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

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

Post by One Ping »

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.
I hear you, but the time when your cash/bond position will do something is during the next major drop/bear market. It will dampen the damage and help preserve your account balance.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by dbr »

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.
If you really think that, then you should not own any bonds. At the same time you should go back and rethink if that is really what you want with all the consequences involved. Everything comes back to what you want. It may be the missing information is not being clear as to the consequences. "Doing something" is an awfully vague objective.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by stemikger »

You could always do the bucket approach and have part of your portfolio more aggressive. Just a thought.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by bertilak »

stemikger wrote: Fri Feb 01, 2019 5:59 pm You could always do the bucket approach and have part of your portfolio more aggressive. Just a thought.
If they own both stocks and bonds then part of the portfolio IS more aggressive, bucket or no bucket.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by bertilak »

bertilak wrote: Fri Feb 01, 2019 6:01 pm
stemikger wrote: Fri Feb 01, 2019 5:59 pm You could always do the bucket approach and have part of your portfolio more aggressive. Just a thought.
With a 50/50 portfolio, half of the portfolio IS more aggressive, bucket or no bucket.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by dknightd »

The difference between 60/40 and 40/60 is not really that big. 50/50 seems a reasonable compromise. That is what we intend for our forever AA. We are currently 25/75. But part of the 75 will be used to buy an SPIA, and part to get me to 70 when I claim SS. By then we'll be roughly 50/50.

Maybe you are confusing the 50/50 ratio with the transition from being spenders not savers. I know for us taking money out every month instead of putting money in every month will not feel quite right. But that is what we saved for, so, I assume we will adjust . . .

Edit: by 70 I expect SS and SPIA to cover our comfortable enough living expenses. The 50/50 will be used for extras ;)
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by The Wizard »

book lover wrote: Fri Feb 01, 2019 2:32 pm If you have won, why run up the score?
Winning big is better than just scraping by?
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dbr
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by dbr »

The Wizard wrote: Fri Feb 01, 2019 6:17 pm
book lover wrote: Fri Feb 01, 2019 2:32 pm If you have won, why run up the score?
Winning big is better than just scraping by?
Yes, actually that could be true . . . but
in fact it isn't a game and there isn't any winning involved. You pay your money, you look at the prospective consequences, and you take your choice.

I think the debate is in how well people understand the consequences and how well people understand what they want to do.
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relaxtothemax
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by relaxtothemax »

Watty wrote: Fri Feb 01, 2019 12:39 pm
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.
We are 63 and 62, retired, DW has a teacher's pension and I will take SS at age 70.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by The Wizard »

When I retired in 2013, I also was about 50% stock funds.
My reason was to reduce volatility during the first seven years of retirement leading up to starting SS at age 70 in 2020.

Things have done okay financially over the past six years and I'm no longer particularly concerned about a major crash prior to March, 2020.
So I've let my stock fund percentage drift upward to around 60% at present.

My 40% of non-stock holdings actually contains zero bond funds, CDs, or "cash".
It's all in TIAA Traditional and TREA...
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by sergeant »

It doesn't always feel right to order healthy food when my friends are eating pastrami sandwiches. It doesn't always feel right to only have one beer when others are drinking more. It doesn't always feel right to wake up early and exercise when others are sleeping in or lounging in front of the TV. 50/50 is certainly an appropriate AA for a couple in your situation. As others have said a 10% or greater allocation to equities does not move the needle much.
AA- 20+ Years of Expenses Fixed Income/The remainder in Equities.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Broken Man 1999 »

OP, I have sometimes felt our 50/50 AA was not aggressive enough. I maintained a higher AA until a few years ago. Honestly, I was astounded by the growth in our portfolio, heck, I was loving seeing our portfolio growing so much. But I also had read lots of articles about the sequence of returns, basically what could happen to an investor right when they were at, or within a whisker of retirement.

So, to counter the sequence of returns issue I moved into our current AA of 50% Equities/ 50% Bonds.

However, even with a reduced allocation to equities, Mr Market was/is still adding to our portfolio more $$ than we were removing over the last couple of years. So, maybe I could have stayed at a higher equity position a bit longer, BUT maybe I could have suffered a very large decline of portfolio value.

In the great meltdown of 2008/2009 I continued buying equities, and earlier I had added a fair amount of I-bonds in the time they were paying 3%-3.6% + inflation adjustment, but I didn't have a large percentage of bonds overall at all.

At that period in time, I had the knowledge I had a good pension waiting for me. So, I could afford to be more aggressive, and I was. But when I received my lump sum pension, I knew that was it for "new" money, so I dialed our AA back. Instead of a monthly check received, now a $ spent had to come from our portfolio. Outflows just aren't as fun as inflows.

We had won the game, and frankly I didn't want to lose what had taken all our working life to accumulate. There would be no time to regroup, and overcome a large loss. Our financial stability could have been negatively impacted for years. That possibility just wasn't one I was willing to endure.

A 50/50 AA gives us the stability to weather years of market declines and perhaps years of waiting for the market to recover. It seems foolish to risk so much, when we have what we need. So, we don't.

I predict over the next few years you will come to appreciate your less aggressive AA. And, if the market keeps chugging along and rising, well, you are still going to get the growth on half of your portfolio.

Broken Man 1999
Last edited by Broken Man 1999 on Fri Feb 01, 2019 6:47 pm, edited 1 time in total.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by goodenyou »

I would bet that when you look at how much difference 10% made in your AA, I would bet it wouldn't be that much. That may comfort your FOMO. Maybe you could convince her to go 55/45. What I did, right or wrong, is increase my stock exposure and decrease my FI risk by reducing the duration. I also hold a cash (Prime MM) position at 2.5% yield.
Last edited by goodenyou on Fri Feb 01, 2019 6:50 pm, edited 1 time in total.
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relaxtothemax
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by relaxtothemax »

Sandtrap wrote: Fri Feb 01, 2019 1:23 pm
relaxtothemax wrote: Fri Feb 01, 2019 11:36 am
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.
Good question, I believe it is because I'm having a hard time seeing the bond/cash allocation for what it is. Just part of an asset allocation. Even when we were at 60/40 (or even 70/30) I had the same sense until the market corrected. I know it plays a part toward stability but just can't seem to let go of the 'investment' part of it
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by One Ping »

The Wizard wrote: Fri Feb 01, 2019 6:17 pm
book lover wrote: Fri Feb 01, 2019 2:32 pm If you have won, why run up the score?
Winning big is better than just scraping by?
That's what makes it a game to some people.

If you have more money than you'll ever need (i.e., you've won the game), what difference does it make if you have 2x that? or 3x, or 5x, or 10x? It's like during the depths of the cold war ... once you have enough nuclear weapons to wipe out the whole human race, what do you need with 2x that many weapons, much less 10x or 50x. :shock: Truly MAD.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by dknightd »

I think I have this figured out. Invest your part 60/40. Invest her part 40/60. Or just do 50/50 smile and be happy :)
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Clever_Username »

One Ping wrote: Fri Feb 01, 2019 7:04 pm
The Wizard wrote: Fri Feb 01, 2019 6:17 pm
book lover wrote: Fri Feb 01, 2019 2:32 pm If you have won, why run up the score?
Winning big is better than just scraping by?
That's what makes it a game to some people.

If you have more money than you'll ever need (i.e., you've won the game), what difference does it make if you have 2x that? or 3x, or 5x, or 10x? It's like during the depths of the cold war ... once you have enough nuclear weapons to wipe out the whole human race, what do you need with 2x that many weapons, much less 10x or 50x. :shock: Truly MAD.
Not sure I agree with the analogy; had the cold war gone hot, not every weapon would be detonated. Some could fail to launch, or be shot down, or not even get a chance to launch. Plus there's always the risk that someone's secret silent propulsion submarine gets stolen by its captain who they thought was loyal to them, but he really blames his wife's death on...

... anyway, back to finances. Some of us have different definitions of winning the game. For me, 25x expenses is winning the game, but I might be more comfortable with a higher multiple to give me a lower chance of running out, even with a bad sequence of returns. So I might be interested in running up the score. Unrelated to nuclear war or finances, two years ago at about this time, the Falcons thought a 28-3 lead was safe, for example.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by siamond »

dknightd wrote: Fri Feb 01, 2019 7:15 pm I think I have this figured out. Invest your part 60/40. Invest her part 40/60. Or just do 50/50 smile and be happy :)
Brilliant! :beer
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by One Ping »

Clever_Username wrote: Fri Feb 01, 2019 7:17 pm
One Ping wrote: Fri Feb 01, 2019 7:04 pm
The Wizard wrote: Fri Feb 01, 2019 6:17 pm
book lover wrote: Fri Feb 01, 2019 2:32 pm If you have won, why run up the score?
Winning big is better than just scraping by?
That's what makes it a game to some people.

If you have more money than you'll ever need (i.e., you've won the game), what difference does it make if you have 2x that? or 3x, or 5x, or 10x? It's like during the depths of the cold war ... once you have enough nuclear weapons to wipe out the whole human race, what do you need with 2x that many weapons, much less 10x or 50x. :shock: Truly MAD.
Not sure I agree with the analogy; had the cold war gone hot, not every weapon would be detonated. Some could fail to launch, or be shot down, or not even get a chance to launch. Plus there's always the risk that someone's secret silent propulsion submarine gets stolen by its captain who they thought was loyal to them, but he really blames his wife's death on...
Touche! :twisted:
I think it still holds though, because if you want to play and win 'global thermonuclear war' (hat tip to Mathew Broderick) all those contingencies should be taken into account when calculating your 'overkill' ratio. One rogue captain notwithstanding (who couldn't really wipe out humanity by himself anyway).
Clever_Username wrote: Fri Feb 01, 2019 7:17 pm ... anyway, back to finances. Some of us have different definitions of winning the game. For me, 25x expenses is winning the game, but I might be more comfortable with a higher multiple to give me a lower chance of running out, even with a bad sequence of returns. So I might be interested in running up the score. Unrelated to nuclear war or finances, two years ago at about this time, the Falcons thought a 28-3 lead was safe, for example.
Yes, but then they hadn't truly won the game, had they ... :wink:
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by White Coat Investor »

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.
The right asset allocation is when your fear of loss is precisely balanced out by your fear of missing out on gains.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by knpstr »

One Ping wrote: Fri Feb 01, 2019 7:04 pm
The Wizard wrote: Fri Feb 01, 2019 6:17 pm
book lover wrote: Fri Feb 01, 2019 2:32 pm If you have won, why run up the score?
Winning big is better than just scraping by?
That's what makes it a game to some people.

If you have more money than you'll ever need (i.e., you've won the game), what difference does it make if you have 2x that? or 3x, or 5x, or 10x? It's like during the depths of the cold war ... once you have enough nuclear weapons to wipe out the whole human race, what do you need with 2x that many weapons, much less 10x or 50x. :shock: Truly MAD.

Yes, but then they hadn't truly won the game, had they ... :wink:
People always say "giving" is the most satisfying way to "spend" money.
If nothing else, run up the score and donate it to charities in your community or ones worldwide that you care about it.

No retiree knows if they truly won the game either. The game doesn't end for anyone until their clock has run out.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by CaliJim »

How do you react in deep bear markets? How did you the great recession of 2007-2008. Do you have the stomach for a 25% loss in equity valuations?
We may be in a similar situation as you, and I know I sleep better with a more conservative allocation 45/55 and perhaps too much (for many hardy stomachs) in short term money market e-fund.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by 02nz »

White Coat Investor wrote: Fri Feb 01, 2019 7:26 pm
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.
The right asset allocation is when your fear of loss is precisely balanced out by your fear of missing out on gains.
True, but OP's problem was that there's no way to balance the fear of loss in December 2018 with the fear of missing out on gains in January 2019.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by dknightd »

siamond wrote: Fri Feb 01, 2019 7:21 pm
dknightd wrote: Fri Feb 01, 2019 7:15 pm I think I have this figured out. Invest your part 60/40. Invest her part 40/60. Or just do 50/50 smile and be happy :)
Brilliant! :beer
Thanks. I have my moments :beer
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by tooluser »

siamond wrote: Fri Feb 01, 2019 2:30 pm 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 think this is fantastic advice, even for single people with no significant other (the "comparing of notes" portion will probably proceed faster).
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by tibbitts »

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.
Where did the cash come from? 50/50 could be 50% stock, 25% high yield bonds, 25% EM bonds. It would meet the letter, though possibly not the spirit, of the compromise.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Island John »

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
+1

McClung's book is impressively detailed and well thought out. If you're having misgivings about your asset allocation, harvesting strategy, or withdrawal strategy in early retirement I would highly recommend it.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Wricha »

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.
Larry Swedroe just wrote a book “Safe and Secure Retirement” I skimmed chapter 7 he talks about reducing your mix to 40/60 and augmenting your stock portion with small value stock and getting a similar returns as a traditional 60/40 slit with less risk. Less exposure to the tails on the bell shape curve. Full disclosure I do not get a kick back from Buckingham. I will read it in detail later.
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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 6:50 pm
Sandtrap wrote: Fri Feb 01, 2019 1:23 pm
relaxtothemax wrote: Fri Feb 01, 2019 11:36 am
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.
Good question, I believe it is because I'm having a hard time seeing the bond/cash allocation for what it is. Just part of an asset allocation. Even when we were at 60/40 (or even 70/30) I had the same sense until the market corrected. I know it plays a part toward stability but just can't seem to let go of the 'investment' part of it
This is why, beyond a certain baseline allocation given your financial needs, circumstances, and risk tolerance vs return, only you can find a comfortable medium between the "investment part of it" and the "fixed".
Here, think of the entirety of things as the "investment part of it". Balance the returns of the equity portion with the "sleep factor" of the "fixed".
You can diversify the "fixed" according to your own needs and need for stability, or at least the feeling of it.'
Like this:
Here is a not up to date visual of various "fixed" available to you besides the bond index funds of various durations that may be helpful:
Image
There are other things you can do to satisfy your need for "returns", "investments", etc. such as expanding and diversifying your income streams/sources, etc. This can happen outside of your "financial portfolio" that is market based.
And so forth.
There is not a huge difference in the larger financial sense between 60/40 and 40/60 when you take into consideration your earnings/income stream, savings rate, etc. And, you're not going to see a bit difference in a short amount of time anyway (years).
For example: look at the vanguard chart comparing various allocations.
VANGUARD PORTFOLIO ALLOCATION MODELS
https://personal.vanguard.com/us/insig ... s?lang=en

There are a lot of options for you.
What's important is to find what works, then stick to it (ignore the noise, headlines, reports), and keep it simple.
There is a difference between "not feeling right" based on sound business and financial intuition and long term experience, and "not feeling right" because of anxiety and stress in and of itself.
j
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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 6:50 pm
Sandtrap wrote: Fri Feb 01, 2019 1:23 pm
relaxtothemax wrote: Fri Feb 01, 2019 11:36 am
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.
Good question, I believe it is because I'm having a hard time seeing the bond/cash allocation for what it is. Just part of an asset allocation. Even when we were at 60/40 (or even 70/30) I had the same sense until the market corrected. I know it plays a part toward stability but just can't seem to let go of the 'investment' part of it
Since the "middle of 2018" your bond/cash side has done just as well as your stock side.

Why aren't you asking what your "stocks are doing for you"?
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.”
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HomerJ
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by HomerJ »

The Wizard wrote: Fri Feb 01, 2019 6:17 pm
book lover wrote: Fri Feb 01, 2019 2:32 pm If you have won, why run up the score?
Winning big is better than just scraping by?
What if by trying to win big, one ends up losing instead?

Does no one in this thread understand what "risk" is?

Edit: And "scraping by" is funny way to phrase that. "I have everything I want" is not equal to "scraping by".

That's like my wife telling me "You were almost late!", and me saying "You mean, I was on time?"
Last edited by HomerJ on Fri Feb 01, 2019 11:23 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.”
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Sandtrap »

bertilak wrote: Fri Feb 01, 2019 6:02 pm
bertilak wrote: Fri Feb 01, 2019 6:01 pm
stemikger wrote: Fri Feb 01, 2019 5:59 pm You could always do the bucket approach and have part of your portfolio more aggressive. Just a thought.
With a 50/50 portfolio, half of the portfolio IS more aggressive, bucket or no bucket.
+1
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HomerJ
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by HomerJ »

Wricha wrote: Fri Feb 01, 2019 10:49 pmLarry Swedroe just wrote a book “Safe and Secure Retirement” I skimmed chapter 7 he talks about reducing your mix to 40/60 and augmenting your stock portion with small value stock and getting a similar returns as a traditional 60/40 slit with less risk. Less exposure to the tails on the bell shape curve. Full disclosure I do not get a kick back from Buckingham. I will read it in detail later.
For the last 10 years, that strategy would have failed. You would have gotten less return, not similar return.
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.”
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by dbr »

HomerJ wrote: Fri Feb 01, 2019 11:20 pm
Wricha wrote: Fri Feb 01, 2019 10:49 pmLarry Swedroe just wrote a book “Safe and Secure Retirement” I skimmed chapter 7 he talks about reducing your mix to 40/60 and augmenting your stock portion with small value stock and getting a similar returns as a traditional 60/40 slit with less risk. Less exposure to the tails on the bell shape curve. Full disclosure I do not get a kick back from Buckingham. I will read it in detail later.
For the last 10 years, that strategy would have failed. You would have gotten less return, not similar return.
Average statistics do not predict individual outcomes.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by bertilak »

dbr wrote: Sat Feb 02, 2019 10:14 am
HomerJ wrote: Fri Feb 01, 2019 11:20 pm
Wricha wrote: Fri Feb 01, 2019 10:49 pmLarry Swedroe just wrote a book “Safe and Secure Retirement” I skimmed chapter 7 he talks about reducing your mix to 40/60 and augmenting your stock portion with small value stock and getting a similar returns as a traditional 60/40 slit with less risk. Less exposure to the tails on the bell shape curve. Full disclosure I do not get a kick back from Buckingham. I will read it in detail later.
For the last 10 years, that strategy would have failed. You would have gotten less return, not similar return.
Average statistics do not predict individual outcomes.
In a casino, roulette has much worse odds than blackjack.

Average gambling statistics don't predict individual outcomes but they do tell you where to expect the most entertainment for your dollar.

Average investment statistics don't tell you individual outcomes but they do tell you where to expect the most return on your investments.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by sambb »

To the op it will feel rught in a bear market
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goingup
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by goingup »

I'd suggest you stick to the plan for at least a few years. Nothing says you have to rebalance however. :twisted: With any luck you'll drift to 60/40, especially if you're drawing from cash/bond funds for expenses.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by dh »

Artsdoctor wrote: Fri Feb 01, 2019 12:09 pm 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.
+1
That is one of the most helpful replies I have read on Bogleheads.org!
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by kacang »

Good thread, I am following this with much interest as we are facing a similar situation.

Would setting an asymmetric rebalance band be a good compromise, eg. 5/10 for lower/upper? OPs' target AA is 50/50, so rebalance from fixed to stock if actual stock portion < 45% and from stock to fixed only if actual stock portion is >60%. Is there any downside to this approach?
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Wricha »

dbr wrote: Sat Feb 02, 2019 10:14 am
HomerJ wrote: Fri Feb 01, 2019 11:20 pm
Wricha wrote: Fri Feb 01, 2019 10:49 pmLarry Swedroe just wrote a book “Safe and Secure Retirement” I skimmed chapter 7 he talks about reducing your mix to 40/60 and augmenting your stock portion with small value stock and getting a similar returns as a traditional 60/40 slit with less risk. Less exposure to the tails on the bell shape curve. Full disclosure I do not get a kick back from Buckingham. I will read it in detail later.
For the last 10 years, that strategy would have failed. You would have gotten less return, not similar return.
Average statistics do not predict individual outcomes.
I will read it detail as should you. They generally do a very good job with there research.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Artsdoctor »

goingup wrote: Sat Feb 02, 2019 1:03 pm I'd suggest you stick to the plan for at least a few years. Nothing says you have to rebalance however. :twisted: With any luck you'll drift to 60/40, especially if you're drawing from cash/bond funds for expenses.
You guys are like little kids!

This is not a contest. The money belongs to both spouses.

I am presuming that both spouses sit down occasionally--perhaps annually--to discuss this. Are you actually advocating that one spouse intentionally not stick to the agreement that both had made? Don't you think that one spouse would feel slighted if the agreement is not honored?

What are you saving the money for?
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by goingup »

Artsdoctor wrote: Sat Feb 02, 2019 3:09 pm
goingup wrote: Sat Feb 02, 2019 1:03 pm I'd suggest you stick to the plan for at least a few years. Nothing says you have to rebalance however. :twisted: With any luck you'll drift to 60/40, especially if you're drawing from cash/bond funds for expenses.
You guys are like little kids!

This is not a contest. The money belongs to both spouses.

I am presuming that both spouses sit down occasionally--perhaps annually--to discuss this. Are you actually advocating that one spouse intentionally not stick to the agreement that both had made? Don't you think that one spouse would feel slighted if the agreement is not honored?

What are you saving the money for?
No, I wouldn't advocate withholding information from a spouse ever. Hopefully the spouse is fully engaged. I guess I am revealing my bias for very wide rebalancing bands. My idea of a rebalancing interval is rarely. Trying to stay at 50/50 seems difficult and I've long personally subscribed to 60/40 ish for the duration. (It's very hard to keep one's personal bias and risk tolerance out of a response.)
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by tennisplyr »

Fear or greed, take your pick
Those who move forward with a happy spirit will find that things always work out.
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relaxtothemax
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by relaxtothemax »

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

Post by White Coat Investor »

02nz wrote: Fri Feb 01, 2019 7:36 pm
White Coat Investor wrote: Fri Feb 01, 2019 7:26 pm
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.
The right asset allocation is when your fear of loss is precisely balanced out by your fear of missing out on gains.
True, but OP's problem was that there's no way to balance the fear of loss in December 2018 with the fear of missing out on gains in January 2019.
Yes, unfortunately our risk tolerance is not static. Still working on the solution for that. The only one I know of is to set it at the maximum in bad times. It's a bit like The Price is Right. You want to get as close as you can to the maximum amount of stocks you can tolerate without going over.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by msk »

relaxtothemax wrote: Sat Feb 02, 2019 9:01 pm 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 situation is perhaps similar to what yours will be yours 10 years hence. I retired at 55 because I felt that my portfolio was enough to sustain us indefinitely at my job-income level forever. But things turned out lucky and I got a COLA pension, about 60% of my job income. Pre-retirement we are always fearful of the unknown, but it turned out that my COLA pension was fully adequate to meet all our needs and the investment portfolio (RE and stocks, nil bonds) was required only for the occasional expensive vacations on the other side of the world. Roll forward 18 years to the present, hence my comment about your situation 10 years hence. I sold off all the rental RE and focused onto 100% stocks. Investment portfolio went up at least a factor 3x, despite purchasing 2 new homes (7 figures each) and giving away a 7 figure sum to initiate an endowment. Now, by mid 70s we figured that it is time to help our adult kids; and the plan is that, on my birthday each year we will tell the kids how much they are going to get monthly over the next 12 months. It's a substantial amount each month to each comparable to what they earn themselves. In hindsight, I feel that I was right in being aggressively invested over my two decades of retirement, specifically because we did not need to supplement my COLA pension for life's necessities. In brief, IMHO, put into bonds only enough to calm your anxieties about stock market volatility. 50% sounds excessive for somebody who does not even depend on the portfolio performance. My percentage is nil...
tarmangani
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by tarmangani »

Go fly a kite. Fly to San Diego and swim. 3D print a miniature golf course.

Given your investing horizon (heirs), it's logical to up your aggression, but, really, the difference between a 50/50 and 60/40 portfolio is pretty negligible. It's not worth losing sleep over.

You won the game. The point of winning the game is that...it's over; time to get off the field. Hard as it may be to believe right now, you don't have to worry about investing any longer. To, uh, translate a quote from The Wire to this particular forum: "Winning the game, based on Bogle's principles, that's the easy part. And then comes life."
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by DrGoogle2017 »

I would go 70/30 since you don’t really need the money.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by Dottie57 »

OP,

In this case Feelings should be ignoredn and logic used. Stay with 50/50. You’ve won your retirement. No need to take further risk.
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Re: We won the game, went to 50/50, but it just doesn't feel right

Post by mpnret »

Being you stated:
"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."
But the only other income sources you stated:
"We are 63 and 62, retired, DW has a teacher's pension and I will take SS at age 70."
I assume there are other sources of income not mentioned. It must be fairly expensive for 2 homes that are over 1 mil each. That being the case you can really do whatever you please with portfolio. You could even donate/gift aggressively now. I would still keep some for the unexpected like long term care, etc.
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