Memo to those who have won the game: it's time to quit playing

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
CULater
Posts: 1201
Joined: Sun Nov 13, 2016 10:59 am

Memo to those who have won the game: it's time to quit playing

Post by CULater » Sun Jan 07, 2018 9:42 am

With CAPE at the second highest level in history and the U.S. stock market acting bubblicious these days, I think it is a good time for older investors to heed Dr. Bernstein's advice: "If you've won the game, stop playing." Nobody can predict what the market will do and accumulators should probably stay put. But if you don't really need to take much market risk anymore, it seems to me this is not a good time to continue to do so. I'm not getting completely out, because I have a floor of safe income-producing assets. But most of my toes are out of the water. Only toes I can afford to lose are still in. I can tolerate risk -- I just don't like losing money. How about others who have "won the game?" What are you doing?
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

livesoft
Posts: 61924
Joined: Thu Mar 01, 2007 8:00 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by livesoft » Sun Jan 07, 2018 9:48 am

I am letting my asset allocation to equities drift higher and not rebalancing into bonds. I don't keep any cash around either. I actually don't mind losing money because it creates fantastic opportunities.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
dumbbunny
Posts: 821
Joined: Thu Apr 24, 2014 10:00 pm
Location: Oregon coast

Re: Memo to those who have won the game: it's time to quit playing

Post by dumbbunny » Sun Jan 07, 2018 9:52 am

According to cfiresim.com I have won the game but I'm still 60/40 and I am selling on the equity side to make a cash reserve to get me through until I start to receive SS in two years. Play on.
“It’s the curse of old men to realize that in the end we control nothing." "Homeland" episode, "Gerontion"

UpperNwGuy
Posts: 691
Joined: Sun Oct 08, 2017 7:16 pm
Location: Washington DC

Re: Memo to those who have won the game: it's time to quit playing

Post by UpperNwGuy » Sun Jan 07, 2018 10:01 am

OP seems to be mixing together two separate concepts:
— Market timing ("With CAPE at the second highest level in history and the U.S. stock market acting bubblicious these days")
— An older investor's AA as determined by his or her IPS

I think a responsible older investor would already be reducing risk as part of his or her long-term plan. OP seems to be advocating that such investors revisit their plans in the light of current market trends (market timing at its finest). If you have a responsible plan, why change it now?

jebmke
Posts: 8140
Joined: Thu Apr 05, 2007 2:44 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by jebmke » Sun Jan 07, 2018 10:04 am

livesoft wrote:
Sun Jan 07, 2018 9:48 am
I am letting my asset allocation to equities drift higher and not rebalancing into bonds. I don't keep any cash around either. I actually don't mind losing money because it creates fantastic opportunities.
Same here. Also, I burned through my carryover losses. Not eager to have any income. If a bunching opportunity comes along I might dump some equity into the DAF but right now my tax rate doesn't favor that.
When you discover that you are riding a dead horse, the best strategy is to dismount.

racy
Posts: 207
Joined: Sun Mar 30, 2008 7:38 am
Location: Nebraska

Re: Memo to those who have won the game: it's time to quit playing

Post by racy » Sun Jan 07, 2018 10:11 am

At 65 & feeling like a winner, I have my portfolio set at:
1. Stock allocation of 45%, and
2. Slice/dice into Total Stk, Wellesley, Sm Cap, REIT, Int'l & Health sector.
I slice/dice so that I'm not concentrated in Apple, Microsoft, Alphabet, Amazon & Facebook. I don't want to see too much overlap in the funds' Top 10 holdings.
Last edited by racy on Sun Jan 07, 2018 10:17 am, edited 1 time in total.

The Wizard
Posts: 12003
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Memo to those who have won the game: it's time to quit playing

Post by The Wizard » Sun Jan 07, 2018 10:17 am

I also am letting my equities drift higher. Formerly I had 50% stocks as a target. I'm now thinking a 60% target will be better for the rest of my retirement, which started in 2013.

I will win my latest game in two years when I file for SS at age 70. That $3500/month, on top of my annuity income, should make my investment portfolio pretty much discretionary...
Attempted new signature...

jebmke
Posts: 8140
Joined: Thu Apr 05, 2007 2:44 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by jebmke » Sun Jan 07, 2018 10:18 am

CULater wrote:
Sun Jan 07, 2018 9:42 am
But if you don't really need to take much market risk anymore, it seems to me this is not a good time to continue to do so.
I suppose one could argue that this is a true statement no matter what the valuations are. That was my approach when I retired in 2007.
When you discover that you are riding a dead horse, the best strategy is to dismount.

AlohaJoe
Posts: 3544
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Memo to those who have won the game: it's time to quit playing

Post by AlohaJoe » Sun Jan 07, 2018 10:19 am

I'm amazed that these people know with certainty that they will never spend a decade in an assisted living home for people with Alzheimer's at a cost of $6,000 a month on top of all their other expenses that their spouse, who lives elsewhere, has.

They can perfectly predict the future...but instead of doing something useful with that amazing ability -- like play Powerball -- all they do is adjust their asset allocation!

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: Memo to those who have won the game: it's time to quit playing

Post by dbr » Sun Jan 07, 2018 10:21 am

My stock allocation has not reached my rebalancing bands yet so I am making no changes. As time comes to make some withdrawals from assets, if stocks are above target, I would probably sell equities rather than bonds as the mechanics to take those withdrawals.

As far as the game: It is not a game and you can't quit. What Bernstein means by that quip is that people should not take more risk in stock investing than they need to take. I am comfortable my investment risk is appropriate whatever signals might be coming from the market.

livesoft
Posts: 61924
Joined: Thu Mar 01, 2007 8:00 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by livesoft » Sun Jan 07, 2018 10:23 am

dbr wrote:
Sun Jan 07, 2018 10:21 am
As time comes to make some withdrawals from assets, if stocks are above target, I would probably sell equities rather than bonds as the mechanics to take those withdrawals.
Well sure, I will sell equities to meet expenses before I sell bonds.
Wiki This signature message sponsored by sscritic: Learn to fish.

mega317
Posts: 2431
Joined: Tue Apr 19, 2016 10:55 am

Re: Memo to those who have won the game: it's time to quit playing

Post by mega317 » Sun Jan 07, 2018 10:34 am

When I win the game, I plan to find a new game. Once my retirement is secure I might want to fund college for my kids, then maybe relatives' kids, then maybe strangers' kids, etc.

CULater
Posts: 1201
Joined: Sun Nov 13, 2016 10:59 am

Re: Memo to those who have won the game: it's time to quit playing

Post by CULater » Sun Jan 07, 2018 10:45 am

I guess I don't understand why someone who has "won the game" would be taking a gradualist approach to reducing their equity allocation, especially in the face of the obvious high market valuations. If you don't need to have anything in stocks or need a much lower percentage than you currently have, why not just go online tomorrow and get out? Maybe it's greed. People just can't leave party while the booze is flowing. Frankly, that's the best time to leave, IMO. No traffic jams yet. :)
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

Crushtheturtle
Posts: 120
Joined: Sat Mar 15, 2014 10:29 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by Crushtheturtle » Sun Jan 07, 2018 10:48 am

Nuts

8-)

david1082b
Posts: 365
Joined: Fri Jun 09, 2017 12:35 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by david1082b » Sun Jan 07, 2018 10:49 am

CULater wrote:
Sun Jan 07, 2018 9:42 am
With CAPE at the second highest level in history...
Current Shiller PE Ratio: 33.27
http://www.multpl.com/shiller-pe/
These are all the higher readings I can find from a monthly table:
Shiller PE Ratio by Month

May 1, 2001 34.07
Feb 1, 2001 35.83
Jan 1, 2001 36.98
Dec 1, 2000 37.27
Nov 1, 2000 38.78
Oct 1, 2000 39.37
Sep 1, 2000 41.89
Aug 1, 2000 42.87
Jul 1, 2000 42.75
Jun 1, 2000 42.78
May 1, 2000 41.96
Apr 1, 2000 43.53
Mar 1, 2000 43.22
Feb 1, 2000 42.18
Jan 1, 2000 43.77
Dec 1, 1999 44.19
Nov 1, 1999 43.21
Oct 1, 1999 40.55
Sep 1, 1999 41.32
Aug 1, 1999 41.93
Jul 1, 1999 43.83
Jun 1, 1999 42.18
May 1, 1999 42.55
Apr 1, 1999 42.70
Mar 1, 1999 41.35
Feb 1, 1999 40.40
Jan 1, 1999 40.57
Dec 1, 1998 38.82
Nov 1, 1998 37.37
Oct 1, 1998 33.77
Sep 1, 1998 33.53
Aug 1, 1998 35.42
Jul 1, 1998 38.26
Jun 1, 1998 36.80
May 1, 1998 36.95
Apr 1, 1998 37.27
Mar 1, 1998 36.29
Feb 1, 1998 34.71

http://www.multpl.com/shiller-pe/table?f=m
July '99 looks like the second highest, 43.83.

Call_Me_Op
Posts: 6915
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: Memo to those who have won the game: it's time to quit playing

Post by Call_Me_Op » Sun Jan 07, 2018 10:52 am

What does "stop playing" mean?
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

User avatar
Pajamas
Posts: 6015
Joined: Sun Jun 03, 2012 6:32 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by Pajamas » Sun Jan 07, 2018 10:53 am

CULater wrote:
Sun Jan 07, 2018 9:42 am
I think it is a good time for older investors to heed Dr. Bernstein's advice: "If you've won the game, stop playing."
Isn't that true for all investors at all times?

I think so, although it is very common to want to find a new game to play when one game is finished.

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: Memo to those who have won the game: it's time to quit playing

Post by dbr » Sun Jan 07, 2018 10:54 am

CULater wrote:
Sun Jan 07, 2018 10:45 am
I guess I don't understand why someone who has "won the game" would be taking a gradualist approach to reducing their equity allocation, especially in the face of the obvious high market valuations. If you don't need to have anything in stocks or need a much lower percentage than you currently have, why not just go online tomorrow and get out? Maybe it's greed. People just can't leave party while the booze is flowing. Frankly, that's the best time to leave, IMO. No traffic jams yet. :)
If you don't need stocks and follow the caution to take no more risk than needed, then you are already out of the market. It is unusual for most retirees to be so wealthy with respect to what they need that they need no stocks at all. What you call greed can also be an objective assessment of what people want to do with their money. One example is having more to leave to others as a legacy. Others does not necessarily mean near-do-well offspring, either.

User avatar
pezblanco
Posts: 474
Joined: Thu Sep 12, 2013 8:02 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by pezblanco » Sun Jan 07, 2018 10:59 am

CULater wrote:
Sun Jan 07, 2018 10:45 am
I guess I don't understand why someone who has "won the game" would be taking a gradualist approach to reducing their equity allocation, especially in the face of the obvious high market valuations. If you don't need to have anything in stocks or need a much lower percentage than you currently have, why not just go online tomorrow and get out? Maybe it's greed. People just can't leave party while the booze is flowing. Frankly, that's the best time to leave, IMO. No traffic jams yet. :)
Some random thoughts:

I think most people have a investment plan of decreasing stock holding with age, i.e. there is a glidepath. You seem to think that everyone has or should have a "magic number" ... once you hit the magic number, you cash out and put all money in Treasuries. For many/most retirees, they have just about the money they need for a safe retirement ... at the 4% rule more or less. Studies show that having some stock presence is actually safer than an all bond allocation. I seem to remember Bernstein talking about taking gains off the table not cashing out entirely anyway. Not playing the game means just putting at risk what is NECESSARY to put at risk ...

staythecourse
Posts: 5807
Joined: Mon Jan 03, 2011 9:40 am

Re: Memo to those who have won the game: it's time to quit playing

Post by staythecourse » Sun Jan 07, 2018 11:00 am

Apologize if I am repeating as I didn't read the other responses. I think investors should be asking does the returns recently change one's "abililty, willingness, and need to take risk" as Mr. Swedroe is known to talk about in his books. Then yes one should be addressing this every year to see if anything changes the answers to those questions. IF they do change then one should revisit their asset allocation.

BUT one should not say, "Boy CAPE is high so better take some money of the table". That is market timing and we know how that turns out.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: Memo to those who have won the game: it's time to quit playing

Post by dbr » Sun Jan 07, 2018 11:01 am

Call_Me_Op wrote:
Sun Jan 07, 2018 10:52 am
What does "stop playing" mean?
My recollection of reading this in more words is that Bernstein specifically wants people to understand that stocks are risky and that the game is owning stocks. The alternative when you have enough money is to cut back on stock allocation and prepare purchase of SPIAs and bond ladders to provide income in retirement, or at least a large reserve of fixed income. I think it is a most unfortunate quip offered for effect when a straightforward explanation in a few paragraphs does much better. I think Bernstein feels you have to grab people's attention to make a point, or his editors do. Very possibly that is actually true though I find that kind of writing distasteful because it is an insult to people's intelligence and conveys an impression that you are not so sure your own message is really convincing. The issue of what is risk in retirement and what is the best use of assets to meet retirement needs is not all that simple. I do think Bernstein does deserve appreciation for thoughtful contributions to that topic, though not in that particular quip.

User avatar
Tycoon
Posts: 1229
Joined: Wed Mar 28, 2012 7:06 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by Tycoon » Sun Jan 07, 2018 11:03 am

Thanks for the concern. There is always a reason to be fearful. I'll stay put.
...I might be just beginning | I might be near the end. Enya | | C'est la vie

Broken Man 1999
Posts: 1270
Joined: Wed Apr 08, 2015 11:31 am

Re: Memo to those who have won the game: it's time to quit playing

Post by Broken Man 1999 » Sun Jan 07, 2018 11:54 am

50% stocks and 50% bonds work for us. We might have "won", but who really knows? I believe our retirement portfolio is conservative enough.

As well, some of us invest for other generations.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: Memo to those who have won the game: it's time to quit playing

Post by dbr » Sun Jan 07, 2018 11:59 am

Broken Man 1999 wrote:
Sun Jan 07, 2018 11:54 am
50% stocks and 50% bonds work for us. We might have "won", but who really knows? I believe our retirement portfolio is conservative enough.

As well, some of us invest for other generations.

Broken Man 1999
I think that is prudent and also recognizes that objectives are not just the certain locking in of a retirement income stream. It is a big step from "stocks are risky" in some general sense to "A safe retirement eschews stocks." Bernstein does not even say that either.

Random Walker
Posts: 2862
Joined: Fri Feb 23, 2007 8:21 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by Random Walker » Sun Jan 07, 2018 12:09 pm

CULater wrote:
I guess I don't understand why someone who has "won the game" would be taking a gradualist approach to reducing their equity allocation, especially in the face of the obvious high market valuations. If you don't need to have anything in stocks or need a much lower percentage than you currently have, why not just go online tomorrow and get out? Maybe it's greed. People just can't leave party while the booze is flowing. Frankly, that's the best time to leave, IMO. No traffic jams yet. :)
I totally agree! I’m 55, don’t know when I could be forced into retirement. Over last two years I’ve transitioned from 70% equities to 42%, and I’m questioning whether I should go lower! People talk about rebalancing with withdrawals or new money, but for people close to retirement, I think the market can swing much faster than we can make those adjustments. I started a thread couple days ago called Customizing The Glidepath, also something found in one of Bernstein’s books.

viewtopic.php?f=10&t=236967

Dave

minimalistmarc
Posts: 247
Joined: Fri Jul 24, 2015 4:38 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by minimalistmarc » Sun Jan 07, 2018 12:13 pm

It’s not greedy to keep playing if you don’t need the money. I’ll be invested until I die hopefully not for another 60 years

User avatar
arcticpineapplecorp.
Posts: 3026
Joined: Tue Mar 06, 2012 9:22 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by arcticpineapplecorp. » Sun Jan 07, 2018 12:15 pm

I can't find the direct quote from Larry Swedroe, but Day9 paraphrased it pretty well in this past post:
Day9 wrote:
Wed Jun 14, 2017 1:53 pm
Paraphrasing Mr Swedroe: A retired couple's portfolio went from $12 million to $2 million after the 2000 tech bubble burst (They were 100% invested in high-flying tech stocks). When he asked them if their life would be much better if it instead had doubled to $24 million, the husband shrugged and said "No, I guess not". The wife punched the husband in the shoulder and said "I told you so!"

I doubt anyone who reads this forum would make a mistake of this magnitude but it is still a valuable lesson. In situations like this, the consequences of the possible outcomes dominate the probabilities of the outcomes.
viewtopic.php?t=221097#p3407853
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

User avatar
arcticpineapplecorp.
Posts: 3026
Joined: Tue Mar 06, 2012 9:22 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by arcticpineapplecorp. » Sun Jan 07, 2018 12:18 pm

The 'ol Warren Buffett quote (as applied to LTCM) part in red (emphasis mine):
But to make money they didn’t have and didn’t need, they risked what they did have and did need, and that’s foolish. That is just plain foolish. Doesn’t make any difference what your IQ is. If you risk something that is important to you for something that is unimportant to you, it just does not make any sense. I don’t care whether the odds are 100 to one that you succeed or 1,000 to one that you succeed. If you hand me a gun with a thousand chambers – a million chambers in it – and there’s a bullet in one chamber, and you said, “put it up to your temple, how much do you want to be paid to pull it once?” I’m not going to pull it. You can name any sum you want but it doesn’t do anything for me on the upside and I think the downside is fairly clear. [Laughter] So I’m not interested in that kind of a game. And yet people do it financially without thinking about it very much.
source: https://alphaarchitect.com/2015/09/08/w ... ary-risks/
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

User avatar
randomizer
Posts: 1326
Joined: Sun Jul 06, 2014 3:46 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by randomizer » Sun Jan 07, 2018 12:20 pm

Pretty far from winning the game here. I would love to be in a place where I could take less risk. I am pretty much resigned to walking the fine line at 75:25 forever.
75:25 — HODL the course!

User avatar
Sandtrap
Posts: 5089
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Memo to those who have won the game: it's time to quit playing

Post by Sandtrap » Sun Jan 07, 2018 12:23 pm

AlohaJoe wrote:
Sun Jan 07, 2018 10:19 am
I'm amazed that these people know with certainty that they will never spend a decade in an assisted living home for people with Alzheimer's at a cost of $6,000 a month on top of all their other expenses that their spouse, who lives elsewhere, has.

They can perfectly predict the future...but instead of doing something useful with that amazing ability -- like play Powerball -- all they do is adjust their asset allocation!
I agree. Very True.
My MIL, age 94, has dementia and her total monthly expenses are $7-8k/mo. It's a big hit. :shock:

(politely curious). . . who are "these people". . . ?

mahalo nui loa
j :D

Bastiat
Posts: 136
Joined: Thu May 26, 2016 11:07 am

Re: Memo to those who have won the game: it's time to quit playing

Post by Bastiat » Sun Jan 07, 2018 12:24 pm

CULater wrote:
Sun Jan 07, 2018 10:45 am
I guess I don't understand why someone who has "won the game" would be taking a gradualist approach to reducing their equity allocation, especially in the face of the obvious high market valuations. If you don't need to have anything in stocks or need a much lower percentage than you currently have, why not just go online tomorrow and get out? Maybe it's greed. People just can't leave party while the booze is flowing. Frankly, that's the best time to leave, IMO. No traffic jams yet. :)
If the market were obviously overvalued, it would not be at this level. That should be obvious.

Also, the first time the market surpassed this CAPE was in January 1998 with the S&P 500 around 960. It remained above this level for over 3 years until March 2001, with the S&P 500 around 1150 and a total return of 28% during that period.

Those who have won the game should be adjusting their allocation based on their IPS and their willingness, ability, and need to take risk - not whatever you or the CAPE says. I don't know if you think you're helping people by encouraging them to go online tomorrow and unthinkingly "get out" (in other words, to market time because of emotion), but you're not.
Last edited by Bastiat on Sun Jan 07, 2018 12:25 pm, edited 1 time in total.

TonyDAntonio
Posts: 416
Joined: Thu Mar 03, 2016 8:32 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by TonyDAntonio » Sun Jan 07, 2018 12:25 pm

Never can figure out winning the game. I'm still in the game and to me it feels like baseball. Meaning: I can't go into a four corners offense(basketball), I can't run the ball to kill the clock(football), I've got to get all 27 outs. Which means I've got to keep pitching and playing defense (bonds, cash) and keeping pushing across some runs (stocks).

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: Memo to those who have won the game: it's time to quit playing

Post by dbr » Sun Jan 07, 2018 12:41 pm

TonyDAntonio wrote:
Sun Jan 07, 2018 12:25 pm
Never can figure out winning the game. I'm still in the game and to me it feels like baseball. Meaning: I can't go into a four corners offense(basketball), I can't run the ball to kill the clock(football), I've got to get all 27 outs. Which means I've got to keep pitching and playing defense (bonds, cash) and keeping pushing across some runs (stocks).
I do think understanding what Bernstein might mean by winning the game is not a trivial discussion. It would be best to go back to his own words on that, wherever they are.

Random Walker
Posts: 2862
Joined: Fri Feb 23, 2007 8:21 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by Random Walker » Sun Jan 07, 2018 12:48 pm

Bastiat wrote:
Those who have won the game should be adjusting their allocation based on their IPS and their willingness, ability, and need to take risk - not whatever you or the CAPE says. I don't know if you think you're helping people by encouraging them to go online tomorrow and unthinkingly "get out" (in other words, to market time because of emotion), but you're not.
I think you are mistaken. The OP is not talking about in/out market timing. He is talking about one way substantial lasting change to the Investment Policy Statement based on the need, ability, willingness you refer to. Circumstances change, and the change in valuations over the last decade has changed many people’s circumstances significantly.

Dave

User avatar
AndrewXnn
Posts: 152
Joined: Thu Jan 02, 2014 7:55 pm
Location: Upstate New York

Re: Memo to those who have won the game: it's time to quit playing

Post by AndrewXnn » Sun Jan 07, 2018 12:53 pm

As the 3rd richest man in the world, Warren Buffet has won the game.

From what I can tell, he is not about to quit playing. :happy

Random Walker
Posts: 2862
Joined: Fri Feb 23, 2007 8:21 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by Random Walker » Sun Jan 07, 2018 12:58 pm

AndrewXnn,
As Larry always says, we need to consider ability, need, willingness to take risk. Warren Buffett has tremendous ability because his cushion is humongous. For those of us with much smaller cushion, ability to take risk is a lot less than Buffett. It’s an irony of investing that those who need to take the least risk also have the greatest ability to take risk.

Dave

User avatar
cfs
Posts: 4154
Joined: Fri Feb 23, 2007 1:22 am
Location: ~ Mi Propio Camino ~

Re: Memo to those who have won the game: it's time to quit playing

Post by cfs » Sun Jan 07, 2018 12:59 pm

Some of us are not using our investments for a living and never will, we have our bases covered by our pensions including social security. The need to take risk is not there but we take it anyway. Your money, your portfolio, your decision. Good luck and thanks for reading / cfs
~ Member of the Active Retired Force since 2014 ~

User avatar
Sandtrap
Posts: 5089
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Memo to those who have won the game: it's time to quit playing

Post by Sandtrap » Sun Jan 07, 2018 1:05 pm

IPS is 30/70. Equities have crept up to nearly 40/60 over the past year.
Either would be fine as portfolio is substantial.
Tempting to leave it alone.
Really tempting.

j :D

User avatar
Mel Lindauer
Moderator
Posts: 28391
Joined: Mon Feb 19, 2007 8:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: Memo to those who have won the game: it's time to quit playing

Post by Mel Lindauer » Sun Jan 07, 2018 1:10 pm

Broken Man 1999 wrote:
Sun Jan 07, 2018 11:54 am

I think that is prudent and also recognizes that objectives are not just the certain locking in of a retirement income stream. It is a big step from "stocks are risky" in some general sense to "A safe retirement eschews stocks." Bernstein does not even say that either.
That's true. In fact, in The Intelligent Asset Allocator, Bill states:
If you start with an all-bond portfolio, adding small amounts of stocks increases returns, as expected. However, adding a small amount of stocks also decreases the portfolio risk slightly, with the minimum risk portfolio consisting of about 7% stock. A portfolio of 12% stock produces the same risk as the all-bond portfolio.Thus, the investor whose sole aim is to reduce risk must of necessity own some stock.
Best Regards - Mel | | Semper Fi

User avatar
HomerJ
Posts: 11411
Joined: Fri Jun 06, 2008 12:50 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by HomerJ » Sun Jan 07, 2018 1:18 pm

UpperNwGuy wrote:
Sun Jan 07, 2018 10:01 am
OP seems to be mixing together two separate concepts:
— Market timing ("With CAPE at the second highest level in history and the U.S. stock market acting bubblicious these days")
— An older investor's AA as determined by his or her IPS

I think a responsible older investor would already be reducing risk as part of his or her long-term plan. OP seems to be advocating that such investors revisit their plans in the light of current market trends (market timing at its finest). If you have a responsible plan, why change it now?
This.

One should have an AA that you can stick to even if the market starts a 50% drop tomorrow. Because it could. The chance never goes to zero.

If you an older investor close to retirement, you should have a conservative AA, REGARDLESS of valuations.

And when someone starts talking about CAPE, and how the chances of a crash are now 7% instead of 5%, you can say "Yeah, I was prepared for the crash when the odds were 5%, even back when they were 2%. So thanks for the advice, but I was ALREADY prepared for a crash."

Because that's the responsible smart way to invest.

TravelforFun
Posts: 1378
Joined: Tue Dec 04, 2012 11:05 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by TravelforFun » Sun Jan 07, 2018 1:21 pm

Nothing is certain and no one can be sure they have won the game.

Best thing we can do is to stay the course and maintain the AA with which we're comfortable. Forcing ourself to rebalance in times like this eliminate the greed factor.

TravelforFun

hulburt1
Posts: 312
Joined: Tue Jul 15, 2014 9:17 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by hulburt1 » Sun Jan 07, 2018 1:24 pm

I've won but I'm playing with house money. I'm at 2.5m. Can ride this up to 3m or down to 2m. I also have cash to take me to70 and then SS. I am sending money to Roth and taking out more this year because I made $500000 last year. Still live on 60000 and very happy. I'm 65 and keep and eye on this daily. I really don't have a life but I'm having fun. :sharebeer

User avatar
bottlecap
Posts: 5663
Joined: Tue Mar 06, 2007 11:21 pm
Location: Tennessee

Re: Memo to those who have won the game: it's time to quit playing

Post by bottlecap » Sun Jan 07, 2018 1:26 pm

CULater wrote:
Sun Jan 07, 2018 9:42 am
I can tolerate risk -- I just don't like losing money.
I love it. Can I use this as my personal quote?

Everybody should follow their IPS. If they do, they won't have to react to any measure put forth by any economist or shaman.

JT

hudson
Posts: 1423
Joined: Fri Apr 06, 2007 9:15 am

Re: Memo to those who have won the game: it's time to quit playing

Post by hudson » Sun Jan 07, 2018 1:40 pm

cfs wrote:
Sun Jan 07, 2018 12:59 pm
Some of us are not using our investments for a living and never will, we have our bases covered by our pensions including social security. The need to take risk is not there but we take it anyway. Your money, your portfolio, your decision. Good luck and thanks for reading / cfs
Thanks CFS! I like
Your money, your portfolio, your decision.

I don't perfectly have my bases covered...but close enough to be retired. My biggest risk would be nursing home type services.
I don't like equities...so I can't get excited about owning them. I've read most of the Boglehead books, advice, and studies that one should hold at least 20% equities. Maybe some day...maybe not....probably not. So I could be one of the most conservative Bogleheads....but I don't follow William Bernstein's recommendation to hold very short term bonds.
IPS: I've never written one and don't plan to. My plan is to stay in investments like CDs, or AAA/AA/A Bonds. If someone gave me some equities, I would sell them as soon as the market opened.

,

bhsince87
Posts: 1683
Joined: Thu Oct 03, 2013 1:08 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by bhsince87 » Sun Jan 07, 2018 1:42 pm

Keep in mind CAPE is still being impacted by the horrible earnings of 2008 and 2009.
BH87

jebmke
Posts: 8140
Joined: Thu Apr 05, 2007 2:44 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by jebmke » Sun Jan 07, 2018 1:45 pm

bhsince87 wrote:
Sun Jan 07, 2018 1:42 pm
Keep in mind CAPE is still being impacted by the horrible earnings of 2008 and 2009.
Will they filter out the hits from write-offs of deferred tax assets going forward?
When you discover that you are riding a dead horse, the best strategy is to dismount.

User avatar
cfs
Posts: 4154
Joined: Fri Feb 23, 2007 1:22 am
Location: ~ Mi Propio Camino ~

Re: Memo to those who have won the game: it's time to quit playing

Post by cfs » Sun Jan 07, 2018 1:51 pm

hudson wrote:
Sun Jan 07, 2018 1:40 pm
. . . If someone gave me some equities, I would sell them as soon as the market opened . . .
Ha! This is really funny, thank you. Good luck with your investments, and thanks for reading ~cfs~
~ Member of the Active Retired Force since 2014 ~

aaronl
Posts: 349
Joined: Thu Apr 03, 2008 8:54 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by aaronl » Sun Jan 07, 2018 1:58 pm

bhsince87 wrote:
Sun Jan 07, 2018 1:42 pm
Keep in mind CAPE is still being impacted by the horrible earnings of 2008 and 2009.
Isn't that the point of cyclical adjustment (the CA in CAPE)?

Bob
Posts: 183
Joined: Mon Feb 26, 2007 5:15 pm

Re: Memo to those who have won the game: it's time to quit playing

Post by Bob » Sun Jan 07, 2018 2:00 pm

I agree with the OP's idea of lowering risk as one nears "having won the game." But I am having a hard time figuring how to quantify the level of "risk" of loss involved not just in adjusting one's AA but in the different investments products that one might select for stocks vs. bonds. I wonder if anyone has a comparative scale or a reference that might help?

To try to clarify what I mean, it is not just one's allocation to Equities vs. Bonds that determines the risk one is taking on. If the Bonds are all U.S. Treasuries the risk is far lower than if the Bonds are all Munis or even Muni Funds. So a 50/50 AA of, say, 50% a Total Market stock fund and U.S. Treasuries would have a lower "risk" than 50% TM stock and 50% Intermediate Muni fund -- but I have not idea how to evaluate that difference in risk or what a "worst case" might be for losses of one versus the other. Same is true for the Equity side, obviously, where a Total Market index fund would (i expect) have a lower risk than a growth fund.

sport
Posts: 7036
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Memo to those who have won the game: it's time to quit playing

Post by sport » Sun Jan 07, 2018 2:02 pm

We are retired. Our allocation is 35% equities +/- 5%. The market gains on Friday pushed us to 40.2% equities. I placed rebalancing sales/purchase orders at Vanguard yesterday.

Post Reply