We won the game, went to 50/50, but it just doesn't feel right

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
relaxtothemax
Posts: 19
Joined: Tue Jan 16, 2018 10:47 am

We won the game, went to 50/50, but it just doesn't feel right

Post by relaxtothemax »

My wife and I looked at our accounts last year and decided to go for a conservative 50/50 mix.
I wanted 60/40 and she wanted 40/60 so we met in the middle.
We don't have any reason to grow our assets anymore then a 50/50 mix would.
We made the AA change around the middle of 2018.
But somehow it just doesn't seem right, I don't mean I wish I was back to 70/30 and feel like I'm missing out.
Just that lots of cash/bonds just seems wrong.
I'm not looking to change anything, just wondering if anyone has a comment to add.
Thanks for any feedback and feel free to ask for more information as needed.

added--
The reason I posted this question was because I was curious what role cash really plays in a portfolio.
I have read the following:
-- 'fixed income' portion of an asset allocation.
-- 'dry powder' which I take to mean market timing, money really meant to be invested in equities but waiting.
-- 'emergency funds' which I have read should not be part of asset allocation.
-- 'capital preservation' which could be another way of saying fear based.

Our situation is such that we really have no need for the cash and/or maybe the equity portion of our total portion.
Our spending matches our other sources of income so all the years of saving have resulted in a large portfolio which we may not need at all.
My wife really doesn't really care what our asset allocation is, she just answered the questions on a form and it came up with 40/60.
My answers came up with 60/40 so we decided on 50/50 but when I decided to look at what we really intend to do with this portfolio is when I started to question what the ideal asset allocation should be. At this time it seems probable that I will be donating all of my RMD's to charity. Our taxable account will be inherited by our son or split between him and charities. We may spend more in the future or gift some along the way. We really are happy with our level of spending. Even converting to Roth doesn't seem to make sense.

So we have considered raising the asset allocation to more aggressive to match a longer time frame for other recipients. This is why I question cash.

Our current situation is:
age 63 and 62--retired
total investments
primary home 1.5m
second home, not rented 1.3 m
taxable account 3.4 m
-- 2m in VTSAX Vanguard total stock
--700k in VTIAX Vanguard total international stock
--700k in 1 year or less T-bills
tIRA 2m
--1.5m in VTBLX Vanguard total bond
--.5m in VTABX Vanguard total international bond

Thanks again for any imput
Last edited by relaxtothemax on Sat Feb 02, 2019 9:02 pm, edited 1 time in total.
Admiral
Posts: 3013
Joined: Mon Oct 27, 2014 12:35 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Admiral »

relaxtothemax wrote: Fri Feb 01, 2019 11:36 am My wife and I looked at our accounts last year and decided to go for a conservative 50/50 mix.
I wanted 60/40 and she wanted 40/60 so we met in the middle.
We don't have any reason to grow our assets anymore then a 50/50 mix would.
We made the AA change around the middle of 2018.
But somehow it just doesn't seem right, I don't mean I wish I was back to 70/30 and feel like I'm missing out.
Just that lots of cash/bonds just seems wrong.
I'm not looking to change anything, just wondering if anyone has a comment to add.
Thanks for any feedback and feel free to ask for more information as needed.
What exactly are you missing out on, if you don't need the money? Anyway changing your AA 10% either way isn't likely to make a material difference in your life...and doubly so if you don't need the money.
livesoft
Posts: 73338
Joined: Thu Mar 01, 2007 8:00 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by livesoft »

I think normal people try to Minimize Regret in their investing. That could take the form of fear of losing money, but it can also take the form of fear of missing out on gains.

For myself, my fear of missing out on gains is stronger than my fear of losing money, so I hold zero cash and have an asset allocation that is 60/40 most of the time, but sometimes goes to 70/30 or 75/25. What works for me may not work for you. And what works for you may not work for your spouse.
Wiki This signature message sponsored by sscritic: Learn to fish.
bloom2708
Posts: 8164
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by bloom2708 »

How did you feel in December when the market was tanking?

I would expect exactly what you are feeling. No way to have it both ways and keep your asset allocation and not market time.

My parents settled on 40/60. When stocks are soaring they want to be 100/0. When stocks are tanking they want to be 0/100.

I think you picked a good mix. My guess is you are north of 50/50 if you didn't re-balance (based on the market going up in Jan).

Let it float in 5% bands and only move back to 50/50 if you get off by 5%. Or when you withdraw, use the withdrawal to move back to your mix.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
User avatar
SmileyFace
Posts: 5681
Joined: Wed Feb 19, 2014 10:11 am

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by SmileyFace »

Each time I have scaled back I have felt a bit odd about it as well (I've done it in 5% increments over the years).
After living your whole life with a more aggressive allocation, being a bit more conservative takes some getting used to.
You should feel blessed by your success! The fact you won the game is the main thing.
02nz
Posts: 5553
Joined: Wed Feb 21, 2018 3:17 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by 02nz »

bloom2708 wrote: Fri Feb 01, 2019 11:42 am How did you feel in December when the market was tanking?
+1. I'd add: did this "doesn't feel right" emerge, oh, in January 2019, when the stock market had fantastic performance?

You already decided on your asset allocation. That's not to say it can't ever change, but it sure seems you're responding to market ups and downs, as the factors that led you to the decision on 50/50 haven't changed at all.
123
Posts: 6387
Joined: Fri Oct 12, 2012 3:55 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by 123 »

If things don't feel right mabe it's time for a change. If you've got multiple accounts like his and her IRAs and/or 401Ks etc maybe you can each go your own way in your "own" account and put the common components in joint taxable accounts. Of course if the majority of the assets are in the account of one individual then that is less likely to be a workable compromise
The closest helping hand is at the end of your own arm.
28fe6
Posts: 532
Joined: Wed Jan 03, 2018 9:01 am

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by 28fe6 »

I have 20 years of accumulation left, and I'm 50-50, because I think the chances of equities outperforming bonds over the next 20 years cannot be predicted.
hudson
Posts: 3230
Joined: Fri Apr 06, 2007 9:15 am

Post by hudson »

duplicate
Last edited by hudson on Fri Feb 01, 2019 5:28 pm, edited 1 time in total.
User avatar
Artsdoctor
Posts: 4270
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Artsdoctor »

I never thought I'd sound like Suze Orman, but here it goes.

People first, money second.

If your spouse is happy at 50/50 and if this was a compromise you both made together, I wouldn't change a thing. You might want to do some research on how little a difference the 50/50 versus 60/40 asset allocation makes (the Vanguard site has several papers on this).

Do not agonize over this. Spend more quality time with your spouse.
hudson
Posts: 3230
Joined: Fri Apr 06, 2007 9:15 am

in 2012 Larry Swedroe said

Post by hudson »

If I was in your shoes, I wouldn't take any more risk; I would likely take less.
Here's what Larry Swedroe said back in 2012:

viewtopic.php?p=1372822#p1372822

William Bernstein also had a comment:

viewtopic.php?p=2908476#p2908476

and this: viewtopic.php?p=1869017#p1869017
Last edited by hudson on Fri Feb 01, 2019 12:13 pm, edited 1 time in total.
User avatar
bligh
Posts: 1314
Joined: Wed Jul 27, 2016 9:13 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by bligh »

relaxtothemax wrote: Fri Feb 01, 2019 11:36 am My wife and I looked at our accounts last year and decided to go for a conservative 50/50 mix.
I wanted 60/40 and she wanted 40/60 so we met in the middle.
We don't have any reason to grow our assets anymore then a 50/50 mix would.
We made the AA change around the middle of 2018.
But somehow it just doesn't seem right, I don't mean I wish I was back to 70/30 and feel like I'm missing out.
Just that lots of cash/bonds just seems wrong.
I'm not looking to change anything, just wondering if anyone has a comment to add.
Thanks for any feedback and feel free to ask for more information as needed.
If the market were to drop 20% like it did at the end of last year you'll feel great holding those cash/bonds.

I think it is normal to wish you had tilted more into stocks when the market is going up, and wish you had tilted more into bonds when the market is going down. Just stay the course. It sounded like you wanted to go more aggressive, your wife wanted to go more conservative and the two of your compromised on something that was a just a tad bit more conservative than you'd like, and a tad bit more aggressive than she would like. In other words, it will feel just a tad bit wrong to both of you. :)

Having said that, if you felt like you had too much in cash/bonds even as the market was tanking a couple of months back, then you should revisit the conversation with your spouse and see if you can make a stronger case for 60/40. If not, then stick with the compromise. It isn't like you are making a big financial mistake holding it or anything. It is pretty much a middle the road AA for someone who has won the game (based on the recommendations I have seen on this board).
brainstem
Posts: 428
Joined: Mon Aug 20, 2007 5:11 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by brainstem »

Remember Jack Bogle's comment in the last few months:
Half the time I think I am in too much equity, half the time I think I am in too little.... so I must be close to the right allocation.
livesoft
Posts: 73338
Joined: Thu Mar 01, 2007 8:00 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by livesoft »

bloom2708 wrote: Fri Feb 01, 2019 11:42 amMy parents settled on 40/60. When stocks are soaring they want to be 100/0. When stocks are tanking they want to be 0/100.
Interesting that I am different. When stocks are soaring, I am happy to stick to 60/40. After stocks have tanked, I want to be 75/25. I think to myself after a big drop in the stock market, "My bond funds have just missed a big drop in the stock market."
Wiki This signature message sponsored by sscritic: Learn to fish.
bloom2708
Posts: 8164
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by bloom2708 »

livesoft wrote: Fri Feb 01, 2019 12:15 pm
bloom2708 wrote: Fri Feb 01, 2019 11:42 amMy parents settled on 40/60. When stocks are soaring they want to be 100/0. When stocks are tanking they want to be 0/100.
Interesting that I am different. When stocks are soaring, I am happy to stick to 60/40. After stocks have tanked, I want to be 75/25. I think to myself after a big drop in the stock market, "My bond funds have just missed a big drop in the stock market."
Market timing for your "lack of market timing" feelings. I get it. Have more stocks just after the big dip and before the big run ups. If one could only know...
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
KyleAAA
Posts: 8553
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by KyleAAA »

My wife is also more conservative than me and our compromise is more conservative than I would like. But it's better than if one of us won out and caused the other unnecessary worry. Besides, is 50% in bonds REALLY that big of a jump from 40%? You might miss out on 0.5-1% per year in long-term returns, but at the benefit of less volatility.
livesoft
Posts: 73338
Joined: Thu Mar 01, 2007 8:00 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by livesoft »

bloom2708 wrote: Fri Feb 01, 2019 12:21 pm Have more stocks just after the big dip and before the big run ups. If one could only know...
I don't care so much about big run-ups. I can see that a big dip has happened because it is right there in my face. And I did this in 2008-2009 as well. But I can also see big run-ups after they happen as well.
Wiki This signature message sponsored by sscritic: Learn to fish.
MiddleOfTheRoad
Posts: 305
Joined: Fri Jul 21, 2017 11:19 am

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by MiddleOfTheRoad »

Ok, I want to confess that I cannot kill the market timer in me. In my IPS I have the following:

1. AA 75/25
2. Rebalance every 10% drop of VTI
3. When VTI is down 30% or more from all time high, go to 90/10
4. When VTI is back to 90% of all time high, go back to 75/25 and stay there

Disclaimer: I may have too much faith in the long term prospect of the stock market. I have 15% international, but I base the above rules on VTI. I did rebalance in late December.
Topic Author
relaxtothemax
Posts: 19
Joined: Tue Jan 16, 2018 10:47 am

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by relaxtothemax »

Thanks for all the replies, all good comments, that's what I love about this community.
I will not be changing anything but after taking more risk during our earning years it is difficult to adjust, just like retiring.
It seems our cash/bond position should be doing something, sort of like how I can't be idle just because I'm retired.
User avatar
galeno
Posts: 2107
Joined: Fri Dec 21, 2007 12:06 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by galeno »

Exact same situation here. For our retirement wife (and daughter) wanted 40/60. I wanted 60/40. We went with 40/60 in 2015 right before we retired. Was 80/20 from 1986-2005. Went to 60/40 2006-2015. Now at 40/60 2016-present.

At first I hated it. 40/60 just seemed too "underpowered".

Three years later I love it. It's an easy smooth ride.

It's so much easier and relaxing playing defense.
KISS & STC.
User avatar
Watty
Posts: 20646
Joined: Wed Oct 10, 2007 3:55 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Watty »

relaxtothemax wrote: Fri Feb 01, 2019 11:36 am and feel free to ask for more information as needed.
It matters a lot if you are 45 or 75. How old are you?

There are a lot of threads like this one on author Bill Bernstein's opinion that if you have won the game that you should stop playing.

viewtopic.php?t=237297

I do not know that I agree with it but a reasonable case can be made for his idea that if you have a large retirement account where taxes are not an issue then you could just put 30 years expenses into a ladder of individual TIPS and be fine.

This could also be part of your normal asset allocation since the individual tips would count as bonds in your normal 50/50(or whatever) asset allocation.
User avatar
Nestegg_User
Posts: 1546
Joined: Wed Aug 05, 2009 1:26 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Nestegg_User »

relaxtothemax wrote: Fri Feb 01, 2019 12:30 pm Thanks for all the replies, all good comments, that's what I love about this community.
I will not be changing anything but after taking more risk during our earning years it is difficult to adjust, just like retiring.
It seems our cash/bond position should be doing something, sort of like how I can't be idle just because I'm retired.

wrong user name??


[ for us, 45% equities....but we also have a pension, haven't yet started SS (but eligible); base on max of 3.5% WR ]
RadAudit
Posts: 3914
Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by RadAudit »

relaxtothemax wrote: Fri Feb 01, 2019 11:36 am I'm not looking to change anything, just wondering if anyone has a comment to add.
Thanks for any feedback and feel free to ask for more information as needed.
Comments I have.

You didn't state your age. I'm about 72. My AA is ~50 / ~50. The fun begins when you are in the decumulation phase of life, have to take RMDs, and the market tanks. About then, the lots of cash / bonds feels a lot better - as long as you can figure how long those cash / bonds will support the necessary withdrawals from the portfolio. Edit: Or, you can calculate the joint probability that the portfolio will run out before both you and your DW transition. That tends to put things in a different perspective.
Last edited by RadAudit on Fri Feb 01, 2019 1:10 pm, edited 1 time in total.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.
User avatar
bertilak
Posts: 7837
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by bertilak »

Harry Markowitz won the Nobel Prize for exploring the mathematical tradeoff between risk and return. A few years ago the Wall Street Journal asked him how, given his work, he structured his own portfolio. He replied:
  • I visualized my grief if the stock market went way up and I wasn’t in it – or if it went way down and I was completely in it. My intention was to minimize my future regret. So I split my contributions 50/50 between bonds and equities.
-- Morgan Housel, a partner at Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal, quoting Markowitz. https://www.collaborativefund.com/blog/ ... 247fbe7c95

I came to the same 50/50 for about the same reason. Think of it as two 100% portfolios. Whatever happens, one or the other will look like an act of genius and the other will probably not do too bad.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
User avatar
Doom&Gloom
Posts: 3576
Joined: Thu May 08, 2014 3:36 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Doom&Gloom »

DaftInvestor wrote: Fri Feb 01, 2019 11:44 am Each time I have scaled back I have felt a bit odd about it as well (I've done it in 5% increments over the years).
After living your whole life with a more aggressive allocation, being a bit more conservative takes some getting used to.
You should feel blessed by your success! The fact you won the game is the main thing.
+1

Each step becomes progressively more boring in a way. But that is the way it is designed to be.
User avatar
HomerJ
Posts: 15151
Joined: Fri Jun 06, 2008 12:50 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by HomerJ »

I'm 50/50, which means I'm never wrong.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
dbr
Posts: 33842
Joined: Sun Mar 04, 2007 9:50 am

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by dbr »

If it doesn't feel right then you need to go back a step and think more about what you are actually trying to do.
User avatar
alpine_boglehead
Posts: 409
Joined: Fri Feb 17, 2017 9:51 am
Location: Austria

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by alpine_boglehead »

It's understandable that a change from something you felt right about for a long time isn't easy.

Put a 50/50 and a 70/30 allocation into portfoliovisualizer.com (e.g. US stock market and intermediate term treasuries) since 1972. You'll be surprised how very little difference there is in the annual return (CAGR).

This is of course dependent on the selected time frame, you're starting with high interest rates, so there was a significant tail wind from the bonds in the portfolio.

Here's a link to the analysis.

It's 9.04% vs 9.63% CAGR for 50/50 vs 70/30 ($588k vs $758k end balance starting from $10k from 1972 to 2019). Really surprising for myself, too. That also makes me feel less bad about the bonds in my portfolio. Relax and enjoy your good fortune :beer
Last edited by alpine_boglehead on Fri Feb 01, 2019 1:24 pm, edited 1 time in total.
User avatar
Sandtrap
Posts: 11737
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Sandtrap »

relaxtothemax wrote: Fri Feb 01, 2019 11:36 am My wife and I looked at our accounts last year and decided to go for a conservative 50/50 mix.
I wanted 60/40 and she wanted 40/60 so we met in the middle.
We don't have any reason to grow our assets anymore then a 50/50 mix would.
We made the AA change around the middle of 2018.
But somehow it just doesn't seem right, I don't mean I wish I was back to 70/30 and feel like I'm missing out.
Just that lots of cash/bonds just seems wrong.
I'm not looking to change anything, just wondering if anyone has a comment to add.
Thanks for any feedback and feel free to ask for more information as needed.
Precisely, why does it "feel wrong"???? :shock:

curious. . please define this.

How about posting a portfolio review for input based on a more comprehensive look at actionable data.
Here's the format:
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212
(try it, you can edit your original post to include it: use the pencil icon)

Some tools that might help you.
ONLINE FINANCIAL TOOLS
PORFOLIO VISUALIZERS, PROJECTIONS, AND ANALYSIS
https://www.portfoliovisualizer.com
Firecalc. Retirement. How long will your money last?
https://www.firecalc.com
Morningstar Instant Xray
http://www.morningstar.com/portfolio.ht ... Entry.aspx
Optimal Retirement Planner (I-ORP)
https://www.i-orp.com/paper/index.html

aloha
j
Wiki Bogleheads Wiki: Everything You Need to Know
User avatar
Clever_Username
Posts: 1748
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Clever_Username »

relaxtothemax wrote: Fri Feb 01, 2019 12:30 pm It seems our cash/bond position should be doing something, sort of like how I can't be idle just because I'm retired.
Your cash/bond position is doing something, though, isn't it?
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.
jnet2000
Posts: 320
Joined: Tue Mar 19, 2013 4:22 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by jnet2000 »

We went to a 50/50 mix when we were in our late 30s. Now in our 40s still seems right for us. We plan to stay there for another 20 years.
"You really don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing" Warren Buffet
User avatar
gmaynardkrebs
Posts: 2128
Joined: Sun Feb 10, 2008 11:48 am

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by gmaynardkrebs »

You have the gambling instinct, which Keynes celebrated.
User avatar
Socrates
Posts: 477
Joined: Sun May 13, 2018 10:27 pm
Location: Margaritaville

depends really on timeline

Post by Socrates »

I loved the December dip......I am 52, but bought up. I have 20 plus years. If you have a shorter timeline, I would be more in a preservation mode.
“Don't waste your time looking back. You're not going that way.” ― Ragnar Lothbrok.
User avatar
HomerJ
Posts: 15151
Joined: Fri Jun 06, 2008 12:50 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by HomerJ »

relaxtothemax wrote: Fri Feb 01, 2019 11:36 am My wife and I looked at our accounts last year and decided to go for a conservative 50/50 mix.
I wanted 60/40 and she wanted 40/60 so we met in the middle.
We don't have any reason to grow our assets anymore then a 50/50 mix would.
We made the AA change around the middle of 2018.
But somehow it just doesn't seem right, I don't mean I wish I was back to 70/30 and feel like I'm missing out.
Just that lots of cash/bonds just seems wrong.
I'm not looking to change anything, just wondering if anyone has a comment to add.
Thanks for any feedback and feel free to ask for more information as needed.
I do find it interesting that you felt this way if you changed in the middle of 2018.

I would have thought you would have been super happy the last few months of 2018, watching your hard-earned retirement portfolio only go down 10% instead of 14%. I mean I'm guessing that's a ton of actual dollars we're talking about.

I mean, why do you feel like you're missing out? Even after the gains of January, currently you've haven't missed out on anything. Stock market has gained like 3% starting from June of 2018, and it's still DOWN 1% starting from July of 2018.

So why do you feel like you're missing out? Since you made the change, the stock market hasn't done anything.
Last edited by HomerJ on Fri Feb 01, 2019 1:40 pm, edited 1 time in total.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
User avatar
HomerJ
Posts: 15151
Joined: Fri Jun 06, 2008 12:50 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by HomerJ »

Clever_Username wrote: Fri Feb 01, 2019 1:26 pm
relaxtothemax wrote: Fri Feb 01, 2019 12:30 pm It seems our cash/bond position should be doing something, sort of like how I can't be idle just because I'm retired.
Your cash/bond position is doing something, though, isn't it?
This. CDs have returned almost as much as the stock market since the "middle of 2018" (when the OP changed to 50/50)
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
J295
Posts: 2590
Joined: Sun Jan 01, 2012 11:40 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by J295 »

... doesn't feel right." (emphasis added).

Respectfully, feelings have nothing to do with choosing an AA or implementing an IPS. Do you have an IPS? Our IPS is simple, but helpful. Early retirees with an age based AA. You may wish to consider developing an IPS with an AA acceptable to you and your spouse (and something the survivor can keep on autopilot upon death of first spouse).

Best of luck.
User avatar
gmaynardkrebs
Posts: 2128
Joined: Sun Feb 10, 2008 11:48 am

Re: depends really on timeline

Post by gmaynardkrebs »

deleted
Last edited by gmaynardkrebs on Fri Feb 01, 2019 2:03 pm, edited 1 time in total.
User avatar
tadamsmar
Posts: 9077
Joined: Mon May 07, 2007 12:33 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by tadamsmar »

relaxtothemax wrote: Fri Feb 01, 2019 11:36 am I don't mean I wish I was back to 70/30 and feel like I'm missing out.
You are missing out on something. You are missing out on the consequences of defying your wife!

I suppose you could both just do your own thing with your individual accounts.
zubinh
Posts: 60
Joined: Fri Jan 11, 2019 10:13 am
Location: NY

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by zubinh »

Hmmm...something tells me this would not have been posted in December.... :happy
2015
Posts: 2906
Joined: Mon Feb 10, 2014 2:32 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by 2015 »

Would you feel any differently if it were October 2008?
Jack FFR1846
Posts: 12632
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Jack FFR1846 »

I went with age minus 10 in bonds till I hit 60. Then, at 50/50, I decided to stick right there. Now when bonds go up, I say "Yay!" because my bonds went up. When equities go up, I say "Yay!" because my equities went up.

Win/win.
Bogle: Smart Beta is stupid
User avatar
siamond
Posts: 5560
Joined: Mon May 28, 2012 5:50 am

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by siamond »

Contrary to most posters here, I do not believe the OP is reacting to current market conditions. I think he primarily has lingering issues about compromising to 50/50 while he was deeply convinced that 60/40 was the right thing to do. Which I personally would not disagree with as a sound starting point for retirement asset allocation, as recommended by the old sage Peter Bernstein (and as can be easily validated by running various types of backtesting tools). This being said, this all depends on personal circumstances, including behavioral aspects in addition to numerical aspects. And of course, a truly solid agreement between spouses (which I suspect was missing to start with).

OP, let me suggest the following procedure. Step back from the decision making about your asset allocation. Identify your top 3 financial goals (for the rest of your life). Identify your top-3 financial fears. Ask your wife to INDEPENDENTLY do the same. Then compare notes and have a good in-depth discussion, trying really hard to understand what the other is trying to express. It is not a matter of deciding who's right or wrong, it is a matter of developing a deep understanding of both perspectives. Mull over this for a month or two while discussing again every now and then. Once you both have done enough chewing on this, take the SUM of the inputs (goals and fears), come back to your asset allocation and it should be easier to reach a more solid compromise that you both truly agree on. I don't know what will be the outcome, but I believe you will be on more solid ground if you go through the process in earnest. Oh, and I'd suggest you put in writing the essence of the discussion (e.g. in your IPS), this will help next time you have doubts.
book lover
Posts: 177
Joined: Thu Aug 23, 2012 4:01 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by book lover »

If you have won, why run up the score?
Barsoom
Posts: 331
Joined: Thu Dec 06, 2018 9:40 am

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Barsoom »

There was a book that came out a few years ago called "Living Off Your Money" by Michael McClung. He studied many retirement drawdown strategies (as opposed to accumulation strategies) and made a recommendation for maximizing annual withdrawals while minimizing the risk of running out of money.

In short, his strategy was to have a 50/50 allocation, only withdraw from your bonds for income, let the equity portion accumulate (or shrink) on its own, and only sell stocks when they reach 20% growth. Then move the growth into bonds and repeat. Only sell stocks when bonds run out, and never buy more stocks except for dividend reinvestment.

I only found this book last month and bought the PDF version. The first three chapters are free to whet your appetite.

Here is the rather long discussion thread about this book: viewtopic.php?t=192105. Most people were impressed with the book, felt the research added much to a badly needed area of focus (decumulation in retirement), but were skeptical if it really added more benefit over the BH strategy.

The thread is worth the read, if you're not interested in the book itself.

-B
02nz
Posts: 5553
Joined: Wed Feb 21, 2018 3:17 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by 02nz »

Barsoom wrote: Fri Feb 01, 2019 2:32 pm There was a book that came out a few years ago called "Living Off Your Money" by Michael McClung. He studied many retirement drawdown strategies (as opposed to accumulation strategies) and made a recommendation for maximizing annual withdrawals while minimizing the risk of running out of money.

In short, his strategy was to have a 50/50 allocation, only withdraw from your bonds for income, let the equity portion accumulate (or shrink) on its own, and only sell stocks when they reach 20% growth. Then move the growth into bonds and repeat. Only sell stocks when bonds run out, and never buy more stocks except for dividend reinvestment.

I only found this book last month and bought the PDF version. The first three chapters are free to whet your appetite.

Here is the rather long discussion thread about this book: viewtopic.php?t=192105. Most people were impressed with the book, felt the research added much to a badly needed area of focus (decumulation in retirement), but were skeptical if it really added more benefit over the BH strategy.

The thread is worth the read, if you're not interested in the book itself.

-B
The excellent Early Retirement Now series on withdrawal rates includes a detailed look at McClung's prime harvesting method, including a (slight) refinement. The whole series is worth reading.

https://earlyretirementnow.com/2017/04/ ... arvesting/
Barsoom
Posts: 331
Joined: Thu Dec 06, 2018 9:40 am

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Barsoom »

02nz wrote: Fri Feb 01, 2019 2:36 pm The excellent Early Retirement Now series on withdrawal rates includes a detailed look at McClung's prime harvesting method, including a (slight) refinement. The whole series is worth reading.

https://earlyretirementnow.com/2017/04/ ... arvesting/
Thanks. I'm going to look at that right now.

-B
2015
Posts: 2906
Joined: Mon Feb 10, 2014 2:32 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by 2015 »

siamond wrote: Fri Feb 01, 2019 2:30 pm Contrary to most posters here, I do not believe the OP is reacting to current market conditions. I think he primarily has lingering issues about compromising to 50/50 while he was deeply convinced that 60/40 was the right thing to do. Which I personally would not disagree with as a sound starting point for retirement asset allocation, as recommended by the old sage Peter Bernstein (and as can be easily validated by running various types of backtesting tools). This being said, this all depends on personal circumstances, including behavioral aspects in addition to numerical aspects. And of course, a truly solid agreement between spouses (which I suspect was missing to start with).
...
I'm sorry but I just cannot agree with this. The human mind is so full of blind spots I don't see how it's possible to partition unconscious psychological/emotional reaction to current market conditions out of the decision making process consideration, regardless of personal circumstances. It's much easier to think a 60/40 asset allocation was the right thing to do during a bull market than during a crash.
dbr
Posts: 33842
Joined: Sun Mar 04, 2007 9:50 am

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by dbr »

siamond wrote: Fri Feb 01, 2019 2:30 pm Contrary to most posters here, I do not believe the OP is reacting to current market conditions. I think he primarily has lingering issues about compromising to 50/50 while he was deeply convinced that 60/40 was the right thing to do. Which I personally would not disagree with as a sound starting point for retirement asset allocation, as recommended by the old sage Peter Bernstein (and as can be easily validated by running various types of backtesting tools). This being said, this all depends on personal circumstances, including behavioral aspects in addition to numerical aspects. And of course, a truly solid agreement between spouses (which I suspect was missing to start with).

OP, let me suggest the following procedure. Step back from the decision making about your asset allocation. Identify your top 3 financial goals (for the rest of your life). Identify your top-3 financial fears. Ask your wife to INDEPENDENTLY do the same. Then compare notes and have a good in-depth discussion, trying really hard to understand what the other is trying to express. It is not a matter of deciding who's right or wrong, it is a matter of developing a deep understanding of both perspectives. Mull over this for a month or two while discussing again every now and then. Once you both have done enough chewing on this, take the SUM of the inputs (goals and fears), come back to your asset allocation and it should be easier to reach a more solid compromise that you both truly agree on. I don't know what will be the outcome, but I believe you will be on more solid ground if you go through the process in earnest. Oh, and I'd suggest you put in writing the essence of the discussion (e.g. in your IPS), this will help next time you have doubts.
I agree. When one is uncomfortable the first step is to understand why, what is the source of it. We here can only speculate and the OP hasn't said. Maybe he doesn't know.
WhiteMaxima
Posts: 2151
Joined: Thu May 19, 2016 5:04 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by WhiteMaxima »

depend on your age and how many years to invest. If you won the game, just keep the score. Don't lose the game if the the stock market take a 50% cut like 1929 and 2008. 50/50 is perfect. aggressive but still defensive.
02nz
Posts: 5553
Joined: Wed Feb 21, 2018 3:17 pm

Re: We won the game, went to 50/50, but it just doesn't feel right

Post by 02nz »

siamond wrote: Fri Feb 01, 2019 2:30 pm I think he primarily has lingering issues about compromising to 50/50 while he was deeply convinced that 60/40 was the right thing to do.
Up to OP to chime in. One can be deeply convinced about a lot of things. But 50/50 vs 60/40? Hardly any difference in the big scheme of things. Barely worth a forum thread, definitely not worth a disagreement with a spouse. And call me cynical but I don't think it's entirely a coincidence OP posted this on Feb 1, right after all the articles about the best January for stocks in 30 years.
Post Reply