Investing Techniques For People Approaching Retirement In This Aging Bull Market

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
Explorer
Posts: 221
Joined: Thu Oct 13, 2016 7:54 pm

Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Explorer » Sat Jun 08, 2019 10:17 am

I would like us to discuss broad investment techniques for those approaching retirement and already have sizable/adequate assets BUT want to continue to participate in the market without getting hit by a huge downdraft.

No snarky comments please. Please chime in if you are following techniques other than B&H with an AA based on risk considerations.

I will start with the techniques I have been employing lately:
- Bond yields are very low now so avoid investment grade bonds - in fact exit positions already in
- Follow the Fed in entering and existing stock market positions: very evident that market and Fed have got a symbiotic relationship going - when one flexes the muscle the other is responding
- Time is not your friend
- Carry a high stake of cash [ok with losing value to inflation]
- Limit losses in positions you hold [x% stop loss]
- Don't get carried away by tax handcuffs or tax implications
- MOST IMPORTANT OF ALL - Preserve your capital base - who knows when markets recover if a large draw-down occurs.

Thank you.
Explorer

HEDGEFUNDIE
Posts: 2566
Joined: Sun Oct 22, 2017 2:06 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by HEDGEFUNDIE » Sat Jun 08, 2019 10:28 am

Explorer wrote:
Sat Jun 08, 2019 10:17 am
want to continue to participate in the market without getting hit by a huge downdraft.
The best way to do this is to combine your stock holdings with some long term Treasuries. When stocks go up your Treasuries will stagnate or trend down. When stocks crash your Treasuries will jump, giving you downside protection.

The other techniques you have listed seem to require a knack for predicting the future...

livesoft
Posts: 66339
Joined: Thu Mar 01, 2007 8:00 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by livesoft » Sat Jun 08, 2019 10:34 am

My spouse is still working, but I am retired. We are withdrawing from our portfolio to pay expenses. I looked at your list and we pretty much do the opposite of what you listed. A major reason is that in our sixties we have 40 to 50 years ahead of us. It is not like one is going to withdraw all their money on the day (or even year) they retire and spend it.
- Bond yields are very low now so avoid investment grade bonds - in fact exit positions already in
Switched more from short-term bonds since last November more and more into Total Bond Index. Total Bond Index fund is up about 8% since then.

- Follow the Fed in entering and existing stock market positions: very evident that market and Fed have got a symbiotic relationship going - when one flexes the muscle the other is responding
Don't care about the Fed too much since they pretty much foreshadow quite well anything they do.

- Carry a high stake of cash [ok with losing value to inflation]
No cash ever. Just use index funds of equities and bonds and maintain about a 60:40 asset allocation.

- Limit losses in positions you hold [x% stop loss]
No stop losses ever. Instead purchase more equity shares when things drop. Since portfolio is only index funds, there are really no individual stocks to worry about losing money with. If a broad market index fund drops, then it presents a buying opportunity to take advantage of.

- Don't get carried away by tax handcuffs or tax implications
Learn tax laws and pay no taxes on investment income. Since we have not made contributions to taxable accounts since I retired (only withdrawals) there are really no opportunities for tax-loss harvesting anyways since all TLHing was done in the past at market lows.

- MOST IMPORTANT OF ALL - Preserve your capital base - who knows when markets recover if a large draw-down occurs.
Instead of this, have a relatively large capital base so that draw downs just don't matter. With 40% bonds, that is more than 10 to 15 years of withdrawals. If markets don't recover one is going to have other more important problems.
I guess we are quite a bit different in anxiety levels and behavioral outlook. I am not buy & hold, since I make major rebalancing moves on so-called RBDs.

Perhaps I could classify investors by what they did on December 24, 2018 when some index funds entered 20%-off-recent-highs territory.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
CyclingDuo
Posts: 2311
Joined: Fri Jan 06, 2017 9:07 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by CyclingDuo » Sat Jun 08, 2019 11:11 am

Explorer wrote:
Sat Jun 08, 2019 10:17 am
I would like us to discuss broad investment techniques for those approaching retirement and already have sizable/adequate assets BUT want to continue to participate in the market without getting hit by a huge downdraft.
You make sure your asset allocation is set to meet your current and future needs, as well as tolerance for loss.

To borrow from Larry Swedroe's graphic about a typical 50% bear market and the amount of losses to expect (the example uses the bear market in the early 1970's), you can foretell more or less what the dip will be...

Image

So ask yourself if you can survive a 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40% or 50% or more loss and determine your asset allocation accordingly. As painful as loss is (remember 2000-2003 & 2007-2009?), if indeed it is a result of the economic cycle moving from expansion to retrenchment/recession, time will bring things back...

Image

Expansions and recessions we cannot stop, but we can plan our AA accordingly to weather the duration...

Image
"Everywhere is within walking distance if you have the time." ~ Steven Wright

bhsince87
Posts: 2281
Joined: Thu Oct 03, 2013 1:08 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by bhsince87 » Sat Jun 08, 2019 11:12 am

livesoft wrote:
Sat Jun 08, 2019 10:34 am
My spouse is still working, but I am retired. We are withdrawing from our portfolio to pay expenses. I looked at your list and we pretty much do the opposite of what you listed. A major reason is that in our sixties we have 40 to 50 years ahead of us. It is not like one is going to withdraw all their money on the day (or even year) they retire and spend it.
- Bond yields are very low now so avoid investment grade bonds - in fact exit positions already in
Switched more from short-term bonds since last November more and more into Total Bond Index. Total Bond Index fund is up about 8% since then.

- Follow the Fed in entering and existing stock market positions: very evident that market and Fed have got a symbiotic relationship going - when one flexes the muscle the other is responding
Don't care about the Fed too much since they pretty much foreshadow quite well anything they do.

- Carry a high stake of cash [ok with losing value to inflation]
No cash ever. Just use index funds of equities and bonds and maintain about a 60:40 asset allocation.

- Limit losses in positions you hold [x% stop loss]
No stop losses ever. Instead purchase more equity shares when things drop. Since portfolio is only index funds, there are really no individual stocks to worry about losing money with. If a broad market index fund drops, then it presents a buying opportunity to take advantage of.

- Don't get carried away by tax handcuffs or tax implications
Learn tax laws and pay no taxes on investment income. Since we have not made contributions to taxable accounts since I retired (only withdrawals) there are really no opportunities for tax-loss harvesting anyways since all TLHing was done in the past at market lows.

- MOST IMPORTANT OF ALL - Preserve your capital base - who knows when markets recover if a large draw-down occurs.
Instead of this, have a relatively large capital base so that draw downs just don't matter. With 40% bonds, that is more than 10 to 15 years of withdrawals. If markets don't recover one is going to have other more important problems.
I guess we are quite a bit different in anxiety levels and behavioral outlook. I am not buy & hold, since I make major rebalancing moves on so-called RBDs.

Perhaps I could classify investors by what they did on December 24, 2018 when some index funds entered 20%-off-recent-highs territory.

I'm with livsoft on this.

Just retired 6 months ago at age 53.

In the few years before that, I ramped from 90/10 (with 10 being MM account, zero bonds) to 55/45.

At first, I bought a lot of CDs. But IMO bond yields are decent now. We can keep up with inflation with short term bonds, and beat it with longer term bonds, including a large chunk of tax free muni fund.

We keep 6 months worth of "cash" in money market fund which is currently breaking even with inflation. No need for other cash that I can see, which will almost certainly lose to inflation.

Delaying selling some stocks until next year at least, when capital gains rates drop to zero.

Will never use a stop loss order. Guaranteed way to lose money, especially when the algorithms kick in.
Retirement: When you reach a point where you have enough. Or when you've had enough.

Broken Man 1999
Posts: 2506
Joined: Wed Apr 08, 2015 11:31 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Broken Man 1999 » Sat Jun 08, 2019 11:50 am

Explorer wrote:
Sat Jun 08, 2019 10:17 am
I would like us to discuss broad investment techniques for those approaching retirement and already have sizable/adequate assets BUT want to continue to participate in the market without getting hit by a huge downdraft.

No snarky comments please. Please chime in if you are following techniques other than B&H with an AA based on risk considerations.

I will start with the techniques I have been employing lately:
- Bond yields are very low now so avoid investment grade bonds - in fact exit positions already in
- Follow the Fed in entering and existing stock market positions: very evident that market and Fed have got a symbiotic relationship going - when one flexes the muscle the other is responding
- Time is not your friend
- Carry a high stake of cash [ok with losing value to inflation]
- Limit losses in positions you hold [x% stop loss]
- Don't get carried away by tax handcuffs or tax implications
- MOST IMPORTANT OF ALL - Preserve your capital base - who knows when markets recover if a large draw-down occurs.

Thank you.
Explorer
Good luck with your choices. You are counting on making correct timing calls. These activities must be executed correctly twice (getting in/out, or out/in). I fear your (or anyone else's) ability to successfully accomplish these tasks isn't very likely.

I absolutely desire to continue participating in the stock market, mainly for legacy reasons. I believe a 50% equity and 50% bond portfolio gives me what I seek, a comfortable retirement with the possibility to pass some of the portfolio forward.

Large draw downs do not worry me, my bonds can provide for my needs such that I won't have to sell equities at low prices. That is kinda why I have them.

Of your seven goals/strategies, I can strongly support one: Don't get carried away by tax handcuffs or tax implications.

Although your last goal is this: MOST IMPORTANT OF ALL - Preserve your capital base - who knows when markets recover if a large draw-down occurs., I honestly believe your other goals/strategies will most likely subject your portfolio more risk than simply adopting an appropriate AA and sticking to it.

I wish you well!

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

User avatar
Watty
Posts: 16085
Joined: Wed Oct 10, 2007 3:55 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Watty » Sat Jun 08, 2019 12:36 pm

Explorer wrote:
Sat Jun 08, 2019 10:17 am
No snarky comments please. Please chime in if you are following techniques other than B&H with an AA based on risk considerations.

I will start with the techniques I have been employing lately:
- Bond yields are very low now so avoid investment grade bonds - in fact exit positions already in
- Follow the Fed in entering and existing stock market positions: very evident that market and Fed have got a symbiotic relationship going - when one flexes the muscle the other is responding
- Time is not your friend
- Carry a high stake of cash [ok with losing value to inflation]
- Limit losses in positions you hold [x% stop loss]
- Don't get carried away by tax handcuffs or tax implications
- MOST IMPORTANT OF ALL - Preserve your capital base - who knows when markets recover if a large draw-down occurs.
That is way too complex and frankly I have a hard time understanding it, but that may is just me.

An alternative would be to just let your retirement spending vary some based on how your portfolio is doing.

For example the Vanguard 2020 target date fund is 55% stocks and 45% bonds.

That would mean that if stocks drop 30% you would have about a 17% drop in your portfolio. If a third of your retirement spending will come from Social Security then reducing your portfolio spending by 17 would mean that your total retirement spending would only need to be reduced by around 11%.

Likewise a 50% stock market drop would result in about a 28% portfolio drop and with Social Security you would need to reduce your spending by around 19%.

I am pretty middle class compared to a lot of posters her but when I retired I set my retirement goals so that could reduce my retirement spending by 10-20% if I needed to and still be very comfortable. Since I have a paid off house I could even reduce my retirement budget by a third and get by without any real hardship but it would be pretty frugal.

User avatar
Sandtrap
Posts: 6741
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Sandtrap » Sat Jun 08, 2019 12:50 pm

CyclingDuo wrote:
Sat Jun 08, 2019 11:11 am
Explorer wrote:
Sat Jun 08, 2019 10:17 am
I would like us to discuss broad investment techniques for those approaching retirement and already have sizable/adequate assets BUT want to continue to participate in the market without getting hit by a huge downdraft.
You make sure your asset allocation is set to meet your current and future needs, as well as tolerance for loss.

To borrow from Larry Swedroe's graphic about a typical 50% bear market and the amount of losses to expect (the example uses the bear market in the early 1970's), you can foretell more or less what the dip will be...

Image

So ask yourself if you can survive a 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40% or 50% or more loss and determine your asset allocation accordingly. As painful as loss is (remember 2000-2003 & 2007-2009?), if indeed it is a result of the economic cycle moving from expansion to retrenchment/recession, time will bring things back...

Image

Expansions and recessions we cannot stop, but we can plan our AA accordingly to weather the duration...

Image
Outstanding charts!

That 8 year recovery period looks painful to a retiree!!!

Thanks for posting!
j :happy
Last edited by Sandtrap on Sat Jun 08, 2019 12:57 pm, edited 1 time in total.

User avatar
Sandtrap
Posts: 6741
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Sandtrap » Sat Jun 08, 2019 12:56 pm

Explorer wrote:
Sat Jun 08, 2019 10:17 am
I would like us to discuss broad investment techniques for those approaching retirement and already have sizable/adequate assets BUT want to continue to participate in the market without getting hit by a huge downdraft.

No snarky comments please. Please chime in if you are following techniques other than B&H with an AA based on risk considerations.

I will start with the techniques I have been employing lately:
- Bond yields are very low now so avoid investment grade bonds - in fact exit positions already in
- Follow the Fed in entering and existing stock market positions: very evident that market and Fed have got a symbiotic relationship going - when one flexes the muscle the other is responding
- Time is not your friend
- Carry a high stake of cash [ok with losing value to inflation]
- Limit losses in positions you hold [x% stop loss]
- Don't get carried away by tax handcuffs or tax implications
- MOST IMPORTANT OF ALL - Preserve your capital base - who knows when markets recover if a large draw-down occurs.

Thank you.
Explorer
My techniques for aging bulls :shock: . . . seniors in an aging bull market.

AA based on the fact that; I have more to lose than to gain, I'm retired and time is not my friend (agree).

Diversification of fixed, including cash, across the board as a storm buffer.

Be content with yields. Pay the taxes. Where unavoidable anyway.

Definitely seek to preserve my base. Again, I have more to lose than to gain.

Interesting post.
Thanks for posting.
j

rai
Posts: 1195
Joined: Tue Apr 06, 2010 7:11 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by rai » Sat Jun 08, 2019 1:14 pm

WoW I’m not doing anything you mention.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

rai
Posts: 1195
Joined: Tue Apr 06, 2010 7:11 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by rai » Sat Jun 08, 2019 1:23 pm

Double post
Last edited by rai on Sat Jun 08, 2019 1:29 pm, edited 1 time in total.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

rai
Posts: 1195
Joined: Tue Apr 06, 2010 7:11 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by rai » Sat Jun 08, 2019 1:23 pm

Outstanding charts!

That 8 year recovery period looks painful to a retiree!!!

Thanks for posting!
j :happy
If I’m reading the chart correct that is the years for the actual price of the stocks to recover not mentioning reinvestment of dividends or buying power of dividends. With dividends 2-2.5% mightn’t that cover most of the spending in retirement? If you are spending 3-4% of total and you are getting 2-3% dividends and interest on bonds aren’t you selling very few shares of stocks and bond funds?
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

SGM
Posts: 2954
Joined: Wed Mar 23, 2011 4:46 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by SGM » Sat Jun 08, 2019 2:51 pm

In 40+ years of investing I have never written a stop loss order. Taxes are important to me and one my largest expenses. I try to limit income tax by keeping capital gains to a minimum. We don't have the added tax burden of RMDs because we converted all traditional accounts to Roth accounts. I don't reach for higher dividends. Some of my real estate taxes are for income producing property. My AA has gone from 100% stock to 60/40. In my taxable account I use several muni bond funds. In my Roth accounts I have some total bond fund and low cost stock funds.

We keep only the cash we will need for large expenses in the next few months not covered by our monthly income. We get dividends, delayed SS, pension and annuity income and rental income monthly so we have a rather small withdrawal rate from the taxable portfolio and none from the Roth accounts.

User avatar
David Jay
Posts: 6549
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by David Jay » Sat Jun 08, 2019 3:08 pm

I retired 5 months ago, but in the 5 years leading up to retirement I did the following:
1. Moved from 100% stocks to about 50/50 over that period. I was somewhat opportunistic, converting small amounts after major market gains.
2. I began with Total Bond, but later (with about a year to go) moved 2 years living expenses to Short Term Bond.

I am doing precisely nothing due to an “aging bull market”. My IPS contains no recommendation that are based on market conditions behind the traditional rebalancing bands.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

User avatar
David Jay
Posts: 6549
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by David Jay » Sat Jun 08, 2019 3:11 pm

SGM wrote:
Sat Jun 08, 2019 2:51 pm
In 40+ years of investing I have never written a stop loss order
Explorer: I would do some searches here on the site for “stop loss orders”, they can be very dangerous in a “flash crash” scenario.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

delamer
Posts: 7833
Joined: Tue Feb 08, 2011 6:13 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Marke

Post by delamer » Sat Jun 08, 2019 3:41 pm

What level of withdrawal are you planning to make annually? And what is your overall stock allocation?

If you are following a safe withdrawal rate of about 4% of initial portfolio with annual inflation adjustments, then your investing plan is unnecessarily complex. However, this SWR requires a minimum stock allocation of 30%.

longinvest
Posts: 3482
Joined: Sat Aug 11, 2012 8:44 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by longinvest » Sat Jun 08, 2019 4:21 pm

I don't care about the state of the market. Anchoring on past states would be a behavioral pitfall. I simply don't know if the market's state is high or low relative to its future states, and I don't believe that anyone knows. In other words, I never try to time the market (video).

A good approach to retirement is to combine stable lifelong income from Social Security, a pension (if any), and (if necessary) an inflation-indexed SPIA* with variable withdrawals (VPW) from a globally-diversified balanced portfolio, possibly using an all-in-one fund such as Vanguard's LifeStrategy Moderate Growth Fund (VSMGX).

"When there are multiple solutions to a problem, choose the simplest one." -- Jack Bogle

* Single-Premium Immediate Annuity.
Bogleheads investment philosophy | single-ETF balanced portfolio | VBAL

Dick D
Posts: 134
Joined: Sat Jun 16, 2007 8:55 am
Location: Connecticut

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Dick D » Sat Jun 08, 2019 5:05 pm

I do not think this is a snarky comment, but what would you do in this situation you described. As many have said many roads lead to Dublin.

Grt2bOutdoors
Posts: 20590
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Grt2bOutdoors » Sat Jun 08, 2019 5:16 pm

When filet mignon is on sale, stock up. When filet mignon becomes expensive, switch to something cheaper like fresh fruits and vegetables.
One can still eat well by keeping a varied diet. No need to make rash moves, everything in moderation. The same applies to financial instruments.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Topic Author
Explorer
Posts: 221
Joined: Thu Oct 13, 2016 7:54 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Explorer » Sat Jun 08, 2019 7:48 pm

Thanks for the comments so far - and I appreciate the steadfast approach people have with their investment philosophy. Good for them!

I also heed the advice on stop loss orders.

World is awash in more debt (sovereign and corporate) now than ever before. The next crash may not recover as fast as the rear-view mirror graphs show. So.. the question is about complacency.

Why allow your assets go lower in value with the hope that somehow the value will rise back? I am yet to see a satisfactory answer to that question.

Yours truly,
Chicken Little Explorer

longinvest
Posts: 3482
Joined: Sat Aug 11, 2012 8:44 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by longinvest » Sat Jun 08, 2019 8:01 pm

Explorer wrote:
Sat Jun 08, 2019 7:48 pm
Why allow your assets go lower in value with the hope that somehow the value will rise back? I am yet to see a satisfactory answer to that question.
Why anchor on a specific portfolio balance value? Even TIPS fluctuate in value. Even if I put the value of a Toyota Corolla into I-Bonds, there's no guarantee that it'll be sufficient to buy a car in 30 years. Yes, the value will have grown with the Consumer Price Index, but the basket of goods it tracks might have evolved to exclude individual cars.

During my life, so far, my family income has fluctuated. Yet, somehow, we managed to adapt. Millions of family units do the same!

I see no reason we wouldn't be able to continue adapting our spending to available income (combining lifelong stable income and variable portfolio withdrawals) during retirement.
Bogleheads investment philosophy | single-ETF balanced portfolio | VBAL

Random Walker
Posts: 3900
Joined: Fri Feb 23, 2007 8:21 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Random Walker » Sat Jun 08, 2019 8:45 pm

Minimize sequence of returns risk. Diversify across factors. Read Larry Swedroe’s Reducing The Risk Of Black Swans. Diversification is always important, but more important over critical short periods like a few years on either side of retirement date.

Dave

venkman
Posts: 970
Joined: Tue Mar 14, 2017 10:33 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by venkman » Sat Jun 08, 2019 8:46 pm

Explorer wrote:
Sat Jun 08, 2019 7:48 pm
Why allow your assets go lower in value with the hope that somehow the value will rise back? I am yet to see a satisfactory answer to that question.
nisiprius wrote:
Mon Dec 07, 2009 4:50 pm
1) If you want the risk premium, you must take the risk.

bhsince87
Posts: 2281
Joined: Thu Oct 03, 2013 1:08 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by bhsince87 » Sat Jun 08, 2019 9:24 pm

Explorer wrote:
Sat Jun 08, 2019 7:48 pm
Thanks for the comments so far - and I appreciate the steadfast approach people have with their investment philosophy. Good for them!

I also heed the advice on stop loss orders.

World is awash in more debt (sovereign and corporate) now than ever before. The next crash may not recover as fast as the rear-view mirror graphs show. So.. the question is about complacency.

Why allow your assets go lower in value with the hope that somehow the value will rise back? I am yet to see a satisfactory answer to that question.

Yours truly,
Chicken Little Explorer
I don't want to go too far astray or theoretical here, but the debt thing is a pet peeve of mine.

Since at least 1971, the meaning of debt has changed.

Money now IS debt.

If the economy grows, debt MUST grow, or else we see deflation.

Too much debt can be bad, no doubt.

But debt should grow as the economy grows.
Retirement: When you reach a point where you have enough. Or when you've had enough.

Topic Author
Explorer
Posts: 221
Joined: Thu Oct 13, 2016 7:54 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Explorer » Sat Jun 08, 2019 10:24 pm

bhsince87 wrote:
Sat Jun 08, 2019 9:24 pm

I don't want to go too far astray or theoretical here, but the debt thing is a pet peeve of mine.

Since at least 1971, the meaning of debt has changed.

Money now IS debt.

If the economy grows, debt MUST grow, or else we see deflation.

Too much debt can be bad, no doubt.

But debt should grow as the economy grows.
I am not following this logic at all. The debt levels companies and countries have today can in no way be good for the stock or bond markets. The effect has not shown up yet since central banks come run to the rescue and continue to print money...

bhsince87
Posts: 2281
Joined: Thu Oct 03, 2013 1:08 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by bhsince87 » Sat Jun 08, 2019 10:30 pm

Explorer wrote:
Sat Jun 08, 2019 10:24 pm
bhsince87 wrote:
Sat Jun 08, 2019 9:24 pm

I don't want to go too far astray or theoretical here, but the debt thing is a pet peeve of mine.

Since at least 1971, the meaning of debt has changed.

Money now IS debt.

If the economy grows, debt MUST grow, or else we see deflation.

Too much debt can be bad, no doubt.

But debt should grow as the economy grows.
I am not following this logic at all. The debt levels companies and countries have today can in no way be good for the stock or bond markets. The effect has not shown up yet since central banks come run to the rescue and continue to print money...
Private banks create (print) more money than central banks.

Almost every time the make a loan, they are creating money out of thin air, as we understand it. And if they use good judgement, that's almost always a good thing.

And it can be a very good thing for stock and bond markets! Because it means the economy is growing. The "pie" is getting bigger.
Retirement: When you reach a point where you have enough. Or when you've had enough.

HEDGEFUNDIE
Posts: 2566
Joined: Sun Oct 22, 2017 2:06 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by HEDGEFUNDIE » Sat Jun 08, 2019 10:49 pm

Explorer wrote:
Sat Jun 08, 2019 10:24 pm
bhsince87 wrote:
Sat Jun 08, 2019 9:24 pm

I don't want to go too far astray or theoretical here, but the debt thing is a pet peeve of mine.

Since at least 1971, the meaning of debt has changed.

Money now IS debt.

If the economy grows, debt MUST grow, or else we see deflation.

Too much debt can be bad, no doubt.

But debt should grow as the economy grows.
I am not following this logic at all. The debt levels companies and countries have today can in no way be good for the stock or bond markets. The effect has not shown up yet since central banks come run to the rescue and continue to print money...
Lack of credit is what caused the 2008 disaster.

Credit is like motor oil, it’s dirty and needs constant replenishing, but without it the engine would seize up.

And yes, as the economy grows, we need more credit. Just like more cars on the road need more oil.

heyyou
Posts: 3431
Joined: Tue Feb 20, 2007 4:58 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by heyyou » Sat Jun 08, 2019 11:47 pm

Our portfolio survival action is on the spending side, not dependent on investing yoga. Our method of dealing with market crashes includes patience and prudence, since history shows that a crash does not last long, it just feels like a long period. With 40% of portfolio in bond funds (10+ years of retirement spending), plus having delayed SS to age 70, plus having low necessary expenses, we expect to adapt to whatever does occur, by trying to limit our spending to a fixed percentage of each recent annual portfolio value. If we miss by some inconsequential amount per month, no big deal.

Having retired at the very end of 2005, we were new retirees during the 2008 crash. Our portfolio eventually lost a third, for a while, including some in a money market fund to add to the angst during that time.

OP, you have been living within and below your means for most of your career, so just continue to do that, in retirement, when necessary.

A note on a well researched method, Michael H. McClung suggests starting retirement with a near 50/50 allocation, then spending from only bonds first, since a crash could happen early in retirement. The bond portion is replenished when the initial equity value has grown to 120% of the retirement day value (110% is okay but less ideal). He spends a fixed % of each recent annual portfolio value, the % initially adjusted relative to CAPE10 stock valuations on retirement day, i.e. a slightly lower % as a buffer for the current high valuations.

User avatar
nisiprius
Advisory Board
Posts: 38260
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by nisiprius » Sun Jun 09, 2019 5:42 am

Explorer wrote:
Sat Jun 08, 2019 10:17 am
...Carry a high stake of cash [ok with losing value to inflation]...
It probably won't lose value to inflation. One of the distortions that people use when trying to sell moderately risky investments to moderately risk-averse investors is the idea that inflation is going to decimate the buying power of your cash holdings. This is only true by using creative rhetoric and using the fact that the word "cash" is used casually to describe more than one thing. In particular, "cash" can describe physical paper currency with a fixed number of dollars print on it, but it can also describe interest-earning vehicles including bank accounts and Treasury bills.

Certainly, a physical stack of paper money in a safe deposit box is going to lose a lot to inflation, enough to worry about.

Certainly, stupid and non-competitive bank accounts--non-interest-bearing business checking accounts, 0.10% APY on a Platinum Pentagram Checking X-Treme account--will lose a lot of purchasing power.

But reasonable bank accounts--not even the highest Internet rates, just shopping around and paying attention--earn interest in about the same ballpark as Treasury bills. And Treasury bills historically have eked out around an 0.5% or 0.6% real return, and are often included in lists of "inflation hedges."

For example, right now as I write this, the local small brick-and-mortar bank I've used for thirty years is paying 1.85% on its best savings account. Online, 2% seems easy to find. By comparison, VMFXX, the Federal money market fund, is showing a 2.32% SEC yield, the one-month rate on Treasury bills is 2.30%... and inflation has been running around 2%.

Are decent bank accounts really losing to inflation? Maybe by a hair, maybe not, it's pretty close. There might be better or worse things, but the idea that bank accounts are going to be savaged by inflation is scare talk. Oh, sure--I personally lived through the days of 12% inflation when bank accounts were capped at 6% by regulation Q, but they aren't now.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

SovereignInvestor
Posts: 280
Joined: Mon Aug 20, 2018 4:41 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by SovereignInvestor » Sun Jun 09, 2019 6:06 am

Pick an allocation and stick with it

50/50 isn't fully bulletproof if there's an inflation outbreak.

Nornay in most deflation art downturns long term treasurys are best hedge for stocks like in 2008. But if its 1973 both got slaughtered and a small gold position hedged the inflation.

Shorter term bonds avoid the risk of inflation hurting stocks and bonds but the short term bonds hedge inflation less.

Another strategy is for bonds using barbell. Say someone has 50% bonds...maybe half in really long treasurys like 30Y zero coupons and the rest in very short term tbills.

For the IRA I manage I actually use that method roughly.

50% stocks geared more towards some lower beta like utilities and health

25% long term treasurys
25% very short term bonds. Most in VCSH which is short term IG. Corporate bond ris drops when duration is super low but it yields about 100 bps above treasurys.

Deflationary crash it will perform well as stock get hit but weighting health and utilities are defensive....long bonds surge and short bonds hold roughly steady or lose modest amount.

Inflationary crash the stocks get hit...long treasurys too but the short term bonds hold up.

Sharp rally with moderate inflation..the stocks do well and treasurys lag and short term bonds hold steady


Also I would avoid using CAPE. IMO it is statistically invalid bevause of changes in the data over time. It said to stocks are overvalued since 2012. All validation of CAPE is based on the past.

delamer
Posts: 7833
Joined: Tue Feb 08, 2011 6:13 pm

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by delamer » Sun Jun 09, 2019 10:05 am

Explorer wrote:
Sat Jun 08, 2019 7:48 pm
Thanks for the comments so far - and I appreciate the steadfast approach people have with their investment philosophy. Good for them!

I also heed the advice on stop loss orders.

World is awash in more debt (sovereign and corporate) now than ever before. The next crash may not recover as fast as the rear-view mirror graphs show. So.. the question is about complacency.

Why allow your assets go lower in value with the hope that somehow the value will rise back? I am yet to see a satisfactory answer to that question.

Yours truly,
Chicken Little Explorer
“Hope” is the wrong term.

People put money in stocks because of the historical pattern that, over the long run, stocks outperform other types of investments.

If you don’t believe that pattern will continue, then don’t invest in stocks.

You are a good candidate for a liability-matching portfolio. You put 25 years of net expenses (expenses after Social Security and pensions) into cash/TIPS/short-term bonds. The rest of your portfolio goes into stocks.

YRT70
Posts: 146
Joined: Sat Apr 27, 2019 8:51 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by YRT70 » Sun Jun 09, 2019 10:20 am

Random Walker wrote:
Sat Jun 08, 2019 8:45 pm
Diversify across factors. Read Larry Swedroe’s Reducing The Risk Of Black Swans. Diversification is always important, but more important over critical short periods like a few years on either side of retirement date.
I think this is the most useful strategy. The book by Larry explains it well.
CyclingDuo wrote:
Sat Jun 08, 2019 11:11 am
Image

Expansions and recessions we cannot stop, but we can plan our AA accordingly to weather the duration...
Great post. Thanks for sharing.

Was dividend reinvested in this chart? Morningstar says the downturn + recovery after 2001 took 75 months; a little over 6 years. https://content.usaa.com/mcontent/stati ... lWFY3kM9ug

User avatar
CyclingDuo
Posts: 2311
Joined: Fri Jan 06, 2017 9:07 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by CyclingDuo » Sun Jun 09, 2019 11:19 am

YRT70 wrote:
Sun Jun 09, 2019 10:20 am
Random Walker wrote:
Sat Jun 08, 2019 8:45 pm
Diversify across factors. Read Larry Swedroe’s Reducing The Risk Of Black Swans. Diversification is always important, but more important over critical short periods like a few years on either side of retirement date.
I think this is the most useful strategy. The book by Larry explains it well.
CyclingDuo wrote:
Sat Jun 08, 2019 11:11 am
Image

Expansions and recessions we cannot stop, but we can plan our AA accordingly to weather the duration...
Great post. Thanks for sharing.

Was dividend reinvested in this chart? Morningstar says the downturn + recovery after 2001 took 75 months; a little over 6 years. https://content.usaa.com/mcontent/stati ... lWFY3kM9ug
No divvy's.

Nominal returns for dividends reinvested compares the 4 major bear markets in the chart below (does not include inflation)...

Image

Does it pay to wait until a crash to enter the market?

Read this study...

Bide your time until a crash to enter market?

https://www.straitstimes.com/business/i ... ter-market
"Everywhere is within walking distance if you have the time." ~ Steven Wright

CurlyDave
Posts: 988
Joined: Thu Jul 28, 2016 11:37 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by CurlyDave » Mon Jun 10, 2019 2:42 am

Explorer wrote:
Sat Jun 08, 2019 7:48 pm

...I also heed the advice on stop loss orders...
What I have been experimenting with lately is using ETFs and trailing stops instead of a bond position. A trailing stop is a much different kettle of fish than a simple stop loss order. With traditional stop loss orders the only thing I have stopped in 50 years of investing is the gains I would have gotten otherwise.

BUT, if I take a few years of expenses, hold SPY or QQQ and place a 5% trailing stop, the most I am going to lose is 5%. I can deal with that. The potential gain is that I get the performance of the ETF less 5%, which most of the time beats the stuffing out of bond performance, even with the 5% knock.

If the stop triggers, I have a cash position. If it doesn't trigger, I am enjoying stock performance with "safe" money.

And, yes I have looked up "flash crashes". They are rare. I am willing to take the chance with a couple years worth of expenses.

Turbo29
Posts: 465
Joined: Tue May 01, 2018 7:12 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by Turbo29 » Mon Jun 10, 2019 10:51 am

CurlyDave wrote:
Mon Jun 10, 2019 2:42 am


And, yes I have looked up "flash crashes". They are rare. I am willing to take the chance with a couple years worth of expenses.
As with anything reading about it and experiencing it are two different things. I had a position in SPY with a stop in 2010. Never again.

sman09
Posts: 260
Joined: Fri Mar 23, 2018 12:02 am

Re: Investing Techniques For People Approaching Retirement In This Aging Bull Market

Post by sman09 » Tue Jun 11, 2019 1:00 pm

CyclingDuo wrote:
Sun Jun 09, 2019 11:19 am

Does it pay to wait until a crash to enter the market?

Read this study...

Bide your time until a crash to enter market?

https://www.straitstimes.com/business/i ... ter-market
Excellent read! Thanks for sharing CyclingDuo.

Post Reply