Old Guys Investing

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woodedareas
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Old Guys Investing

Post by woodedareas » Sat Mar 31, 2018 4:54 pm

Any older folks holding cash and waiting for CD’s at 3% or higher? I think the rates will be about 3% for a 1year CD by the end of the year. At the age of 78 why risk the market especially with an AA of 25 equities/75. I wouldn’t be surprised to see 5 year rates at 5% by years end. This what an older guy like me has been waiting. If my assumption on rates is correct, I will take the 3% return,add social security, add approximately 3% withdrawl, and I can live great with no risk. I will ladder CD’s.

Uniballer
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Re: Old Guys Investing

Post by Uniballer » Sat Mar 31, 2018 5:19 pm

You may think so now, but what if the inflation rate increases even faster than the interest rates?

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mhadden1
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Re: Old Guys Investing

Post by mhadden1 » Sat Mar 31, 2018 5:36 pm

woodedareas wrote:
Sat Mar 31, 2018 4:54 pm
Any older folks holding cash and waiting for CD’s at 3% or higher? I think the rates will be about 3% for a 1year CD by the end of the year. At the age of 78 why risk the market especially with an AA of 25 equities/75. I wouldn’t be surprised to see 5 year rates at 5% by years end. This what an older guy like me has been waiting. If my assumption on rates is correct, I will take the 3% return,add social security, add approximately 3% withdrawl, and I can live great with no risk. I will ladder CD’s.
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delamer
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Re: Old Guys Investing

Post by delamer » Sat Mar 31, 2018 5:39 pm

What are you going to do if your assumption on rates is not correct?

woodedareas
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Re: Old Guys Investing

Post by woodedareas » Sat Mar 31, 2018 5:49 pm

We are so accustomed to taking market risk primarily because CD rates have been so low for such a long time that we are stuck. I am fortunate I don’t have to gamble and am comfortable anticipating 3%or higher given my reading of the Federal Reserve. When you get older risk is no longer an option unless you have to take it to survive. I am a fan of the 3 fund portfolio, but it involves considerable risk. I’ll take 3-4% any time especially at my age. it wasn’t that long ago when most older Americans invested only in CD’s. Now that rates are escalating CD’are becoming more attractive at least to me.

Marketman
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Re: Old Guys Investing

Post by Marketman » Sat Mar 31, 2018 6:08 pm

I think I remember reading that the least volatile asset allocation historically has been 20/80 stocks/bonds. Can someone back this up? Of course you may not like bond funds but a laddered 5 year CD portfolio would have about the same risk as a 2 year duration treasury bond fund. I don't buy "if you hold to maturity there is no principle risk." Yes there is, it from inflation.

My point is that 10 or 20% stocks may give you a less volatile portfolio and certainly would probably be safer overall (in terms of preserving purchasing power) than all fixed income even at age 78. You may live another 20 years. Also, do you have heirs and/or charities that you wish to leave money to?

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msi
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Re: Old Guys Investing

Post by msi » Sat Mar 31, 2018 6:12 pm

Some time ago, I remember thinking 5% was low. Different world...

delamer
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Re: Old Guys Investing

Post by delamer » Sat Mar 31, 2018 6:21 pm

woodedareas wrote:
Sat Mar 31, 2018 5:49 pm
We are so accustomed to taking market risk primarily because CD rates have been so low for such a long time that we are stuck. I am fortunate I don’t have to gamble and am comfortable anticipating 3%or higher given my reading of the Federal Reserve. When you get older risk is no longer an option unless you have to take it to survive. I am a fan of the 3 fund portfolio, but it involves considerable risk. I’ll take 3-4% any time especially at my age. it wasn’t that long ago when most older Americans invested only in CD’s. Now that rates are escalating CD’are becoming more attractive at least to me.

You didn’t answer the question that I asked — what will you do if you are wrong about interest rates?

sport
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Re: Old Guys Investing

Post by sport » Sat Mar 31, 2018 6:23 pm

When interest rates were more "normal", I had a CD ladder that extended out to 5 or 6 years. When rates dropped, I did not want to commit to such long maturities, so I compressed the ladder to about 3 years. So, now that rates are increasing, I have several CDs maturing this year. I did not want to take the money out of CDs and wait, because the cost of waiting is the foregone higher interest offered by CDs over savings or money market fund/accounts. So, as my CDs mature, I will take advantage of the higher rates. I expect to choose maturities based on the yield curve. Right now, only 2-year or 3-year rates are attractive to me. If the longer part of the curve steepens, then I will consider some longer ones. I also try to choose maturities to separate the maturity dates in my ladder. The CD ladder is part of my bond allocation.

woodedareas
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Re: Old Guys Investing

Post by woodedareas » Sat Mar 31, 2018 6:46 pm

delamer wrote:
Sat Mar 31, 2018 6:21 pm
woodedareas wrote:
Sat Mar 31, 2018 5:49 pm
We are so accustomed to taking market risk primarily because CD rates have been so low for such a long time that we are stuck. I am fortunate I don’t have to gamble and am comfortable anticipating 3%or higher given my reading of the Federal Reserve. When you get older risk is no longer an option unless you have to take it to survive. I am a fan of the 3 fund portfolio, but it involves considerable risk. I’ll take 3-4% any time especially at my age. it wasn’t that long ago when most older Americans invested only in CD’s. Now that rates are escalating CD’are becoming more attractive at least to me.

You didn’t answer the question that I asked — what will you do if you are wrong about interest rates?
I have lived long enough to realize I can be wrong, but doesn’t incorrect assumptions also apply to the stock market? I have nothing to lose by waiting until December to check on rates and create a ladder. I still run my business and don’t need the Income.

delamer
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Re: Old Guys Investing

Post by delamer » Sat Mar 31, 2018 6:55 pm

woodedareas wrote:
Sat Mar 31, 2018 6:46 pm
delamer wrote:
Sat Mar 31, 2018 6:21 pm
woodedareas wrote:
Sat Mar 31, 2018 5:49 pm
We are so accustomed to taking market risk primarily because CD rates have been so low for such a long time that we are stuck. I am fortunate I don’t have to gamble and am comfortable anticipating 3%or higher given my reading of the Federal Reserve. When you get older risk is no longer an option unless you have to take it to survive. I am a fan of the 3 fund portfolio, but it involves considerable risk. I’ll take 3-4% any time especially at my age. it wasn’t that long ago when most older Americans invested only in CD’s. Now that rates are escalating CD’are becoming more attractive at least to me.

You didn’t answer the question that I asked — what will you do if you are wrong about interest rates?
I have lived long enough to realize I can be wrong, but doesn’t incorrect assumptions also apply to the stock market? I have nothing to lose by waiting until December to check on rates and create a ladder. I still run my business and don’t need the Income.
Of course you have something to lose. You lose income that you could be receiving from other investments, like stock dividends or bond interest.

But you still didn’t answer my question. My point is that you need to have a plan for how to invest if you can’t get the interest rates that you want. If you just plan to hold on until you get those target rates, you could have money in a savings account for a long time.

Why not do TIPS if you are risk averse?

spectec
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Re: Old Guys Investing

Post by spectec » Sat Mar 31, 2018 7:03 pm

I don't pretend to know anything about the direction of interest rates, but it is refreshing to see someone else with an AA of 25/75.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

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David Jay
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Re: Old Guys Investing

Post by David Jay » Sat Mar 31, 2018 8:28 pm

Marketman wrote:
Sat Mar 31, 2018 6:08 pm
I think I remember reading that the least volatile asset allocation historically has been 20/80 stocks/bonds.
Cash LOOKS less volatile, because there is no drop in the number of denominated dollars with inflation.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Marketman
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Re: Old Guys Investing

Post by Marketman » Sat Mar 31, 2018 10:02 pm

I think I misread what the OP meant. I thought he meant he was 100% fixed income and that an AA of 25/75 stocks/bonds is too risky. I was encouraging him to have at least a small stock allocation of 10 or 20%. If he is 25/75, even better!

OP, neglect my advice above.

Duffydog1
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Re: Old Guys Investing

Post by Duffydog1 » Sun Apr 01, 2018 8:39 am

I am currently partially invested in VG Life Strategy Income Fund which is about 25/75. I did so after considerable research and I might add ignoring the advice from VG financial consultant who suggested I should be 60% equities. At the age of 78 and still employed in my own company I can glide the rest of the way. But I do want to keep up with inflation and leave my estate to my family. The Life Strategy fund balances itself and fits perfectly with my situation. However as interest creep up, CD's look more attractive again and are more stable and certain. The Life Strategy fund doesn't go up or down very much and that is where someone like me should be at this stage in life. Depending on how much money one has CD's can be a management problem as they are only insured up to $250,000. One thing missing in this thread is age, health, and life expectancy. I would guess that most of us at my age have some health problems as that is all my friends talk about. Simply stated the older you get the less money you will need on an annualized basis. In my case since I am still employed I have not drawn down on my IRA or other funds. In this manner I have deferred my use of IRA and non IRA funds. I don't take much risk because I don't need to. My wife is younger and I invest for her and the grandchildren. I am absolutely thrilled that CD rates are rising and I may be able to drop some of the market risk. I will still hold onto a few stocks and some long term corporate bonds (5%) and leave something in the Life Strategy Funds, and I will never listen to a VG advisor. I don't expect to go out 5 years on CD's unless there is a significant increase to 4% but I don't see that this time. I will be in the 3-5 year range.

sport
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Re: Old Guys Investing

Post by sport » Sun Apr 01, 2018 9:57 am

Duffydog1 wrote:
Sun Apr 01, 2018 8:39 am
At the age of 78...
Duffydog1 wrote:
Sun Apr 01, 2018 8:39 am
In my case since I am still employed I have not drawn down on my IRA or other funds. In this manner I have deferred my use of IRA...
I hope you have been taking any RMDs that are due.

woodedareas
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Re: Old Guys Investing

Post by woodedareas » Sun Apr 01, 2018 3:39 pm

Yes I have been taking RMD’s. Vanguard does a good job with RMDs. My accountant is also very observant.
Thanks

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Earl Lemongrab
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Re: Old Guys Investing

Post by Earl Lemongrab » Sun Apr 01, 2018 7:07 pm

I don't plan to use CDs at all. For the portion of my portfolio in that sort of allocation, I use the stable value fund in the 401(k). It's currently at 2.64% for 2nd quarter. It will generally track changes in interest rates with the usual lag. Right now, approximately 20% of the portfolio is in it, which is 50% of fixed-income with the rest in bond index.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

bayview
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Re: Old Guys Investing

Post by bayview » Sun Apr 01, 2018 7:28 pm

woodedareas wrote:
Sat Mar 31, 2018 6:46 pm
delamer wrote:
Sat Mar 31, 2018 6:21 pm
woodedareas wrote:
Sat Mar 31, 2018 5:49 pm
We are so accustomed to taking market risk primarily because CD rates have been so low for such a long time that we are stuck. I am fortunate I don’t have to gamble and am comfortable anticipating 3%or higher given my reading of the Federal Reserve. When you get older risk is no longer an option unless you have to take it to survive. I am a fan of the 3 fund portfolio, but it involves considerable risk. I’ll take 3-4% any time especially at my age. it wasn’t that long ago when most older Americans invested only in CD’s. Now that rates are escalating CD’are becoming more attractive at least to me.
You didn’t answer the question that I asked — what will you do if you are wrong about interest rates?
I have lived long enough to realize I can be wrong, but doesn’t incorrect assumptions also apply to the stock market? I have nothing to lose by waiting until December to check on rates and create a ladder. I still run my business and don’t need the Income.
(cleaned up the quotes)

DH is moving to CDs. We are creating a ladder, but we did go ahead and place an order for brokered 3-year CDs at 2.8%. If rates are at 3% at the end of the year, then great, we'll buy at that rate for the next 6-month rung.

But we wanted to get the money working for him now. Better 2.8% than 1-point-something while waiting to see 3.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

Call_Me_Op
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Re: Old Guys Investing

Post by Call_Me_Op » Mon Apr 02, 2018 6:02 am

Your assumption on 5 year rates seems high. How do you come up with that?
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Call_Me_Op
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Re: Old Guys Investing

Post by Call_Me_Op » Mon Apr 02, 2018 6:03 am

Marketman wrote:
Sat Mar 31, 2018 6:08 pm
I think I remember reading that the least volatile asset allocation historically has been 20/80 stocks/bonds. Can someone back this up? Of course you may not like bond funds but a laddered 5 year CD portfolio would have about the same risk as a 2 year duration treasury bond fund. I don't buy "if you hold to maturity there is no principle risk." Yes there is, it from inflation.
Untrue. Principal has nothing to do with inflation. What is at risk is spending power, not principal.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Marketman
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Re: Old Guys Investing

Post by Marketman » Mon Apr 02, 2018 2:16 pm

Call_Me_Op wrote:
Mon Apr 02, 2018 6:03 am
Marketman wrote:
Sat Mar 31, 2018 6:08 pm
I think I remember reading that the least volatile asset allocation historically has been 20/80 stocks/bonds. Can someone back this up? Of course you may not like bond funds but a laddered 5 year CD portfolio would have about the same risk as a 2 year duration treasury bond fund. I don't buy "if you hold to maturity there is no principle risk." Yes there is, it from inflation.
Untrue. Principal has nothing to do with inflation. What is at risk is spending power, not principal.
I misread the OP's original post when I posted that. I have withdrawn my advice. However, what I was saying is that (I think) the least volatile mix of stock and bonds has historically been 20/80. That is, market volatility in the short run. I was not talking about inflation.

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