Maintaining high stock allocation + VPW

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K8ya
Posts: 145
Joined: Fri Aug 10, 2012 12:48 am

Maintaining high stock allocation + VPW

Post by K8ya »

Recently I have soured on target date funds:

Image

A bond allocation higher than 50% will surely lower the SWR a significant amount. Probably part of the concern of a 4% SWR.

Rather, I am starting to think it would be better to dip stock allocation from 80% to 70% or so, still a high proportion. And just spend less on bad years. The VPW method.

* I naturally do this even now, as a high earner
* Overall return remains high
* I am not aware of any recent decade long bear markets. I think that may be an artifact of early/mid stage monetary policy (speculation)

Who agrees/disagrees?
dogagility
Posts: 1757
Joined: Fri Feb 24, 2017 6:41 am

Re: Maintaining high stock allocation + VPW

Post by dogagility »

Agree.

Some thoughts from my IPS (not verbatim)...

The sweet spot balancing withdrawal amount volatility and portfolio longevity in retirement seems to be in the range of 60-75% equity allocation during the entirety of retirement.

Insuring against an unlikely SORR is costly to a portfolio.

To maximize portfolio growth, accumulators should favor equities heavily.
The more flexibility you have the less you need to know what happens next. -- Morgan Housel
Random Walker
Posts: 4930
Joined: Fri Feb 23, 2007 8:21 pm

Re: Maintaining high stock allocation + VPW

Post by Random Walker »

K8ya wrote: Sat May 15, 2021 6:24 am * I am not aware of any recent decade long bear markets. I think that may be an artifact of early/mid stage monetary policy (speculation)

Who agrees/disagrees?
https://www.portfoliovisualizer.com/bac ... ion2_2=100

2000-2012 US stock market underperformed short term treauries.

Did a quick peek on Portfolio Visualizer
US Stock Market
1972-74 -30%
2000-02 -37%
2007-9 -34%

Poster above says insuring against SORR is costly. I have done that, and so far I’ve found him to be very right! The investment decisions are all about trade offs. From the above periods in my lifetime, looks like one needs to be ready for a 30-40% loss on the equity side over about two years during withdrawal phase. Many people here assume equities can lose 50% at any given time in making their AA decisions. If one’s VPW can tolerate the above, then the strategy works for them. Tough stuff though; money withdrawn after a big market decline won’t be there to experience subsequent gains.

Dave
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