Is anyone running 50/50 stock bond who is younger?

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JohnDindex
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Is anyone running 50/50 stock bond who is younger?

Post by JohnDindex » Tue Aug 06, 2019 1:56 pm

I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year. Yes that is a lot over time, but it had double the volatility of a stock/bond portfolio.

If you look at the same portfolios in an accumulation scenario starting with $10k and adding $10k/year the all stock advantage is only .46% per year and 13% more total wealth. A downturn in the equity markets and the riskier portfolio could easily be back to even or below. The additional wealth from all equity portfolios seems to evaporate rather quickly during a sharp downturn, and then takes many years to recover such as 2009-2013.

If you are a high saver as many are here and maxing out multiple vehicles, 401k, backdoor roth, taxable etc, you may be taking more risk than is even necessary to reach your goals.

I wonder if a simple portfolio 1/4 each us stocks, intl stocks, total bond, TIPS would be a simple path to financial success?

MoneyMarathon
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Re: Is anyone running 50/50 stock bond who is younger?

Post by MoneyMarathon » Tue Aug 06, 2019 2:04 pm

JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year.
When yields are falling, high bond allocations can hold their own.

This unfortunately works in reverse if yields are rising. The underperformance gap grows.

If the choice is heads I underperform a little, tails I underperform a lot... maybe the winning move is not to play?

That is, hold more stocks.

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sometimesinvestor
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Re: Is anyone running 50/50 stock bond who is younger?

Post by sometimesinvestor » Tue Aug 06, 2019 2:09 pm

At this time investing in a high % of bonds seems to ignore most measures of value. %0% cash and 59% equities I certainly understand

Random Poster
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Re: Is anyone running 50/50 stock bond who is younger?

Post by Random Poster » Tue Aug 06, 2019 2:28 pm

I don't know what you mean by "younger," but I'm 42 (with an almost 40-year old wife) and we are doing a 40 US/10 International/50 Bond portfolio.

A 50/50 overall split is easy to keep up with and seems to provide the 'right' level of fluctuations and upside/downside protections for us. I'd probably prefer to go even lower with the stock allocation, but doing so would likely compromise the longevity of the portfolio.

For whatever it is worth, we save a decent amount (low $200K a year in taxable, max out IRAs and a 401K) and I plan on leaving paid employment soon, with a 2.5% withdrawal rate.

So, for us, a 50/50 seems to make sense.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by RadAudit » Tue Aug 06, 2019 2:31 pm

JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
you may be taking more risk than is even necessary to reach your goals.
It rarely makes sense, to me, to take more risk than is necessary to meet your goals.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by vineviz » Tue Aug 06, 2019 2:32 pm

JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I wonder if a simple portfolio 1/4 each us stocks, intl stocks, total bond, TIPS would be a simple path to financial success?
It’s definitely a lot longer path when you start with bond yields at 2% than when you start with yields at 9%, as they were in 1987.

The savings rate a young investor would need in order to retire comfortably at age 65 or 70 would be substantially higher with the 50-50 portfolio than with an 80-20 portfolio.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

sergio
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Re: Is anyone running 50/50 stock bond who is younger?

Post by sergio » Tue Aug 06, 2019 2:34 pm

I asked a similar question before: viewtopic.php?t=280798

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JohnDindex
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Re: Is anyone running 50/50 stock bond who is younger?

Post by JohnDindex » Tue Aug 06, 2019 3:31 pm

Random Poster wrote:
Tue Aug 06, 2019 2:28 pm
I don't know what you mean by "younger," but I'm 42 (with an almost 40-year old wife) and we are doing a 40 US/10 International/50 Bond portfolio.

A 50/50 overall split is easy to keep up with and seems to provide the 'right' level of fluctuations and upside/downside protections for us. I'd probably prefer to go even lower with the stock allocation, but doing so would likely compromise the longevity of the portfolio.

For whatever it is worth, we save a decent amount (low $200K a year in taxable, max out IRAs and a 401K) and I plan on leaving paid employment soon, with a 2.5% withdrawal rate.

So, for us, a 50/50 seems to make sense.
I’m 34 (wife 33) your example is pretty much what I meant. Your plan looks very sound, good luck

50ismygoal
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Re: Is anyone running 50/50 stock bond who is younger?

Post by 50ismygoal » Tue Aug 06, 2019 3:35 pm

I went 50/50 at 50. I’m 52 now. No regrets. I worried a lot about the bond portion as experts pronounced that bond funds could only go down. I’m still waiting for that.

rascott
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Re: Is anyone running 50/50 stock bond who is younger?

Post by rascott » Tue Aug 06, 2019 3:36 pm

Back testing over a period where yields have done nothing but drop is rather pointless. It would be impossible for bonds to provide those kinds of returns going forward....unless we are headed way into the world of negative interest rates.

Bonds were a great investment even twenty years ago. Not so much today.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by Trader Joe » Tue Aug 06, 2019 4:37 pm

"Is anyone running 50/50 stock bond who is younger?"

No, I would not and I do not do this with my investment portfolio. I invest in VFIAX (Vanguard 500 Index Fund Admiral Shares).

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Re: Is anyone running 50/50 stock bond who is younger?

Post by 7eight9 » Tue Aug 06, 2019 4:53 pm

We are at 20/80 and have never had a higher stock percentage. I would probably be happier with no stock at all. When the first time you invest in a 401k is 2006 and the first time you open a brokerage account is 2008 (because ING CD rates were below 3.0% at the time and you wanted to make more money) you become really negative on the stock market really fast. At least with bonds and cash (CD, money market, high yield accounts etc.) you don't see your net worth evaporating before your eyes. Sure, the markets recovered (this time). There is no guarantee that they will the next time in an investor's time frame.

I've seen inflation mentioned a lot. You can buy TIPs or I Bonds to protect against inflation. And the trend these days seems to be moving closer to deflation than inflation. German government bonds went negative for all maturities. Not saying it is going to happen in the United States but how many people would have predicted that today we would be looking at the 30 year at 2.39%?

Reuters article about German government bonds --- https://www.reuters.com/article/eurozon ... SL8N24Y326

Save enough and you won't have to worry about equity returns.
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averagedude
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Re: Is anyone running 50/50 stock bond who is younger?

Post by averagedude » Tue Aug 06, 2019 4:59 pm

I do believe you would benefit by having a higher equity allocation going forward if you are young, but having a 50/50 portfolio when you are young is leaps and bounds ahead of the average young person who is living paycheck to paycheck and has a negative net worth.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by Woodshark » Tue Aug 06, 2019 5:04 pm

I'm not sure what you are asking but I'm a few week shy of 59. Last October I was a little rattled about the 10 year bull market so I ran the figures, looked at the results and took us from 60/35/5(cash) to 50/45/5. It's not a huge difference in outcomes but it made a huge difference to me. I sleep well and don't worry about market downturns near as much.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by willthrill81 » Tue Aug 06, 2019 5:08 pm

JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year. Yes that is a lot over time, but it had double the volatility of a stock/bond portfolio.
For a person who doesn't need the funds for decades, why should volatility matter?
“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

7eight9
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Re: Is anyone running 50/50 stock bond who is younger?

Post by 7eight9 » Tue Aug 06, 2019 5:17 pm

willthrill81 wrote:
Tue Aug 06, 2019 5:08 pm
JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year. Yes that is a lot over time, but it had double the volatility of a stock/bond portfolio.
For a person who doesn't need the funds for decades, why should volatility matter?
A person hopes they don't funds for decades. If they need the funds earlier than anticipated volatility might matter.
I guess it all could be much worse. | They could be warming up my hearse.

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willthrill81
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Re: Is anyone running 50/50 stock bond who is younger?

Post by willthrill81 » Tue Aug 06, 2019 5:20 pm

7eight9 wrote:
Tue Aug 06, 2019 5:17 pm
willthrill81 wrote:
Tue Aug 06, 2019 5:08 pm
JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year. Yes that is a lot over time, but it had double the volatility of a stock/bond portfolio.
For a person who doesn't need the funds for decades, why should volatility matter?
A person hopes they don't funds for decades. If they need the funds earlier than anticipated volatility might matter.
If you treat your entire portfolio like one big emergency fund that you may need the entirety of at any given moment in time, you're probably going to to sacrifice a lot of returns and money by doing so.

If you were an accumulator with $10k in your portfolio in 1979 and contributed $1k annually, a 50/50 AA would have left you with $1,063,674. A 70/30 AA would have left you with $1,350,965.
“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

columbia
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Re: Is anyone running 50/50 stock bond who is younger?

Post by columbia » Tue Aug 06, 2019 5:25 pm

It’s an excellent regret minimization tactic.

7eight9
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Re: Is anyone running 50/50 stock bond who is younger?

Post by 7eight9 » Tue Aug 06, 2019 5:30 pm

willthrill81 wrote:
Tue Aug 06, 2019 5:20 pm
7eight9 wrote:
Tue Aug 06, 2019 5:17 pm
willthrill81 wrote:
Tue Aug 06, 2019 5:08 pm
JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year. Yes that is a lot over time, but it had double the volatility of a stock/bond portfolio.
For a person who doesn't need the funds for decades, why should volatility matter?
A person hopes they don't funds for decades. If they need the funds earlier than anticipated volatility might matter.
If you treat your entire portfolio like one big emergency fund that you may need the entirety of at any given moment in time, you're probably going to to sacrifice a lot of returns and money by doing so.

If you were an accumulator with $10k in your portfolio in 1979 and contributed $1k annually, a 50/50 AA would have left you with $1,063,674. A 70/30 AA would have left you with $1,350,965.
That is pretty neat. Not to be facetious but is there a way to see how a Japanese investor would have done with those two portfolios?
I guess it all could be much worse. | They could be warming up my hearse.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by willthrill81 » Tue Aug 06, 2019 5:40 pm

7eight9 wrote:
Tue Aug 06, 2019 5:30 pm
willthrill81 wrote:
Tue Aug 06, 2019 5:20 pm
7eight9 wrote:
Tue Aug 06, 2019 5:17 pm
willthrill81 wrote:
Tue Aug 06, 2019 5:08 pm
JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year. Yes that is a lot over time, but it had double the volatility of a stock/bond portfolio.
For a person who doesn't need the funds for decades, why should volatility matter?
A person hopes they don't funds for decades. If they need the funds earlier than anticipated volatility might matter.
If you treat your entire portfolio like one big emergency fund that you may need the entirety of at any given moment in time, you're probably going to to sacrifice a lot of returns and money by doing so.

If you were an accumulator with $10k in your portfolio in 1979 and contributed $1k annually, a 50/50 AA would have left you with $1,063,674. A 70/30 AA would have left you with $1,350,965.
That is pretty neat. Not to be facetious but is there a way to see how a Japanese investor would have done with those two portfolios?
Had they invested in the same securities, a Japanese investor would have had the same result.

I'm guessing you mean what the result would have been if someone had invested in Japanese stocks and bonds. I don't have easy access to those data, but according to Portfolio Charts, which uses data going back to 1970, it would have taken between 10 and 26 years to reach $50k with a $10k initial investment and $1k annual contributions with a 50/50 AA. With a 70/30, it would have taken between 8 and 28 years. So even given the very rough stretch that Japanese stocks have had for 30 years, a 70/30 AA would not, on average, have worked out worse in this instance than a 50/50 AA.
“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

Random Poster
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Re: Is anyone running 50/50 stock bond who is younger?

Post by Random Poster » Tue Aug 06, 2019 7:19 pm

willthrill81 wrote:
Tue Aug 06, 2019 5:20 pm
If you were an accumulator with $10k in your portfolio in 1979 and contributed $1k annually, a 50/50 AA would have left you with $1,063,674. A 70/30 AA would have left you with $1,350,965.
That’s nice.

Of course, if you aren’t the kind of person who can handle the swings and gyrations that a 70/30 portfolio would have, or you needed to start retirement in 2008 or 2009 (being 30 years after your start date), you might be left with a few ulcers too.

And, if course, maybe the 50/50 person doesn’t want or need more money. So why take on the extra risks and potential headaches?

Dink2018
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Re: Is anyone running 50/50 stock bond who is younger?

Post by Dink2018 » Tue Aug 06, 2019 7:54 pm

Yes,

I'm about 20% cash 50% bonds 30% stocks. 36 years old, its all new money, my VG account was started in October 2018 so I really need to make sure I get these things set up right and not get overconfident with my tolerance. During the financial crash I made some massive life changes that I would have never predicted prior to it so I know my risk tolerance isn't much higher than 60/40

Given I might buy a house soon and need at least 100k down, maybe $200k it doesn't seem like having more than 30% equities makes much sense.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by FRT15 » Tue Aug 06, 2019 8:09 pm

I'm approximately 30/70 at 37. I don't feel the need to take more risk based on savings rate and modest lifestyle. I think I would view it differently if I had more actively participated earlier on with consistent dca.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by willthrill81 » Tue Aug 06, 2019 9:53 pm

Random Poster wrote:
Tue Aug 06, 2019 7:19 pm
willthrill81 wrote:
Tue Aug 06, 2019 5:20 pm
If you were an accumulator with $10k in your portfolio in 1979 and contributed $1k annually, a 50/50 AA would have left you with $1,063,674. A 70/30 AA would have left you with $1,350,965.
That’s nice.

Of course, if you aren’t the kind of person who can handle the swings and gyrations that a 70/30 portfolio would have, or you needed to start retirement in 2008 or 2009 (being 30 years after your start date), you might be left with a few ulcers too.

And, if course, maybe the 50/50 person doesn’t want or need more money. So why take on the extra risks and potential headaches?
I'm not suggesting that 70/30 or 50/50 are or are not optimal for anyone. I was merely illustrating the significant difference that a seemingly small annual return difference made over a 40 year period. Statements like "only lagged by .67%" often gloss over the importance of such differences over long periods of time.
“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

mathguy3021
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Re: Is anyone running 50/50 stock bond who is younger?

Post by mathguy3021 » Tue Aug 06, 2019 10:31 pm

willthrill81 wrote:
Tue Aug 06, 2019 9:53 pm
Random Poster wrote:
Tue Aug 06, 2019 7:19 pm
willthrill81 wrote:
Tue Aug 06, 2019 5:20 pm
If you were an accumulator with $10k in your portfolio in 1979 and contributed $1k annually, a 50/50 AA would have left you with $1,063,674. A 70/30 AA would have left you with $1,350,965.
That’s nice.

Of course, if you aren’t the kind of person who can handle the swings and gyrations that a 70/30 portfolio would have, or you needed to start retirement in 2008 or 2009 (being 30 years after your start date), you might be left with a few ulcers too.

And, if course, maybe the 50/50 person doesn’t want or need more money. So why take on the extra risks and potential headaches?
I'm not suggesting that 70/30 or 50/50 are or are not optimal for anyone. I was merely illustrating the significant difference that a seemingly small annual return difference made over a 40 year period. Statements like "only lagged by .67%" often gloss over the importance of such differences over long periods of time.
There is no guarantee that the difference between 70/30 and 50/50 will be as great in the future as is was in the past. If stocks were guaranteed to return 10% annually if held for the next 40 years, almost no young person would own bonds or cash. What if US stocks decline for the next 40 years due to some unexpected events? What if the 2nd great depression causes a 90% crash in stocks? You might say these are unlikely events, but there is no guarantee that they won't happen. When starting from high stock valuations, future returns have been lower so you cannot expect the difference between a 70/30 and 50/50 AA over the next 40 years to be very similar to the past 40 years. I would have loved to buy stocks cheaply 40 years ago. I don't believe the valuations are the same today so expected returns and expected differences between 70/30 and 50/50 should not be compared to the past 40 years.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by rascott » Tue Aug 06, 2019 10:58 pm

mathguy3021 wrote:
Tue Aug 06, 2019 10:31 pm
willthrill81 wrote:
Tue Aug 06, 2019 9:53 pm
Random Poster wrote:
Tue Aug 06, 2019 7:19 pm
willthrill81 wrote:
Tue Aug 06, 2019 5:20 pm
If you were an accumulator with $10k in your portfolio in 1979 and contributed $1k annually, a 50/50 AA would have left you with $1,063,674. A 70/30 AA would have left you with $1,350,965.
That’s nice.

Of course, if you aren’t the kind of person who can handle the swings and gyrations that a 70/30 portfolio would have, or you needed to start retirement in 2008 or 2009 (being 30 years after your start date), you might be left with a few ulcers too.

And, if course, maybe the 50/50 person doesn’t want or need more money. So why take on the extra risks and potential headaches?
I'm not suggesting that 70/30 or 50/50 are or are not optimal for anyone. I was merely illustrating the significant difference that a seemingly small annual return difference made over a 40 year period. Statements like "only lagged by .67%" often gloss over the importance of such differences over long periods of time.
There is no guarantee that the difference between 70/30 and 50/50 will be as great in the future as is was in the past. If stocks were guaranteed to return 10% annually if held for the next 40 years, almost no young person would own bonds or cash. What if US stocks decline for the next 40 years due to some unexpected events? What if the 2nd great depression causes a 90% crash in stocks? You might say these are unlikely events, but there is no guarantee that they won't happen. When starting from high stock valuations, future returns have been lower so you cannot expect the difference between a 70/30 and 50/50 AA over the next 40 years to be very similar to the past 40 years. I would have loved to buy stocks cheaply 40 years ago. I don't believe the valuations are the same today so expected returns and expected differences between 70/30 and 50/50 should not be compared to the past 40 years.
Stocks were at higher valuations in early 90s (and much, much higher in late 90s). 1992 it was at 26x (with higher interest rates) . An investor who bought the index fund has made 10% CAGR since that point, including through two awful bear markets with 50% drawdowns.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by pascalwager » Tue Aug 06, 2019 11:29 pm

I'm no longer younger, but when I was younger, my AA was 0/100--and the "100" was 100% T-bills--for 15 younger years.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by Lee_WSP » Tue Aug 06, 2019 11:36 pm

And if you started with 10k and invested 10k per year on a monthly basis ending in 2008, here's what you would end up with if you split long term treasuries & the sp500:

50/50 - $2,244,556
70/30 - $2,122,040
100/0 - $1,877,423

One year later the S&P 500 comes out nearly ahead and then breaks out again.

But two years earlier you had:
50/50 - $2,409,699
70/30 - $2,614,218
100/0 - $2,968,746

The only absolute rule is that if you don't have ten years to wait out a dip, you should pare back your equities exposure.

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willthrill81
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Re: Is anyone running 50/50 stock bond who is younger?

Post by willthrill81 » Tue Aug 06, 2019 11:42 pm

mathguy3021 wrote:
Tue Aug 06, 2019 10:31 pm
willthrill81 wrote:
Tue Aug 06, 2019 9:53 pm
Random Poster wrote:
Tue Aug 06, 2019 7:19 pm
willthrill81 wrote:
Tue Aug 06, 2019 5:20 pm
If you were an accumulator with $10k in your portfolio in 1979 and contributed $1k annually, a 50/50 AA would have left you with $1,063,674. A 70/30 AA would have left you with $1,350,965.
That’s nice.

Of course, if you aren’t the kind of person who can handle the swings and gyrations that a 70/30 portfolio would have, or you needed to start retirement in 2008 or 2009 (being 30 years after your start date), you might be left with a few ulcers too.

And, if course, maybe the 50/50 person doesn’t want or need more money. So why take on the extra risks and potential headaches?
I'm not suggesting that 70/30 or 50/50 are or are not optimal for anyone. I was merely illustrating the significant difference that a seemingly small annual return difference made over a 40 year period. Statements like "only lagged by .67%" often gloss over the importance of such differences over long periods of time.
There is no guarantee that the difference between 70/30 and 50/50 will be as great in the future as is was in the past. If stocks were guaranteed to return 10% annually if held for the next 40 years, almost no young person would own bonds or cash. What if US stocks decline for the next 40 years due to some unexpected events? What if the 2nd great depression causes a 90% crash in stocks? You might say these are unlikely events, but there is no guarantee that they won't happen. When starting from high stock valuations, future returns have been lower so you cannot expect the difference between a 70/30 and 50/50 AA over the next 40 years to be very similar to the past 40 years. I would have loved to buy stocks cheaply 40 years ago. I don't believe the valuations are the same today so expected returns and expected differences between 70/30 and 50/50 should not be compared to the past 40 years.
I never insinuated that the next 40 years would like the past 40 years. On the contrary, I said "I was merely illustrating the significant difference that a seemingly small annual return difference made over a 40 year period."

That being said, the evidence does not suggest that high valuations are nearly as much of a long term threat to returns as many believe them to be. When Kitces compared the subsequent 30 year U.S. stock returns when starting CAPE was in the bottom quintile to the top quintile, the difference in annual returns was only 1%.
A look at the available market data suggests that realistically, it would be appropriate to reduce equity return assumptions by about 100bps (or 1 percentage point) over the next 30 years, to reflect the current valuation environment. Ironically, the reduction is not greater, because 30 years is such a long time that even if returns are bad for a period of time, there are enough subsequent years to recover as well.
https://www.kitces.com/blog/should-equi ... valuation/

I'll be the first to say that 1% compounded over 30 years is a big difference, but it still meant that average inflation-adjusted stock returns were 5.5% when the starting CAPE was in the highest historic quintile. And I don't really think that anyone should be planning on stocks to return more than 5% inflation-adjusted over any period of time because the past has shown that returns can be even lower than that over 30+ year periods.

Image

Even for lump sums invested in January of 2000, when CAPE was very near its all-time, a 70/30 AA still slightly outperformed a 50/50 from then until now. And with dollar cost averaging, that level of outperformance would only have grown.

But yes, we might see the stock market completely implode and Great Depression Part 2.0 come around. We might also see the U.S. completely default on Treasuries and the bond market completely implode. Or maybe both could occur. But the past for which we have good data seems pretty robust to me. YMMV.
Last edited by willthrill81 on Tue Aug 06, 2019 11:44 pm, edited 1 time in total.
“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: Is anyone running 50/50 stock bond who is younger?

Post by willthrill81 » Tue Aug 06, 2019 11:42 pm

Lee_WSP wrote:
Tue Aug 06, 2019 11:36 pm
The only absolute rule is that if you don't have ten years to wait out a dip, you should pare back your equities exposure.
:sharebeer
“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

Lee_WSP
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Re: Is anyone running 50/50 stock bond who is younger?

Post by Lee_WSP » Wed Aug 07, 2019 12:41 am

willthrill81 wrote:
Tue Aug 06, 2019 11:42 pm
Lee_WSP wrote:
Tue Aug 06, 2019 11:36 pm
The only absolute rule is that if you don't have ten years to wait out a dip, you should pare back your equities exposure.
:sharebeer
A second takeaway may be that it doesn't seem to even matter until your portfolio is 10-20x your yearly contribution.

If we run the simulation again, but this time with the following four AA: 100/0; 80/20; 50/50; & 20/80...

The three AA's do not significantly diverge until the portfolio value hits 200k (yearly contribution of 10k (833/mo)).

Run from 78-87 they are all hovering between $246,441 - $258,974

Run from 87 - 96 they are between $200,208 to $266,998

As we approach the 2000's there starts to be a little more spread, but also more volatility.

95 to 2005 they end between $190,248 and 200,583 with the 20/80 actually taking the lead

And if you keep running that sim to 2019, all equities do not come out ahead until...never.

https://www.portfoliovisualizer.com/bac ... total3=100

Day9
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Re: Is anyone running 50/50 stock bond who is younger?

Post by Day9 » Wed Aug 07, 2019 1:22 am

RadAudit wrote:
Tue Aug 06, 2019 2:31 pm
JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
you may be taking more risk than is even necessary to reach your goals.
It rarely makes sense, to me, to take more risk than is necessary to meet your goals.
I think these are the wisest posts in the thread. I am still accumulating and a long way from retirement but right now, to give one example, I would be almost equally happy with $3 million as I would with $6 million so I should not take extra risk to shoot for 6.
I'm just a fan of the person I got my user name from

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Re: Is anyone running 50/50 stock bond who is younger?

Post by illumination » Wed Aug 07, 2019 1:25 am

JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year.
In that era, 10 year treasuries paid around 7% - 9% and inflation was around 3%. If I could get those sots of numbers today, I would be lopsided into bonds and not even care if I was missing a bull market.

Low interest rates really look like a long term phenomenon, Ben Bernanke said he didn't believe they would normalize in his lifetime. Considering that's coming from a former FED chairman, it can't really be dismissed.

I just don't see how you'll get anything but returns that barely keep up with inflation with a bond heavy portfolio. And if you don't believe that's true, and that interest rates will soon "normalize", your bond portion is going to get hammered and that's the last place you wan to be. It just seems like a lose/lose to me.

I look at bonds now more to just not "lose" money rather than a long term investment. As you get older, absolutely you need that stability, but starting out as a younger investor, 50/50 just seems to be a guaranteed way to not have enough growth.

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willthrill81
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Re: Is anyone running 50/50 stock bond who is younger?

Post by willthrill81 » Wed Aug 07, 2019 10:28 am

Lee_WSP wrote:
Wed Aug 07, 2019 12:41 am
willthrill81 wrote:
Tue Aug 06, 2019 11:42 pm
Lee_WSP wrote:
Tue Aug 06, 2019 11:36 pm
The only absolute rule is that if you don't have ten years to wait out a dip, you should pare back your equities exposure.
:sharebeer
A second takeaway may be that it doesn't seem to even matter until your portfolio is 10-20x your yearly contribution.

If we run the simulation again, but this time with the following four AA: 100/0; 80/20; 50/50; & 20/80...

The three AA's do not significantly diverge until the portfolio value hits 200k (yearly contribution of 10k (833/mo)).

Run from 78-87 they are all hovering between $246,441 - $258,974

Run from 87 - 96 they are between $200,208 to $266,998

As we approach the 2000's there starts to be a little more spread, but also more volatility.

95 to 2005 they end between $190,248 and 200,583 with the 20/80 actually taking the lead

And if you keep running that sim to 2019, all equities do not come out ahead until...never.

https://www.portfoliovisualizer.com/bac ... total3=100
That makes sense. Over a long period accumulation period, the last decade's returns have the biggest impact on the final portfolio value.
“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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timboktoo
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Re: Is anyone running 50/50 stock bond who is younger?

Post by timboktoo » Wed Aug 07, 2019 9:35 pm

I think it's reasonable, if it satisfies your need and willingness to take risk.

Please be careful not to rely too strongly on backtesting. Calculate your returns conservatively.

It's tempting to look at the history of markets over a long period of time and think that you're looking the nature of markets. But you're only seeing what happened. What's going to happen is completely unknown.

- Tim

alex123711
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Re: Is anyone running 50/50 stock bond who is younger?

Post by alex123711 » Wed Aug 07, 2019 9:47 pm

Is the only reason people on here advocate 70/30 or higher because of past data/ returns, yet as everyone mentions; past returns do not predict future returns?

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Carlos Danger
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Re: Is anyone running 50/50 stock bond who is younger?

Post by Carlos Danger » Wed Aug 07, 2019 9:48 pm

Under 40
35% Janus Intermediate Term Bond Fund (403b) / Vanguard Extended Duration Treasuries (IRAs)
5% Gold (IRAs)

We're moving forward, not backwards. The 2020s are next, not the 1980s. US Treasury yields aren't low, they're high.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by willthrill81 » Wed Aug 07, 2019 9:53 pm

alex123711 wrote:
Wed Aug 07, 2019 9:47 pm
Is the only reason people on here advocate 70/30 or higher because of past data/ returns, yet as everyone mentions; past returns do not predict future returns?
No. Logically, stocks should outperform bonds over the long-term because they are more volatile and uncertain, and logical investors should demand higher returns from such an investment than something that is guaranteed by the "full faith and credit of the U.S. government," as U.S. Treasury bonds are, for instance.

Also, the "historical results do not predict the future" statement was mandated by the SEC to dissuade people from choosing mutual funds solely on their recent past performance, which is appropriate. But this most certainly does not mean that we should ignore historical results. At a minimum, historical results show us whether a specific strategy is plausible.
“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: Is anyone running 50/50 stock bond who is younger?

Post by Lee_WSP » Wed Aug 07, 2019 10:19 pm

alex123711 wrote:
Wed Aug 07, 2019 9:47 pm
Is the only reason people on here advocate 70/30 or higher because of past data/ returns, yet as everyone mentions; past returns do not predict future returns?
Let me correct that for you:

past returns predict, but do not guarantee future returns

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Re: Is anyone running 50/50 stock bond who is younger?

Post by CarpeDiem22 » Thu Aug 08, 2019 12:36 am

I'm 32 and at 45:55 stock/bond allocation (target is usually 65:35). I was deliberately 20% lower in stocks, and stock indexes in my geo have fallen 10% in last 40 days. If they fall 10% more, I'll go to 65:35.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by iamblessed » Thu Aug 08, 2019 10:13 pm

JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year. Yes that is a lot over time, but it had double the volatility of a stock/bond portfolio.

If you look at the same portfolios in an accumulation scenario starting with $10k and adding $10k/year the all stock advantage is only .46% per year and 13% more total wealth. A downturn in the equity markets and the riskier portfolio could easily be back to even or below. The additional wealth from all equity portfolios seems to evaporate rather quickly during a sharp downturn, and then takes many years to recover such as 2009-2013.

If you are a high saver as many are here and maxing out multiple vehicles, 401k, backdoor roth, taxable etc, you may be taking more risk than is even necessary to reach your goals.

I wonder if a simple portfolio 1/4 each us stocks, intl stocks, total bond, TIPS would be a simple path to financial success?
True but keep in mind that the bond bull started in 1981. Don't look for bonds to do that good for the next 30 years.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by Lee_WSP » Thu Aug 08, 2019 10:16 pm

iamblessed wrote:
Thu Aug 08, 2019 10:13 pm
JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year. Yes that is a lot over time, but it had double the volatility of a stock/bond portfolio.

If you look at the same portfolios in an accumulation scenario starting with $10k and adding $10k/year the all stock advantage is only .46% per year and 13% more total wealth. A downturn in the equity markets and the riskier portfolio could easily be back to even or below. The additional wealth from all equity portfolios seems to evaporate rather quickly during a sharp downturn, and then takes many years to recover such as 2009-2013.

If you are a high saver as many are here and maxing out multiple vehicles, 401k, backdoor roth, taxable etc, you may be taking more risk than is even necessary to reach your goals.

I wonder if a simple portfolio 1/4 each us stocks, intl stocks, total bond, TIPS would be a simple path to financial success?
True but keep in mind that the bond bull started in 1981. Don't look for bonds to do that good for the next 30 years.
I've researched this. People have been saying that for the past ten years. My response to them is why can't the bond people just switch to short term bonds with virtually no interest rate risk.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by michaeljc70 » Fri Aug 09, 2019 11:31 am

I'm not sure what "younger" is, but I didn't have any bonds until my 40s. Now (age 49 and retired) I have 75/25 and don't plan on changing that ever. Going back to 1987 isn't far enough to draw any valid conclusions about long term differences in performance.

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Re: Is anyone running 50/50 stock bond who is younger?

Post by willthrill81 » Fri Aug 09, 2019 11:51 am

Lee_WSP wrote:
Thu Aug 08, 2019 10:16 pm
iamblessed wrote:
Thu Aug 08, 2019 10:13 pm
JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year. Yes that is a lot over time, but it had double the volatility of a stock/bond portfolio.

If you look at the same portfolios in an accumulation scenario starting with $10k and adding $10k/year the all stock advantage is only .46% per year and 13% more total wealth. A downturn in the equity markets and the riskier portfolio could easily be back to even or below. The additional wealth from all equity portfolios seems to evaporate rather quickly during a sharp downturn, and then takes many years to recover such as 2009-2013.

If you are a high saver as many are here and maxing out multiple vehicles, 401k, backdoor roth, taxable etc, you may be taking more risk than is even necessary to reach your goals.

I wonder if a simple portfolio 1/4 each us stocks, intl stocks, total bond, TIPS would be a simple path to financial success?
True but keep in mind that the bond bull started in 1981. Don't look for bonds to do that good for the next 30 years.
I've researched this. People have been saying that for the past ten years. My response to them is why can't the bond people just switch to short term bonds with virtually no interest rate risk.
That was the mantra that many here were chanting last year. But from Aug., 2018, to July, 2019, the most recent 12 month period, long-term Treasuries returned 13.81% vs. short-term Treasuries' 4.08%.
“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

corey407woc
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Re: Is anyone running 50/50 stock bond who is younger?

Post by corey407woc » Fri Aug 09, 2019 1:36 pm

I use VTMFX (50/50) US and munipal fund for 2/3 of my emergency fund and keep the other 1/3 in cash Ally bank. I use 80/20 for my main investment portfolio though

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Re: Is anyone running 50/50 stock bond who is younger?

Post by lassevirensghost » Fri Aug 09, 2019 1:44 pm

willthrill81 wrote:
Fri Aug 09, 2019 11:51 am
Lee_WSP wrote:
Thu Aug 08, 2019 10:16 pm
iamblessed wrote:
Thu Aug 08, 2019 10:13 pm
JohnDindex wrote:
Tue Aug 06, 2019 1:56 pm
I find it interesting that since the inception of the Total Bond Market fund in 1987, that a portfolio split between global stocks 50/50 us/intl and bonds only lagged an all equity portfolio by about .67% per year. Yes that is a lot over time, but it had double the volatility of a stock/bond portfolio.

If you look at the same portfolios in an accumulation scenario starting with $10k and adding $10k/year the all stock advantage is only .46% per year and 13% more total wealth. A downturn in the equity markets and the riskier portfolio could easily be back to even or below. The additional wealth from all equity portfolios seems to evaporate rather quickly during a sharp downturn, and then takes many years to recover such as 2009-2013.

If you are a high saver as many are here and maxing out multiple vehicles, 401k, backdoor roth, taxable etc, you may be taking more risk than is even necessary to reach your goals.

I wonder if a simple portfolio 1/4 each us stocks, intl stocks, total bond, TIPS would be a simple path to financial success?
True but keep in mind that the bond bull started in 1981. Don't look for bonds to do that good for the next 30 years.
I've researched this. People have been saying that for the past ten years. My response to them is why can't the bond people just switch to short term bonds with virtually no interest rate risk.
That was the mantra that many here were chanting last year. But from Aug., 2018, to July, 2019, the most recent 12 month period, long-term Treasuries returned 13.81% vs. short-term Treasuries' 4.08%.
It is almost like the bond market isn't that much easier to predict than the equities market.
“Groucho, how do you invest your money?” | “All in bonds.” | “But Groucho, they don’t pay much return.” | “They do when you have a lot of em!”

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