Does anyone else not use a fixed asset allocation?

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vanbogle59
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Re: Does anyone else not use a fixed asset allocation?

Post by vanbogle59 »

BitTooAggressive wrote: Sun Sep 12, 2021 9:56 am Is anyone else taking a more flexible approach or is almost everyone in the static allocation of stocks bonds no matter market conditions?
I'm 62 and closing in on end of salary. Since I've already made my "minimum" and then some, I've committed to this "just-a-bit-flexible" plan:

1) When portfolio is at ATH (now) 50/50 - cuz nobody knows nothing, that level of risk lets me sleep and historically has returned more than I "need".
Details: equity is 80/20 us/int, fixed is total-bond and "cash"
Cash is stuff like CD ladder, TIPS... and is always kept at 10 yrs of "minimum" income

2) When equites fall, rebalance to 50/50 from bonds - cuz if equities were worth buying at higher prices, they still must be! :beer
I only do this if equites fall by 1/8. And I only do it down to 50 %. So, a max of 4 times.
#2 is never allowed to touch the cash.
(The idea is that I can always ignore equites and bonds for 10 years)

3) Once #2 triggers, if equites rise, my AA will skew towards equites, and I let it ride (this is the flex part)
Let it ride until the entire portfolio is at ATH, then reset to a new #1.
(The idea is that I will be back to ATH before the market is, actually lowering my risk!)

During withdrawal phase (coming soon!) I will also adjust for withdrawals.

I admit this is almost identical to 50/50 at ATH, rising to 60/40 if equity declines. And my version is more complicated. And it's not a mathematical guarantee.
But it satisfies my itch to outsmart the market while keeping me inside the guardrails.
:sharebeer
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BitTooAggressive
Posts: 45
Joined: Tue Jul 13, 2021 3:15 pm

Re: Does anyone else not use a fixed asset allocation?

Post by BitTooAggressive »

vanbogle59 wrote: Tue Sep 14, 2021 1:34 pm
BitTooAggressive wrote: Sun Sep 12, 2021 9:56 am Is anyone else taking a more flexible approach or is almost everyone in the static allocation of stocks bonds no matter market conditions?
I'm 62 and closing in on end of salary. Since I've already made my "minimum" and then some, I've committed to this "just-a-bit-flexible" plan:

1) When portfolio is at ATH (now) 50/50 - cuz nobody knows nothing, that level of risk lets me sleep and historically has returned more than I "need".
Details: equity is 80/20 us/int, fixed is total-bond and "cash"
Cash is stuff like CD ladder, TIPS... and is always kept at 10 yrs of "minimum" income

2) When equites fall, rebalance to 50/50 from bonds - cuz if equities were worth buying at higher prices, they still must be! :beer
I only do this if equites fall by 1/8. And I only do it down to 50 %. So, a max of 4 times.
#2 is never allowed to touch the cash.
(The idea is that I can always ignore equites and bonds for 10 years)

3) Once #2 triggers, if equites rise, my AA will skew towards equites, and I let it ride (this is the flex part)
Let it ride until the entire portfolio is at ATH, then reset to a new #1.
(The idea is that I will be back to ATH before the market is, actually lowering my risk!)

During withdrawal phase (coming soon!) I will also adjust for withdrawals.

I admit this is almost identical to 50/50 at ATH, rising to 60/40 if equity declines. And my version is more complicated. And it's not a mathematical guarantee.
But it satisfies my itch to outsmart the market while keeping me inside the guardrails.
:sharebeer
But we do know something. We know we make money on bonds from yields and falling rates. Neither is very good for bonds at the moment. So I only see bonds now as providing cash that you need (lucky for you, you can set 10 years aside) or buy stocks if and when there is a market downturn.
mikejuss
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Re: Does anyone else not use a fixed asset allocation?

Post by mikejuss »

The username checks out. Sounds like you're market timing, OP. Bonne chance!
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vanbogle59
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Re: Does anyone else not use a fixed asset allocation?

Post by vanbogle59 »

BitTooAggressive wrote: Tue Sep 14, 2021 5:27 pm But we do know something. We know we make money on bonds from yields and falling rates. Neither is very good for bonds at the moment. So I only see bonds now as providing cash that you need (lucky for you, you can set 10 years aside) or buy stocks if and when there is a market downturn.
If I could predict the movement of bond yields, I wouldn't be spending my time here.
I'd be trying to figure out how to keep my first yacht from bumping into my second yacht when the new helicopter is landing. The old one didn't throw off quite so much down draft, but it took multiple trips to get the orchestra on board. I mean, if dinner can't be served on schedule, why bother?
mikejuss
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Re: Does anyone else not use a fixed asset allocation?

Post by mikejuss »

vanbogle59 wrote: Tue Sep 14, 2021 5:39 pm
BitTooAggressive wrote: Tue Sep 14, 2021 5:27 pm But we do know something. We know we make money on bonds from yields and falling rates. Neither is very good for bonds at the moment. So I only see bonds now as providing cash that you need (lucky for you, you can set 10 years aside) or buy stocks if and when there is a market downturn.
If I could predict the movement of bond yields, I wouldn't be spending my time here.
I'd be trying to figure out how to keep my first yacht from bumping into my second yacht when the new helicopter is landing. The old one didn't throw off quite so much down draft, but it took multiple trips to get the orchestra on board. I mean, if dinner can't be served on schedule, why bother?
+1. Yacht-helicopter collisions are the worst.
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BitTooAggressive
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Re: Does anyone else not use a fixed asset allocation?

Post by BitTooAggressive »

sailaway wrote: Tue Sep 14, 2021 10:09 am
BitTooAggressive wrote: Tue Sep 14, 2021 10:05 am Is there any place on this website that defines all the acronyms commonly used here?

Yep!

https://www.bogleheads.org/wiki/Abbrevi ... d_Acronyms
Thanks
ColoradoRick
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Re: Does anyone else not use a fixed asset allocation?

Post by ColoradoRick »

BitTooAggressive wrote: Sun Sep 12, 2021 9:56 am I am 58 years old, 6 years away from when I plan to retire. I do not have a fixed allocation between stocks and bonds.
I plan on having a two bucket approach, 1 bucket cash or what I call close enough to cash. For me that is VBIRX, short duration, high quality bond fund. Currently I have 15% in this. At retirement it will be my 5 year cash bucket and for now it provides cash and money to buy into stocks during a downturn.

My other bucket is for long term. Right now it is 100% stocks all index funds about 55% US and 45% international. I also hold about 30% small cap.

So I do not maintain a fixed bond stock allocation but will adjust as I see fit, especially in the long term bucket. Long term bonds yields are low and interest rates cannot go much lower so I see no role for bonds in my long term bucket.

However if interest rates ever went back up to late 70s early 80s level and I can get long term treasuries at 14% or whatever they were I would significantly adjust my long term bucket to probably 50% bonds.

Is anyone else taking a more flexible approach or is almost everyone in the static allocation of stocks bonds no matter market conditions?
Dear OP -
My IPS is 2 buckets -
1st bucket - cash/CDs/Bonds equivalent to 10 years expenses
2nd bucket - equities vary between 50 to 70% depending upon a) what P/E is for S&P both trailing and forward and also what sentiment is. For example I'm currently at 64% equities; but realizing that almost all P/E's are elevated I will reduce equities to mid 50s to 60%, probably in November to January time frame. I realize this is heresy for true Bogleheads, but I enjoy playing stocks, and I am watching to see if upcoming 3 best months of the year (historically Nov/Dec/Jan) continue to elevate. If they do, I'll reduce, if we have a big correction well then my equity % will be reduced, so either way I am OK. I sleep very well at night and it keeps me out of the bars. I do plan in the next 3 to 5 years to eliminate ALL my individual stocks as I have earned very close to S&P with substantially more risk. But to state the obvious, it's my money and I get to do what I want.
dbr
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Re: Does anyone else not use a fixed asset allocation?

Post by dbr »

ColoradoRick wrote: Wed Sep 15, 2021 3:13 pm
Dear OP -
My IPS is 2 buckets -
1st bucket - cash/CDs/Bonds equivalent to 10 years expenses
2nd bucket - equities vary between 50 to 70% depending upon a) what P/E is for S&P both trailing and forward and also what sentiment is. For example I'm currently at 64% equities; but realizing that almost all P/E's are elevated I will reduce equities to mid 50s to 60%, probably in November to January time frame. I realize this is heresy for true Bogleheads, but I enjoy playing stocks, and I am watching to see if upcoming 3 best months of the year (historically Nov/Dec/Jan) continue to elevate. If they do, I'll reduce, if we have a big correction well then my equity % will be reduced, so either way I am OK. I sleep very well at night and it keeps me out of the bars. I do plan in the next 3 to 5 years to eliminate ALL my individual stocks as I have earned very close to S&P with substantially more risk. But to state the obvious, it's my money and I get to do what I want.
What do you do to make sure the first bucket is always at the designated level?

It would also be interesting to see what your overall asset allocation between stocks and bonds/cash is over time. The point would be to see how much that varies from someone who would have set and rebalanced to a specific target.
Topic Author
BitTooAggressive
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Joined: Tue Jul 13, 2021 3:15 pm

Re: Does anyone else not use a fixed asset allocation?

Post by BitTooAggressive »

ColoradoRick wrote: Wed Sep 15, 2021 3:13 pm
BitTooAggressive wrote: Sun Sep 12, 2021 9:56 am I am 58 years old, 6 years away from when I plan to retire. I do not have a fixed allocation between stocks and bonds.
I plan on having a two bucket approach, 1 bucket cash or what I call close enough to cash. For me that is VBIRX, short duration, high quality bond fund. Currently I have 15% in this. At retirement it will be my 5 year cash bucket and for now it provides cash and money to buy into stocks during a downturn.

My other bucket is for long term. Right now it is 100% stocks all index funds about 55% US and 45% international. I also hold about 30% small cap.

So I do not maintain a fixed bond stock allocation but will adjust as I see fit, especially in the long term bucket. Long term bonds yields are low and interest rates cannot go much lower so I see no role for bonds in my long term bucket.

However if interest rates ever went back up to late 70s early 80s level and I can get long term treasuries at 14% or whatever they were I would significantly adjust my long term bucket to probably 50% bonds.

Is anyone else taking a more flexible approach or is almost everyone in the static allocation of stocks bonds no matter market conditions?
Dear OP -
My IPS is 2 buckets -
1st bucket - cash/CDs/Bonds equivalent to 10 years expenses
2nd bucket - equities vary between 50 to 70% depending upon a) what P/E is for S&P both trailing and forward and also what sentiment is. For example I'm currently at 64% equities; but realizing that almost all P/E's are elevated I will reduce equities to mid 50s to 60%, probably in November to January time frame. I realize this is heresy for true Bogleheads, but I enjoy playing stocks, and I am watching to see if upcoming 3 best months of the year (historically Nov/Dec/Jan) continue to elevate. If they do, I'll reduce, if we have a big correction well then my equity % will be reduced, so either way I am OK. I sleep very well at night and it keeps me out of the bars. I do plan in the next 3 to 5 years to eliminate ALL my individual stocks as I have earned very close to S&P with substantially more risk. But to state the obvious, it's my money and I get to do what I want.
Similar philosophy as mine, a cash bucket and long term bucket adjusted based on valuation.
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