When I was managing my in-laws' finances, I will admit that I sold all of their equities. Their equity allocation had drifted down to 20% over time, they were well into their 90s, both were in nursing homes, and they had no legacy goals. The only thing their money was doing was paying medical expenses at that point. They did not outlive their finances but the last thing I needed at the time was a bear market.VictoriaF wrote: ↑Thu Mar 23, 2023 1:44 pm The question "At what point would you stop investing in stocks?" can be interpreted in two ways:
(1) When you would stop buying (new) stocks and stock funds?
(2) When you would you sell all your (existing) stocks and stock funds?
The answer to interpretation-1 depends on one's glide path and the distinction one makes between the assets one holds for himself and the assets one holds for his heirs and charities.
The answer to interpreation-2 is usually "never." A notable exception is when you are in such dare circumstances that you need to sell all your remaining assets to buy food.
Victoria
At what point would you stop investing in stocks altogether?
- Artsdoctor
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Re: At what point would you stop investing in stocks?
Re: At what point would you stop investing in stocks?
I'll always maintain some exposure to equities, but when I enter the withdrawal stage it will probably be only about 40%. I'll probably have about 10% in cash and 50% bonds.
To me it doesn't make sense not to have some exposure to equities because anything can underperform for a fairly extended period. We've seen that over the last two years or so with bonds. Someone allocated entirely or mostly to bonds lost more money during that time then someone with a more balanced portfolio. So to me during retirement you want to be thoroughly well diversified in both equities and relatively lower risk assets like bonds and cash.
To me it doesn't make sense not to have some exposure to equities because anything can underperform for a fairly extended period. We've seen that over the last two years or so with bonds. Someone allocated entirely or mostly to bonds lost more money during that time then someone with a more balanced portfolio. So to me during retirement you want to be thoroughly well diversified in both equities and relatively lower risk assets like bonds and cash.
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
Re: At what point would you stop investing in stocks?
Yes. I stopped after the 2008 flop. I can't hold stocks and sleep.
I invest in CDS, nominal treasuries, and TIPS.
I'd consider munis if the payout was good.
Re: At what point would you stop investing in stocks?
So you don't regret not loading up on 15% to 20% government bonds in the late 1970s and early 1980s?
The question isn't at what age I want to retire, it's at what income. |
- George Foreman
Re: At what point would you stop investing in stocks?
I've never been particularly confident in the idea stocks would just keep going up. The past 100 years saw the massive global expansion of capitalism; global poverty going from 90% to under 10%.. There's nothing typical about the 20th century, and most stocks still underperformed T-bills. Capitalism is really working towards 'perfect competition' – market returns are due to a few outliers. Our long-term data on stock market returns is also flawed – there have been long periods of stocks underperforming treasuries.TinyHouse wrote: ↑Thu Mar 23, 2023 10:44 am Questions for you:
Be honest: Is there ever a point when you would stop investing in equities? Are you committed pretty much no matter what? Some people can’t stomach the market, that’s why they aren’t in it, and that’s a pretty reasonable and understandable position. Some don’t need to take the risk. But unless you are a business owner, or have other means of income, the alternatives to equities don’t look that great either (cash, bonds, PMs). Diversification becomes key, but what do you diversify to?
What would you invest in if you could not invest in VTSAX or the like? For me probably real estate and some gold (95/5?) if I couldn’t invest in equities, or starting a business, but those options aren’t really passive.
Here’s to many more years of returns for the US market (and the global economy).
An ideal long-term portfolio for me might be something like:
25% Private Equity and VC <- a different roll of the dice; a process of improving businesses, rather than just betting on them.
25% Global Stocks <- who's to say all the growth won't be out of EM over the next century?
25% Absolute Return <- at its simplest, this could just be TIPS, gold and credit; but I'd use low cost All Weather funds.
25% Real Assets <- property, infrastructure, renewables. Direct investment. Gov. subsidised. Long-term inflation-linked cashflows.
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Re: At what point would you stop investing in stocks?
I've long been a fan of the "100-age" theory of % equities AA.
So in answer to OP's question--- upon reaching age 100 I would not be investing in equities.
So in answer to OP's question--- upon reaching age 100 I would not be investing in equities.
Re: At what point would you stop investing in stocks?
Appreciate the honesty, and glad you’ve found an investment allocation that works for you. Just curious: Do you have a pension? Any other retirement income?
Re: At what point would you stop investing in stocks?
You seem to focus on a lot of the negatives but there are a plethora of positives coming for economic efficiency related to machine learning, AI, biotech, self driving and other technology advancements that are or will be high growth, high margin businesses that will drive the markets over the coming decades. I’d ignore the noise. You’re investing in the best and most innovative companies in the world with VTSAX.TinyHouse wrote: ↑Thu Mar 23, 2023 10:44 am We all know to “stay the course”, that the “market always recovers”, and long-term equity investors are rewarded. I am personally bought into that because I don’t see a lot of other alternatives to VTSAX that allow for truly passive and tax efficient returns. I have well over $1 million in VTSAX, and I keep contributing. Some really crazy and catastrophic things can happen, and those end up being some great times to buy the market. I am betting on the US market and economy over the long term. I wish I was more creative and had some cool business that could generate income for me (and my children’s children) through thick and thin so that I didn’t have to really think about investing in corporations that I have no interest or stake in, other than to give me market returns. So for me, I’m staying invested, and there really isn’t much that would deviate me from that plan.
But I’m trying to be honest with myself, at what point is it not a good strategy? What would it take for me to stop? I hate being locked into a strategy (if it’s not going to work), even if it has been very successful over the last 100+ years over the long term. I have every hoping expectation real returns will continue. This is even despite my disdain for many of these companies, falling birth rates, lack of participation in the workforce, growing international and domestic tensions, banking and money system uncertainty, rising debt, etc, etc. I guess my trigger would be if, for some reason, I could not access my money or sell my investments. If I felt like the brokers weren’t giving me control, and my money was locked in, it would make me lose trust in the institution, and probably the system as a whole. At that point, tbh, I would wish I had other means of investment income.
Questions for you:
Be honest: Is there ever a point when you would stop investing in equities? Are you committed pretty much no matter what? Some people can’t stomach the market, that’s why they aren’t in it, and that’s a pretty reasonable and understandable position. Some don’t need to take the risk. But unless you are a business owner, or have other means of income, the alternatives to equities don’t look that great either (cash, bonds, PMs). Diversification becomes key, but what do you diversify to?
What would you invest in if you could not invest in VTSAX or the like? For me probably real estate and some gold (95/5?) if I couldn’t invest in equities, or starting a business, but those options aren’t really passive.
Here’s to many more years of returns for the US market (and the global economy).
Re: At what point would you stop investing in stocks?
The 20 yr TIPS point on the Treasury Dept 'Daily Yield Curve', then the longest in that source, exceeded 3% a dozen or so days in Oct/Nov 2008 and shorter points were above 3 by more for longer. But I guess if you look back to posts on this forum then (started in 2007?) they wouldn't have all said 'let's get out of stocks', and not doing so was the right call in retrospect. I get the general point of that post that a high enough riskless return, even one below historical stock returns, even one below the current expected return of stocks (which I'd ballpark as 4% real pre tax), could change your asset allocation away from risk. But a low valuation/high expected return of TIPS is highly likely in real life to correspond to lower valuation/higher expected return of stocks than now. I thought TIPS were attractive in 2008-9 and I shifted a significant % of portfolio into them vs before that, though nowhere near 100% and from other fixed income not from stocks.
Also obviously tax is a significant issue comparing TIPS and stocks, depending whether on one hand it's 401k's for both or other hand it's not only taxable but mainly aiming to pass unrealized cap gains along to heirs, and have them extinguished under current law (basis step up). My after tax real return on 3% TIPS with 2.5% expected inflation would be around 1.3% at the margin, and moreover the after tax TIPS yield declines as inflation rises, nothing gives a guaranteed after tax real return.
Re: At what point would you stop investing in stocks?
There is no point at which I would completely get out of equities. If the stock market/economy outlook was so bad that I felt equities were doomed, I can't see what else would be a good investment. Maybe moving somewhere overseas with a very low cost of living ...TinyHouse wrote: ↑Thu Mar 23, 2023 10:44 am
stuff deleted
Questions for you:
Be honest: Is there ever a point when you would stop investing in equities? Are you committed pretty much no matter what? Some people can’t stomach the market, that’s why they aren’t in it, and that’s a pretty reasonable and understandable position. Some don’t need to take the risk. But unless you are a business owner, or have other means of income, the alternatives to equities don’t look that great either (cash, bonds, PMs). Diversification becomes key, but what do you diversify to?
What would you invest in if you could not invest in VTSAX or the like? For me probably real estate and some gold (95/5?) if I couldn’t invest in equities, or starting a business, but those options aren’t really passive.
Here’s to many more years of returns for the US market (and the global economy).
[edited to add]. I also believe a "bond only" portfolio is more risky, not less risky, than a portfolio with at least some equity; that's one reason I'd never go all fixed income.
At some level of wealth (probably 8 figures) I'd be tempted to look at a diversified real estate portfolio (owning parts of apartment buildings, storage facilities, timberland etc, not me buying a bunch of houses all in my area and playing landlord) to complement a globally diversified stock and bond portfolio. Things like gold don't do a lot for me, though I might consider looking again at commodities.
Last edited by TN_Boy on Fri Mar 24, 2023 9:41 am, edited 1 time in total.
Re: At what point would you stop investing in stocks?
I stopped investing in stocks about a year-and-a-half ago and moved a good amount into TIAA Real Estate; I was able to get around the account limit by rebalancing and by a couple of systematic transfers, so, with what I already had invested, I was a bit under 3X the limit. I waited a little too long to get out of TREA (early December) but was still very happy. Now I have moved most of my investments to TIAA Traditional at 6.25% in the illiquid account and 5.5% in the liquid account. I am only three years away from retirement at 70, so am more conservative than some. I have no FOMO and I sleep well. That said, I can still take funds out of the liquid TRAD and reinvest in equities at some point that makes sense. The illiquid TRAD can only be withdrawn in equal amounts over 7 years (I don't plan to annuitize) and that works just fine for me. I will use some for expenses but will reinvest the bulk of that account; I'm hoping by that time things will look better for equities. For now, I am not particularly optimistic. I still have a token amount in equities -- about 5% of total investments -- but, like I said, I'm not optimistic.
Re: At what point would you stop investing in stocks?
I don't need to stop investing in stocks, and have no plans to do so. I've been retired since 2014. I've kept my 403b investment account that I established in 1975. This investment account, plus Social Security income, are how I live day-to-day. The 403b is also a major part of our family legacy to our children. Why stop? My "stock" investments are about 50% of my total 403b account; the balance is in fixed income.
Added: My 403b is with TIAA. I chose not to annuitize my investment in TIAA Traditional; instead I am depleting it year-by-year via a TPA (transfer payout annuity).The money from that is part of my RMD's. My TIAA RMD's plus Social Security are the two main sources of income flowing into my bank and my wallet. Some of that flow is rerouted into a special savings account to help one of our children to buy a house.
Added: My 403b is with TIAA. I chose not to annuitize my investment in TIAA Traditional; instead I am depleting it year-by-year via a TPA (transfer payout annuity).The money from that is part of my RMD's. My TIAA RMD's plus Social Security are the two main sources of income flowing into my bank and my wallet. Some of that flow is rerouted into a special savings account to help one of our children to buy a house.
Last edited by Garco on Fri Mar 24, 2023 10:03 am, edited 3 times in total.
Re: At what point would you stop investing in stocks?
75, retired, pension, social, no debt.TinyHouse wrote: ↑Fri Mar 24, 2023 8:42 amAppreciate the honesty, and glad you’ve found an investment allocation that works for you. Just curious: Do you have a pension? Any other retirement income?
Rule #1 of investing: If you don't need to take risk, don't. (Larry Swedroe/Groucho Marx)
Re: At what point would you stop investing in stocks?
We invested aggressively for decades in equities
We reached our financial milestone
Bob Brinkers (Land of Critical Mass)google it
Now I keep adding to Vanguard Intermediate Term Tax Exempt
We reached our financial milestone
Bob Brinkers (Land of Critical Mass)google it
Now I keep adding to Vanguard Intermediate Term Tax Exempt
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Re: At what point would you stop investing in stocks?
Tips were a great deal then in 2008 but so were stocks. 10/24/08 VTI was $43, now $194.JackoC wrote: ↑Fri Mar 24, 2023 8:59 amThe 20 yr TIPS point on the Treasury Dept 'Daily Yield Curve', then the longest in that source, exceeded 3% a dozen or so days in Oct/Nov 2008 and shorter points were above 3 by more for longer. But I guess if you look back to posts on this forum then (started in 2007?) they wouldn't have all said 'let's get out of stocks', and not doing so was the right call in retrospect. I get the general point of that post that a high enough riskless return, even one below historical stock returns, even one below the current expected return of stocks (which I'd ballpark as 4% real pre tax), could change your asset allocation away from risk. But a low valuation/high expected return of TIPS is highly likely in real life to correspond to lower valuation/higher expected return of stocks than now. I thought TIPS were attractive in 2008-9 and I shifted a significant % of portfolio into them vs before that, though nowhere near 100% and from other fixed income not from stocks.
Seems like no point to having less than 25% in stocks unless you are extremely old and just don’t like market volatility. Tips are close to a guarantee but not perfect — the price of what you are buying could inflate faster than the CPI used for tips adjustment. For example college costs were much higher than the cpi increase over the past 50 years. Very few retired people are paying college tuition but I could imagine some health care service rising faster than the CPI.
Re: At what point would you stop investing in stocks?
Good points er999!
That could be me...age 75...(not extremely?)
Stocks = heartburn.
When I get a chance (in 2024), I'll likely become 50-70% TIPS with the rest nominal treasuries/CDs/munis. (likely somewhat imperfectly duration matched.)
- TheTimeLord
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Re: At what point would you stop investing in stocks?
So Elon Musk, Bill Gates and Warren Buffet should sell all their stocks? I could be wrong but I am guessing there is some context missing from that quote.hudson wrote: ↑Fri Mar 24, 2023 9:36 am75, retired, pension, social, no debt.TinyHouse wrote: ↑Fri Mar 24, 2023 8:42 amAppreciate the honesty, and glad you’ve found an investment allocation that works for you. Just curious: Do you have a pension? Any other retirement income?
Rule #1 of investing: If you don't need to take risk, don't. (Larry Swedroe/Groucho Marx)
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Re: At what point would you stop investing in stocks?
Thanks TheTimeLord!
I should have added, "With all the usual exceptions."
I should have added, "With all the usual exceptions."
- TheTimeLord
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Re: At what point would you stop investing in stocks?
This article from 2014 by Larry might add to this thread.
Asset Allocation Guide: How much risk should you take by Larry Swedroe
https://www.cbsnews.com/news/asset-allo ... -you-take/
Last edited by TheTimeLord on Fri Mar 24, 2023 11:03 am, edited 1 time in total.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Re: At what point would you stop investing in stocks?
I am not adding to my current holdings like I did when I worked. I am still reinvesting dividends in most of my Mutual funds. When we start taking SS, we will have to decide (since we will not need it to live on) if we should invest it in equities or just build up cash and bonds. That is still 5 years away (I hope ), but my current thinking is that we might invest half of it - no for ourselves, but for our heirs. They can (hopefully) reap the long term benefits.
We probably will never get completely out of our current equities, but we have reduced their component in our AA. Many of them we have held so long we have large capital gains in them (in the taxable accounts). We will let our heirs reap those benefits.
We probably will never get completely out of our current equities, but we have reduced their component in our AA. Many of them we have held so long we have large capital gains in them (in the taxable accounts). We will let our heirs reap those benefits.
- AnnetteLouisan
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Re: At what point would you stop investing in stocks?
I guess when I stop contributing to my 401K and IRA. Because I only seem to do it right when it’s automatic.
Re: At what point would you stop investing in stocks?
68 years old, just retired. My portfolio is aggressive, but much the same since I started investing:
97% equities (VTSAX/VTMGX), 3% cash. No changes planned. I've never owned bonds. SS near maximum at 70 should largely cover expenses. Any additional requirements, if needed, covered by dividends from taxable.
Portfolio is currently about 120X. Should be good to go.
97% equities (VTSAX/VTMGX), 3% cash. No changes planned. I've never owned bonds. SS near maximum at 70 should largely cover expenses. Any additional requirements, if needed, covered by dividends from taxable.
Portfolio is currently about 120X. Should be good to go.
Re: At what point would you stop investing in stocks?
We're at about 50x.
At this point, stock investing is not really a necessity.
We still do it, but it's mostly just to capture some upside and for LOLZ.
At this point, stock investing is not really a necessity.
We still do it, but it's mostly just to capture some upside and for LOLZ.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
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Re: At what point would you stop investing in stocks?
Thanks for the URL. I'm pretty much in agreement, except for being more stock heavy in theTheTimeLord wrote: ↑Fri Mar 24, 2023 11:01 amThis article from 2014 by Larry might add to this thread.
Asset Allocation Guide: How much risk should you take by Larry Swedroe
https://www.cbsnews.com/news/asset-allo ... -you-take/
5-10 year range.
Re: At what point would you stop investing in stocks?
That does seem to be the sweet spot.billthecat wrote: ↑Thu Mar 23, 2023 11:47 am But, these days, I oscillate between "I wish I had more stock" and "thank god I don't have more stock" multiple times throughout the day, so it's probably about right.
"Better is the enemy of good." Good is good.
Re: At what point would you stop investing in stocks?
It may be the case that the market has always recovered and long-term equity investors have been rewarded, but there are no guarantees. Equities usually return more than bonds because they are riskier than bonds (risk premium). Risk includes the real possibility that they will underperform or lose money over any given time frame.
If TIPS generated a real return, after taxes, sufficient to meet my anticipated needs, then I'd make sure I had enough TIPS, even if it meant giving up some potential equity upside. Otherwise, I'd make sure I had at least 20% or 25% in equities for diversification.
If you're holding so much in equities that you're not sleeping at night or in danger of panic selling, you should rethink your asset allocation.
Real estate is, to me, too undiversified and may require active management. Gold is a greater fool theory investment - it does not produce a return other than by finding buyers who'll pay more.
Re: At what point would you stop investing in stocks?
My wife is set to receive my stock portfolio upon my expiration date.
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Re: At what point would you stop investing in stocks?
I'll probably never be completely out of stocks, but I hope to be 40/40/20 (VTI & VXUS / BND / cash, CDs, & inflation protected bonds) at retirement. That's about as simple as I can keep it and for my wife to understand.
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Re: At what point would you stop investing in stocks altogether?
When I've moved on to heavenly pastures. Until then, I will continue to invest in enterprises that provide a call option on growth of capital. For money I can not afford to lose, I will hold an appropriate amount of fixed income or annuities.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
- FoundingFather
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Re: At what point would you stop investing in stocks?
I see a lot of wisdom in the idea of always staying somewhere between 80/20 and 20/80, as long as life keeps going on in its present course. However, as Candor and others have suggested, if the music stops, then I guess I'd stop investing in much of anything.
Founding Father
"I do not think myself equal to the Command I am honored with." -George Washington (excerpt from Journals of the Continental Congress, 16 June 1775)
Re: At what point would you stop investing in stocks altogether?
The only thing that would stop me from investing in stocks altogether would be that they weren't available - in other words, some sort of black swan event...
Cheers
Cheers
Re: At what point would you stop investing in stocks?
And going forward the wealth tax effect of TIPS would grind your real portfolio value down about 2-4% per year. It’s not completely safe at all.TomatoTomahto wrote: ↑Thu Mar 23, 2023 12:15 pmAssuming some of the equities are in taxable, converting to 100% TIPS would probably be very expensive via LTCG.
Re: At what point would you stop investing in stocks?
Can you show me anything that shows adding gold and real estate will outperform a simple 2 or 3 fund Boglehead portfolio? $10M or $3M, I can’t see that what you’re saying adds value by increasing returns or reducing risk. In fact, you might be adding risk and reducing expected returns.homebuyer6426 wrote: ↑Thu Mar 23, 2023 11:03 am If I had more than $10 million in today's dollars I wouldn't stop investing in stocks, but would probably make things like gold and real estate a sizable part of the portfolio. Because I wouldn't need the high return anymore as much as I'd need the non-correlation.
That will never happen. I don't see any other game in town better for me than stocks.
What you said about not being able to access/control your portfolio was interesting. If that were the case I too would not want the investment. Same would apply to bank accounts that started limiting my abilities, I'd find some other way to store the value. There are thousands of things that hold their value with time. To give an random example, plant a bunch of black walnut trees and you'll stand to make a lot of money when they mature and you sell them for their wood.
Re: At what point would you stop investing in stocks altogether?
I will always invest in equities. I'm investing for myself and also my heirs. The stock market goes up and down, so I invest no matter what.
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Re: At what point would you stop investing in stocks?
I have resisted investing in gold and real estate.Leesbro63 wrote: ↑Sat Mar 25, 2023 4:35 amCan you show me anything that shows adding gold and real estate will outperform a simple 2 or 3 fund Boglehead portfolio? $10M or $3M, I can’t see that what you’re saying adds value by increasing returns or reducing risk. In fact, you might be adding risk and reducing expected returns.homebuyer6426 wrote: ↑Thu Mar 23, 2023 11:03 am If I had more than $10 million in today's dollars I wouldn't stop investing in stocks, but would probably make things like gold and real estate a sizable part of the portfolio. Because I wouldn't need the high return anymore as much as I'd need the non-correlation.
That will never happen. I don't see any other game in town better for me than stocks.
What you said about not being able to access/control your portfolio was interesting. If that were the case I too would not want the investment. Same would apply to bank accounts that started limiting my abilities, I'd find some other way to store the value. There are thousands of things that hold their value with time. To give an random example, plant a bunch of black walnut trees and you'll stand to make a lot of money when they mature and you sell them for their wood.
Gold is one step better than crypto, in that it is used in industry (11% of mined gold) and a lot more in jewelry. But, it costs a lot to produce and store and doesn't pay dividends. My best investment is the gold band on my ring finger
Real estate is a game for active participation. I just don't see myself as a landlord and property management companies take too large a cut. REITs don't seem to be a smart investment.
So, a BH portfolio it is. There just isn't a reasonable alternative until you get to 9 digit portfolios, and I'm not even sure about that. I don't have a 9 digit portfolio, so I haven't examined the issue with any energy.
I get the FI part but not the RE part of FIRE.
Re: At what point would you stop investing in stocks altogether?
I would stop if I had so little compared to my expenses that I couldn't weather a storm in the markets, but I doubt that's the intent of your question.
Once wealth rises past what you need over your lifetime, you can reset your timeline to your kids or grandkids. So there is no real reason to stop investing.
Once wealth rises past what you need over your lifetime, you can reset your timeline to your kids or grandkids. So there is no real reason to stop investing.
Re: At what point would you stop investing in stocks?
+1. Exactly. Agreed on all points. We seem to be at least somewhat similarly situated and think alike.TomatoTomahto wrote: ↑Sat Mar 25, 2023 7:55 amI have resisted investing in gold and real estate.Leesbro63 wrote: ↑Sat Mar 25, 2023 4:35 amCan you show me anything that shows adding gold and real estate will outperform a simple 2 or 3 fund Boglehead portfolio? $10M or $3M, I can’t see that what you’re saying adds value by increasing returns or reducing risk. In fact, you might be adding risk and reducing expected returns.homebuyer6426 wrote: ↑Thu Mar 23, 2023 11:03 am If I had more than $10 million in today's dollars I wouldn't stop investing in stocks, but would probably make things like gold and real estate a sizable part of the portfolio. Because I wouldn't need the high return anymore as much as I'd need the non-correlation.
That will never happen. I don't see any other game in town better for me than stocks.
What you said about not being able to access/control your portfolio was interesting. If that were the case I too would not want the investment. Same would apply to bank accounts that started limiting my abilities, I'd find some other way to store the value. There are thousands of things that hold their value with time. To give an random example, plant a bunch of black walnut trees and you'll stand to make a lot of money when they mature and you sell them for their wood.
Gold is one step better than crypto, in that it is used in industry (11% of mined gold) and a lot more in jewelry. But, it costs a lot to produce and store and doesn't pay dividends. My best investment is the gold band on my ring finger
Real estate is a game for active participation. I just don't see myself as a landlord and property management companies take too large a cut. REITs don't seem to be a smart investment.
So, a BH portfolio it is. There just isn't a reasonable alternative until you get to 9 digit portfolios, and I'm not even sure about that. I don't have a 9 digit portfolio, so I haven't examined the issue with any energy.
Re: At what point would you stop investing in stocks?
Perhaps tax management becomes more important, and more strategies are available, with a 9 digit portfolio, but one should be sensitive to taxes throughout. Otherwise, I don't believe there are good reasons to change from a BH portfolio.TomatoTomahto wrote: ↑Sat Mar 25, 2023 7:55 amI have resisted investing in gold and real estate.Leesbro63 wrote: ↑Sat Mar 25, 2023 4:35 amCan you show me anything that shows adding gold and real estate will outperform a simple 2 or 3 fund Boglehead portfolio? $10M or $3M, I can’t see that what you’re saying adds value by increasing returns or reducing risk. In fact, you might be adding risk and reducing expected returns.homebuyer6426 wrote: ↑Thu Mar 23, 2023 11:03 am If I had more than $10 million in today's dollars I wouldn't stop investing in stocks, but would probably make things like gold and real estate a sizable part of the portfolio. Because I wouldn't need the high return anymore as much as I'd need the non-correlation.
That will never happen. I don't see any other game in town better for me than stocks.
What you said about not being able to access/control your portfolio was interesting. If that were the case I too would not want the investment. Same would apply to bank accounts that started limiting my abilities, I'd find some other way to store the value. There are thousands of things that hold their value with time. To give an random example, plant a bunch of black walnut trees and you'll stand to make a lot of money when they mature and you sell them for their wood.
Gold is one step better than crypto, in that it is used in industry (11% of mined gold) and a lot more in jewelry. But, it costs a lot to produce and store and doesn't pay dividends. My best investment is the gold band on my ring finger
Real estate is a game for active participation. I just don't see myself as a landlord and property management companies take too large a cut. REITs don't seem to be a smart investment.
So, a BH portfolio it is. There just isn't a reasonable alternative until you get to 9 digit portfolios, and I'm not even sure about that. I don't have a 9 digit portfolio, so I haven't examined the issue with any energy.
Regarding gold and real estate, it's not for me either. As I posted above "Real estate is, to me, too undiversified and may require active management. Gold is a greater fool theory investment - it does not produce a return other than by finding buyers who'll pay more."
And of course no one can possibly show that "adding gold and real estate will outperform a simple 2 or 3 fund Boglehead portfolio" [emphasis added]. Beware of anyone who attempts to speak confidently about such future returns.
Re: At what point would you stop investing in stocks?
That broadens the topic out to every study of past returns, some of which have shown gold improving on long term returns. I would say the point though rather than going down that rabbit hole (for the umpteenth time) would be to note the near absence AFAIK of proposed alternative portfolios include *no* stocks in publicly traded companies. 'Harry Brown Permanent Portfolio' is 25% stock, 'Dragon Portfolio' is 24%, Asvanunt/Richardson 2017 found the mean-variance optimal (not max return obviously) portfolio 1936-2014 was 48% corporate bond, 35% treasury 17% stock, as a few random recollections of such proposals and tests. Graham's dictum was no less than 25% or more than 75% stock, maybe those exercises (roughly) corroborate that, or they chose something around 25% based on Graham. Anyway a fairly low % stock even for the 'long haul', not just in old age, is plausible especially if you're focused on surviving big downside, and more likely to appeal if you look beyond just US in just last century. The only one I can think of that doesn't necessarily have any publicly traded equity is Talib's idea of the barbel of 90% very safe assets and 10% extremely risk assets, where a suggestion for the latter was continuous (implicitly leveraged) long in the VIX futures*, but the underlying source of that expected return is still the stock market.Leesbro63 wrote: ↑Sat Mar 25, 2023 4:35 amCan you show me anything that shows adding gold and real estate will outperform a simple 2 or 3 fund Boglehead portfolio? $10M or $3M, I can’t see that what you’re saying adds value by increasing returns or reducing risk. In fact, you might be adding risk and reducing expected returns.homebuyer6426 wrote: ↑Thu Mar 23, 2023 11:03 am If I had more than $10 million in today's dollars I wouldn't stop investing in stocks, but would probably make things like gold and real estate a sizable part of the portfolio. Because I wouldn't need the high return anymore as much as I'd need the non-correlation.
That will never happen. I don't see any other game in town better for me than stocks.
What you said about not being able to access/control your portfolio was interesting. If that were the case I too would not want the investment. Same would apply to bank accounts that started limiting my abilities, I'd find some other way to store the value. There are thousands of things that hold their value with time. To give an random example, plant a bunch of black walnut trees and you'll stand to make a lot of money when they mature and you sell them for their wood.
I think a general answer to the question (when you wouldn't *have* stocks, obviously you stop adding them eventually in most cases) is hard to find. Theoretically if the riskless return was high enough, but realistically high riskless expected return tends to imply still higher risky expected return (as in TIPS reaching 'golden' 3% level in 2008, but stock valuation and expected return had also improved, albeit painfully if already long stocks). Expected equity risk premium measurable and measured at a very low or negative value could be a reason to abandon stocks. But that's never been true AFAIK based on simple measures of stock expected return (eg. 1/CAPE or div yield+EPS growth based on macro picture, v apparent expected real return of bonds pre TIPS or TIPS since then). Estimates of very low ERP almost always depend on assuming expected negative speculative return of stocks (valuation mean reversion), an assumption itself inherently speculative IMO.
And, things sort of like stock (real estate is, gold isn't), where they work, are usually something you do in addition to stocks not instead. The exception might be if you're very skilled at managing a specific non-stock asset, in which you have to the scale to diversify. We don't wonder why Buffett doesn't buy index funds for his own (not heirs) purposes, likewise if somebody skilled enough at real estate (on a scale where they could diversify adequately), though even then they might find it attractive to have *some* stocks.
*generally you get big gains from 'contango', forward VIX is generally higher due to risk premium and converges down to the spot. Sometimes you lose a boatload on spikes in the VIX. The idea is that can work with at a high enough expected average return with enough safe money.
- Lawrence of Suburbia
- Posts: 691
- Joined: Mon Aug 08, 2022 12:04 pm
Re: At what point would you stop investing in stocks altogether?
I've stopped investing in everything; I'm retired!
74% VTHRX/8% DODWX/12% TIAA Traditional/6% SWVXX
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- Posts: 721
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Re: At what point would you stop investing in stocks?
I believe it is the Nevada retirement fund that is around 40B so 11 digits and all index funds, very low cost and with excellent track record of returns compared to other more actively managed state retirement funds and other endowments.TomatoTomahto wrote: ↑Sat Mar 25, 2023 7:55 amI have resisted investing in gold and real estate.Leesbro63 wrote: ↑Sat Mar 25, 2023 4:35 amCan you show me anything that shows adding gold and real estate will outperform a simple 2 or 3 fund Boglehead portfolio? $10M or $3M, I can’t see that what you’re saying adds value by increasing returns or reducing risk. In fact, you might be adding risk and reducing expected returns.homebuyer6426 wrote: ↑Thu Mar 23, 2023 11:03 am If I had more than $10 million in today's dollars I wouldn't stop investing in stocks, but would probably make things like gold and real estate a sizable part of the portfolio. Because I wouldn't need the high return anymore as much as I'd need the non-correlation.
That will never happen. I don't see any other game in town better for me than stocks.
What you said about not being able to access/control your portfolio was interesting. If that were the case I too would not want the investment. Same would apply to bank accounts that started limiting my abilities, I'd find some other way to store the value. There are thousands of things that hold their value with time. To give an random example, plant a bunch of black walnut trees and you'll stand to make a lot of money when they mature and you sell them for their wood.
Gold is one step better than crypto, in that it is used in industry (11% of mined gold) and a lot more in jewelry. But, it costs a lot to produce and store and doesn't pay dividends. My best investment is the gold band on my ring finger
Real estate is a game for active participation. I just don't see myself as a landlord and property management companies take too large a cut. REITs don't seem to be a smart investment.
So, a BH portfolio it is. There just isn't a reasonable alternative until you get to 9 digit portfolios, and I'm not even sure about that. I don't have a 9 digit portfolio, so I haven't examined the issue with any energy.
Re: At what point would you stop investing in stocks altogether?
Nope. I'll always have something in equities, at least half if not more.
"Know what you own, and know why you own it." — Peter Lynch
- TheTimeLord
- Posts: 12130
- Joined: Fri Jul 26, 2013 2:05 pm
Re: At what point would you stop investing in stocks altogether?
So you have sold all your equities, or do you mean investing new money? Maybe it is semantics but if you have money in equities you, in my mind, are investing in equities because you are either expecting or depending on the future returns of those holdings and that is an active no a passive position from my perspective.Lawrence of Suburbia wrote: ↑Sat Mar 25, 2023 10:32 pm I've stopped investing in everything; I'm retired!
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Re: At what point would you stop investing in stocks?
I agree.TomatoTomahto wrote: ↑Sat Mar 25, 2023 7:55 amI have resisted investing in gold and real estate.Leesbro63 wrote: ↑Sat Mar 25, 2023 4:35 amCan you show me anything that shows adding gold and real estate will outperform a simple 2 or 3 fund Boglehead portfolio? $10M or $3M, I can’t see that what you’re saying adds value by increasing returns or reducing risk. In fact, you might be adding risk and reducing expected returns.homebuyer6426 wrote: ↑Thu Mar 23, 2023 11:03 am If I had more than $10 million in today's dollars I wouldn't stop investing in stocks, but would probably make things like gold and real estate a sizable part of the portfolio. Because I wouldn't need the high return anymore as much as I'd need the non-correlation.
That will never happen. I don't see any other game in town better for me than stocks.
What you said about not being able to access/control your portfolio was interesting. If that were the case I too would not want the investment. Same would apply to bank accounts that started limiting my abilities, I'd find some other way to store the value. There are thousands of things that hold their value with time. To give an random example, plant a bunch of black walnut trees and you'll stand to make a lot of money when they mature and you sell them for their wood.
Gold is one step better than crypto, in that it is used in industry (11% of mined gold) and a lot more in jewelry. But, it costs a lot to produce and store and doesn't pay dividends. My best investment is the gold band on my ring finger
Real estate is a game for active participation. I just don't see myself as a landlord and property management companies take too large a cut. REITs don't seem to be a smart investment.
So, a BH portfolio it is. There just isn't a reasonable alternative until you get to 9 digit portfolios, and I'm not even sure about that. I don't have a 9 digit portfolio, so I haven't examined the issue with any energy.
Except for the gold band on the ring finger. That went away a decade ago, and I'm perfectly happy being a single Boglehead.
Re: At what point would you stop investing in stocks altogether?
No. As market performance gets worse, my contributions increase. My AA will change over time but this mindset stays the same.
Light weight baby!
Re: At what point would you stop investing in stocks altogether?
I haven't read all of the replies, but my answer is never. I probably have enough for my retirement at this point. Any extra money is for the next generations.
Re: At what point would you stop investing in stocks altogether?
Actually, I am thinking of stopping to invest in stocks all the time because: If I keep saving annually what I am saving now (and there is no reason to assume I would save less) getting 4% nominal return would land me fair and square on *my number* for FIRE at 59/60. I am 8-9 years away from 59/60 so I am thinking more conservatively. I am also wondering if I even need to take equity risk anymore. I am 55/45 AA (Total Stock Market+SP500/TIAA trad) with TIAA Trad earning 5.6% across all vintages. I can SWAN with this AA, but I find myself asking whether I need to take the equity risk at all?
If you were me, would you be 55/45 at this point if I have room in TIAA Trad to be at 25/75 AA. There's no guarantee that TIAA Trad will stay this high at ~6%, but it's also unlikely to go below 4%, and 4% is all I need to reach my #. I am worried I might be too greedy thinking I have to invest in stocks for the growth at the risk of a 20%-50% loss at a time when the returns from my fixed accounts are at 5.6% without the risk of a loss.
Should I just go to 25/75 at this point and SWAN even better for the years to FIRE or am I missing something why need to take the equity risk?
If you were me, would you be 55/45 at this point if I have room in TIAA Trad to be at 25/75 AA. There's no guarantee that TIAA Trad will stay this high at ~6%, but it's also unlikely to go below 4%, and 4% is all I need to reach my #. I am worried I might be too greedy thinking I have to invest in stocks for the growth at the risk of a 20%-50% loss at a time when the returns from my fixed accounts are at 5.6% without the risk of a loss.
Should I just go to 25/75 at this point and SWAN even better for the years to FIRE or am I missing something why need to take the equity risk?
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Re: At what point would you stop investing in stocks altogether?
I think Dr. Bill Bernstein suggested “when you’ve won the game, stop playing”.
That’s almost where I am, relative to my goals, needs, and risk aversion.
For me that means while my total dollar value of equities might go up during specific market conditions, my portfolio percentage allocation to equities is on the decreasing part of the glide path. I continue to work and put money into my 401k, including equities according to my glide path allocation.
My mother, on the other hand, isn’t buying any new equity shares at this late stage of her life. Not even to rebalance. Between state pension, IRA, paid off home, and remainder of dad’s estate, she doesn’t need or want any more equities.
That’s almost where I am, relative to my goals, needs, and risk aversion.
For me that means while my total dollar value of equities might go up during specific market conditions, my portfolio percentage allocation to equities is on the decreasing part of the glide path. I continue to work and put money into my 401k, including equities according to my glide path allocation.
My mother, on the other hand, isn’t buying any new equity shares at this late stage of her life. Not even to rebalance. Between state pension, IRA, paid off home, and remainder of dad’s estate, she doesn’t need or want any more equities.
A strategy that works only in bull markets isn’t much of a strategy. Anyway, four dollars a pound.
- Lawrence of Suburbia
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- Joined: Mon Aug 08, 2022 12:04 pm
Re: At what point would you stop investing in stocks altogether?
Ah, good point. I took the question literally (if not flippantly), meaning "am I investing new money in equities?". And yes, I'm absolutely dependent on the stock growth in my portfolio to support me in retirement.TheTimeLord wrote: ↑Sun Mar 26, 2023 9:48 amSo you have sold all your equities, or do you mean investing new money? Maybe it is semantics but if you have money in equities you, in my mind, are investing in equities because you are either expecting or depending on the future returns of those holdings and that is an active no a passive position from my perspective.Lawrence of Suburbia wrote: ↑Sat Mar 25, 2023 10:32 pm I've stopped investing in everything; I'm retired!
74% VTHRX/8% DODWX/12% TIAA Traditional/6% SWVXX
Re: At what point would you stop investing in stocks altogether?
What exactly does “stop playing” look like?Mr. Buzzkill wrote: ↑Sun Mar 26, 2023 11:49 pm I think Dr. Bill Bernstein suggested “when you’ve won the game, stop playing”.
That’s almost where I am, relative to my goals, needs, and risk aversion.
For me that means while my total dollar value of equities might go up during specific market conditions, my portfolio percentage allocation to equities is on the decreasing part of the glide path. I continue to work and put money into my 401k, including equities according to my glide path allocation.
My mother, on the other hand, isn’t buying any new equity shares at this late stage of her life. Not even to rebalance. Between state pension, IRA, paid off home, and remainder of dad’s estate, she doesn’t need or want any more equities.