Timing vs planning -- what would you do?

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DebiT
Posts: 121
Joined: Sat Dec 28, 2013 1:45 pm

Timing vs planning -- what would you do?

Post by DebiT » Fri Sep 21, 2018 11:42 am

We're 61, both self-employed, probably not fully retiring until 70 or close to it, because I want to wait for my SS. So no more than 9 years max of my full income earning possible; husband's could even lessen.

Nice very low 7 figure portfolio that we are still adding to, and once house is paid in 3 years will add even more to. AA is 50/50.

Been reading articles (forever) about how high the market is, etc. Saw an interesting one that end with this:
We will cut our stock allocation percentages in half when the monthly close on the 10-month simple moving average (SMA) falls below its trendline. This risk management tool is the one that helped me sidestep a huge chunk of bearish price decimation in the 2000 dot-com disaster as well as 2008's financial collapse
I'm comfortable with our basic allocation, but also want to be wise. Is this a methodology some of you in our age bracket, with large amounts of dollars at play, would be doing at this point in time? And if so, does this simply mean checking it daily/weekly?

Curious to hear answers.
Age 60, complete retirement not til 70, target is 50/50 -- Stock US 30, Intl 15, REIT 5. Bonds US 45, cash ~5

KlangFool
Posts: 10212
Joined: Sat Oct 11, 2008 12:35 pm

Re: Timing vs planning -- what would you do?

Post by KlangFool » Fri Sep 21, 2018 11:50 am

OP,

1) This is market timing. If the system works in any shape or form, the person would be retired at a beach somewhere. So, why should the person post this kind of stuff?

2) Adjust your AA based on the size of your portfolio as a multiple of your annual expense or retirement expense is the right way.

KlangFool

jayhawkerbeef
Posts: 246
Joined: Tue Jul 22, 2014 11:10 am

Re: Timing vs planning -- what would you do?

Post by jayhawkerbeef » Fri Sep 21, 2018 2:45 pm

Agree with KlangFool. If by trying the timing model, it can be hard to execute as when it’s hitting the fan your emotions can run wild.

delamer
Posts: 6138
Joined: Tue Feb 08, 2011 6:13 pm

Re: Timing vs planning -- what would you do?

Post by delamer » Fri Sep 21, 2018 3:48 pm

This is not something we are doing at roughly the same age (although much closer to retirement.). It is market timing.

This best thing you can do as you approach retirement is to get a good handle on your expected expenses and your expected income (from Social Security, pensions, investments).

The amount that you’ll need to withdraw from your investments to cover your expenses should be a major determinant of your asset allocation.

DebiT
Posts: 121
Joined: Sat Dec 28, 2013 1:45 pm

Re: Timing vs planning -- what would you do?

Post by DebiT » Fri Sep 21, 2018 4:54 pm

Thanks, I think I realized that, but once in a while, I need to hear it again
Age 60, complete retirement not til 70, target is 50/50 -- Stock US 30, Intl 15, REIT 5. Bonds US 45, cash ~5

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: Timing vs planning -- what would you do?

Post by livesoft » Fri Sep 21, 2018 5:02 pm

Nope, I'm doing nothing of the sort. I'm not even reading such articles because they are a waste of time and I have better things to do.

We are the same age, my spouse is working and I am retired. Living the dream, so no need to speculate about junk articles like the one you described.
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Mr.BB
Posts: 593
Joined: Sun May 08, 2016 10:10 am

Re: Timing vs planning -- what would you do?

Post by Mr.BB » Fri Sep 21, 2018 5:21 pm

How did you feel at the beginning of the year when the market dropped 10%? Did you want to rebalance? Did you want to buy more stocks, or did you want to run and put your head under the pillow?
Use your reaction from that 10% drop to decide what your allocation should be. If it didn't bother you or you wanted to add more to your stock holdings at that time, then you're fine. If you were panicked at that point you probably need less stocks and more bonds in your portfolio.
Last edited by Mr.BB on Fri Sep 21, 2018 5:55 pm, edited 1 time in total.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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arcticpineapplecorp.
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Joined: Tue Mar 06, 2012 9:22 pm

Re: Timing vs planning -- what would you do?

Post by arcticpineapplecorp. » Fri Sep 21, 2018 5:40 pm

DebiT wrote:
Fri Sep 21, 2018 11:42 am
We're 61, both self-employed, probably not fully retiring until 70 or close to it, because I want to wait for my SS. So no more than 9 years max of my full income earning possible; husband's could even lessen.

Nice very low 7 figure portfolio that we are still adding to, and once house is paid in 3 years will add even more to. AA is 50/50.

Been reading articles (forever) about how high the market is, etc. Saw an interesting one that end with this:
We will cut our stock allocation percentages in half when the monthly close on the 10-month simple moving average (SMA) falls below its trendline. This risk management tool is the one that helped me sidestep a huge chunk of bearish price decimation in the 2000 dot-com disaster as well as 2008's financial collapse
I'm comfortable with our basic allocation, but also want to be wise. Is this a methodology some of you in our age bracket, with large amounts of dollars at play, would be doing at this point in time? And if so, does this simply mean checking it daily/weekly?

Curious to hear answers.
Will comment on the parts in red above:

1. if you're 50/50 and you have enough to retire, you presumably have enough to last 30 years, right? (assumed 4% or less withdrawal yearly adjusted for inflation). If that's the case, when stocks "inevitably" crash, don't you have 15 years worth of spending from the fixed income part of your portfolio? (the other 50% that's not in stocks). Therefore, what's the problem with the stock portion (50%) of your portfolio declining, if you have 50% otherwise to draw from?

2. if the market has been "high" "forever" than what does anyone know since they've been saying it's overvalued for forever.

3. how does one define the "trendline" exactly? I mean in practical terms, what number would the market need to hit to be below it's "trendline" for a "10-month simple moving average". Is it possible that the market went below a "trendline" (don't know what that would be) during the past several years, yet we didn't have a "bearish price decimation"?

In fact, if you look at the following image, we see that since the bottom of the market in March 2009, there were intrayear losses of 16% (2010), 19% (2011), 10% (2012), 12% (2015), 11% (2016) and 10% (2018). Were any/all of these times when the "monthly close on the 10-month simple moving average (SMA) [fell] below its trendline"? Would these have been good times to have "cut your stock allocation in half"? I don't think so. If you did, you certainly missed out on the subsequent recovery/runup in the markets.

Market's decline intrayear on average 13.8% (back to 1980). But they recover and create gains, most often 2/3rds of the time in the past (in the same year). The message is clear. Pick an allocation that allows you to sleep at night and stay the course. Do not tinker. Do not market time.

Image

source: https://am.jpmorgan.com/blob-gim/138340 ... cale=en_US
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

DebiT
Posts: 121
Joined: Sat Dec 28, 2013 1:45 pm

Re: Timing vs planning -- what would you do?

Post by DebiT » Fri Sep 21, 2018 6:32 pm

More good responses. It's true, when the market went down 10%, I'm not sure I even noticed. I certainly didn't feel a need to sell.

And it's true, that if the market went down now or during my earning years, truly it would just be a good opportunity to rebalance and buy more. And especially after reading McClung's book on how to develop a withdrawal strategy, that even after retirement there would be plenty to live on from the bond side.

And it's true, the market tends to have its little blips. And the times when our portfolio hasn't done as well as the allocation would have predicted, were the times when I tried to be "fancy" and time the market. Pretty much failed every time, except maybe for 2000-2001.

It's just good to be reminded, especially these days when the actual dollar amounts are larger than they were, say, in 2008 (when I also didn't sell. I did cry, though, several times). I don't think I would feel measurably better at 40/60 than at 50/50, or even at 30/70. I think esp during these final earnings years, it makes most sense to stay at 50/50.

I so value this board for the accumulated wisdom. Thanks!
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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