When to add bonds?

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tman9940
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When to add bonds?

Post by tman9940 »

I am currently 100% stocks (mostly VTSAX). I also have a good amount in a high yield savings account. I have a high tolerance for risk and I am on the younger side (33). With our latest downturn in Dec 2018, I actually bought more and didn't even think about selling. I have a time horizon of 20-30 years. When would you add some bonds? I don't think I'll be ready for some until about 40 or maybe even later. Is anyone opposed to having all stocks at age 33? Thanks for any ideas!
mega317
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Re: When to add bonds?

Post by mega317 »

How do you know you have a high risk tolerance? There's a difference between a 20-something percent drop that comes back almost as quickly and a crash that sees the media and all your friends crying crisis for months or more and may be associated with widespread unemployment or something else bad.

That said, I think most people around here would recommend less than your age in bonds and I don't know if that amount would change your emotions in a crisis.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
EnjoyIt
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Re: When to add bonds?

Post by EnjoyIt »

There is nothing wrong with going 100% equities if you fully understand those implications, have an appropriate emergency fund and have a job that can easily withstand a recession.

Worst case scenario, you are 100% equities, market is down 40-60% and shortly after you lose your employment unable to find work for longer than your emergency fund can handle forcing you to sell equities at a depressed price, making you question your investing strategy and bylining out of the market completely. Realize that there were plenty of people who like you thought they can handle 100% equities, but when poop hit the fan, panic set in and all that "high tolerance for risk" verbiage went out the window.

Personally, I would not go 100% equities, ever, and my employment is very secure/recession proof.

Your money, your risk, your choices.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
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tman9940
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Re: When to add bonds?

Post by tman9940 »

EnjoyIt wrote: Sat Apr 06, 2019 11:14 am There is nothing wrong with going 100% equities if you fully understand those implications, have an appropriate emergency fund and have a job that can easily withstand a recession.

Worst case scenario, you are 100% equities, market is down 40-60% and shortly after you lose your employment unable to find work for longer than your emergency fund can handle forcing you to sell equities at a depressed price, making you question your investing strategy and bylining out of the market completely. Realize that there were plenty of people who like you thought they can handle 100% equities, but when poop hit the fan, panic set in and all that "high tolerance for risk" verbiage went out the window.

Personally, I would not go 100% equities, ever, and my employment is very secure/recession proof.

Your money, your risk, your choices.
Thanks for your take on it. I have a hefty savings account, that I haven't touched in years and am planning on using half or so for a down payment on a house, when I am ready to buy one. I am also in a situation where my bills are very very low. No wife, no kids. I understand things could get a lot worse than what we saw in Dec. 2018, but I thought that was a good, even though small and quick, test for my portfolio and my reaction (or lack thereof).
michaeljc70
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Re: When to add bonds?

Post by michaeljc70 »

Well, the "good amount" in a high yield savings is not equities so that needs to be taken into account (it is really about equities/fixed income and not equity/bonds). I am not risk averse and I was comfortable with no bonds until 10 years before retirement.
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Re: When to add bonds?

Post by pokebowl »

EnjoyIt wrote: Sat Apr 06, 2019 11:14 am Worst case scenario, you are 100% equities, market is down 40-60% and shortly after you lose your employment unable to find work for longer than your emergency fund can handle forcing you to sell equities at a depressed price, making you question your investing strategy and bylining out of the market completely. Realize that there were plenty of people who like you thought they can handle 100% equities, but when poop hit the fan, panic set in and all that "high tolerance for risk" verbiage went out the window.

Personally, I would not go 100% equities, ever, and my employment is very secure/recession proof.

Your money, your risk, your choices.
If your emergency fund depleted, then that strategy obviously failed regardless of if you invested in equities or not. Not to mention the various safety nets one can use should they find themselves laid off, and methods of moving money around.

I usually don't advocate someone fresh out of school or in the workforce dump all their money into stocks, those individuals should prioritize their savings over investing, eliminate debt, and establish an emergency fund as not to be torpedoed by a surprise expense. After a period of time (which is where the OP appears to be), that advice turns from best practice to, "it depends".
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Re: When to add bonds?

Post by sailaway »

We keep our cash in high yield accounts and take it into consideration as part of our AA. So we are currently 75/20/5, which happens to be age -10 in bonds/cash, but we are unlikely to ever go beyond 60/40.
dbr
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Re: When to add bonds?

Post by dbr »

You add bonds when some combination of not needing to take risk and not being able to take risk tell you to.

In the event that you have ability to take risk but low need to take risk a general answer is to take no more risk than necessary.

Risk assessment is a work in progress and one should continue to assess what is one's best judgement and preference for risk.

These things are conceptual and ambiguous and require thinking about what one is trying to do.
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ankonaman
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Re: When to add bonds?

Post by ankonaman »

At 33 I would not even consider buying bonds. You have time on your side.
NotTooDeepLearning
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Re: When to add bonds?

Post by NotTooDeepLearning »

I'm in my 20's and I'm 60/40. I will admit I may be doing some "tactical tilting" and if we weren't in the later stages of the business cycle I might hold more equities. But when everything crashed in december I still felt good about buying more even after 15% losses. I probably wouldnt have if I was all equities.
pbearn
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Re: When to add bonds?

Post by pbearn »

I’m 50 now (and semi-retired with a 60/40 allocation). I was 100% at your age and it was fine, but painful at times. My advice to 33yo me would have been to keep 5-10% in bonds, that small amount will have a negligible impact on returns but would have allowed me to take advantage of the crashes in 2001, 2002 & 2007 (happy to say I cleaned up quite nicely on our recent 20% dip, despite the stock market now being where it was in January 2018; I couldn’t have done that with a 100% allocation). But 100% is OK. I agree that “age in bonds” is overly conservative.
Last edited by pbearn on Sat Apr 06, 2019 5:27 pm, edited 1 time in total.
bhsince87
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Re: When to add bonds?

Post by bhsince87 »

I never owned a bond or bond fund until my late 40's.

I kept my "dry powder" and emergency fund in a money market account. That was usually between 5 and 10% of my total investments.


Looking back, I probably would have had better returns on the "safe" assets if I had used bonds instead.
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retire2022
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Re: When to add bonds?

Post by retire2022 »

tman9940 wrote: Sat Apr 06, 2019 11:05 am I am currently 100% stocks (mostly VTSAX). I also have a good amount in a high yield savings account. I have a high tolerance for risk and I am on the younger side (33). With our latest downturn in Dec 2018, I actually bought more and didn't even think about selling. I have a time horizon of 20-30 years. When would you add some bonds? I don't think I'll be ready for some until about 40 or maybe even later. Is anyone opposed to having all stocks at age 33? Thanks for any ideas!
TMan9940

Bonds are a ballast and work in opposite direction of equities, so it really depends on your risk tolerance.

If you believe in Lazy Portfolio you just follow the link https://www.bogleheads.org/wiki/Lazy_portfolios
Bonds are suggested at 40%

However if you are more nuanced in thinking you could consider Morningstar Life Time Allocation table depending on risk tolerance, Agressive, Moderate and Conservative chart. For 37 years into the future, they recommend anywhere from 3% to 15% bond allocation.

https://indexes.morningstar.com/resourc ... ummary.pdf

At 58 I have 6% bonds using Morningstar X-Ray tool, you can do an objective not complete analysis of your portfolio holding

https://www.doughroller.net/investing/m ... tar-x-ray/

Also realize bonds fund are subject to interest rates, when they go up, what you have invested maybe worth less, and when rates go down the fund could be worth more.

PS you should consider bonds before the rates change, and also before there is a possibly of crash.

good luck
EnjoyIt
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Re: When to add bonds?

Post by EnjoyIt »

tman9940 wrote: Sat Apr 06, 2019 11:24 am
EnjoyIt wrote: Sat Apr 06, 2019 11:14 am There is nothing wrong with going 100% equities if you fully understand those implications, have an appropriate emergency fund and have a job that can easily withstand a recession.

Worst case scenario, you are 100% equities, market is down 40-60% and shortly after you lose your employment unable to find work for longer than your emergency fund can handle forcing you to sell equities at a depressed price, making you question your investing strategy and bylining out of the market completely. Realize that there were plenty of people who like you thought they can handle 100% equities, but when poop hit the fan, panic set in and all that "high tolerance for risk" verbiage went out the window.

Personally, I would not go 100% equities, ever, and my employment is very secure/recession proof.

Your money, your risk, your choices.
Thanks for your take on it. I have a hefty savings account, that I haven't touched in years and am planning on using half or so for a down payment on a house, when I am ready to buy one. I am also in a situation where my bills are very very low. No wife, no kids. I understand things could get a lot worse than what we saw in Dec. 2018, but I thought that was a good, even though small and quick, test for my portfolio and my reaction (or lack thereof).
Then you are not in 100% equities.
Equities % = equites / (equites + cash in savings account)
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Trader Joe
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Re: When to add bonds?

Post by Trader Joe »

tman9940 wrote: Sat Apr 06, 2019 11:05 am I am currently 100% stocks (mostly VTSAX). I also have a good amount in a high yield savings account. I have a high tolerance for risk and I am on the younger side (33). With our latest downturn in Dec 2018, I actually bought more and didn't even think about selling. I have a time horizon of 20-30 years. When would you add some bonds? I don't think I'll be ready for some until about 40 or maybe even later. Is anyone opposed to having all stocks at age 33? Thanks for any ideas!
I also have a high tolerance for risk, same as you. I plan on waiting until I am 60 years old to assess my need for bonds. You are in your prime. 100% stocks is the way to go. You will not regret it.
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sometimesinvestor
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Re: When to add bonds?

Post by sometimesinvestor »

I have no problem with your not holding bonds but if it were 37 years ago and long term treasuries w ere paying more than 10% you should own some.AS suggested do have some cash perhaps a floating rate fund.
When you retire (a long time from know) you should ideally have a 3 year emergency fund as it would be bad to sell stocks to fix your roof. ,I would buy bonds when the rate beats inflation by 3% . That will happen but I don't know when
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Re: When to add bonds?

Post by selters »

I think asset allocation should be based on portfolio size, not age. You can add bonds when your portfolio reaches a not completely insignificant amount. Define that however you like, 10k, 20k, 50k or something.

If you want some bonds, if only to learn about them, maybe you can start out with a small bond allocation, 10% or so.
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Re: When to add bonds?

Post by dbr »

selters wrote: Sat Apr 06, 2019 6:07 pm I think asset allocation should be based on portfolio size, not age. You can add bonds when your portfolio reaches a not completely insignificant amount. Define that however you like, 10k, 20k, 50k or something.

If you want some bonds, if only to learn about them, maybe you can start out with a small bond allocation, 10% or so.
Indeed so. Portfolio size would be a significant consideration in need, ability, and willingness to take risk.
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Re: When to add bonds?

Post by thefirst100k »

The reason why investors diversify across asset classes (stocks, bonds, cash, etc.) is to reduce our exposure to the risks associated with a particular asset class. This method of risk reduction goes above and beyond diversifying within an asset class. While you may have a well diversified stock portfolio that is insulated against risk of any particular stock failing, you are entirely exposed to the risks associated with stocks as an asset class. Someone with only 70% in stocks would be only 70% exposed to the risks of this asset class. If you are OK with not diversifying your risk across asset classes (stocks, bonds, cash, etc.), then by all means keep 100% in stocks. Over the long term, this could even be less risky. Prepare for a wild ride though. Also you aren't really 100% in stocks if you are holding cash somewhere in my opinion.
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Re: When to add bonds?

Post by saltz1979 »

This is my opinion. I am a little over a year from retiring early at 59 1/2. My retirement account has appreciated substantially since the low of 2009. In my opinion we have had 20 years of equity appreciation in a 10 year timeframe. I have moved into fixed income in a substantial way. I’m not going to give up my “20 years worth of returns” in a bear market that could start at anytime without warning. My crystal ball is cloudy but I am also not greedy. As of now I am within 4% of “winning the game”. I will take my gains.
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Re: When to add bonds?

Post by hlinee »

thefirst100k wrote: Sat Apr 06, 2019 6:53 pm The reason why investors diversify across asset classes (stocks, bonds, cash, etc.) is to reduce our exposure to the risks associated with a particular asset class. This method of risk reduction goes above and beyond diversifying within an asset class. While you may have a well diversified stock portfolio that is insulated against risk of any particular stock failing, you are entirely exposed to the risks associated with stocks as an asset class. Someone with only 70% in stocks would be only 70% exposed to the risks of this asset class. If you are OK with not diversifying your risk across asset classes (stocks, bonds, cash, etc.), then by all means keep 100% in stocks. Over the long term, this could even be less risky. Prepare for a wild ride though. Also you aren't really 100% in stocks if you are holding cash somewhere in my opinion.
Right- if I understand you corrrectly, your opinion is similar to that of Lars Krojer, which also makes sense to me. His argument was that by going 100% in equities, you risk a situation like Japan. Thus, having a healthy amount in bonds hedges against that risk. My problem (as a 20-something) is how much to put into bonds given that I agree with him. I am inclined to still go 100% equities until my 30's or even 40's despite this because I will still have enough time (and hopefully a high-paying job) to make the money back even if the stock market completely tanks.
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Re: When to add bonds?

Post by drk »

It depends. If you have a high savings rate, equity returns won’t be your net worth’s biggest driver for a long time. There’s been very little difference in outcomes between 100/0, 80/20, and 60/40. The difference is that the fixed income allocation has given you the opportunity to overweight stocks after large drops if your jobs is safe and you’re inclined to do so.
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Re: When to add bonds?

Post by Gufomel »

tman9940 wrote: Sat Apr 06, 2019 11:05 am I am currently 100% stocks (mostly VTSAX). I also have a good amount in a high yield savings account.
So you’re not 100% stocks.

I have no idea what the size of your total investments is, but as an example if you have 50k stocks and 50k cash, then you’re really 50/50. That’s fine if that’s what you want to be. But calling it 100% stocks when it’s not is just mental accounting and will get in the way of fairly evaluating your portfolio and risk tolerance.

You can call it 100% stocks plus $X cash, but it’s not 100% stocks.

At least two take aways from this are:

1) it’s possible you’re not as risk tolerant as you think you are, if you’re holding a sizable cash position but saying you’re 100% stocks

2) or maybe you are in fact very risk tolerant, and selling stocks to buy bonds when you already have a sizeable cash position would make your portfolio much more conservative than you were really intending because you were not accounting for your cash position in your portfolio
EnjoyIt
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Re: When to add bonds?

Post by EnjoyIt »

hlinee wrote: Sat Apr 06, 2019 7:51 pm
thefirst100k wrote: Sat Apr 06, 2019 6:53 pm The reason why investors diversify across asset classes (stocks, bonds, cash, etc.) is to reduce our exposure to the risks associated with a particular asset class. This method of risk reduction goes above and beyond diversifying within an asset class. While you may have a well diversified stock portfolio that is insulated against risk of any particular stock failing, you are entirely exposed to the risks associated with stocks as an asset class. Someone with only 70% in stocks would be only 70% exposed to the risks of this asset class. If you are OK with not diversifying your risk across asset classes (stocks, bonds, cash, etc.), then by all means keep 100% in stocks. Over the long term, this could even be less risky. Prepare for a wild ride though. Also you aren't really 100% in stocks if you are holding cash somewhere in my opinion.
Right- if I understand you corrrectly, your opinion is similar to that of Lars Krojer, which also makes sense to me. His argument was that by going 100% in equities, you risk a situation like Japan. Thus, having a healthy amount in bonds hedges against that risk. My problem (as a 20-something) is how much to put into bonds given that I agree with him. I am inclined to still go 100% equities until my 30's or even 40's despite this because I will still have enough time (and hopefully a high-paying job) to make the money back even if the stock market completely tanks.
Just do 10% to get your feet wet. Re-evaluate in 5 years to see if your risk tolerance has changed. Once you have substantial assets I would not have less than 25% in bonds as recommenced by Benjamin Graham.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
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Re: When to add bonds?

Post by willthrill81 »

I believe that a good argument can be made to be 100% stock until ten years prior to your anticipated retirement age. At that point, you can then starting moving into bonds, 2-5% per year.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: When to add bonds?

Post by Random Walker »

I’m a fan of a small allocation to bonds, maybe 10%. I think the psychological/behavioral muscles that you build from rebalancing are worth the minimal decreased expected return compared to 100% equities.

Dave
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Re: When to add bonds?

Post by willthrill81 »

Random Walker wrote: Sun Apr 07, 2019 11:08 am I’m a fan of a small allocation to bonds, maybe 10%. I think the psychological/behavioral muscles that you build from rebalancing are worth the minimal decreased expected return compared to 100% equities.

Dave
I'm not so sure about that. Sacrificing 40-50 basis points annually just to get an investor accustomed to rebalancing doesn't seem worth it to me. Now if having 10% in bonds helps the investor to stay the course when stocks are down 50%, that's a different story, although I would question whether a 45% drop in one's portfolio would produce meaningfully different behaviors than a 50% drop.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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I am 53 and 100% equity

Post by Socrates »

well a tiny amount in junk bonds, but essentially all stock

I think at your age your goal is to accumulate and stocks are best for that. If you are a true buy and hold, you can survive the ups and down of the market. I would look at bonds to preserve what you have - which I am guessing at your age isn't much.

Think rule of 72. If you have returns of 8% your money will double every 9 years. At a 2 % return (bonds) that will double every 36 years.
Like Will said, I will look to move to bonds as I approach 55 or even 60. 10 or 20% in bonds isn't, IMO, going to make much of a difference in a down market for you other than giving you some cash to buy more stocks.
“Don't waste your time looking back. You're not going that way.” ― Ragnar Lothbrok.
Random Walker
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Re: When to add bonds?

Post by Random Walker »

willthrill81 wrote: Sun Apr 07, 2019 11:19 am
Random Walker wrote: Sun Apr 07, 2019 11:08 am I’m a fan of a small allocation to bonds, maybe 10%. I think the psychological/behavioral muscles that you build from rebalancing are worth the minimal decreased expected return compared to 100% equities.

Dave
I'm not so sure about that. Sacrificing 40-50 basis points annually just to get an investor accustomed to rebalancing doesn't seem worth it to me. Now if having 10% in bonds helps the investor to stay the course when stocks are down 50%, that's a different story, although I would question whether a 45% drop in one's portfolio would produce meaningfully different behaviors than a 50% drop.
I agree that there is not much discipline difference required between 100/0 and 90/10. The return difference I think would probably be smaller than the 0.4-0.5% above because of decreased volatility drag. Maybe 0.2-0.3%.
The potential costs of behavioral errors can easily totally drown out a lot of the expenses we typically discuss like expense ratios.

Dave
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Re: When to add bonds?

Post by willthrill81 »

Random Walker wrote: Sun Apr 07, 2019 11:51 am
willthrill81 wrote: Sun Apr 07, 2019 11:19 am
Random Walker wrote: Sun Apr 07, 2019 11:08 am I’m a fan of a small allocation to bonds, maybe 10%. I think the psychological/behavioral muscles that you build from rebalancing are worth the minimal decreased expected return compared to 100% equities.

Dave
I'm not so sure about that. Sacrificing 40-50 basis points annually just to get an investor accustomed to rebalancing doesn't seem worth it to me. Now if having 10% in bonds helps the investor to stay the course when stocks are down 50%, that's a different story, although I would question whether a 45% drop in one's portfolio would produce meaningfully different behaviors than a 50% drop.
I agree that there is not much discipline difference required between 100/0 and 90/10. The return difference I think would probably be smaller than the 0.4-0.5% above because of decreased volatility drag. Maybe 0.2-0.3%.
The potential costs of behavioral errors can easily totally drown out a lot of the expenses we typically discuss like expense ratios.

Dave
The beauty of being 100% stock is that the investor doesn't have to do anything except not panic sell. :wink:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: When to add bonds?

Post by dbr »

willthrill81 wrote: Sun Apr 07, 2019 12:09 pm
The beauty of being 100% stock is that the investor doesn't have to do anything except not panic sell. :wink:
[/quote]

But, but, but . . . if he wants a withdrawal he'll have to sell stocks when they are down :twisted: **

**For those readers without a sarcasm detector please turn yours on.
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pezblanco
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Re: When to add bonds?

Post by pezblanco »

If you are willing to be 100% stocks (which I think is fine at your age), you might also want to consider being more than 100% stocks ... i.e. a judicious use of leverage. Look at some of the discussions involving Life Cycle Investing on the site. The book by Ayres and Nalebuff is a good intro to some of the ideas. BH's in my opinion give waaaay too conservative advice to younger investors with 30 year investment horizons than they should ...
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Re: When to add bonds?

Post by Engineer250 »

willthrill81 wrote: Sun Apr 07, 2019 10:55 am I believe that a good argument can be made to be 100% stock until ten years prior to your anticipated retirement age. At that point, you can then starting moving into bonds, 2-5% per year.
Am similar age to OP (though started working young and went through 2008) and this is my plan.

I read an article around 2008 that states too many people about to retire were too heavily invested in stocks, and too many young people were too heavily invested in bonds. Am 100% and plan to stay that way until I get a lot closer, then do a more extreme ramp up in bonds as I get close. I’ve been through 2008, didn’t really know there was a downturn in December, and like that I don’t need to do anything. A target fund would serve largely the same purpose though.
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tman9940
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Re: When to add bonds?

Post by tman9940 »

Thank You all for your input/advice! I realize not every dollar I have is in stocks. I was trying to say that every dollar I have invested is in stocks. The main goal of my cash is for a down payment for a home and for any unexpected expenses that my arise. Not to mention, bonds seems harder to understand than stocks. Thanks again!
Bob B.
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Re: When to add bonds?

Post by Bob B. »

There is nothing wrong with being all stocks at age 33. Especially if you have a high yielding savings account/money market.
And you were smart to buy on the last big dip.
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Re: When to add bonds?

Post by Bob B. »

There is nothing wrong with being all stocks at age 33. Especially if you have a high yielding savings account/money market.
And you were smart to buy on the last big dip.
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Re: When to add bonds?

Post by ThrustVectoring »

Engineer250 wrote: Mon Apr 08, 2019 2:14 pm
willthrill81 wrote: Sun Apr 07, 2019 10:55 am I believe that a good argument can be made to be 100% stock until ten years prior to your anticipated retirement age. At that point, you can then starting moving into bonds, 2-5% per year.
Am similar age to OP (though started working young and went through 2008) and this is my plan.

I read an article around 2008 that states too many people about to retire were too heavily invested in stocks, and too many young people were too heavily invested in bonds. Am 100% and plan to stay that way until I get a lot closer, then do a more extreme ramp up in bonds as I get close. I’ve been through 2008, didn’t really know there was a downturn in December, and like that I don’t need to do anything. A target fund would serve largely the same purpose though.
I'm in roughly the same boat and am thinking along similar lines. Adding bonds helps your worst-plausible-case investing results over the short term only. Over longer and longer timeframes, the risk of participating in bull markets crushes the risks of losing money in bear markets, even if you end up being born at an unfortunate time. I don't know the exact breakeven points, but I suspect it's something like "with 5th percentile historical equity returns, stocks beat out bonds after 25 to 35 years".

And I agree that target date funds don't ramp up bonds as quickly as you'd ideally like. IMO it's because mutual funds are structurally incapable of customizing the ramp based off your personal assets and cash flows. Like, my personal plan is to target 18 years of expenses in stocks and 12 in bonds, and invest in 100% stocks until I hit the 18x mark. Afterwards, all new money goes to bonds, and I'll do an annual rebalance to get my stock exposure back to 18x (selling stocks in retirement accounts, buying in taxable). Repeat until 12x annual expenses saved in bonds, then either retire or keep working (and saving in stocks) while FI.
Current portfolio: 60% VTI / 40% VXUS
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scorcher31
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Joined: Sun Mar 06, 2016 11:13 pm

Re: When to add bonds?

Post by scorcher31 »

I'm about you age and have no problem with 100% stocks as long as you aren't going to sell until retirement. For us we are probably 93% equities 7% bonds. Mostly because my wife had some bonds in her 401k I never felt like changing over. I also had way too much for us between my checking and high yield savings (was about 120k). I decided to take 50k out and move to municipal state bonds in my taxable account as the dividends were tax free in my state and I needed 50k to buy the fund. I figured the dividends were over twice the taxable interest rate at the time and i could always pull those back if I really needed. I plan to wait until my late 40's or early 50's and then will probably switch to 80/20 maybe 75/25 or so.

Everyone says you don't know how you will react when the market drops, but frankly I'd be fine with it as well. I figure I could finally dump big money into the market while it's cheap. I do assume it will always eventually come up, but also keep 20% in international. I figure if US markets don't come back up there are much bigger problems to deal with any everybody is probably in trouble anyways except for our friends in bunkers stockpiling gold and ammo.
mikeyzito22
Posts: 469
Joined: Sat Dec 02, 2017 5:42 pm

Re: When to add bonds?

Post by mikeyzito22 »

scorcher31 wrote: Mon Apr 08, 2019 9:37 pm I'm about you age and have no problem with 100% stocks as long as you aren't going to sell until retirement. For us we are probably 93% equities 7% bonds. Mostly because my wife had some bonds in her 401k I never felt like changing over. I also had way too much for us between my checking and high yield savings (was about 120k). I decided to take 50k out and move to municipal state bonds in my taxable account as the dividends were tax free in my state and I needed 50k to buy the fund. I figured the dividends were over twice the taxable interest rate at the time and i could always pull those back if I really needed. I plan to wait until my late 40's or early 50's and then will probably switch to 80/20 maybe 75/25 or so.

Everyone says you don't know how you will react when the market drops, but frankly I'd be fine with it as well. I figure I could finally dump big money into the market while it's cheap. I do assume it will always eventually come up, but also keep 20% in international. I figure if US markets don't come back up there are much bigger problems to deal with any everybody is probably in trouble anyways except for our friends in bunkers stockpiling gold and ammo.
Scorcher, could you tell me how much interest you were getting tax free with the muni fund at 50K? Also, were you reivesting or having it deposited into a bank account? I'm interested in knowing more about a taxable account with munis instead of keeping a large pile in high yield savings. Thanks!
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