Any Dry Powder Strategies?

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TheTimeLord
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Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 8:35 am

Nearing retirement and feeling FI I have bottomed out my equity allocation and expect it to have a rising guide path, at least in the early years of retirement. As a results, I have more or less ended up with dry powder. My intention going forward had been to add new contributions between here and retirement to a Total Market Index fund but instead I have decided to extend my dry powder reserves using Vanguard Balanced Index and Fidelity Puritan Funds. All new contributions will go into these funds and when I feel it is time to use my dry powder I will simple exchange shares in these funds for shares in a Total Market Index or S&P 500 fund. Do any other BH have a Dry Powder strategy?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

jebmke
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Re: Any Dry Powder Strategies?

Post by jebmke » Mon Jul 09, 2018 8:42 am

I use a little talc after I shower.
When you discover that you are riding a dead horse, the best strategy is to dismount.

j0nnyg1984
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Re: Any Dry Powder Strategies?

Post by j0nnyg1984 » Mon Jul 09, 2018 8:46 am

What a cornball term. I've only ever heard it on prepper and silver stackers forums.

My strategy for my cash is to leave it in cash.

staythecourse
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Re: Any Dry Powder Strategies?

Post by staythecourse » Mon Jul 09, 2018 8:55 am

j0nnyg1984 wrote:
Mon Jul 09, 2018 8:46 am
What a cornball term. I've only ever heard it on prepper and silver stackers forums.

My strategy for my cash is to leave it in cash.
Agreed. Dry powder means nothing. It is just cash. Add that portion to your cash allocation and reanalyze your asset allocation (stocks/ bonds/cash/ alternative investments). There is no superasset class named dry powder. It is useless term with no meaning (other then for mental accounting).

Good luck.
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TheTimeLord
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Re: Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 8:57 am

j0nnyg1984 wrote:
Mon Jul 09, 2018 8:46 am
What a cornball term. I've only ever heard it on prepper and silver stackers forums.

My strategy for my cash is to leave it in cash.
Well Jack Bogle is older so maybe he can be a little corny at times.
Benz: One hugely vexing issue for a lot of investors is what to do with their bond money. In 2014, we've had very good returns from the bond market, but I think investors are still trying to feel their way given these widespread expectations that yields will eventually go up. What's your counsel to investors against this backdrop?

Bogle: If you buy a bond today--a good bond and not a junk bond that is fairly assured of paying its coupons, which is where the value is created--it shouldn't surprise anybody to know that the odds are at least 91%, I would say, that your return on that bond will be about 3% over the next 10 years. And if it's a 10-year bond and it gets paid off at the end, you know that's going to be the case. So, it's a good rule. And we are looking at basically not speculating in the bond market but signing a contract, in effect, saying, "I understand that I will get 3% a year for the next 10 years, and I think that's a good deal." Whether it is or not is a wholly different question; but it's very close to a contractual guarantee.
So, why would you have bonds of any type? I think nearly all investors will keep their behavior and temptation to do something in times of high market volatility. That temptation will be reduced if you have what we used to call an anchor to windward, something like that. A little dry powder might be another way of looking at it. So, it simply reduces the volatility of the portfolio--with the almost certain knowledge that it will reduce the return of your total portfolio over time. You're getting less volatility; you're going to get lower return.
I think most people need that for X percent of their portfolio. I happen to think you need it more when you are older and less when you are younger. And certainly, a young person starting his or her 401(k) today should be 100% in stocks. If the market goes down 50%, they've lost $50 of their $100 investment. So, it may look like a lot to them then, but they'll be OK, I promise.


So, I like it as a conservative investment, but I worry about [higher-yielding bonds]. It's totally obvious that the higher-yielding and, therefore, the longer-term maturities will be a better long-term investment--10-year investment--than the intermediate or the short, descending right down there in yield. And yet, they have a lot more volatility. I think that our Treasury fund is up 25% this year. Just thinking about the mathematics of a big change in the yield on a 25-year bond: Each 1% reduction in interest rates increases the value of the bond by about 17%.
https://www.morningstar.com/videos/6704 ... bonds.html
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Silk McCue
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Re: Any Dry Powder Strategies?

Post by Silk McCue » Mon Jul 09, 2018 8:59 am

j0nnyg1984 wrote:
Mon Jul 09, 2018 8:46 am
What a cornball term. I've only ever heard it on prepper and silver stackers forums.
Lack of knowledge of the well established use of a financial term is excusable. Mocking someones use of the term and comparing them to a prepper etc is not. Let's keep it civil.

https://www.investopedia.com/terms/d/drypowder.asp
What is 'Dry Powder'

Dry powder is a slang term referring to marketable securities that are highly liquid and considered cash-like. Dry powder can also refer to cash reserves kept on hand by a company, venture capital firm or individual to cover future obligations, purchase assets or make acquisitions. Securities considered to be dry powder could be Treasuries or other short-term fixed income investment that can be liquidated on short notice in order to provide emergency funding or allow an investor to purchase assets.
Cheers

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TheTimeLord
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Re: Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 9:00 am

staythecourse wrote:
Mon Jul 09, 2018 8:55 am
j0nnyg1984 wrote:
Mon Jul 09, 2018 8:46 am
What a cornball term. I've only ever heard it on prepper and silver stackers forums.

My strategy for my cash is to leave it in cash.
Agreed. Dry powder means nothing. It is just cash. Add that portion to your cash allocation and reanalyze your asset allocation (stocks/ bonds/cash/ alternative investments). There is no superasset class named dry powder. It is useless term with no meaning (other then for mental accounting).

Good luck.
This might help, it is the definition from Investopedia.

What is 'Dry Powder'
Dry powder is a slang term referring to marketable securities that are highly liquid and considered cash-like. Dry powder can also refer to cash reserves kept on hand by a company, venture capital firm or individual to cover future obligations, purchase assets or make acquisitions. Securities considered to be dry powder could be Treasuries or other short-term fixed income investment that can be liquidated on short notice in order to provide emergency funding or allow an investor to purchase assets.



Read more: Dry Powder https://www.investopedia.com/terms/d/dr ... z5KlXepQOW
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celia
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Re: Any Dry Powder Strategies?

Post by celia » Mon Jul 09, 2018 9:53 am

If nearing or recently retired, consider using some of the extra cash to pay taxes on Roth conversions. Think about how those assets can grow tax-free instead.

To help decide if and how much to convert, consider what your taxes will be like after you are taking SS and RMDs. Converting will lower your future RMDs.

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Re: Any Dry Powder Strategies?

Post by Dottie57 » Mon Jul 09, 2018 10:02 am

celia wrote:
Mon Jul 09, 2018 9:53 am
If nearing or recently retired, consider using some of the extra cash to pay taxes on Roth conversions. Think about how those assets can grow tax-free instead.

To help decide if and how much to convert, consider what your taxes will be like after you are taking SS and RMDs. Converting will lower your future RMDs.
I do have cash on hand for conversions starting next year and for use in a severe downturn.

TN_Boy
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Re: Any Dry Powder Strategies?

Post by TN_Boy » Mon Jul 09, 2018 10:13 am

TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Nearing retirement and feeling FI I have bottomed out my equity allocation and expect it to have a rising guide path, at least in the early years of retirement. As a results, I have more or less ended up with dry powder. My intention going forward had been to add new contributions between here and retirement to a Total Market Index fund but instead I have decided to extend my dry powder reserves using Vanguard Balanced Index and Fidelity Puritan Funds. All new contributions will go into these funds and when I feel it is time to use my dry powder I will simple exchange shares in these funds for shares in a Total Market Index or S&P 500 fund. Do any other BH have a Dry Powder strategy?
My strategy in retirement would be to spend down the bond (and a bit of cash) part of the asset allocation if disaster (market crash) happens.

Before retirement, my strategy would be to maintain my desired asset allocation, which consists of stocks, bonds, and a bit of cash. If a crash happened before retirement I would .... rebalance to my asset allocation (I might or might not aggressively rebalance, but I did rebalance in 2008/2009 and I would do so again).

Either I don't understand your question (very possible) or you are looking at things in a more complicated way than I am. The key thing is that I have an asset allocation, and that drives decisions. I do not keep large cash allocations, preferring bonds instead; I can sell the bonds/bond funds to rebalance or spend as needed.

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whodidntante
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Re: Any Dry Powder Strategies?

Post by whodidntante » Mon Jul 09, 2018 12:43 pm

We know what dry powder is. Are common, easy to understand metaphors allowed here? I say they are.

Adopting a more conservative allocation waiting for a crash is fine if you have enough money already, but trend following is likely a more successful market timing strategy. What's your objective?

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TheTimeLord
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Re: Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 12:49 pm

whodidntante wrote:
Mon Jul 09, 2018 12:43 pm
We know what dry powder is. Are common, easy to understand metaphors allowed here? I say they are.

Adopting a more conservative allocation waiting for a crash is fine if you have enough money already, but trend following is likely a more successful market timing strategy. What's your objective?
At this point security and risk management far outweigh maximizing gain. That said when bought at reasonable prices (what is a reasonable price is debatable) I still see equities as my preferred long term investment. I just thought this was a rather simple and elegant way of executing a dry powder strategy.
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chevca
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Re: Any Dry Powder Strategies?

Post by chevca » Mon Jul 09, 2018 1:00 pm

I'm not familiar with the Fidelity Puritan funds. But, how is keeping money in the Balanced Index fund, which is 60% stocks, considered "dry powder"?

The Wizard
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Re: Any Dry Powder Strategies?

Post by The Wizard » Mon Jul 09, 2018 1:10 pm

Just rebalance to your desired AA from time to time and be done with it.
No point in being creative for a problem that doesn't exist.

Now as to what to use for the non-stock portion of your AA, we have a good question.
VBILX (Int term bond fund) has total return of -2.14% YTD. So that's not so great.
A MM fund would do better...
Attempted new signature...

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David Jay
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Re: Any Dry Powder Strategies?

Post by David Jay » Mon Jul 09, 2018 1:38 pm

TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Nearing retirement...
We’re waiting for you on the 2019 Roll call thread. :D
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Sandtrap
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Re: Any Dry Powder Strategies?

Post by Sandtrap » Mon Jul 09, 2018 1:42 pm

TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Nearing retirement and feeling FI I have bottomed out my equity allocation and expect it to have a rising guide path, at least in the early years of retirement. As a results, I have more or less ended up with dry powder. My intention going forward had been to add new contributions between here and retirement to a Total Market Index fund but instead I have decided to extend my dry powder reserves using Vanguard Balanced Index and Fidelity Puritan Funds. All new contributions will go into these funds and when I feel it is time to use my dry powder I will simple exchange shares in these funds for shares in a Total Market Index or S&P 500 fund. Do any other BH have a Dry Powder strategy?
Muni bonds, CD ladders, etc.

. . . . I thought you already were retired. . . . :shock:
j

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TheTimeLord
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Re: Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 2:25 pm

chevca wrote:
Mon Jul 09, 2018 1:00 pm
I'm not familiar with the Fidelity Puritan funds. But, how is keeping money in the Balanced Index fund, which is 60% stocks, considered "dry powder"?
To me this is simpler and more elegant than having 2 funds, one equity and one dry powder for equity investment. So 60% equity becomes 100% equity.
TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
when I feel it is time to use my dry powder I will simple exchange shares in these funds for shares in a Total Market Index or S&P 500 fund.
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chevca
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Re: Any Dry Powder Strategies?

Post by chevca » Mon Jul 09, 2018 2:31 pm

That's just mental gymnastics, IMO. Why do you need 2 funds? Put what you're comfortable with into an S&P 500 or TSM fund now and keep the rest in cash (actual "dry powder").

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Re: Any Dry Powder Strategies?

Post by goblue100 » Mon Jul 09, 2018 2:50 pm

Yeah, money in equities is not "dry powder".
Some people are immune to good advice. - Saul Goodman

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Pajamas
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Re: Any Dry Powder Strategies?

Post by Pajamas » Mon Jul 09, 2018 3:06 pm

j0nnyg1984 wrote:
Mon Jul 09, 2018 8:46 am
What a cornball term. I've only ever heard it on prepper and silver stackers forums.
It's a common term for active investors, from day traders to hedge fund managers.
My strategy for my cash is to leave it in cash.
Same here, cash or something cash-like with no variation in principle. Investments in the funds mentioned (which hold equities) wouldn't qualify as dry powder.

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TheTimeLord
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Re: Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 3:40 pm

goblue100 wrote:
Mon Jul 09, 2018 2:50 pm
Yeah, money in equities is not "dry powder".
Of course it isn't. The dry powder is the 40% bonds in the Balance Index Fund.
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TheTimeLord
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Re: Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 3:45 pm

chevca wrote:
Mon Jul 09, 2018 2:31 pm
That's just mental gymnastics, IMO. Why do you need 2 funds? Put what you're comfortable with into an S&P 500 or TSM fund now and keep the rest in cash (actual "dry powder").
Well normally I would do TSM and then TBM for Dry Powder, thus 2 funds. This way I only have 1 fund and zero calculations on how much goes where just add the everything to Balanced Index, approximately 40% goes to Dry Powder and when I want to use the Powder I exchange Balanced Index shares for TSM shares. If it is mental gymnastics, it is simple, elegant mental gymnastics.
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Sandtrap
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Re: Any Dry Powder Strategies?

Post by Sandtrap » Mon Jul 09, 2018 3:56 pm

TheTimeLord wrote:
Mon Jul 09, 2018 3:40 pm
goblue100 wrote:
Mon Jul 09, 2018 2:50 pm
Yeah, money in equities is not "dry powder".
Of course it isn't. The dry powder is the 40% bonds in the Balance Index Fund.
Depends on "how dry".
There are degrees of "dry powder" from dry to really dry.
The fixed portion of Balanced Income Fund is "dry".
CD's or CD ladder is "drier".
Treasuries are "very very dry".
Cash in a bank account, or in hand, is the "driest".
Varying degrees of security of principal and liquidity.
j :D

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danielc
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Re: Any Dry Powder Strategies?

Post by danielc » Mon Jul 09, 2018 5:41 pm

staythecourse wrote:
Mon Jul 09, 2018 8:55 am
Agreed. Dry powder means nothing. It is just cash.
It's such a weird expression. Why does "dry powder" mean cash?

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Re: Any Dry Powder Strategies?

Post by danielc » Mon Jul 09, 2018 5:44 pm

TheTimeLord wrote:
Mon Jul 09, 2018 9:00 am
This might help, it is the definition from Investopedia.

What is 'Dry Powder'
Dry powder is a slang term referring to marketable securities that are highly liquid and considered cash-like. Dry powder can also refer to cash reserves kept on hand by a company, venture capital firm or individual to cover future obligations, purchase assets or make acquisitions. Securities considered to be dry powder could be Treasuries or other short-term fixed income investment that can be liquidated on short notice in order to provide emergency funding or allow an investor to purchase assets.
Yeah, but where does that name come from? I'm not American. Some times I'm surprised by American slang.

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Re: Any Dry Powder Strategies?

Post by Silk McCue » Mon Jul 09, 2018 6:00 pm

danielc wrote:
Mon Jul 09, 2018 5:41 pm
staythecourse wrote:
Mon Jul 09, 2018 8:55 am
Agreed. Dry powder means nothing. It is just cash.
It's such a weird expression. Why does "dry powder" mean cash?
Google this phrase -it’s what I do when I see a reference I don’t understand.
where does the term dry powder come from
Cheers

chevca
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Re: Any Dry Powder Strategies?

Post by chevca » Mon Jul 09, 2018 6:12 pm

TheTimeLord wrote:
Mon Jul 09, 2018 3:45 pm
chevca wrote:
Mon Jul 09, 2018 2:31 pm
That's just mental gymnastics, IMO. Why do you need 2 funds? Put what you're comfortable with into an S&P 500 or TSM fund now and keep the rest in cash (actual "dry powder").
Well normally I would do TSM and then TBM for Dry Powder, thus 2 funds. This way I only have 1 fund and zero calculations on how much goes where just add the everything to Balanced Index, approximately 40% goes to Dry Powder and when I want to use the Powder I exchange Balanced Index shares for TSM shares. If it is mental gymnastics, it is simple, elegant mental gymnastics.
Well, elegance does tend to get high scores in gymnastics. :happy To each their own, and it's definitely not a bad strategy.

Are we ignoring that this seems to be a market timing strategy though? When will you feel like it's time to put it all in equities... what's the line/limit/signal to make that move?

youngpleb
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Re: Any Dry Powder Strategies?

Post by youngpleb » Mon Jul 09, 2018 6:15 pm

A fund that is 60% equities is not really "dry powder." Also, I don't have any such strategy. I like my money working as hard as possible every day for me. If it gets cut if half, that's ok. I've got the time. :beer
danielc wrote:
Mon Jul 09, 2018 5:44 pm
Yeah, but where does that name come from? I'm not American. Some times I'm surprised by American slang.
Wet gunpowder is useless, so back in the day it was always a good idea to keep a little in reserve so it would be dry and ready to go if needed for your cannon/musket/etc.
27. Always learning.

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Re: Any Dry Powder Strategies?

Post by bertilak » Mon Jul 09, 2018 6:24 pm

danielc wrote:
Mon Jul 09, 2018 5:44 pm
Yeah, but where does that name come from? I'm not American. Some times I'm surprised by American slang.
Back in the day (way back) there weren't bullets, each with their own encapsulated gun powder. Guns were primed to shoot by packing powder (hopefully dry!) down the barrel followed by a lead ball. The powder was ignited to fire the gun. Cannons were fired the same way.

This is certainly not American in origin. It is probably impossible to pin down the actual origin of the phrase but a common attribution is to Lord Cromwell of England in the 17th century: "Trust in God but keep your powder dry."

Keeping your powder dry was not a trivial exercise as wars (and hunting) tended to continue right on through the mud, the rain, the sleet and the snow. The common "dry powder" strategy was to use buffalo horn to hold one's powder and keep it dry -- a powder horn.

Here is on from the British Royal Navy:
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Re: Any Dry Powder Strategies?

Post by Rowan Oak » Mon Jul 09, 2018 6:29 pm

TheTimeLord wrote:
Mon Jul 09, 2018 8:57 am
j0nnyg1984 wrote:
Mon Jul 09, 2018 8:46 am
What a cornball term. I've only ever heard it on prepper and silver stackers forums.

My strategy for my cash is to leave it in cash.
Well Jack Bogle is older so maybe he can be a little corny at times.
Bogle: So, why would you have bonds of any type? I think nearly all investors will keep their behavior and temptation to do something in times of high market volatility. That temptation will be reduced if you have what we used to call an anchor to windward, something like that. A little dry powder might be another way of looking at it. So, it simply reduces the volatility of the portfolio--with the almost certain knowledge that it will reduce the return of your total portfolio over time. You're getting less volatility; you're going to get lower return.
Totally agree with your use of the term.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

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Rowan Oak
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Re: Any Dry Powder Strategies?

Post by Rowan Oak » Mon Jul 09, 2018 6:46 pm

Sandtrap wrote:
Mon Jul 09, 2018 3:56 pm
TheTimeLord wrote:
Mon Jul 09, 2018 3:40 pm
goblue100 wrote:
Mon Jul 09, 2018 2:50 pm
Yeah, money in equities is not "dry powder".
Of course it isn't. The dry powder is the 40% bonds in the Balance Index Fund.
Depends on "how dry".
There are degrees of "dry powder" from dry to really dry.
The fixed portion of Balanced Income Fund is "dry".
CD's or CD ladder is "drier".
Treasuries are "very very dry".
Cash in a bank account, or in hand, is the "driest".
Varying degrees of security of principal and liquidity.
j :D
Agreed. Using the Balanced Index Fund seems more like damp powder.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

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Re: Any Dry Powder Strategies?

Post by dogagility » Mon Jul 09, 2018 6:56 pm

TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Nearing retirement and feeling FI I have bottomed out my equity allocation and expect it to have a rising guide path, at least in the early years of retirement. As a results, I have more or less ended up with dry powder. My intention going forward had been to add new contributions between here and retirement to a Total Market Index fund but instead I have decided to extend my dry powder reserves using Vanguard Balanced Index and Fidelity Puritan Funds. All new contributions will go into these funds and when I feel it is time to use my dry powder I will simple exchange shares in these funds for shares in a Total Market Index or S&P 500 fund. Do any other BH have a Dry Powder strategy?
This smacks of market timing to me.

Up until your penultimate sentence, I thought you were just changing your asset allocation because of different goals/timelines. Or perhaps you were concerned about sequence-of-returns risk in early retirement. But then I read "...when I feel it is time to use my dry powder...".

To answer your question, I don't have a market timing investing strategy. YMMV.

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Re: Any Dry Powder Strategies?

Post by dknightd » Mon Jul 09, 2018 7:00 pm

I'm also close to retirement - maybe . . .
I find myself with more holdings in short term bond fund, money market fund, and guaranteed return fund, than I would normally be comfortable with. I admit, I got a little nervous and over the last year or so have been slowly moving money out of stock and into "dry powder". Basically aggressively re-balancing every month, if the S&P was more than 1% above the last time I "re-balanced", I moved 1% more out.
My plan is pretty simple. I'll use that money to replace SS income while I wait till 70 to claim. If the market drops more than 10% from when I was selling, I'll start putting some of it back into stocks. But I'll do it slowly, 1% at a time, just in case the market ends up 40% lower than when I sold. I'll start back in if it drops 10%, and keep doing it until I don't have enough cash to carry me for a few years. If it does not drop enough between now and 70, no problem, I'll spend the cash and let the stocks ride.
My plan is to always have enough cash like things to last me 2-3 years.
When I retire I'll probably use some of my funds to buy a simple annuity. When I hit 70 I'll probably buy another simple annuity that together with SS will cover my basic cost of living forever. (essentially replacing the pension our parents had)
Some might consider this a loose-loose plan. But I consider it a win-win plan.
I have some money still in stocks. I have nearly enough cash like things to cover SS while I wait to claim.
If stocks go up, great. If stocks go down, fine. Either way I'll be safe and comfortable.
By the time I claim SS at 70 I expect to be back at about a 50/50 balance, which I will probably maintain forever0.
That could happen because stocks go up, or it could happen because I was spending my cash like things. Only time will tell.
In the mean time, my basic living expenses will be covered, and likely I'll have enough for a little fun :)

This may sound like market timing, and perhaps it is. But it has been my plan all along. 60/40 during accumulation phase (looking back I should have done 70/30, or even 80/20, but that was not my plan). 30/70 after retirement and while waiting for SS to kick in. 50/50 from then on. It might also appear like fancy bookkeeping, but it is not IMO. I'm planning for the next 2 phases of my life, now till 70, then 70 onward. Two different timelines.

chevca
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Re: Any Dry Powder Strategies?

Post by chevca » Mon Jul 09, 2018 7:06 pm

That "maybe" thing is key here. We all know TImelord will never retire, since they've been "nearing retirement" for years now. So, these are mainly thought exercise threads anyway. :happy

I kid... I'm hoping Timelord does actually retire one of these years. They've earned it.

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Re: Any Dry Powder Strategies?

Post by sergeant » Mon Jul 09, 2018 7:28 pm

I don't think your plan is simple or elegant. It would be far simpler to put dry powder in a MM account. I don't think dry powder strategies are sound in increasing returns. They may help you sleep at night though.
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dknightd
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Re: Any Dry Powder Strategies?

Post by dknightd » Mon Jul 09, 2018 7:43 pm

TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Vanguard Balanced Index and Fidelity Puritan Funds.
Sorry, I should have looked before. I agree with others, these do not look like "dry powder" funds to me.

Ron Scott
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Re: Any Dry Powder Strategies?

Post by Ron Scott » Mon Jul 09, 2018 7:43 pm

TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Nearing retirement and feeling FI I have bottomed out my equity allocation and expect it to have a rising guide path, at least in the early years of retirement. As a results, I have more or less ended up with dry powder. My intention going forward had been to add new contributions between here and retirement to a Total Market Index fund but instead I have decided to extend my dry powder reserves using Vanguard Balanced Index and Fidelity Puritan Funds. All new contributions will go into these funds and when I feel it is time to use my dry powder I will simple exchange shares in these funds for shares in a Total Market Index or S&P 500 fund. Do any other BH have a Dry Powder strategy?
You're hoping to time the market properly. It's not a sin...it is what it is. But you're probably going to fail; just sayin'.

Tell us: How will you know or as you say feel it is time to buy equities with this dry powder of yours?

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Re: Any Dry Powder Strategies?

Post by whodidntante » Mon Jul 09, 2018 7:57 pm

dknightd wrote:
Mon Jul 09, 2018 7:43 pm
TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Vanguard Balanced Index and Fidelity Puritan Funds.
Sorry, I should have looked before. I agree with others, these do not look like "dry powder" funds to me.
It's more conservative than a stock index. I think that's the point.

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Re: Any Dry Powder Strategies?

Post by dknightd » Mon Jul 09, 2018 7:58 pm

Ron Scott wrote:
Mon Jul 09, 2018 7:43 pm
TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Nearing retirement and feeling FI I have bottomed out my equity allocation and expect it to have a rising guide path, at least in the early years of retirement. As a results, I have more or less ended up with dry powder. My intention going forward had been to add new contributions between here and retirement to a Total Market Index fund but instead I have decided to extend my dry powder reserves using Vanguard Balanced Index and Fidelity Puritan Funds. All new contributions will go into these funds and when I feel it is time to use my dry powder I will simple exchange shares in these funds for shares in a Total Market Index or S&P 500 fund. Do any other BH have a Dry Powder strategy?
You're hoping to time the market properly. It's not a sin...it is what it is. But you're probably going to fail; just sayin'.

Tell us: How will you know or as you say feel it is time to buy equities with this dry powder of yours?
He's a time lord, he will know ;)

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Re: Any Dry Powder Strategies?

Post by dknightd » Mon Jul 09, 2018 8:01 pm

whodidntante wrote:
Mon Jul 09, 2018 7:57 pm
dknightd wrote:
Mon Jul 09, 2018 7:43 pm
TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Vanguard Balanced Index and Fidelity Puritan Funds.
Sorry, I should have looked before. I agree with others, these do not look like "dry powder" funds to me.
It's more conservative than a stock index. I think that's the point.
Still not what I'd call dry powder YMMV

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Re: Any Dry Powder Strategies?

Post by dknightd » Mon Jul 09, 2018 8:09 pm

I gave timelord my plan for dry powder. Pretty detailed. Please pick it apart at your convenience. I've been known to change my mind.
Thanks

rgs92
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Re: Any Dry Powder Strategies?

Post by rgs92 » Mon Jul 09, 2018 8:17 pm

I see the major issue is that Fidelity Puritan is an actively managed fund with an ER of .55%, so this does not conform to Boglehead recommendations.

I have heard Cramer use the term dry powder many times (and I have heard other financial commentators use it too).
But it is seems like a form of market timing to me, also something a Boglehead avoids.

So, in short, I don't think this makes sense. Just pick a Vanguard Target fund that is on the conservative side and put everything in that.

(I think I echoed what others have said above after scrolling up a bit, so apologies for that.)

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Re: Any Dry Powder Strategies?

Post by Compound » Mon Jul 09, 2018 8:30 pm

TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Nearing retirement and feeling FI I have bottomed out my equity allocation and expect it to have a rising guide path, at least in the early years of retirement. As a results, I have more or less ended up with dry powder. My intention going forward had been to add new contributions between here and retirement to a Total Market Index fund but instead I have decided to extend my dry powder reserves using Vanguard Balanced Index and Fidelity Puritan Funds. All new contributions will go into these funds and when I feel it is time to use my dry powder I will simple exchange shares in these funds for shares in a Total Market Index or S&P 500 fund. Do any other BH have a Dry Powder strategy?
Can you provide clarification on your portfolio? Based on the above information and additional information down thread, are you suggesting you used to be 100% stocks and are now 60/40 stocks/bonds? If so, terminology aside, I applaude the derisking move. It bothers me to think of anyone, short of having a ridiculously high multiple of expected earning, being at 100% stocks going into retirement.

What is your desired asset allocation 10 years after retirement? 20? Etc. You mention an escalating glide path into a higher stock allocation at some point after retirement, but are short on details. What exactly is the plan?

(Edited a typo.)
Last edited by Compound on Mon Jul 09, 2018 8:36 pm, edited 1 time in total.

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Re: Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 8:34 pm

chevca wrote:
Mon Jul 09, 2018 6:12 pm
TheTimeLord wrote:
Mon Jul 09, 2018 3:45 pm
chevca wrote:
Mon Jul 09, 2018 2:31 pm
That's just mental gymnastics, IMO. Why do you need 2 funds? Put what you're comfortable with into an S&P 500 or TSM fund now and keep the rest in cash (actual "dry powder").
Well normally I would do TSM and then TBM for Dry Powder, thus 2 funds. This way I only have 1 fund and zero calculations on how much goes where just add the everything to Balanced Index, approximately 40% goes to Dry Powder and when I want to use the Powder I exchange Balanced Index shares for TSM shares. If it is mental gymnastics, it is simple, elegant mental gymnastics.
Well, elegance does tend to get high scores in gymnastics. :happy To each their own, and it's definitely not a bad strategy.

Are we ignoring that this seems to be a market timing strategy though? When will you feel like it's time to put it all in equities... what's the line/limit/signal to make that move?
It is 100% a market timing/risk management strategy based on the possibly flawed belief that equities aren't as risky when bought in throes of a bear market. Looking for a 30% sell off. Also, note 2 things I am only doing this with monies above and beyond what I feel I need for retirement and if I had 100% confidence in this strategy I would be using TBM instead of Balanced Index to park my excess contributions. So take with a large grain of salt and some fries.
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Re: Any Dry Powder Strategies?

Post by radiowave » Mon Jul 09, 2018 8:34 pm

Sandtrap wrote:
Mon Jul 09, 2018 3:56 pm
TheTimeLord wrote:
Mon Jul 09, 2018 3:40 pm
goblue100 wrote:
Mon Jul 09, 2018 2:50 pm
Yeah, money in equities is not "dry powder".
Of course it isn't. The dry powder is the 40% bonds in the Balance Index Fund.
Depends on "how dry".
There are degrees of "dry powder" from dry to really dry.
The fixed portion of Balanced Income Fund is "dry".
CD's or CD ladder is "drier".
Treasuries are "very very dry".
Cash in a bank account, or in hand, is the "driest".
Varying degrees of security of principal and liquidity.
j :D
Assuming dry powder is in a taxable account, where does a municipal bond fund lie in the above (e.g. Vanguard VWITX)?
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Re: Any Dry Powder Strategies?

Post by dknightd » Mon Jul 09, 2018 8:36 pm

whodidntante wrote:
Mon Jul 09, 2018 7:57 pm
dknightd wrote:
Mon Jul 09, 2018 7:43 pm
TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Vanguard Balanced Index and Fidelity Puritan Funds.
Sorry, I should have looked before. I agree with others, these do not look like "dry powder" funds to me.
It's more conservative than a stock index. I think that's the point.
I'm sorry, I do not consider a balanced fund as "dry powder". YMMV

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Re: Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 8:37 pm

sergeant wrote:
Mon Jul 09, 2018 7:28 pm
I don't think your plan is simple or elegant. It would be far simpler to put dry powder in a MM account. I don't think dry powder strategies are sound in increasing returns. They may help you sleep at night though.
FWIW, the goal is to manage risk, not increase returns.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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TheTimeLord
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Re: Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 8:41 pm

dknightd wrote:
Mon Jul 09, 2018 7:43 pm
TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Vanguard Balanced Index and Fidelity Puritan Funds.
Sorry, I should have looked before. I agree with others, these do not look like "dry powder" funds to me.
I only consider the bond portion of these funds "dry powder". The idea is instead of splitting new contributions between an equity fund and a bond fund I am using a 60/40 fund and when it comes time to deploy the "dry powder" I just exchange the 60/40 fund for shares in a 100% equity index fund.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: Any Dry Powder Strategies?

Post by TheTimeLord » Mon Jul 09, 2018 8:43 pm

Ron Scott wrote:
Mon Jul 09, 2018 7:43 pm
TheTimeLord wrote:
Mon Jul 09, 2018 8:35 am
Nearing retirement and feeling FI I have bottomed out my equity allocation and expect it to have a rising guide path, at least in the early years of retirement. As a results, I have more or less ended up with dry powder. My intention going forward had been to add new contributions between here and retirement to a Total Market Index fund but instead I have decided to extend my dry powder reserves using Vanguard Balanced Index and Fidelity Puritan Funds. All new contributions will go into these funds and when I feel it is time to use my dry powder I will simple exchange shares in these funds for shares in a Total Market Index or S&P 500 fund. Do any other BH have a Dry Powder strategy?
You're hoping to time the market properly. It's not a sin...it is what it is. But you're probably going to fail; just sayin'.

Tell us: How will you know or as you say feel it is time to buy equities with this dry powder of yours?
The average bear market pull back is something like 33% off of the high. The plan to use 30% as the trigger.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: Any Dry Powder Strategies?

Post by dknightd » Mon Jul 09, 2018 8:46 pm

TheTimeLord wrote:
Mon Jul 09, 2018 8:34 pm
Also, note 2 things I am only doing this with monies above and beyond what I feel I need for retirement and if I had 100% confidence in this strategy I would be using TBM instead of Balanced Index to park my excess contributions. So take with a large grain of salt and some fries.
If it is money above and beyond what you think you will need it does not really matter what you do with it :cheers:

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