I'm 31, and 95% stocks. Given economy indicators, would moving 20-30% to BND be "timing"?

[TheBogleWay]

Hey guys.


I'm such a Boglehead (10 years now) that I don't even check the forum often. I set a plan, sit and relax.

But I have to admit to myself that I've never invested through a recession. The economy seems amazing but as you're all seeing, there are indicators that say we're overdue for a downturn. While I'm a "don't time the market" guy when helping friends, would it be considered timing for me to move say... 15-25% of my portfolio in my non-tax advantaged accounts over to BND?


I like being 95% stocks. Again I'm 31, income is very strong, and my portfolio is now just a hair above $1m so I should be ok in mostly equities.


Thoughts on me doing this?

[livesoft]

Who cares? Just do it. Only then will you know if you can stomach it.

Are you going to stay there? Or do you have a plan to reduce BND at some point in the future?

But if you make a good income, then maybe a muni-bond fund is really what you want?

[Wiggums]

It wouldn’t be market timing if you have decided to change your asset allocation. They said the market would only go up 2% this year and we got much more. Nobody knows the future. If you want less equities, then get more bonds. Just don’t chase returns.

[Stinky]

Is your plan to move to 70-80% stocks a permanent change in your investment allocation? If so, do it and be happy.

If not, and if you plan to return to 95% after the recession passes (whenever that is), that would be market timing. Not extreme, but timing all the same.

[sometimesinvestor]

It might be a good decision and it might not work out. If you are nervous about the market reduce your risk.You will sleep better and it might make it easier to stay the course. The only thing puzzling is to make the move in a taxable account and generate capital gains. Why not do it in an IRA, 401k or Roth

[TheBogleWay]

Who cares? Just do it. Only then will you know if you can stomach it.

Are you going to stay there? Or do you have a plan to reduce BND at some point in the future?

But if you make a good income, then maybe a muni-bond fund is really what you want?

To be honest, "municipal bonds" is something I haven't taken the time to learn. I understand investing relatively well, but don't know muni bonds yet or how they compare to BND or what the advantages are.


If you're in the mood for explaining, I'm all ears. I like when things are explained like I'm 5.

[TheBogleWay]

It might be a good decision and it might not work out. If you are nervous about the market reduce your risk.You will sleep better and it might make it easier to stay the course. The only thing puzzling is to make the move in a taxable account and generate capital gains. Why not do it in an IRA, 401k or Roth

Actually, my primary BND allocation IS inside of my 401k right now.

That being said, 401ks have caps, and my 401k is small compared to my taxable accounts. So.... I can't possibly make my portfolio 15-25% more bond heavy using my 401k. Is it bad to have them in taxable?


Totally separate thought, what bonds I do have in my 401k, if the market tanks, maybe I'd just move those bonds to equities when we have to be near the bottom to go back to my normal stock-heavy portfolio?

[retiredflyboy]

Yes, if you changed your AA because of economic indicators. At 31, I assume you have 30 years to retirement plus or minus, so unless you find you are stressed or can’t enjoy life, can’t sleep etc. why not be 100% in stocks. Block out the current noise and follow your well thought out long term plan. If you haven’t already, write out an investment plan and that way you can revisit it when you face uncertainty.

[IanRichmond]

Who cares? Just do it. Only then will you know if you can stomach it.

Are you going to stay there? Or do you have a plan to reduce BND at some point in the future?

But if you make a good income, then maybe a muni-bond fund is really what you want?

To be honest, "municipal bonds" is something I haven't taken the time to learn. I understand investing relatively well, but don't know muni bonds yet or how they compare to BND or what the advantages are.


If you're in the mood for explaining, I'm all ears. I like when things are explained like I'm 5.

Municipal bonds (munis) are bonds issued by local and state governments for projects (such as raising money for a school, sports stadium, and bettering the transit system). They are often considered safer than corporate bonds because governments have the ability to tax (or collect revenues from the sports stadium) to raise money to pay those bonds back. With that being said, certain states are in worser territory than others. For instance, Puerto Rico is not doing so well paying back their obligations. Nonetheless, especially with a diversified muni bond there is a little to worry about.
The tax advantage of muni bonds is that they are exempt from federal taxes. You can get an added bonus by buying a municipal bond/muni bond fund with your state and get exempt from state taxes as well. For instance, if you live in a high tax state like New York, you can buy a New York State municipal bond fund (with munis issued by NY state entities) and all of the coupon payments will be exempt from taxes. Note, this only applies to the coupon payments (the % yield) and not the capital gain (meaning, if you bought $100 worth of the muni fund, it pays a $5 coupon payment, and then it goes up to $120 and you sell it, you'll be taxed on $20 gain but not the $5 coupon payment). Muni yields are lower than corporate bonds because of the tax advantage.

[Watty]

For comparison the Vanguard 2060 target date fund is about 10% bonds so you would be going from one extreme to a bit far on the other side.

If you post your information using this suggested format as a guideline you will get better suggestions about what to do.

viewtopic.php?f=1&t=6212

It is easy to get in the trap of changing your plans based on your impressions of the market.

It would be good to read up on investment policy statements and write your own to establish a long term plan.

https://www.bogleheads.org/wiki/Investm ... _statement

[rascott]

Bad plan....go look at "news" from 3-5 years ago....with all the prognostication about the coming downturn.

Bonds are arguably a bigger bubble than equities.

Your time horizon is maybe 25-60 years.... Why have any bonds if you are able to just tune out the noise?

[mottooscillator]

I'm in a similar boat. The way I've been thinking about it is there are two reasons to change asset allocation (one good, one bad):

1. Change in your life status: ability, willingness, need to take risk
2. Market timing

Even if 2 is what brought this up in your mind, if you can evaluate 1 and come to a conclusion that your life has changed significantly enough to warrant re-evaluating your AA, you are golden.

[make_a_better_world]

It's on a lot of our minds. On a short timeline the market may very well take a downturn. Attempting to predict where the market will be in the future, and using that assessment to decide when to move your money in and out is market timing and you'll probably be wrong about the moments to act. Trying to make assessments of where we are right now, however, is not market timing in my opinion. Stock prices are extremely high relative to earnings.

Personally I am taking my own amateur version of Ray Dalio's All-Weather fund approach where you have different asset classes with different degrees of correlation. I'm not selling my stocks to try and jump back in when it feels different. But I have a significant amount of cash and real estate also. Going into a downturn is the one time cash is often the strongest asset class. Whatever happens and when it happens I will be positioned to act. I will continue dollar cost averaging and perhaps increase the monthly amounts if the market tanks. I might get lucky with real estate acquisitions if that market tanks. Berkshire is keeping a record amount of cash on hand but it's not doing a massive sell-off either.

[greg24]

I like being 95% stocks. Again I'm 31, income is very strong, and my portfolio is now just a hair above $1m so I should be ok in mostly equities.

A market drop could very well be your friend. I'm assuming you'll be using your strong income to continue buying equities if they drop.

[The Casualty]

At your age, knowing now what I have experienced since starting my investing in 83, I would be 99.99 % Stock.

I would sell the family dog and put the proceeds in the market as well.

[Tyler Aspect]

It might be a good decision and it might not work out. If you are nervous about the market reduce your risk.You will sleep better and it might make it easier to stay the course. The only thing puzzling is to make the move in a taxable account and generate capital gains. Why not do it in an IRA, 401k or Roth

Actually, my primary BND allocation IS inside of my 401k right now.

That being said, 401ks have caps, and my 401k is small compared to my taxable accounts. So.... I can't possibly make my portfolio 15-25% more bond heavy using my 401k. Is it bad to have them in taxable?

Totally separate thought, what bonds I do have in my 401k, if the market tanks, maybe I'd just move those bonds to equities when we have to be near the bottom to go back to my normal stock-heavy portfolio?

If your 401k account is entirely bond, then the next logical location for bond would be Roth IRA. If Roth IRA is also full of bond, then the next logical location for bond would be the taxable account.

If you want to move back to the current allocation after waiting nearing the bottom, then yes, it would be market timing and not a good practice.

[msk]

I am 100% stocks at age 75. I have dabbled in stocks since the early 1980s and have NEVER bought bonds. During ALL that time stocks have NEVER looked cheap. They always looked over-priced. Check the P/E ratios in the early days of Microsoft, Apple or even Amazon today. I disagree that after a 60% fall (e.g. the Nasdaq fiasco in the dot.com bust) stocks looked cheap. They did NOT! There is NEVER anything that tells you they are about to bounce back and that the fall will not continue towards 80% or 90%. Get used to it. Stocks will always look expensive for the rest of your life. The most useful lesson I learned over the decades was simply to hold on. The markets are driven by fear and greed. But the fear spreads like wildfire and market drops always go to irrational lows. Unfortunately the greed drives us into irrational exuberance. Even at absurdly high highs, 50% of the market are buyers and 50% sellers. And our greed is always telling us that we are missing out. Fear always wins in the end. At highs, fear against missing out. At lows, fear of being sucked into a deeper abyss. Diversify, Buy and Hold; forever. My greed and 4 decades of dabbling tells me to avoid bonds. I am not THAT fearful

[billfromct]

The S&P 500, or it's predecessor before 1957, has had a positive return in 75% of the years between 1940 to 2016. Of course past returns is no guarantee of future results.

When you time the market, you have to be right twice, when to get out & when to get back in.

You are trying to time the market as you said, "if the stock market tanks, maybe I'll just move those bonds to equities when we have to be near the bottom to go back to my normal stock heavy portfolio?". Please let us know when equities are "near the bottom".

As others have said, make sure you create a written investor policy statement (IPS) & only change your asset allocation after your written IPS is changed. Keep those old IPSs in your folder so you can see how often you change things. It will be helpful to write down the S&P 500 number at the beginning & end of each IPS change to see how successful your market timing ideas are working out.

bill

[michoco911]

Personally I am taking my own amateur version of Ray Dalio's All-Weather fund approach where you have different asset classes with different degrees of correlation

Would be happy to hear from you how you translated this in terms of ETFs/Codes and percentages

[TheBogleWay]

I am 100% stocks at age 75. I have dabbled in stocks since the early 1980s and have NEVER bought bonds. During ALL that time stocks have NEVER looked cheap. They always looked over-priced. Check the P/E ratios in the early days of Microsoft, Apple or even Amazon today. I disagree that after a 60% fall (e.g. the Nasdaq fiasco in the dot.com bust) stocks looked cheap. They did NOT! There is NEVER anything that tells you they are about to bounce back and that the fall will not continue towards 80% or 90%. Get used to it. Stocks will always look expensive for the rest of your life. The most useful lesson I learned over the decades was simply to hold on. The markets are driven by fear and greed. But the fear spreads like wildfire and market drops always go to irrational lows. Unfortunately the greed drives us into irrational exuberance. Even at absurdly high highs, 50% of the market are buyers and 50% sellers. And our greed is always telling us that we are missing out. Fear always wins in the end. At highs, fear against missing out. At lows, fear of being sucked into a deeper abyss. Diversify, Buy and Hold; forever. My greed and 4 decades of dabbling tells me to avoid bonds. I am not THAT fearful

I needed to hear this, that's great advice. Thanks for sending it my way, I'll remember that wisdom. Weird that they never feel cheap!

[bradpevans]

Hey guys.


I'm such a Boglehead (10 years now) that I don't even check the forum often. I set a plan, sit and relax.

But I have to admit to myself that I've never invested through a recession. The economy seems amazing but as you're all seeing, there are indicators that say we're overdue for a downturn. While I'm a "don't time the market" guy when helping friends, would it be considered timing for me to move say... 15-25% of my portfolio in my non-tax advantaged accounts over to BND?


I like being 95% stocks. Again I'm 31, income is very strong, and my portfolio is now just a hair above $1m so I should be ok in mostly equities.


Thoughts on me doing this?

Since you are in the accumulation phase, market downturns means you are “buying low” (with new 401 money)

Selling equities now to something safer to buy equities later sure sounds like market timing

[retiredjg]

I'm 31, and 95% stocks. Given economy indicators, would moving 20-30% to BND be "timing"?

Yes. And if you move because of "economy indicators" you will likely think you can move back at some time when "indicators" look better. That is classic market timing and a good way to make some classic financial mistakes.

If you have realized you would not be comfortable at 95% stocks when/if the bottom falls out and if you plan to stay at 20 - 30% bonds, that is not market timing - it is adjusting your asset allocation to meet your new understanding of your risk tolerance. If that describes your thoughts, I think it is a good idea.

The goal is to be invested in such a way that you are comfortable even when the market does go down.

You should have been at 20% bonds all along in my opinion.

[ruralavalon]

Hey guys.


I'm such a Boglehead (10 years now) that I don't even check the forum often. I set a plan, sit and relax.

But I have to admit to myself that I've never invested through a recession. The economy seems amazing but as you're all seeing, there are indicators that say we're overdue for a downturn. While I'm a "don't time the market" guy when helping friends, would it be considered timing for me to move say... 15-25% of my portfolio in my non-tax advantaged accounts over to BND?


I like being 95% stocks. Again I'm 31, income is very strong, and my portfolio is now just a hair above $1m so I should be ok in mostly equities.


Thoughts on me doing this?

At age 31, an asset allocation of 20% bonds or other fixed income is within the range of what is reasonable in my opinion. I suggest about 20% in bonds or other fixed income investments (like CDs, savings accounts, money market fund). This is expected to substantially reduce portfolio volatility (risk), with only a relatively modest decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see:
1) Wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk"; and
2) Wiki article, "Asset allocation".


Don't be switching back and forth based on opinions about the economy or any "indicators", that is almost guaranteed to result in significant losses. Follow the good advice you give to your friends, "don't time the market".

Actually, my primary BND allocation IS inside of my 401k right now.

That being said, 401ks have caps, and my 401k is small compared to my taxable accounts. So.... I can't possibly make my portfolio 15-25% more bond heavy using my 401k. Is it bad to have them in taxable?

What is your tax bracket, both federal and state? What state do you pay any state income taxes to?

A municipal bond fund may be a possibility.

[lostdog]

I am 100% stocks at age 75. I have dabbled in stocks since the early 1980s and have NEVER bought bonds. During ALL that time stocks have NEVER looked cheap. They always looked over-priced. Check the P/E ratios in the early days of Microsoft, Apple or even Amazon today. I disagree that after a 60% fall (e.g. the Nasdaq fiasco in the dot.com bust) stocks looked cheap. They did NOT! There is NEVER anything that tells you they are about to bounce back and that the fall will not continue towards 80% or 90%. Get used to it. Stocks will always look expensive for the rest of your life. The most useful lesson I learned over the decades was simply to hold on. The markets are driven by fear and greed. But the fear spreads like wildfire and market drops always go to irrational lows. Unfortunately the greed drives us into irrational exuberance. Even at absurdly high highs, 50% of the market are buyers and 50% sellers. And our greed is always telling us that we are missing out. Fear always wins in the end. At highs, fear against missing out. At lows, fear of being sucked into a deeper abyss. Diversify, Buy and Hold; forever. My greed and 4 decades of dabbling tells me to avoid bonds. I am not THAT fearful

I needed to hear this, that's great advice. Thanks for sending it my way, I'll remember that wisdom. Weird that they never feel cheap!

+1

I'm going to save this in my IPS. My risk tolerance is low and it has been tested in the 2008 financial crisis. Plus having this to look at in my IPS.

[JPH]

If you are nervous with your present allocation, then maybe it is time for a change. Move to an allocation that you are comfortable with now and that will allow you to sleep well through future downturns/recessions. Your comfort is important; exact allocation is unimportant.

[JoeRetire]

But I have to admit to myself that I've never invested through a recession. The economy seems amazing but as you're all seeing, there are indicators that say we're overdue for a downturn.

Of course we aren't in a recession. Nor does anyone know when the next recession will hit.

While I'm a "don't time the market" guy when helping friends, would it be considered timing for me to move say... 15-25% of my portfolio in my non-tax advantaged accounts over to BND?

I like being 95% stocks. Again I'm 31, income is very strong, and my portfolio is now just a hair above $1m so I should be ok in mostly equities.

Thoughts on me doing this?

Do it if it would help you sleep at night.

It's not market timing, it's just adjusting your asset allocation to your tolerance level.

[KlangFool]

I like being 95% stocks. Again I'm 31, income is very strong, and my portfolio is now just a hair above $1m so I should be ok in mostly equities.

TheBogleWay,

<<Again I'm 31, income is very strong>>

Income is not the determinant of AA. Job security is.

<< my portfolio is now just a hair above $1m>>

This 1 million represents

A) How many years of expense?

B) How many years of saving?

When we hit a recession if you are unemployed and the stock market drops 50%, how long can you survive with 525K?

You need to survive in order to survive. If 95/5 cannot let you survive through short-term unemployment, you do not have the ability to have an AA of 95/5.

KlangFool

[Vanguard Fan 1367]

I didn't read the other posts but I wanted to say that rather than "timing" I think it would be simply a good idea to do this any time you can overcome the inertia to do that. Bonds are at an all time high as are stocks so it is possible that your holdings could drop. If that happens please be patient.

[Cyclesafe]

A parallel way to asset allocation to get at risk tolerance is to consider how many times your expected expenses (including increases to family and associated obligations) and expected capital investments (like car, house, etc.) are covered by appropriate-duration fixed investments. If you were to lose your job and the market tanks, this ratio will tell you how long you can go before you need to make serious life trade-offs.

For me, I get nervous if this ratio is less than 5. 10 allows me to sleep at night. For someone (younger) with a greater risk tolerance, perhaps 5 is fine.

[mrspock]

...
I needed to hear this, that's great advice. Thanks for sending it my way, I'll remember that wisdom. Weird that they never feel cheap!

It’s not weird at all. Go pull a historical S&P 500 PE chart, notice what happened in 2009 and 2010? At probably the best time to buy stocks in decades, stocks were astronomically “expensive” (PE above 100!), if you blindly looked at valuations you’d have missed out. Or worse, sold at this point... cratering your portfolio.

Context matters... a lot. In today’s world you need to consider the PE ratio in relation to everything else that is going on (bond yields, economic indicators, employment rate, political winds etc), and this hard and prone to error. So much in fact, John Bogle wisely suggests we don’t tinker too much with our AA beyond what is in a predefined IPS, hence “stay the course”.

I’d suggest if you do not have an IPS you create one, and stick to it barring any major life events (children, marriage etc).

[BlueOrange10]

People often forget that if the market drops 50%, it needs to go up 100% to recover.

[Vanguard Fan 1367]

People often forget that if the market drops 50%, it needs to go up 100% to recover.

Yesterday I drove past the Falls Shopping Center in South Dade County. That is where someone shot and killed his broker and then himself the day after the 1987 crash.

Yes the market does need to go up 100 percent to recover but thankfully especially since 1980 it really hasn't taken that long to come back. If the killer had some patience he would have been pretty wealthy with his stock investments.

[BlueOrange10]

People often forget that if the market drops 50%, it needs to go up 100% to recover.

Yesterday I drove past the Falls Shopping Center in South Dade County. That is where someone shot and killed his broker and then himself the day after the 1987 crash.

Yes the market does need to go up 100 percent to recover but thankfully especially since 1980 it really hasn't taken that long to come back. If the killer had some patience he would have been pretty wealthy with his stock investments.

Problem is most people will look at 10 year performance of their funds and see 14%+ returns. It's been more than 10 years since the market bottomed out, so those figures will be highly misleading. For example, Annualized S&P 500 Return from July 2009 to July 2019 is 14.5%. If you adjust the start date to July 2007, you only get 8%.

[Fallible]

Hey guys.


I'm such a Boglehead (10 years now) that I don't even check the forum often. I set a plan, sit and relax.

But I have to admit to myself that I've never invested through a recession. The economy seems amazing but as you're all seeing, there are indicators that say we're overdue for a downturn. While I'm a "don't time the market" guy when helping friends, would it be considered timing for me to move say... 15-25% of my portfolio in my non-tax advantaged accounts over to BND?


I like being 95% stocks. Again I'm 31, income is very strong, and my portfolio is now just a hair above $1m so I should be ok in mostly equities. ...

This appears to be a matter of risk tolerance, not market timing. You are remembering a recession you missed and concerned about a future recession/possible market drop and that concern is your risk tolerance talking. Thus, you are considering lowering risk to bring it more in line with your tolerance level - and that would be a wise move.

Here's the wiki on "Risk tolerance":

https://www.bogleheads.org/wiki/Risk_tolerance

[stlutz]

If you have a million dollars you are at the point that you should start thinking about return of capital and not just return on capital.

Anytime you make an asset allocation change there is a "market timing" component to it. That's reality. I wouldn't spend my life trying to appease the BMTP (Bogleheads Market Timing Police).

What you should avoid is going from 5% bonds to 25% bonds today and the back next year and then back again the year after that. Instead, perhaps you you'd start on a plan to get to 25% bonds over 3 years--go to 10% now, then increase by 5% each year thereafter. You'll probably get there by just changing where your new contributions go.

[guyinlaw]

Jack Bogle himself says he sold his stocks in year 2000 because valuations did not make any sense to him in those years.

https://youtu.be/k6ra5POdsYg

Minute 2:57
"I said, you know... with bonds yielding around 7% today, stocks yielding around 1%... stock market being at that point closer to 40 times earnings than 30, I think it's impossible that in next decade stocks will outperform bonds"

Minute 3:46
"I was in the process of reducing my equity position, that's normal abot 70/75%... to about 30/25%, and I did that"

I copied this from a old post on this forum.

[willthrill81]

Hey guys.


I'm such a Boglehead (10 years now) that I don't even check the forum often. I set a plan, sit and relax.

But I have to admit to myself that I've never invested through a recession. The economy seems amazing but as you're all seeing, there are indicators that say we're overdue for a downturn. While I'm a "don't time the market" guy when helping friends, would it be considered timing for me to move say... 15-25% of my portfolio in my non-tax advantaged accounts over to BND?


I like being 95% stocks. Again I'm 31, income is very strong, and my portfolio is now just a hair above $1m so I should be ok in mostly equities.


Thoughts on me doing this?

Yes, this would be timing the market.

No, economic indicators do not say we are "overdue" for a downturn. The length of time since the last recession is not a significant predictor of when the next recession will occur. Those who say otherwise are very likely misinformed or trying to sell you something, like the talking heads on TV.

If seeing your 95/5 portfolio drop in value by around 50% would have any realistic chance of making you panic sell, then you should permanently reduce your stock allocation to the point that a 50% drop in stocks would not spook you.

[BlueOrange10]

The length of time since the last recession is not a significant predictor of when the next recession will occur. Those who say otherwise are very likely misinformed or trying to sell you something, like the talking heads on TV.

Sure it is. We can go by past history since recessions are a regular occurrence.


https://www.nber.org/cycles.html

[willthrill81]

The length of time since the last recession is not a significant predictor of when the next recession will occur. Those who say otherwise are very likely misinformed or trying to sell you something, like the talking heads on TV.

Sure it is. We can go by past history since recessions are a regular occurrence.

https://www.nber.org/cycles.html

Of course you can calculate the average length of time between recessions, but that doesn't mean that that average period is predictive of anything at all. Many academic studies have been done regarding this topic, and the consistent conclusion has been that the length of the time since the last recession is not even a statistically significant predictor, a very low standard, of the next recession.

[BlueOrange10]

Of course you can calculate the average length of time between recessions, but that doesn't mean that that average period is predictive of anything at all. Many academic studies have been done regarding this topic, and the consistent conclusion has been that the length of the time since the last recession is not even a statistically significant predictor, a very low standard, of the next recession.

I'm a statistics guy, so there is information to be gleaned from any data set. I think it is silly to say we know absolutely nothing about when the next recession could occur.

[stlutz]

Of course you can calculate the average length of time between recessions, but that doesn't mean that that average period is predictive of anything at all. Many academic studies have been done regarding this topic, and the consistent conclusion has been that the length of the time since the last recession is not even a statistically significant predictor, a very low standard, of the next recession.

As a supporting example, Australia hasn't had a recession in 30 years.

[willthrill81]

Of course you can calculate the average length of time between recessions, but that doesn't mean that that average period is predictive of anything at all. Many academic studies have been done regarding this topic, and the consistent conclusion has been that the length of the time since the last recession is not even a statistically significant predictor, a very low standard, of the next recession.

I'm a statistics guy, so there is information to be gleaned from any data set. I think it is silly to say we know absolutely nothing about when the next recession could occur.

I am well versed in statistics myself. You should then be very well aware that data-mining does not necessarily provide you with anything actionable.

I didn't say that "we know absolutely nothing about when the next recession could occur." But the length of time since the last recession has not been a statistically significant predictor of when the next recession will occur. Other variables (e.g. purchase manager index, yield curve inversion, up-trend in unemployment rate) have been far more predictive.

Of course you can calculate the average length of time between recessions, but that doesn't mean that that average period is predictive of anything at all. Many academic studies have been done regarding this topic, and the consistent conclusion has been that the length of the time since the last recession is not even a statistically significant predictor, a very low standard, of the next recession.

As a supporting example, Australia hasn't had a recession in 30 years.

[mathguy3021]

I had a similar asset allocation of about 90/10 before moving about 15% of my 401(k) to the stable value fund near the recent stock market peak. I have about the same net worth as you do. My reason for changing AA was that after nearly 15 years of being heavily stock invested, my tolerance for risk changed. Many valuation metrics also show that US stocks are more expensive than average. High valuations have led to lower future returns. If you started investing in 1999, you would have lower annualized returns in the s&p 500 index compared to historical returns. So although many older investors with 100% stocks would say "stocks always look expensive" you cannot ignore the fact that current valuations matter and valuations are indicative and a strong predictor of future long term returns. 1929, 1999, and 2007 are proof that valuations matter.

[retiredjg]

Why do people keep talking about "recessions" when they really mean something else?

This discussion is obviously about a downturned market or extended bear market. That is not the same thing as a recession at all.

[Fallible]

Hey guys.

I'm such a Boglehead (10 years now) that I don't even check the forum often. I set a plan, sit and relax.

But I have to admit to myself that I've never invested through a recession. The economy seems amazing but as you're all seeing, there are indicators that say we're overdue for a downturn. While I'm a "don't time the market" guy when helping friends, would it be considered timing for me to move say... 15-25% of my portfolio in my non-tax advantaged accounts over to BND?

I like being 95% stocks. Again I'm 31, income is very strong, and my portfolio is now just a hair above $1m so I should be ok in mostly equities.

Thoughts on me doing this?

Yes, this would be timing the market.

No, economic indicators do not say we are "overdue" for a downturn. The length of time since the last recession is not a significant predictor of when the next recession will occur. Those who say otherwise are very likely misinformed or trying to sell you something, like the talking heads on TV.

If seeing your 95/5 portfolio drop in value by around 50% would have any realistic chance of making you panic sell, then you should permanently reduce your stock allocation to the point that a 50% drop in stocks would not spook you.

As I read the OP (I boldfaced it above), he wisely recognizes that he has not been through a recession, is therefore concerned about talk of the next one, and is considering changing course to lower risk. That’s about personal risk tolerance, about how much risk one can or wants to handle. And it’s a smart move because experience in recessions and market downturns is considered one of the best ways to determine risk tolerance and avoid the worry, anxiety, and possible panic-selling in a recession/market downturn.

On the other hand, if the OP were coolly predicting what the market will do and then investing based on that prediction. with his only goal to make more money, that's a description of market timing.

On many forum threads, I think it's become easy to confuse the two because they often begin with references to what the market might do and how one should react to that. It's unfortunate that some OPs understandably concerned about risk now feel guilty that lowering it may be timing the market.

[longleaf]

I think you'd be comfortable with a less aggressive allocation. Try 80/20 and transition to 60/40 if it helps you sleep. I'm sure you're aware of the guideline of "your age in bonds"

For all we know, VTI could increase 10% in the next year.

[CnC]

So what if it is market timing,

If you are feeling squeamish worrying about losses it's time to adjust your asset allocation.

Better now than in 1-36 months once stocks do crash.

If after they do crash you are still feeling pretty good then bump your asset allocation back up.

[willthrill81]

Hey guys.

I'm such a Boglehead (10 years now) that I don't even check the forum often. I set a plan, sit and relax.

But I have to admit to myself that I've never invested through a recession. The economy seems amazing but as you're all seeing, there are indicators that say we're overdue for a downturn. While I'm a "don't time the market" guy when helping friends, would it be considered timing for me to move say... 15-25% of my portfolio in my non-tax advantaged accounts over to BND?

I like being 95% stocks. Again I'm 31, income is very strong, and my portfolio is now just a hair above $1m so I should be ok in mostly equities.

Thoughts on me doing this?

Yes, this would be timing the market.

No, economic indicators do not say we are "overdue" for a downturn. The length of time since the last recession is not a significant predictor of when the next recession will occur. Those who say otherwise are very likely misinformed or trying to sell you something, like the talking heads on TV.

If seeing your 95/5 portfolio drop in value by around 50% would have any realistic chance of making you panic sell, then you should permanently reduce your stock allocation to the point that a 50% drop in stocks would not spook you.

As I read the OP (I boldfaced it above), he wisely recognizes that he has not been through a recession, is therefore concerned about talk of the next one, and is considering changing course to lower risk. That’s about personal risk tolerance, about how much risk one can or wants to handle. And it’s a smart move because experience in recessions and market downturns is considered one of the best ways to determine risk tolerance and avoid the worry, anxiety, and possible panic-selling in a recession/market downturn.

On the other hand, if the OP were coolly predicting what the market will do and then investing based on that prediction. with his only goal to make more money, that's a description of market timing.

On many forum threads, I think it's become easy to confuse the two because they often begin with references to what the market might do and how one should react to that. It's unfortunate that some OPs understandably concerned about risk now feel guilty that lowering it may be timing the market.

It's probably a mixture of market timing and changing the AA to one that the OP can live with for the long-term. But when people are basing their decisions on things like "we're overdue for a downturn," we probably can't say that there's no timing involved at all.

[make_a_better_world]

Personally I am taking my own amateur version of Ray Dalio's All-Weather fund approach where you have different asset classes with different degrees of correlation

Would be happy to hear from you how you translated this in terms of ETFs/Codes and percentages

I sent you a PM.

[Tyler Aspect]

People often forget that if the market drops 50%, it needs to go up 100% to recover.

Is it true that the market need to apply a greater force for a 100% recovery than a 50% drop? Consider the case of a doubling versus halving. Doubling can be considered as multiplying by 2, while halving can be considered as dividing by 2. Doubling is the inverse of halving with the same factor of 2 being involved.

(12.3 * 2) / 2 = 12.3
(12.3 / 2) * 2 = 12.3

It does not matter if you doubling first then halving second, or halving first then doubling second. You come back to the original figure. Same amount of "force" either way.