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  • #31


    I have always been perplexed personally by the plan to go to bonds more heavily in retirement.    especially if a physician who has been fortunate enough to save and who is likely to leave a large amount to children.  I see so many of my former senior partners retire and they get their RMD checks and then they just take the money that they don’t plan on spending anyways and reflexively put it into bonds.  ??? thanks for sharing.
    Click to expand...


    Would they advise their children to invest in bonds? Of course not, but there is no difference.

    There's a very technical term for this complex line of reasoning: THWADI. That's How We've Always Done It.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

    Comment


    • #32




      Great point, didn’t consider that. Will bump that bond % down a bit. Thanks!
      Click to expand...


      But ARE you investing 100% of this money for the long term?  Or will you be using some of it for other, shorter-term needs (emergency fund, new car purchase, down payment on a house, vacations, etc.)?

      The bond allocation may be a good place to store cash for those sorts of shorter-term needs.  Just stop adding to it once the dollar amount in those bond funds meets your projected needs for the next few years.  The rest, I agree, should go into stocks.

      Comment


      • #33







        Great point, didn’t consider that. Will bump that bond % down a bit. Thanks!
        Click to expand…


        But ARE you investing 100% of this money for the long term?  Or will you be using some of it for other, shorter-term needs (emergency fund, new car purchase, down payment on a house, vacations, etc.)?

        The bond allocation may be a good place to store cash for those sorts of shorter-term needs.  Just stop adding to it once the dollar amount in those bond funds meets your projected needs for the next few years.  The rest, I agree, should go into stocks.
        Click to expand...


        I agree with @artemis except for the use of bond "funds". They are no more guaranteed in the short term than are equity funds. Your priorities in the short term (< 5 years) are: 1) liquidity and 2) safety. Bond funds fail #2. Otoh, for planned needs in the short term for which you have money set aside, high-quality corporate bonds or certificates of deposit, timed to mature at the date of need, will provide higher income at less risk while fulfilling both 1 and 2. For non-specified needs, best to keep your money in a MMA or high-interest checking/savings account.

        You can solve for these variables with, you guessed it, a financial plan.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

        Comment


        • #34

          Live Free MD wrote:
          Click to expand…




          Johanna, just curious: I know you’re not a huge fan of bonds, but for someone within 2-4 years of retirement, what % of bonds do you recommend?
          Click to expand...


          The five years before retirement and the five years after retirement are your greatest risk for sequence of return problems.  James Cloonan with the American Association of Individual Investors recommends having 2 to 5 years of living expenses covered in liquid, risk free, cash like products.  (CD, Money Market, ultra-short bond fund, etc.)

          I'd argue that you need to cover the difference between your guaranteed income and your needs (not wants) for 2-4 years.  The rest can be invested more aggressively.

          Supposed you have needs of $60K per year to keep a roof over your head, food on the table, pay utilities, property taxes, homeowners and medical insurance.  Suppose too that you have $30K coming in from Social Security.  You need another $30K per year to cover your needs.  Starting four years before your desired retirement date, put $30K per year into laddered CDs.  By your retirement date, you've got $120K in CDs and you can cover your fixed expenses and replenish the cash each year.  You can splurge more on wants based on how the market performs, but you have your needs amply covered.

          We shouldn't to go to 90%+ bonds on day one of a retirement at age 55.  You may have another 50 years ahead of you, plus generational wealth for your heirs.

          Comment


          • #35


            Great point, didn’t consider that. Will bump that bond % down a bit. Thanks!
            Click to expand...


            Stock/Bond allocation is the most important decision to make for a DIY investor.  Even after you voiced that you feel the market is uncomfortably high after a long bull-market run, you were able to be talked into an even more aggressive allocation from a few posts on an internet forum.  Personally, I thought your original plan was rather good, what changed?


            My point is that, if you are invested only for the long term and intend to do absolutely nothing when the market corrects (except, perhaps, to invest more), what part do bonds play in your portfolio other than dampening your long-term returns?
            Click to expand...


            Why include VXUS, when VTI has higher returns over long periods?  Why VTI, when small cap has higher long term returns?  Why small cap, when small cap value has higher long term returns?  Why small cap value, when...  I think we have determined that CardinalsFan should invest 100% of his savings in VTWV, since in the long run - it might have higher returns?  Anything less would dampen his long-term returns.

            I appreciate Johanna's valuable contribution on the forum and this website, but it should be noted that her recommendation for a higher equity allocation is outside of mainstream financial advice, particularly when you have voiced your concerns with the volatility associated with the stock market "I don’t think I’m a doomsayer thinking we’re closer to the end of this run than to the beginning."

            The reality is that the particular returns of an individual investor depend on the exact moments that they enter and exit the financial markets with each dollar over their lifetime.  In the "long run" some asset classes have historically had higher returns than others, but what is the long run for you?  People who subscribe to modern portfolio theory and diversify across different asset classes are seeking higher risk-adjusted returns, which takes into account both returns and volatility - you ignore either at your peril.  History would suggest that if you should choose to pursue the highest returns it will be one wild ride over your lifetime.  How would you feel watching years, or decades of your hard work vanish in a bear market?  Would you be comforted knowing that you could wait it out for 15 years?  If so, go ahead and "bump that bond % down a bit."

            Just to state the obvious: the role of bonds isn't to dampen our long-term returns, it is to dampen the volatility of equity returns.

            Meanwhile, if I were you - I would stick to my original plan while I read some Bernstein books.

            Comment


            • #36
              Phantasos makes some valuable points. I have always qualified my long-term recommendations to invest in an appropriately diversified and annually rebalanced equity fund portfolio with a plan in place. That is the ingredient that few DIY investors bother to put in place. If @CardinalsFan has not developed a well-thought out (written, date-specific, dollar-specific) financial plan that s/he follows when determining how much money to allocate to investments and how much to keep liquid at a minimum, I agree that s/he is at the mercy of the markets and needs to dampen long term volatility, the result of which is dampened long-term returns.

              I agree with Warren Buffett that, if you cannot bear watching your portfolio decline by 50%, you should not be in equities. otoh, permanent loss in an appropriately diversified equity portfolio is always a human achievement, of which the market is incapable. That is a historical fact and history is the best (really the only true) guideline for equity behavior that we have. Anything beyond is conjecture.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

              Comment


              • #37
                Agree that asset allocation is the most important decision to make as an investor.  I would point out that most account(s) can contain additional asset classes such REIT’s/Gold/Cash (not that mine does) in addition to stock/bonds.  The OP mentioned the run up of equities with the thought equities was at a high as a factor in the allocation.  Others folks basically questioned the level of comfort with the OP’s asset allocation. Given his taxable and non-taxable asset allocation is in line, at the end of the day it is the OP knowing their ability to remain disciplined in the face of a negative return environment.

                Given the OP’s age, the sequential return risk you mention is much lower for the OP relative to Johanne and if comfortable and disciplined the OP could ride out a 15 year bear market.  At the OP’s age, I had between 0 - 5% in bonds (non-dollar denominated international/EM bonds).  I didn’t seriously consider bonds as part of my asset allocation until I was in my early/mid 40’s.

                I agree that Johanne’s individual asset allocation is more aggressive than the ‘rule of thumb’.  ‘Rule of thumb’ meaning 100 or 110 minus age to calculate an equity allocation percentage. Recently, this ‘Rule of thumb’ is being questioned as people live longer and more active in retirement.  The ‘adjustment’ approaches to address longer lives is to a. save/invest more, b. reduce lifestyle/expense in retirement, c. more aggressive asset allocation relative to ‘rule of thumb’.  Option a. is the best option, but requires a significant savings rate and a long timeframe.  Option b. is adjustable to the extent that you have savings.  Option c. is theoretically manageable as sequential return risk is extended based on extended life expectancy.

                Johanne stated she has a year of retirement income in cash/short term, highly liquid holdings.  This also acts to dampen the volatility of returns as you correctly state one of the purposes of bonds in a asset allocation.  I would not be comfortable with this level of equity return dampening.  If the value of the assets far exceeds that of a projected ‘retirement’ withdraw rate, then there is a level of cushion in taking on the sequential return risk associated with the asset allocation/portfolio.

                Comment


                • #38


                  otoh, permanent loss in an appropriately diversified equity portfolio is always a human achievement, of which the market is incapable. That is a historical fact and history is the best (really the only true) guideline for equity behavior that we have. Anything beyond is conjecture.
                  Click to expand...


                  The most important historical fact is that past performance does not necessarily predict future results.  Japan was a developed economy (not a third-world banana republic), and how has their stock market performed over decades?  Oh, that could never be us?  The reason risk is rewarded, is because it really is risk.

                  Your 80 year old mother, who you have said has the same portfolio as you and your children, has a life expectancy of 10.1 years.  Would it be a good idea for her to hold this portfolio if we had a 10 year outlook for our financial markets that was similar to the year 2000?  If you die, and you have losses in your portfolio - that is rather permanent in my book - you can't just wait for the market to recover.  I wouldn't fault the person who died for inflicting this permanent loss, but rather the person who placed them in a portfolio that was (by most informed opinions) inappropriate for their age and risk tolerance.  Over select periods of time such a person with a short life expectancy will do very well.  Over other periods of time they would die impoverished.

                  Johanna has asked if CardinalsFan "intends to do absolutely nothing when the market corrects (except, perhaps, to invest more)."  Well, to that I would say that nobody intends to make portfolio-destroying behavioral errors, but lots of people do.  People buy at market highs, sell at market lows, performance chase, market time, etc. regardless of what they intend to do.  These aren't just rookie mistakes, a lot of investors only learn what their true risk tolerance is after sustaining crushing losses, often with portfolios which had too aggressive equity allocations.

                   

                  Comment


                  • #39





                    otoh, permanent loss in an appropriately diversified equity portfolio is always a human achievement, of which the market is incapable. That is a historical fact and history is the best (really the only true) guideline for equity behavior that we have. Anything beyond is conjecture. 
                    Click to expand…


                    The most important historical fact is that past performance does not necessarily predict future results.  Japan was a developed economy (not a third-world banana republic), and how has their stock market performed over decades?  Oh, that could never be us?  The reason risk is rewarded, is because it really is risk.

                    Your 80 year old mother, who you have said has the same portfolio as you and your children, has a life expectancy of 10.1 years.  Would it be a good idea for her to hold this portfolio if we had a 10 year outlook for our financial markets that was similar to the year 2000?  If you die, and you have losses in your portfolio – that is rather permanent in my book – you can’t just wait for the market to recover.  I wouldn’t fault the person who died for inflicting this permanent loss, but rather the person who placed them in a portfolio that was (by most informed opinions) inappropriate for their age and risk tolerance.  Over select periods of time such a person with a short life expectancy will do very well.  Over other periods of time they would die impoverished.

                    Johanna has asked if CardinalsFan “intends to do absolutely nothing when the market corrects (except, perhaps, to invest more).”  Well, to that I would say that nobody intends to make portfolio-destroying behavioral errors, but lots of people do.  People buy at market highs, sell at market lows, performance chase, market time, etc. regardless of what they intend to do.  These aren’t just rookie mistakes, a lot of investors only learn what their true risk tolerance is after sustaining crushing losses, often with portfolios which had too aggressive equity allocations.

                     
                    Click to expand...


                    I have found this debate fascinating for quite a while and see valid points on both sides.  But, in some respects it's a bit of a distinction without much of a difference type of thing.

                    A) Phanta advocates a more traditional stock/bond overall allocation mix while B) Johanna prefers two buckets with 100% stock in one and the other being 100% low-risk fixed income for short-term needs (MMFs, CDs, & savings accounts are nothing more than loans you make to earn interest, just like govt and corporate bonds).

                    Unless A maintains a bond allocation % that is vastly different in dollar number from the short-term bucket of B, these two approaches are pretty much just two different ways of describing the same thing.  Put another way, if your 5-year short-term bucket is $500k ($100k/yr) and your 100% stock bucket is $2m, you aren't really "100% equity".  You are 80% stock, 20% cash/fixed income all included.

                    Comment


                    • #40








                      otoh, permanent loss in an appropriately diversified equity portfolio is always a human achievement, of which the market is incapable. That is a historical fact and history is the best (really the only true) guideline for equity behavior that we have. Anything beyond is conjecture. 
                      Click to expand…


                      The most important historical fact is that past performance does not necessarily predict future results.  Japan was a developed economy (not a third-world banana republic), and how has their stock market performed over decades?  Oh, that could never be us?  The reason risk is rewarded, is because it really is risk.

                      Your 80 year old mother, who you have said has the same portfolio as you and your children, has a life expectancy of 10.1 years.  Would it be a good idea for her to hold this portfolio if we had a 10 year outlook for our financial markets that was similar to the year 2000?  If you die, and you have losses in your portfolio – that is rather permanent in my book – you can’t just wait for the market to recover.  I wouldn’t fault the person who died for inflicting this permanent loss, but rather the person who placed them in a portfolio that was (by most informed opinions) inappropriate for their age and risk tolerance.  Over select periods of time such a person with a short life expectancy will do very well.  Over other periods of time they would die impoverished.

                      Johanna has asked if CardinalsFan “intends to do absolutely nothing when the market corrects (except, perhaps, to invest more).”  Well, to that I would say that nobody intends to make portfolio-destroying behavioral errors, but lots of people do.  People buy at market highs, sell at market lows, performance chase, market time, etc. regardless of what they intend to do.  These aren’t just rookie mistakes, a lot of investors only learn what their true risk tolerance is after sustaining crushing losses, often with portfolios which had too aggressive equity allocations.

                       
                      Click to expand…


                      I have found this debate fascinating for quite a while and see valid points on both sides.  But, in some respects it’s a bit of a distinction without much of a difference type of thing.

                      A) Phanta advocates a more traditional stock/bond overall allocation mix while B) Johanna prefers two buckets with 100% stock in one and the other being 100% low-risk fixed income for short-term needs (MMFs, CDs, & savings accounts are nothing more than loans you make to earn interest, just like govt and corporate bonds).

                      Unless A maintains a bond allocation % that is vastly different in dollar number from the short-term bucket of B, these two approaches are pretty much just two different ways of describing the same thing.  Put another way, if your 5-year short-term bucket is $500k ($100k/yr) and your 100% stock bucket is $2m, you aren’t really “100% equity”.  You are 80% stock, 20% cash/fixed income all included.
                      Click to expand...


                      i always love your input.  your words are useful in reframing the discussion.  there is no one best plan for everyone, clearly.  would you consider a spia to offset some of the short term budget uncertainties and feel more comfortable with equities?  that's our plan.

                       

                      Comment


                      • #41








                        otoh, permanent loss in an appropriately diversified equity portfolio is always a human achievement, of which the market is incapable. That is a historical fact and history is the best (really the only true) guideline for equity behavior that we have. Anything beyond is conjecture. 
                        Click to expand…


                        The most important historical fact is that past performance does not necessarily predict future results.  Japan was a developed economy (not a third-world banana republic), and how has their stock market performed over decades?  Oh, that could never be us?  The reason risk is rewarded, is because it really is risk.

                        Your 80 year old mother, who you have said has the same portfolio as you and your children, has a life expectancy of 10.1 years.  Would it be a good idea for her to hold this portfolio if we had a 10 year outlook for our financial markets that was similar to the year 2000?  If you die, and you have losses in your portfolio – that is rather permanent in my book – you can’t just wait for the market to recover.  I wouldn’t fault the person who died for inflicting this permanent loss, but rather the person who placed them in a portfolio that was (by most informed opinions) inappropriate for their age and risk tolerance.  Over select periods of time such a person with a short life expectancy will do very well.  Over other periods of time they would die impoverished.

                        Johanna has asked if CardinalsFan “intends to do absolutely nothing when the market corrects (except, perhaps, to invest more).”  Well, to that I would say that nobody intends to make portfolio-destroying behavioral errors, but lots of people do.  People buy at market highs, sell at market lows, performance chase, market time, etc. regardless of what they intend to do.  These aren’t just rookie mistakes, a lot of investors only learn what their true risk tolerance is after sustaining crushing losses, often with portfolios which had too aggressive equity allocations.

                         
                        Click to expand…


                        I have found this debate fascinating for quite a while and see valid points on both sides.  But, in some respects it’s a bit of a distinction without much of a difference type of thing.

                        A) Phanta advocates a more traditional stock/bond overall allocation mix while B) Johanna prefers two buckets with 100% stock in one and the other being 100% low-risk fixed income for short-term needs (MMFs, CDs, & savings accounts are nothing more than loans you make to earn interest, just like govt and corporate bonds).

                        Unless A maintains a bond allocation % that is vastly different in dollar number from the short-term bucket of B, these two approaches are pretty much just two different ways of describing the same thing.  Put another way, if your 5-year short-term bucket is $500k ($100k/yr) and your 100% stock bucket is $2m, you aren’t really “100% equity”.  You are 80% stock, 20% cash/fixed income all included.
                        Click to expand...


                        Agree. Johanna frames them differently, and I think more appropriately as a necessary component to ride out the storm rather than a nebulus more AUM approach. Does one need the same % of bonds if you have 2M vs. 6M or even at 20M if ones lifestyle is the same?

                        Bonds have a very low nominal return right now. Real returns are lower and likely to be negative over a significant period of time. You have to obviously take this % return and whatever % allocation it is and make sure your total weighted return makes sense with your planning. That is, you cant expect 5% real returns on stocks going forward, apply that to your portfolio goals, and have a 60/40 split, it doesnt add up.

                        Being OP is so young, too much in bonds doesnt make a lot of sense, and neither does worrying about the market. There is nothing better for the young investor than a bear market in stocks that doesnt effect the broader economy long term.

                        More important to the discussion is comfort level and feeling drawn to mess with your account. I dont really think any small percentage of bonds smooths volatility that much unfortunately, 10-15% will still have you feeling awful if the market corrects in the 20-30% range. If you are 60/40 or 50/50 well thats a lot better but then your portfolio will not perform very well and your returns will be lacking.

                        So the thing to do is to work on your mindset, because there is no perfect allocation that both protects the portfolio, makes you feel good, and has a great return. Do things like remind yourself these beginning years only matter as a brute force savings mechanism, you want a bear market, and maybe set up your account to be automatic and allocate itself. Then, just dont ever look at it, dont frequent the financial media or read the hype. Just shovel it in and let it grow.

                        Search articles and posts in 2010-17 of people saying the same thing, then look at all their missed opportunity costs. There is some guy on Seeking Alpha that refuses to buy stocks until a 20% correction which has been his rule for decades. Keeps waiting and watching, etc...It would take something spectacular to make up for this lost opportunity cost as the market has gone up 263% without such an occurrence.

                        Make an allocation you believe you can live with right now. If it starts conservative, fine. As time goes on and you feel more comfortable scale back to some other goal AA. If it starts aggressive fine. If you cant handle that, scale it to some more conservative AA over time.

                        Comment


                        • #42











                          otoh, permanent loss in an appropriately diversified equity portfolio is always a human achievement, of which the market is incapable. That is a historical fact and history is the best (really the only true) guideline for equity behavior that we have. Anything beyond is conjecture. 
                          Click to expand…


                          The most important historical fact is that past performance does not necessarily predict future results.  Japan was a developed economy (not a third-world banana republic), and how has their stock market performed over decades?  Oh, that could never be us?  The reason risk is rewarded, is because it really is risk.

                          Your 80 year old mother, who you have said has the same portfolio as you and your children, has a life expectancy of 10.1 years.  Would it be a good idea for her to hold this portfolio if we had a 10 year outlook for our financial markets that was similar to the year 2000?  If you die, and you have losses in your portfolio – that is rather permanent in my book – you can’t just wait for the market to recover.  I wouldn’t fault the person who died for inflicting this permanent loss, but rather the person who placed them in a portfolio that was (by most informed opinions) inappropriate for their age and risk tolerance.  Over select periods of time such a person with a short life expectancy will do very well.  Over other periods of time they would die impoverished.

                          Johanna has asked if CardinalsFan “intends to do absolutely nothing when the market corrects (except, perhaps, to invest more).”  Well, to that I would say that nobody intends to make portfolio-destroying behavioral errors, but lots of people do.  People buy at market highs, sell at market lows, performance chase, market time, etc. regardless of what they intend to do.  These aren’t just rookie mistakes, a lot of investors only learn what their true risk tolerance is after sustaining crushing losses, often with portfolios which had too aggressive equity allocations.

                           
                          Click to expand…


                          I have found this debate fascinating for quite a while and see valid points on both sides.  But, in some respects it’s a bit of a distinction without much of a difference type of thing.

                          A) Phanta advocates a more traditional stock/bond overall allocation mix while B) Johanna prefers two buckets with 100% stock in one and the other being 100% low-risk fixed income for short-term needs (MMFs, CDs, & savings accounts are nothing more than loans you make to earn interest, just like govt and corporate bonds).

                          Unless A maintains a bond allocation % that is vastly different in dollar number from the short-term bucket of B, these two approaches are pretty much just two different ways of describing the same thing.  Put another way, if your 5-year short-term bucket is $500k ($100k/yr) and your 100% stock bucket is $2m, you aren’t really “100% equity”.  You are 80% stock, 20% cash/fixed income all included.
                          Click to expand…


                          Agree. Johanna frames them differently, and I think more appropriately as a necessary component to ride out the storm rather than a nebulus more AUM approach. Does one need the same % of bonds if you have 2M vs. 6M or even at 20M if ones lifestyle is the same?

                          Bonds have a very low nominal return right now. Real returns are lower and likely to be negative over a significant period of time. You have to obviously take this % return and whatever % allocation it is and make sure your total weighted return makes sense with your planning. That is, you cant expect 5% real returns on stocks going forward, apply that to your portfolio goals, and have a 60/40 split, it doesnt add up.

                          Being OP is so young, too much in bonds doesnt make a lot of sense, and neither does worrying about the market. There is nothing better for the young investor than a bear market in stocks that doesnt effect the broader economy long term.

                          More important to the discussion is comfort level and feeling drawn to mess with your account. I dont really think any small percentage of bonds smooths volatility that much unfortunately, 10-15% will still have you feeling awful if the market corrects in the 20-30% range. If you are 60/40 or 50/50 well thats a lot better but then your portfolio will not perform very well and your returns will be lacking.

                          So the thing to do is to work on your mindset, because there is no perfect allocation that both protects the portfolio, makes you feel good, and has a great return. Do things like remind yourself these beginning years only matter as a brute force savings mechanism, you want a bear market, and maybe set up your account to be automatic and allocate itself. Then, just dont ever look at it, dont frequent the financial media or read the hype. Just shovel it in and let it grow.

                          Search articles and posts in 2010-17 of people saying the same thing, then look at all their missed opportunity costs. There is some guy on Seeking Alpha that refuses to buy stocks until a 20% correction which has been his rule for decades. Keeps waiting and watching, etc…It would take something spectacular to make up for this lost opportunity cost as the market has gone up 263% without such an occurrence.

                          Make an allocation you believe you can live with right now. If it starts conservative, fine. As time goes on and you feel more comfortable scale back to some other goal AA. If it starts aggressive fine. If you cant handle that, scale it to some more conservative AA over time.
                          Click to expand...


                          if i could like this three times, i would.

                           

                          Comment


                          • #43
                            Count where you are, make financial estimates of futures needs and wants.

                            Only then can one set goals and match the appropriate mix. And only after that can o e step back and take a hard look on weather one can tolerate that type of portfolio over time.

                            Planners tend to like asking investment style first, but I always feel people don't understand their own risk tolerance well when it comes to investment. Can you ride the market down like 2007 in stocks and real estate? Many hit the panic button unnecessarily and out for the worse a decade later.

                            Point is that people have a good understanding of their current situation and their end point dream living and base living. Most need help on the journey in between and the how to get there.

                            The difference in the gap dictates the portfolio (or necessitates and adjustment in spend and goals). That's where a planner is worth their weight imho.

                            Comment


                            • #44


                              There is nothing better for the young investor than a bear market in stocks that doesnt effect the broader economy long term.
                              Click to expand...


                              The expected return of the market doesn't change if the market goes up or down.  If you believe otherwise, you believe in market timing.




                              otoh, permanent loss in an appropriately diversified equity portfolio is always a human achievement, of which the market is incapable. That is a historical fact and history is the best (really the only true) guideline for equity behavior that we have. Anything beyond is conjecture.
                              Click to expand...


                              This is a seriously dangerous notion.  Permanent loss (or rather loss over a human lifetime) is possible, otherwise equities are riskless.  What we know from past performance is the average return and standard deviation of returns.  We can't expect the 146 years of historical data on US equities to represent the full range of outcomes for US equity returns, so we have no basis for concluding that permanent impairment is impossible.

                              That said, I see no reason to follow some simple "rule of thumb" on bonds.  This is a silly notion for this community since rules of thumb generally weren't created with high income earners in mind.  High earners with a high % of savings can earn their way out of an equity market downturn at a young age, so there is no reason not to be way more aggressive than "age in bonds" would suggest.

                              Comment


                              • #45


                                jfoxcpacfp wrote: otoh, permanent loss in an appropriately diversified equity portfolio is always a human achievement, of which the market is incapable. That is a historical fact and history is the best (really the only true) guideline for equity behavior that we have. Anything beyond is conjecture.

                                This is a seriously dangerous notion.  Permanent loss (or rather loss over a human lifetime) is possible, otherwise equities are riskless.  What we know from past performance is the average return and standard deviation of returns.  We can’t expect the 146 years of historical data on US equities to represent the full range of outcomes for US equity returns, so we have no basis for concluding that permanent impairment is impossible.
                                Click to expand...


                                Please tell me of one documented instance of "permanent loss in an appropriately diversified equity portfolio" - I'm all ears.
                                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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