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.
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