could totally in my head, but I feel like during the last 2 years I have seen more and more people going very heavy in stocks. I can't help but think it is because people have forgotten 2009 or were not invested at that time. Also, I suppose anyone in their 20s has never experienced a bear market.

Rupert
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Re: Is it ok to have 100% stocks, 15 years+

Post by Rupert » Mon Oct 23, 2017 8:36 am

stemikger wrote:
Mon Oct 23, 2017 8:30 am
jjmaddison wrote:
Mon Oct 23, 2017 8:18 am
Hello,

I plan to retire after 15 years.
Is it ok to have 100% in stocks, or 95% stocks/5% bonds in that case?

I'm kind of tolerant to risk, but was not invested in 2007 and the 1929, so don't know for sure ;)

Looks like most people talk about 80-/20+ here.
The only person who can answer this is you. 95/5 and 80/20 are not a huge difference when you look at the long term returns, go with 85/15. You really have to know your risk tolerance and know what living through a correction or crash feels like. In index investing close enough also wins. It's not about getting the highest returns, it's about investing in such a way where you can stay the course, sleep at night and retire with dignity.
It's also about how much you need the money that you have invested. The previous poster who is in 100% stocks might be very rich or have a very secure pension that covers his/her living expenses, etc. In either case, you can afford to take more risk.

Johm221122
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Re: Is it ok to have 100% stocks, 15 years+

Post by Johm221122 » Mon Oct 23, 2017 8:47 am

I'm also about 15 years to retirement.I'm 60/40

Check out vanguard allocation models
https://personal.vanguard.com/us/insigh ... llocations

KlangFool
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Re: Is it ok to have 100% stocks, 15 years+

Post by KlangFool » Mon Oct 23, 2017 8:52 am

jjmaddison wrote:
Mon Oct 23, 2017 8:18 am
Hello,

I plan to retire after 15 years.
Is it ok to have 100% in stocks, or 95% stocks/5% bonds in that case?

I'm kind of tolerant to risk, but was not invested in 2007 and the 1929, so don't know for sure ;)

Looks like most people talk about 80-/20+ here.
jjmaddison,

'Man plan, God laugh."
-Yiddish Proverb

How do you know that it will work out as planned?

<<I'm kind of tolerant to risk, >>

When we hit a recession and if you are unemployed or under-employed for a few years, you will have to sell your stock at a loss or starve. Over 15 years, there will be at least one or two recession. How do you know that you will not be affected?

KlangFool

aristotelian
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Re: Is it ok to have 100% stocks, 15 years+

Post by aristotelian » Mon Oct 23, 2017 8:59 am

How close are you to your "number"? Could an major crash with extended recession damage your prospects of retiring? If you are on track to retire but cutting it close, I would be very careful. If you have already hit your number a few times over, then you can do whatever you want.

dbr
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Re: Is it ok to have 100% stocks, 15 years+

Post by dbr » Mon Oct 23, 2017 9:05 am

Of course it is ok. But ok means you understand the possible consequences of whatever asset allocation you choose and are prepared to accept those consequences. It is helpful to address how much risk you need to take, how much risk you are able to take, and how much risk you can stand taking.

I believe this is more objective than merely being a "personal" decision. But you could also say it is a matter of informed judgement and preference.

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Watty
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Re: Is it ok to have 100% stocks, 15 years+

Post by Watty » Mon Oct 23, 2017 9:14 am

jjmaddison wrote:
Mon Oct 23, 2017 8:18 am
Looks like most people talk about 80-/20+ here.
I don't have a link handy but as I recall the long term expected return of having 10 or 20 percent in bonds is only modestly lower than 100% stocks but a lot less volatile

When you look this up the numbers will vary based on a lot of assumptions but I don't think you get paid enough for the extra risk.

dbr
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Re: Is it ok to have 100% stocks, 15 years+

Post by dbr » Mon Oct 23, 2017 9:16 am

Please see here: viewtopic.php?f=1&t=230449 for a parallel thread.

McGilicutty
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Re: Is it ok to have 100% stocks, 15 years+

Post by McGilicutty » Mon Oct 23, 2017 9:17 am

Gauntlet wrote:
Mon Oct 23, 2017 8:35 am
As an aside, and this could totally in my head, but I feel like during the last 2 years I have seen more and more people going very heavy in stocks. I can't help but think it is because people have forgotten 2009 or were not invested at that time. Also, I suppose anyone in their 20s has never experienced a bear market.
I'm heavy into stocks (no bonds, a little cash). It's not just the nice return on stocks that is causing people to abandon bonds, but it is also the low return on bonds. Vanguard Total Bond (BND) has returned less than 2% annually over the last 5 years. Over the past year the return is negative.

In days of yore, you could get a decent return on bonds or even in a savings account (5%+). That return made bonds/savings-in-cash relatively easy to hold. Nowadays, you don't get jack.

So, I think it is the combination of the bull market in stocks and the bear market in bonds that is causing people to abandon bonds.

dbr
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Re: Is it ok to have 100% stocks, 15 years+

Post by dbr » Mon Oct 23, 2017 9:19 am

McGilicutty wrote:
Mon Oct 23, 2017 9:17 am

So, I think it is the combination of the bull market in stocks and the bear market in bonds that is causing people to abandon bonds.
I believe there is a great deal of truth in that. We will all be waiting for the conversations here when the next serious downturn in stocks occurs.

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Re: Is it ok to have 100% stocks, 15 years+

Post by runner540 » Mon Oct 23, 2017 9:23 am

msk wrote:
Mon Oct 23, 2017 8:23 am
18 years post retirement, and I am still 100% in stocks :mrgreen:
Do you have any retirement income from stable sources, like SS or pension? If Someone has those they can take more risk with the portfolio.

rantk81
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Re: Is it ok to have 100% stocks, 15 years+

Post by rantk81 » Mon Oct 23, 2017 9:26 am

dbr wrote:
Mon Oct 23, 2017 9:19 am
McGilicutty wrote:
Mon Oct 23, 2017 9:17 am

So, I think it is the combination of the bull market in stocks and the bear market in bonds that is causing people to abandon bonds.
I believe there is a great deal of truth in that. We will all be waiting for the conversations here when the next serious downturn in stocks occurs.
My opinion is that we aren't in a bond bear market at all and that bond prices are too high for me to seriously consider buying them right now.

dbr
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Re: Is it ok to have 100% stocks, 15 years+

Post by dbr » Mon Oct 23, 2017 9:32 am

rantk81 wrote:
Mon Oct 23, 2017 9:26 am
dbr wrote:
Mon Oct 23, 2017 9:19 am
McGilicutty wrote:
Mon Oct 23, 2017 9:17 am

So, I think it is the combination of the bull market in stocks and the bear market in bonds that is causing people to abandon bonds.
I believe there is a great deal of truth in that. We will all be waiting for the conversations here when the next serious downturn in stocks occurs.
My opinion is that we aren't in a bond bear market at all and that bond prices are too high for me to seriously consider buying them right now.
Yes, what people really mean is that interest rates are at all time lows which is the same as bond prices are too high. This forum does not usually speak of bonds the way the bond trader market speaks of them. Some people have made the comment if it means anything that both stocks and bonds are overpriced. Neither of those things is of much interest to me.

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KSOC
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Re: Is it ok to have 100% stocks, 15 years+

Post by KSOC » Mon Oct 23, 2017 9:50 am

It depends on your situation. Too risky for me. I lost job at 58, I was 65/35. Planned on age 62 retirement. I kicked the 401k back to 50/50 when terminated. I was riskier as long as those paychecks were coming. Likely starting withdraws next year out of 401k. Will kick it back up to 60/40 when SS & Pension starts. Only thing I would have done differently is push more money toward my taxable account.
Too soon old, too late smart.

Salmon
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Re: Is it ok to have 100% stocks, 15 years+

Post by Salmon » Mon Oct 23, 2017 10:36 am

No right answer. I plan to be 100% equities until I hit a milestone and then will scale back

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Hyperborea
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Re: Is it ok to have 100% stocks, 15 years+

Post by Hyperborea » Mon Oct 23, 2017 11:18 am

As said above, it's a "matter of informed judgement and preference". I have been essentially 100% equity in my investment accounts (i.e. not including emergency funds and short term savings - house, grad school, car, etc.) since the early 90's. That means I started investing during a recession and the portfolio was through two full recessions. 100% equity can be a fine choice but it does require that one be able to hold that allocation. If you are going to be prone to getting "scared" and jumping the allocation around you will be better to have chosen an allocation you can stick with.

I would suggest that one either glide into less equity as one gets closer to retirement and/or have a variable retirement date planned. So, that may mean delaying retiring if the markets are down when you plan to retire. I would suggest (and I will be) gliding back up towards a high equity allocation depending on how long your retirement will likely be. If you plan on a long retirement (check the actuarial tables - a couple retiring at 50 has a 10% chance that one will live ~50 years, retiring at 60 then ~40 years) then a lower equity allocation has a higher risk of failure or a lower withdrawal rate. That will likely mean having to save more for the same retirement income or taking more risk of going broke.

KlangFool wrote:
Mon Oct 23, 2017 8:52 am
'Man plan, God laugh."
-Yiddish Proverb

How do you know that it will work out as planned?
You're right, why plan? There's no point to doing so because it won't turn out exactly as we imagined. "Eat, drink, and be merry for tomorrow we die."
"Plans are worthless, but planning is everything." - Dwight D. Eisenhower

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Re: Is it ok to have 100% stocks, 15 years+

Post by KyleAAA » Mon Oct 23, 2017 11:31 am

Yes, it's okay if your need, ability, and willingness to take risk call for 100% stocks. It is also true that people tend to systematically over-estimate their risk tolerance if they haven't lived through a big bear market.

TN_Boy
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Re: Is it ok to have 100% stocks, 15 years+

Post by TN_Boy » Mon Oct 23, 2017 12:43 pm

Gauntlet wrote:
Mon Oct 23, 2017 8:35 am
OP, in my opinion, if you did not experience the bear of 2009, which I believe you are alluding to, then I don't believe that you should be 100% stocks. We have had a 9-year-bull market which makes it easy to think that the party will last forever. I am about 20 years from retirement and I have 65% equity. Of course, I lived through 2000-2002 and 2008-2009.

As an aside, and this could totally in my head, but I feel like during the last 2 years I have seen more and more people going very heavy in stocks. I can't help but think it is because people have forgotten 2009 or were not invested at that time. Also, I suppose anyone in their 20s has never experienced a bear market.
Yeah, people love stocks right now.

Another thing to think about, suppose an investor started back in the mid 2000s, and bravely went 100% stocks. 2008/2009 hit and our brave soul lost 50% of his/her (to pick a number) $100,000. $50,000 gone! That hurt! But then the market came roaring back, and our hero kept on making big contributions, and now maybe he/she has $400,000. Or more. Another 50% market decline. Now our hero loses $200,000 with a 100% stock portfolio. That really hurt!

It's a lot more interesting taking a 50% hit when you have high six figures, or seven figures, than when you are just starting out. Also note that when the portfolio is small, yearly contributions can mask a lot of small to moderate declines. When the portfolio gets big, market moves dominate contributions (for most people, anyway).

I also fear that a 100% stock allocation makes trying for a "number" much riskier (not that I argue for a slavish focus on a single number, but most people have a decent idea of the savings they want to support their retirement). Say I need $1,000,000 to retire. I'm 100% stocks. It's 2017 and I have $950,000! I'm about ready to go for it. Then a 50% crash starting Dec 2017 and ending in oh, 2020. Now I have less than $500,000. Hmm. Guess it will be a while before I retire.

And finally, everybody remembers the quick crash and rebound of 2008, but the crash starting in 2000 lasted about three years. And it can go on longer.

I don't care for the 0 real returns of total bond over the last five years, but I'll like the bonds better the next stock market crash.

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Hyperborea
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Re: Is it ok to have 100% stocks, 15 years+

Post by Hyperborea » Mon Oct 23, 2017 12:55 pm

TN_Boy wrote:
Mon Oct 23, 2017 12:43 pm
I also fear that a 100% stock allocation makes trying for a "number" much riskier (not that I argue for a slavish focus on a single number, but most people have a decent idea of the savings they want to support their retirement). Say I need $1,000,000 to retire. I'm 100% stocks. It's 2017 and I have $950,000! I'm about ready to go for it. Then a 50% crash starting Dec 2017 and ending in oh, 2020. Now I have less than $500,000. Hmm. Guess it will be a while before I retire.
You could always consider using a "glidepath" approach where you decrease your equity percentage as you approach the date you plan to retire. You would then possibly want to ramp back up again during retirement. The point of that is to avoid the sequence of return risks.

However, even given that, if I was at 50/50 and the market tanked 50% I would still be delaying retirement for a little while if I could.
"Plans are worthless, but planning is everything." - Dwight D. Eisenhower

Wakefield1
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Re: Is it ok to have 100% stocks, 15 years+

Post by Wakefield1 » Mon Oct 23, 2017 12:56 pm

The answer is probably "no" unless there is plenty of money in the Credit Union or bank-enough for a good size downpayment on a house?

delamer
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Re: Is it ok to have 100% stocks, 15 years+

Post by delamer » Mon Oct 23, 2017 1:07 pm

Johm221122 wrote:
Mon Oct 23, 2017 8:47 am
I'm also about 15 years to retirement.I'm 60/40

Check out vanguard allocation models
https://personal.vanguard.com/us/insigh ... llocations

I was going to post the same link as above. The models show the differences in volatility and return for different allocations over the (very) long run.

We all need to find our comfort level. One factor should be your fixed income resources available in retirement like pensions and Social Security.

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Watty
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Re: Is it ok to have 100% stocks, 15 years+

Post by Watty » Mon Oct 23, 2017 1:28 pm

delamer wrote:
Mon Oct 23, 2017 1:07 pm
Johm221122 wrote:
Mon Oct 23, 2017 8:47 am
I'm also about 15 years to retirement.I'm 60/40

Check out vanguard allocation models
https://personal.vanguard.com/us/insigh ... llocations

I was going to post the same link as above. The models show the differences in volatility and return for different allocations over the (very) long run.

We all need to find our comfort level. One factor should be your fixed income resources available in retirement like pensions and Social Security.
That is a good link.

Using their methodology the 100% stock portfolio had a 10.2% return and the 80/20 portfolio had 9.5% return so there was only a 0.7% difference.

That was over a 90 year time though so it is a bit misleading since most investors who might be looking a couple of decades of investing before they retire and reconsider their asset allocation. With shorter time frames you will have more volatility.

If you want to run this with different time frame you can put them in Firecalc or one of the similar simulators.

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Tyler9000
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Re: Is it ok to have 100% stocks, 15 years+

Post by Tyler9000 » Mon Oct 23, 2017 1:39 pm

For a lot more info, here's my favorite Bogleheads thread on this topic: viewtopic.php?t=196011

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stemikger
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Re: Is it ok to have 100% stocks, 15 years+

Post by stemikger » Mon Oct 23, 2017 3:50 pm

Rupert wrote:
Mon Oct 23, 2017 8:36 am
stemikger wrote:
Mon Oct 23, 2017 8:30 am
jjmaddison wrote:
Mon Oct 23, 2017 8:18 am
Hello,

I plan to retire after 15 years.
Is it ok to have 100% in stocks, or 95% stocks/5% bonds in that case?

I'm kind of tolerant to risk, but was not invested in 2007 and the 1929, so don't know for sure ;)

Looks like most people talk about 80-/20+ here.
The only person who can answer this is you. 95/5 and 80/20 are not a huge difference when you look at the long term returns, go with 85/15. You really have to know your risk tolerance and know what living through a correction or crash feels like. In index investing close enough also wins. It's not about getting the highest returns, it's about investing in such a way where you can stay the course, sleep at night and retire with dignity.
It's also about how much you need the money that you have invested. The previous poster who is in 100% stocks might be very rich or have a very secure pension that covers his/her living expenses, etc. In either case, you can afford to take more risk.
Good point, I agree.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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Re: Is it ok to have 100% stocks, 15 years+

Post by SGM » Mon Oct 23, 2017 4:05 pm

If you have job security and are able to continue to put money into the market when the bear returns you will benefit. Unfortunately, investors tend to sell when the market has bargain prices and to buy when the market is expensive. In a recession some jobs are at risk which would mean you might have to sell assets to survive. I was 100% in stocks 15 years before retirement, but I had job security and experience in prior bear markets. One needs to be comfortable with an asset allocation and stick with it in a bear market or it can be personally disastrous.

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Re: Is it ok to have 100% stocks, 15 years+

Post by grabiner » Mon Oct 23, 2017 5:13 pm

jjmaddison wrote:
Mon Oct 23, 2017 8:18 am
Hello,

I plan to retire after 15 years.
Is it ok to have 100% in stocks, or 95% stocks/5% bonds in that case?

I'm kind of tolerant to risk, but was not invested in 2007 and the 1929, so don't know for sure ;)
Then the answer is no. You don't know how you will actually react to the market falling; a lot of investors discovered in 2008 that they did not have the risk tolerance they thought they did, pulled out of the market, and risked the recovery.

I have had the risk of 100% stock since 2004, but that is because I did know how I would react to a bear market; I had 80% stock in 2000-2002, and changed to a more aggressive portfolio in 2002.
Wiki David Grabiner

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HomerJ
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Re: Is it ok to have 100% stocks, 15 years+

Post by HomerJ » Mon Oct 23, 2017 5:19 pm

BlackStrat wrote:
Mon Oct 23, 2017 8:29 am
msk wrote:
Mon Oct 23, 2017 8:23 am
18 years post retirement, and I am still 100% in stocks :mrgreen:
Whoa! Really?

That's awesome!
Yeah, it helps if you have 3x as much as you need like msk. Makes it easier to stomach those occasional 50% drops... :)

For those of us with 1.2x as much as we need, it might be a better idea to temper the risk with some bonds.

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HomerJ
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Re: Is it ok to have 100% stocks, 15 years+

Post by HomerJ » Mon Oct 23, 2017 5:22 pm

jjmaddison wrote:
Mon Oct 23, 2017 8:18 am
Hello,

I plan to retire after 15 years.
Is it ok to have 100% in stocks, or 95% stocks/5% bonds in that case?

I'm kind of tolerant to risk, but was not invested in 2007 and the 1929, so don't know for sure ;)

Looks like most people talk about 80-/20+ here.
Well, here's the thing... You don't want to be 100% stocks in Year 14, right? What if the market drops 50% and stays down for 5 years... one year before you retire?

You probably don't want to be 100% stocks in Year 11,12, or 13, either, by that measure.

I would suggest slowly moving to a more conservative allocation as you get closer to retirement.

Maybe 80/20 in 5 years, 60/40 in 10 years, 50/50 or 40/60 in 15 years.

Also it matters if you have a pension or something like that. One can withstand a lot more risk if your pension is already going to cover most of your expenses in retirement.

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Hyperborea
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Re: Is it ok to have 100% stocks, 15 years+

Post by Hyperborea » Mon Oct 23, 2017 5:24 pm

HomerJ wrote:
Mon Oct 23, 2017 5:19 pm
BlackStrat wrote:
Mon Oct 23, 2017 8:29 am
msk wrote:
Mon Oct 23, 2017 8:23 am
18 years post retirement, and I am still 100% in stocks :mrgreen:
Whoa! Really?

That's awesome!
Yeah, it helps if you have 3x as much as you need like msk. Makes it easier to stomach those occasional 50% drops... :)

For those of us with 1.2x as much as we need, it might be a better idea to temper the risk with some bonds.

Hmm, if he does have 3x as much as he needs I wonder how he got there? Was it by dragging the anchor of more bonds than he needs?

Also, by more than you need are meaning that as more than the minimum living costs or more than the amount one desires and plans to live on?
"Plans are worthless, but planning is everything." - Dwight D. Eisenhower

TravelforFun
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Re: Is it ok to have 100% stocks, 15 years+

Post by TravelforFun » Mon Oct 23, 2017 5:31 pm

HomerJ wrote:
Mon Oct 23, 2017 5:19 pm
BlackStrat wrote:
Mon Oct 23, 2017 8:29 am
msk wrote:
Mon Oct 23, 2017 8:23 am
18 years post retirement, and I am still 100% in stocks :mrgreen:
Whoa! Really?

That's awesome!
Yeah, it helps if you have 3x as much as you need like msk. Makes it easier to stomach those occasional 50% drops... :)

For those of us with 1.2x as much as we need, it might be a better idea to temper the risk with some bonds.
If 100% of my expenses were covered by SS, pensions, annuities, or their combination, I'd be 100% equity too.

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Re: Is it ok to have 100% stocks, 15 years+

Post by pkcrafter » Mon Oct 23, 2017 6:18 pm

Is it ok to have 100% stocks, 15 years+
Do you understand what risk means? Anyway, we'll let you know in 15 years whether it was a good idea or not. :happy


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: Is it ok to have 100% stocks, 15 years+

Post by TN_Boy » Mon Oct 23, 2017 6:36 pm

Hyperborea wrote:
Mon Oct 23, 2017 12:55 pm
TN_Boy wrote:
Mon Oct 23, 2017 12:43 pm
I also fear that a 100% stock allocation makes trying for a "number" much riskier (not that I argue for a slavish focus on a single number, but most people have a decent idea of the savings they want to support their retirement). Say I need $1,000,000 to retire. I'm 100% stocks. It's 2017 and I have $950,000! I'm about ready to go for it. Then a 50% crash starting Dec 2017 and ending in oh, 2020. Now I have less than $500,000. Hmm. Guess it will be a while before I retire.
You could always consider using a "glidepath" approach where you decrease your equity percentage as you approach the date you plan to retire. You would then possibly want to ramp back up again during retirement. The point of that is to avoid the sequence of return risks.

However, even given that, if I was at 50/50 and the market tanked 50% I would still be delaying retirement for a little while if I could.
Yes, I should have continued to say that I personally would not be comfortable with anything near 100% equity as I neared retirement, if I needed those funds to support my lifestyle in retirement. I tend to like allocations such as 40/60 or 50/50 stock/bond at the point of retirement.

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Re: Is it ok to have 100% stocks, 15 years+

Post by TN_Boy » Mon Oct 23, 2017 6:49 pm

SGM wrote:
Mon Oct 23, 2017 4:05 pm
If you have job security and are able to continue to put money into the market when the bear returns you will benefit. Unfortunately, investors tend to sell when the market has bargain prices and to buy when the market is expensive. In a recession some jobs are at risk which would mean you might have to sell assets to survive. I was 100% in stocks 15 years before retirement, but I had job security and experience in prior bear markets. One needs to be comfortable with an asset allocation and stick with it in a bear market or it can be personally disastrous.
This is generally true, but I'll point out again, for many people, if they've been contributing the max to their retirement accounts all their working lives, by the time they near retirement age, it's possible that the value of *daily* fluctuations in a large portfolio would reflect a significant percentage of their yearly contribution. A mere 10% correction could easily be years of contributions. At that point, if the portfolio takes a huge hit, the yearly contribution will not make a big difference in their net worth.

If you need the money in that portfolio at retirement, 100% stocks is really scary. And if you don't need the money (pension, SS, or maybe you retired at age 85) then yes, it doesn't matter. I am always baffled at the people who post things like "I've been 100% stocks for years, I sleep great at night. Oh, all my expenses are covered by my pensions and SS." I'm happy for those people, but don't find their decision making processing on asset allocation very interesting. :oops:

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Re: Is it ok to have 100% stocks, 15 years+

Post by Hyperborea » Mon Oct 23, 2017 7:01 pm

TN_Boy wrote:
Mon Oct 23, 2017 6:49 pm
If you need the money in that portfolio at retirement, 100% stocks is really scary. And if you don't need the money (pension, SS, or maybe you retired at age 85) then yes, it doesn't matter. I am always baffled at the people who post things like "I've been 100% stocks for years, I sleep great at night. Oh, all my expenses are covered by my pensions and SS." I'm happy for those people, but don't find their decision making processing on asset allocation very interesting. :oops:
Making up examples to make your argument when that isn't the case certainly is easy but wrong. I don't see these mythical posts that you postulate. :?

I'll say it again, I've been 100% equity in my investment accounts (i.e. not including emergency funds and short term savings - house, grad school, car, etc.) since the early 90's. That means I started investing during a recession and the portfolio was through two full recessions. I retired last year, I have no pension, and I am nearly 2 decades from taking SS at 70. I did move to 90/0/10 before retirement. I will be moving to a vaguely 70/10/20 portfolio next year with the sale of my home in the Bay Area. After that I will edge the portfolio back up to perhaps 95/0/5 over the next 5-10 years.

I think if what you are afraid of is sequence of return risks as your somewhat snarky post insinuates then you should deal with that rather than kneecapping your portfolio for your entire investment timeframe (and encouraging others to do so). You can ameliorate those by gliding in to a lower stock allocation before retirement but you will probably need to glide back up again afterwards.
"Plans are worthless, but planning is everything." - Dwight D. Eisenhower

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Re: Is it ok to have 100% stocks, 15 years+

Post by msk » Mon Oct 23, 2017 10:04 pm

Everyone has a different risk tolerance, but it is important to note how the world economy works. Stocks represent companies that borrow money (bonds) to make more money. If the interest rate is too high the companies will stop borrowing and flounder. Hence, in normal times, stocks will always make more money in real terms than bonds. Bonds deliver next to no earnings in real terms. The nominal interest rate may be high, but in real terms it's almost always barely above zero, sometimes even negative. Hence I never viewed bonds as "investing" and consequently never bought a bond in my entire life. I did park cash, very occasionally, in CDs, but ever since my 30s I have always been 100+% invested in, initially, real estate (hence invested at >>100%), and started with stocks in the 1980s. So I have been through numerous recessions and did feel the pain of 50% drops, so by the 2000s I had learnt not to check my stock portfolio when the market drops. You do not sell RE during a recession... Why rub in the bad news? Check your portfolio daily in good times, and ignore it in bad :twisted: Pensions are also important. Obviously if you are able to have a reasonably comfortable retirement on SS and a private pension, you are much less dependent on your investments. Are you able to cut back your spending (that infamous WR) when the markets tank? In real life, most people can. You do not buy a new car when your portfolio has just received a 50% haircut, and most probably you will purchase a higher end car model after a 20% stock market rise; like right now :mrgreen: Trade and industry has been earning between 5 and 6% in real terms over the past 300 years, productive RE around 4% real. Bonds? No obvious reason why this cannot continue for another 300 years. The stocks (i.e. the companies) you own will still be earning that 5 to 6% real annually, regardless of what price you paid for the shares, or what price the shares sell at after a 50% market drop tomorrow. Have faith in the system, eventually it all works out :moneybag In retirement never withdraw more than 5% of your nominal portfolio value annually, and while the nominal cash you withdraw will fluctuate with market prices, your withdrawals will keep up with inflation and will last well over 50 years. I would suggest that people who wish to have the apparent safety of bonds to steer themselves to TIPS. Those at least keep up with inflation. In a 30 year retirement span, inflation is always the big worry. Well diversified stocks will always keep up.

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Re: Is it ok to have 100% stocks, 15 years+

Post by TN_Boy » Mon Oct 23, 2017 10:11 pm

Hyperborea wrote:
Mon Oct 23, 2017 7:01 pm
TN_Boy wrote:
Mon Oct 23, 2017 6:49 pm
If you need the money in that portfolio at retirement, 100% stocks is really scary. And if you don't need the money (pension, SS, or maybe you retired at age 85) then yes, it doesn't matter. I am always baffled at the people who post things like "I've been 100% stocks for years, I sleep great at night. Oh, all my expenses are covered by my pensions and SS." I'm happy for those people, but don't find their decision making processing on asset allocation very interesting. :oops:
Making up examples to make your argument when that isn't the case certainly is easy but wrong. I don't see these mythical posts that you postulate. :?

I'll say it again, I've been 100% equity in my investment accounts (i.e. not including emergency funds and short term savings - house, grad school, car, etc.) since the early 90's. That means I started investing during a recession and the portfolio was through two full recessions. I retired last year, I have no pension, and I am nearly 2 decades from taking SS at 70. I did move to 90/0/10 before retirement. I will be moving to a vaguely 70/10/20 portfolio next year with the sale of my home in the Bay Area. After that I will edge the portfolio back up to perhaps 95/0/5 over the next 5-10 years.

I think if what you are afraid of is sequence of return risks as your somewhat snarky post insinuates then you should deal with that rather than kneecapping your portfolio for your entire investment timeframe (and encouraging others to do so). You can ameliorate those by gliding in to a lower stock allocation before retirement but you will probably need to glide back up again afterwards.
Sorry if you took that wrong. I believe poster msk has stated elsewhere he primarily lives off his COLAed pension. And I'm pretty sure I've seen other examples.

As for your 100% stock portfolio, obviously that worked out well for the last few years, how would your retirement plans have changed if the market had taken a 50% hit in 2015? Has the equity in your house affected your retirement plans?

I don't believe anything in any of my posts, in any thread, has ever implied one should "kneecap" ones portfolio during their entire investment timeframe. An exact quote from this thread would be "I personally would not be comfortable with anything near 100% equity as I neared retirement." Last four words are key. And obviously I am concerned about sequence of return risks -- that is widely viewed as the key risk in retirement when living off a portfolio. Like many others (not all!) on this forum I've reduced stock exposure as retirement nears. I have not decided yet how much, if any, I'll glide the stock percentage up later.

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Re: Is it ok to have 100% stocks, 15 years+

Post by protagonist » Mon Oct 23, 2017 10:15 pm

If you are 100% in stocks, make sure you have a secure job that pays the bills.

Because there is always a possibility that you will lose almost everything you have saved. People talk about a 50% hit as if that is the worst possible scenario. It isn't.

Nobody knows how great a possibility that is since nobody can predict the future. I'm not a bear. Or a bull. I'm just a realist. I have no clue.

I am not making a firm argument against 100% stocks....just realize the risks.

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Re: Is it ok to have 100% stocks, 15 years+

Post by DebiT » Mon Oct 23, 2017 10:29 pm

I definitely agree with other posters above who note that as one's portfolio grows larger, then market swings feel even worse. I recall very clearly how upset I was in 2007, with 20 years to age 70 retirement, to note that we had lost 3-4 years contributions. I think our allocation then was about 60/40 but had crept up to 65/35. (I was going to rebalance in January per the calendar; now I pay more attention, which helps me SWAN). Didn't sell, was fine with that, but sure didn't like the feeling.

So now it's 2017, we are 10 years away from full retirement no later than 70 (so I can collect full SS). Our bare bones expenses will be covered by joint SS, and needed withdrawals will probably be no more than 3% of where I assume portfolio will be. We are 50/50 at this time and will probably stay right there permanently. No pension, and the plan gets tighter if DH doesn't follow my instructions and live until about 80 ;). So at this point avoiding large losses is just as important.

We're going to see a fee-only planner after the first of the year, and one of the questions I will raise is whether it might be wise for the first few years of retirement to go even lower on the stock allocation, to lower sequence of return risk. I don't know if that makes sense or not.
Age 60, complete retirement not til 70, target is 50/50 -- Stock US 30, Intl 15, REIT 5. Bonds US 45, cash ~5

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Re: Is it ok to have 100% stocks, 15 years+

Post by HomerJ » Mon Oct 23, 2017 11:36 pm

msk wrote:
Mon Oct 23, 2017 10:04 pm
Everyone has a different risk tolerance, but it is important to note how the world economy works. Stocks represent companies that borrow money (bonds) to make more money. If the interest rate is too high the companies will stop borrowing and flounder. Hence, in normal times, stocks will always make more money in real terms than bonds. Bonds deliver next to no earnings in real terms. The nominal interest rate may be high, but in real terms it's almost always barely above zero, sometimes even negative. Hence I never viewed bonds as "investing" and consequently never bought a bond in my entire life. I did park cash, very occasionally, in CDs, but ever since my 30s I have always been 100+% invested in, initially, real estate (hence invested at >>100%), and started with stocks in the 1980s. So I have been through numerous recessions and did feel the pain of 50% drops, so by the 2000s I had learnt not to check my stock portfolio when the market drops. You do not sell RE during a recession... Why rub in the bad news? Check your portfolio daily in good times, and ignore it in bad :twisted: Pensions are also important. Obviously if you are able to have a reasonably comfortable retirement on SS and a private pension, you are much less dependent on your investments. Are you able to cut back your spending (that infamous WR) when the markets tank? In real life, most people can. You do not buy a new car when your portfolio has just received a 50% haircut, and most probably you will purchase a higher end car model after a 20% stock market rise; like right now :mrgreen: Trade and industry has been earning between 5 and 6% in real terms over the past 300 years, productive RE around 4% real. Bonds? No obvious reason why this cannot continue for another 300 years. The stocks (i.e. the companies) you own will still be earning that 5 to 6% real annually, regardless of what price you paid for the shares, or what price the shares sell at after a 50% market drop tomorrow. Have faith in the system, eventually it all works out :moneybag In retirement never withdraw more than 5% of your nominal portfolio value annually, and while the nominal cash you withdraw will fluctuate with market prices, your withdrawals will keep up with inflation and will last well over 50 years. I would suggest that people who wish to have the apparent safety of bonds to steer themselves to TIPS. Those at least keep up with inflation. In a 30 year retirement span, inflation is always the big worry. Well diversified stocks will always keep up.
Just FYI msk. You would have been completely broke during the Great Depression with 100% stocks in retirement. 89% drop in stocks while you are withdrawing money to eat is not a good recipe for success.

That's why it's risky to go 100% stocks the day you retire. Pretty tiny risk, sure. But it's obvious that anything that has actually happened in the past is certainly possible.

Sequence of returns matters. Yes, stocks over the long-run have always done very well, but a crash the day after retirement that takes a few years (or a decade!) to recover is a real danger.

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Re: Is it ok to have 100% stocks, 15 years+

Post by HomerJ » Mon Oct 23, 2017 11:40 pm

Hyperborea wrote:
Mon Oct 23, 2017 7:01 pm
I retired last year, I have no pension, and I am nearly 2 decades from taking SS at 70. I did move to 90/0/10 before retirement.
How would you have dealt with a 50% crash that happened a month after you retired that took 5 years to recover? What about a 70% crash? Just kept on spending? Gone back to work? Might have been tough to find a job during a huge recession that caused a large stock crash.

Or are you saying that it's impossible for that to have happened? People should just use 100% stocks up until the day they hit their number, retire at 90/10 and just hope for the best?

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Re: Is it ok to have 100% stocks, 15 years+

Post by MichDad » Tue Oct 24, 2017 4:36 am

I'm not recommending that anyone replicate what I've done. I'm simply reporting on it.

In the mid-1980s, as I was thinking about saving for retirement, I read investment newsletters from T. Rowe Price that compared how various asset classes performed over time. I saw that stock portfolios beat other portfolios in periods greater than 20 years. Since I was young, I decided then that I'd place all my retirement investments into US and international equities. I had a steady job and career with the federal government.

I started investing for retirement in 1987 through the federal Thrift Savings Plan. For the first year or so, all federal employees were required to invest into the G Fund, which is similar to a mix of a money market and a bond fund. As soon as we were permitted to invest into the C Fund (S&P 500), and later the S (Small cap) and I (International) Funds, I placed all my investments into them. As years went on, and I started investing also into IRAs and a taxable fund, I invested only into equities.

Later I married and my wife let me handle her investments. I treated her investments, all in private sector 401(k)s and IRAs, much like mine: all equities, no bonds. We did this until March 2017, 30 years from when I started.

In March 2017, I finally put 34 percent of our entire combined retirement portfolio into the G Fund in one very large lump sum. I've also started investing a portion of my new bi-weekly TSP investments into the G Fund. With the gains in equities since March, my G Fund investment now represents "only" 33 percent of our entire retirement portfolio.

The caveats are (1) I've had steady employment; (2) I've qualified for a federal pension with a diet COLA; (3) we'll both have Social Security; and (4) I have a high tolerance for risk. I didn't panic or deviate from this plan when equities tanked in 2000 and 2008/09. Perhaps it was shear luck, but so far, it's worked out well for us. My wife has retired and I plan on joining her a few months into 2018.

If US and international equities dropped 50 percent in value (or more) tomorrow, my pension and G Fund savings would be sufficient to carry us nicely until I begin to collect Social Security at age 70. Hopefully, our equities investments would recover by then but, if not, my pension and our combined Social Security should be more than sufficient to cover our expenses.

MichDad

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Re: Is it ok to have 100% stocks, 15 years+

Post by Valuethinker » Tue Oct 24, 2017 5:21 am

Gauntlet wrote:
Mon Oct 23, 2017 8:35 am
OP, in my opinion, if you did not experience the bear of 2009, which I believe you are alluding to, then I don't believe that you should be 100% stocks. We have had a 9-year-bull market which makes it easy to think that the party will last forever. I am about 20 years from retirement and I have 65% equity. Of course, I lived through 2000-2002 and 2008-2009.

+1

This is very wise. I should add that even having lived through those 2 downturns, I now find I own more bonds-- time has shortened to retirement!
As an aside, and this could totally in my head, but I feel like during the last 2 years I have seen more and more people going very heavy in stocks. I can't help but think it is because people have forgotten 2009 or were not invested at that time. Also, I suppose anyone in their 20s has never experienced a bear market.
That again is wise.

I think this is precisely it. To me, 2008-09 was like yesterday. But to someone who didn't lose hundreds of thousands of dollars in that time (I actually had stopped keeping track because it was so painful, I just sat back and let it happen) talk of market downturns must seem theoretical.

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Re: Is it ok to have 100% stocks, 15 years+

Post by Valuethinker » Tue Oct 24, 2017 5:27 am

jjmaddison wrote:
Mon Oct 23, 2017 8:18 am
Hello,

I plan to retire after 15 years.
Is it ok to have 100% in stocks, or 95% stocks/5% bonds in that case?

I'm kind of tolerant to risk, but was not invested in 2007 and the 1929, so don't know for sure ;)

Looks like most people talk about 80-/20+ here.
And if people really are 80/20 then they are right.

It will make a big difference to one's mental state in the next downturn. And it provides cash for rebalancing-- to the extent that there is momentum in stock returns (i.e. they get too high and too low) rebalancing improves performance.

Being 100% stocks fully exposes one to the volatility of the market. My own observation is that the bear markets seem to be coming with greater frequency, and are more vicious when they do come. We had that golden age of the 1980s and 90s when stocks tended to just go straight up (bear market in 1990) but I think we are done with that-- the undervaluation caused by the 1970s was corrected.

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