who here is tempted to pullback on stocks?

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gasman
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Re: who here is tempted to pullback on stocks?

Post by gasman » Sun Nov 24, 2013 8:54 am

I am often tempted to time the market.
I am also often tempted by dessert, sports cars, and attractive females.
I just know that other than an occasional dessert, all of the above are bad choices.

YDNAL
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Re: who here is tempted to pullback on stocks?

Post by YDNAL » Sun Nov 24, 2013 11:06 am

dickenjb wrote:
dickenjb wrote:My target AA is 60/40 and I am currently at 64.2% stocks. So yes, I am tempted to sell some stocks. But my IPS says my rebalance bands are +/- 5%. So I will wait a little longer.

When I do pull the trigger I will sell down to 60% per my IPS.
Now I am at 64.5% equities. When it gets to 65 I will be compelled (not tempted) to reduce my equities to 60%.
Actually, Equity risk is not materially different at 0.65 versus 0.60. This ain't rocket Science (not even Science), and to focus on a 3rd digit to the right of the decimal point (0.00X) seems that way. IMO, a plan to limit constant monitoring/tinkering - not that you do this, dickenjb :wink: - keeps our worse enemy away (ourselves).

FWIW, I updated our plan after the great recession loosely based on Benjamin Graham's philosophy, and use quintiles of Equity risk for different aspects (goals) of the overall plan.

Code: Select all

Equity		Rebalance band	
70		|	60/40	-	80/20
60		|	50/50	-	70/30
50		|	40/60	-	60/40
40		|	30/70	-	50/50
30		|	20/80	-	40/60
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

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linenfort
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Re: who here is tempted to pullback on stocks?

Post by linenfort » Mon Nov 25, 2013 7:20 am

I don't understand the table above. :confused
bogleheads, don't knock state lotteries. They helped defund the mafia.

ot1138
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Re: who here is tempted to pullback on stocks?

Post by ot1138 » Mon Nov 25, 2013 9:54 am

With CAPE above 25, Cliff Asness article suggests that expected return of next 10 years will be 0.1% with the range of +6 and -6%.
That's based on a naïve model. Once you factor in interest rates (ERPs are not static - they expand and contract in conjunction with 10 year treasuries), one comes to very different conclusions. My model projects 10-year returns of 5.8% with a maximum historical range of 2.7% - 9.9%.

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HomerJ
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Re: who here is tempted to pullback on stocks?

Post by HomerJ » Mon Nov 25, 2013 11:04 am

ot1138 wrote:
With CAPE above 25, Cliff Asness article suggests that expected return of next 10 years will be 0.1% with the range of +6 and -6%.
That's based on a naïve model. Once you factor in interest rates (ERPs are not static - they expand and contract in conjunction with 10 year treasuries), one comes to very different conclusions. My model projects 10-year returns of 5.8% with a maximum historical range of 2.7% - 9.9%.
Nobody knows nothing. Buy and hold, pick an appropriate AA for your age and need to take risk, and rebalance occasionally. I'm not trusting anyone's "model".

Doesn't matter to me if Cliff is right or ot1138 is right. Either way, I'm sticking with my 50/50 stocks and bonds, and I'll get the market return, whatever it may be.

If I don't have my "number" in 11 years (when my youngest graduates college), then I'll either work longer (part-time hopefully), or cut back on my lifestyle a bit in order to retire.

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TinyElvis
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The Whoopee Allocation

Post by TinyElvis » Sat Sep 12, 2015 10:20 am

This is beautifully simple and straight-forward.
Phineas J. Whoopee wrote:I started contemplating all this as I thought about retiring early or switching to a financially riskier but more personally fulfilling career, and how those decisions might affect the age-in-bonds rough guideline.

If you're asking how I came up with the rule:
I began with the rough, planning-only guideline of taking an initial 4% of the portfolio, adjusted for inflation each subsequent year. That would mean having a portfolio value of 25 times expenses. The safer 3% would mean 33 times.
...
Mr. Whoopee, if you don't mind I would love to hear more about this.

This original post was about 2 years ago. Can you provide an update on what has changed since? Where are you in your steps?

Would you mind sharing what your fund allocation is and how it may have changed as you moved up into a new tier?

Being an engineering sort, I really like patterns; simple and repeatable patterns.

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Phineas J. Whoopee
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Re: The Whoopee Allocation

Post by Phineas J. Whoopee » Mon Sep 14, 2015 1:34 pm

TinyElvis wrote:This is beautifully simple and straight-forward.
Thank you. Here's a link to the specific post, to make it easier for others to find the whole thing.
TinyElvis wrote:
Phineas J. Whoopee wrote:I started contemplating all this as I thought about retiring early or switching to a financially riskier but more personally fulfilling career, and how those decisions might affect the age-in-bonds rough guideline.
...
...
This original post was about 2 years ago. Can you provide an update on what has changed since? Where are you in your steps?
The stock market went up a lot, which really helped me, but I've kept using the same plan, without any changes.
TinyElvis wrote:Would you mind sharing what your fund allocation is and how it may have changed as you moved up into a new tier?
...
Late last year I made it up and over 35 times expenses, so I'm at 40/60, where I plan to stay. I'll revisit it occasionally, of course, but I think it will get the job done the way it is.
25% total stock
15% international stock
40% inflation-protected fixed income
20% nominal fixed income

It's split across a 401(k), traditional IRA, Roth Ira, and taxable. In the first of those my choices are limited, but it includes Vanguard's Institutional Index fund, which tracks the S&P 500, Extended Market which I mix in to approximate total stock, FTSE All-world Ex-US, and Total Bond. I don't replicate the allocation in each account, but of course it's all one portfolio.

I'm not sure how much more I have to add to the post you quoted, but thanks for the kind words about it. Do you have any more specific questions?

PJW

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TheTimeLord
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Re: The Whoopee Allocation

Post by TheTimeLord » Mon Sep 14, 2015 1:39 pm

Phineas J. Whoopee wrote: Late last year I made it up and over 35 times expenses,......
PJW
Is that expenses over and above SS and pension or overall expenses? Thanks.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Phineas J. Whoopee
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Re: The Whoopee Allocation

Post by Phineas J. Whoopee » Mon Sep 14, 2015 2:01 pm

TheTimeLord wrote:
Phineas J. Whoopee wrote: Late last year I made it up and over 35 times expenses,......
PJW
Is that expenses over and above SS and pension or overall expenses? Thanks.
Total expenses, not offset for future SS.

Here's why I decided to do it that way:

I'm assuming my expenses will inflate along with CPI. The latter is by no means certain, and I might end up taking a hit on SS, so I've built things to be pretty strong. Inflation is the biggest threat to the plan I've identified.

I've stress tested the plan by assuming I never earn another social security taxable dollar, and using the worst set of assumptions the AnyPIA tool makes available, and that I'll only get 75% of what the formulas say, and just for fun I threw in a permanent 50% decline in stocks (equities go down once, then resume their more usual behavior, but from the lower base). It survives all that happening simultaneously.

Most likely my returns and SS benefits will be better, but I'm prepared for a rough road. As time goes by, and far-off future events become less far off, I probably will be able to increase my spending above inflation, but I'm not comfortable assuming all that will happen at this early date.

I hadn't expected, by the way, ever to get to 35x, but the past three years in a row of double-digit stock market gains lifted me there.

PJW

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TinyElvis
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Re: The Whoopee Allocation

Post by TinyElvis » Mon Sep 14, 2015 2:13 pm

Hi.
Phineas J. Whoopee wrote:I hadn't expected, by the way, ever to get to 35x, but the past three years in a row of double-digit stock market gains lifted me there.PJW
Congratulations. :)

Please allow me to dig deeper and I apologize if these are amateur questions.,

In your original post, you mentioned:
Phineas J. Whoopee wrote:..the gains are being safely set aside in bonds, until I get up to 35 times expenses at which point the stock holding can start to grow again.
I assume this to mean the your net proceeds from your re-balancing is used to purchase more in your bond funds. Am I correct?

Do you reinvest dividends or use to add to your bond allocation?

How often do you re-balance.. only when you hit a threshold?

So now that you are at 35x, what happens?

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Phineas J. Whoopee
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Re: The Whoopee Allocation

Post by Phineas J. Whoopee » Mon Sep 14, 2015 2:45 pm

TinyElvis wrote:...
Phineas J. Whoopee wrote:..the gains are being safely set aside in bonds, until I get up to 35 times expenses at which point the stock holding can start to grow again.
I assume this to mean the your net proceeds from your re-balancing is used to purchase more in your bond funds. Am I correct?
It's less precise than that. If you start from 20x expenses (whatever the expenses are), 70% stock is around 14 years worth. At a multiple of 25, 60% stock is 15 years; 30x at 50% is 15 years; and 35x at 40% is 14 years.

Obviously the value of the stocks fluctuates, but as the portfolio grew from tier to tier I always had about 15 years worth of living expenses in equities. At a multiple of 35, the number of years worth in stocks can start going up, should Mr. Market decide to do things that way. New contributions, at this portfolio size, make little difference (but at least it's always a positive difference).
TinyElvis wrote:Do you reinvest dividends or use to add to your bond allocation?
The great majority of the portfolio is in tax-deferred accounts. I automatically reinvest dividends everywhere except taxable. I take a look to see how best to deploy those.
TinyElvis wrote:How often do you re-balance.. only when you hit a threshold?
I reallocate when I hit thresholds, and for rebalancing I use a 10%-of-porfolio wide tolerance band. I used to evaluate quarterly, but as I was getting close to my target multiple late last year I took to looking weekly. It really doesn't make a difference, and I'm not tempted to sell or buy because I have a strong and specific plan, and I know precisely why I wrote it that way.
TinyElvis wrote:So now that you are at 35x, what happens?
A question much on my mind. The reason for the plan being what it became was to enable a risky career change or early retirement, so now those appear to be options in front of me.

To quote myself from the post:
PJW wrote: ...
I've carved my policy with an axe, not a scalpel.
...
Hope that was helpful.

I'm happy to answer more questions if anybody wants to ask them. :happy

PJW

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TinyElvis
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Re: The Whoopee Allocation

Post by TinyElvis » Mon Sep 14, 2015 4:31 pm

Phineas J. Whoopee wrote:I'm happy to answer more questions if anybody wants to ask them. :happy
Very helpful.. thank you.

I've got another.. since you are sitting at 40/60 now, the whole 60 is in the Total Bond Fund? Your inflation protected fixed-income is coming via the TBF allocation?

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Phineas J. Whoopee
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Re: The Whoopee Allocation

Post by Phineas J. Whoopee » Mon Sep 14, 2015 4:43 pm

TinyElvis wrote:...
I've got another.. since you are sitting at 40/60 now, the whole 60 is in the Total Bond Fund? Your inflation protected fixed-income is coming via the TBF allocation?
No. Total Bond, despite its name, leaves out several types of bonds, among them inflation-protected ones. I'm pretty happy with what it is and what it holds, but some posters think it should be named differently.

My inflation-protected fixed income is in Series I Savings Bonds and TIPS funds.

Most of the nominal is in Total Bond in my 401(k), but some is in CDs and Series EE Savings Bonds.

The model is three-fund plus TIPS, but due to what's available to me where, and all the tax advantages and disadvantages, there are eleven holdings in my portfolio. That's not for market timing, or slicing and dicing, or anything else than being low-cost, tax-efficient, and within my 401(k) constraints which I really can't complain about because the expense ratios on Vanguard's Institutional Plus share class are so low.

PJW

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stemikger
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Re: who here is tempted to pullback on stocks?

Post by stemikger » Mon Sep 14, 2015 4:59 pm

Listen to Jack talk about it. As long as you are not an all or nothing investor. If you feel you want to change your asset allocation to a more conservative one, do it, but make sure it's for the right reasons.

With 12 to 15 more years of work ahead of me, I'm keeping my asset allocation where it is. I'm tired and done with trying to guess what the market is going to do and tired of worrying about it. So, I will just stay a bit on the conservative side and not even look at what the market is doing.

So sorry to say it, but I'm Staying the Course!

https://www.youtube.com/watch?v=k6ra5POdsYg
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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TinyElvis
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Re: The Whoopee Allocation

Post by TinyElvis » Mon Sep 14, 2015 6:08 pm

Phineas J. Whoopee wrote:That's not for market timing, or slicing and dicing, or anything else than being low-cost, tax-efficient, and within my 401(k) constraints which I really can't complain about because the expense ratios on Vanguard's Institutional Plus share class are so low.
PJW
Thank you for sharing your knowledge.

goblue100
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Re: who here is tempted to pullback on stocks?

Post by goblue100 » Tue Jun 06, 2017 9:30 am

Don't know of a better way to bookmark a thread, so I'm posting in it. A lot of this has been much on my mind lately. My need to take risk is diminishing thanks to the bull market. My willingness is still there, and I've had a hard time dropping equity allocation, but I've probably shifted 5%, from 80/20 to 75 /25. I think the PJW formula makes sense, so wanted to save it for myself.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

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UpsetRaptor
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Re: who here is tempted to pullback on stocks?

Post by UpsetRaptor » Mon Oct 16, 2017 10:57 am

This thread is (another) great example promoting stay-the-course. 4 years ago, when opie noted stocks' nice run and inquired about taking profits, S&P was in the 1700s. We're now in the 2500s. Sure, another bear market will hit at some point, but we don't know when, and if you attempted to time the market by pulling back on equities four years ago, my condolences.

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