old farts like me

[q-school]

at some point, the variance in the stock market may not make sense.  if you reached FI, then why keep putting money at risk, when we are sure there is a correction coming.  I would think a primary goal for people on this site is to avoid a catastrophic mistake which would change you from FI to non FI and prolong mandatory working career length.  while I realize there are no 'right answer', I feel that anyone who crossed over from FI to non FI would feel like they probably made the wrong decision. 

bonus points are awarded for contributions from people with pensions but pensions that don't kick in for a while after projected retirement age.  so in other words, potentially gap issues, but not true loss of FI.  just temporary SORR issues.  for the purposes of this discussion, I hope to exclude emergency withdrawals from retirement accounts because I think that would hurt everyone here emotionally on a fundamental level. 

please add to list of options and offer thoughts/feelings/emotions:

1)take the 20%+ profit of past two years and cash out.  big tax bill, but more defensive stance and ready to get in when correction appears

2)keep chugging along, don't try to time market, still have plenty of time for next correction.  amass a larger 'emergency fund' to try and steady the emotions during the correction so you can go five years without touching investments.

3)can't you do math?  no reason to change anything at all.

Discuss.

 

[Zaphod]

Its a great idea, but it all boils down to biases and perceptions which most of the time are just flat out wrong and colored by recent events (gfc). People have literally been saying the same for the last ten years. Say you get out, we melt up to 3700 and correct back 20% to 2960 which is higher than today, or who knows? When would you get back in? Most of the time people are confirmed in those kind of events they just see further pain and have difficulty ever getting back in.

Could go on a long time, unless you're in a riskier than comfortable asset allocation. Obviously the higher we go up the harder the fall likely is, and that is a bit scary. Hopefully a stall or small correction or several as is normal happens this year to keep the slope of the rise more reasonable than it currently is.

Yes, valuations are high, but that has never stopped the market before and is unlikely to stop it now. Has to be some external catalyst to break the prevailing narrative and fomo. Perceived correlated global expansion is not that kind of catalyst. Remember, just because bonds were a good negatively correlated asset does not mean they will be in the future, and they certainly do not have as much upside as they used to given their starting point. Shorter durations look best in that regard.

When US/global expansion starts to cool off that will be when I start to take a look at cooling and de risking for a shorter time. Trends slow before they turn. Remember even in 1987 the market ended the year up and it was just year 5 of an 18 year bull market. 2000-2017 was pretty bleh and overall terrible returns, we could just be in the beginnings of a longer stage bull (some say towards 2029/2030), but of course will have cyclical bears.

In the end I dont expect to hold through especially if we go higher very fast, but am trying to see the bigger/longer picture more and more. Of course, depends on your 'longer'.

[WallStreetPhysician]

A lot of people dial back their stock allocation as their portfolio value rises. Losing 50% on a million dollar portfolio is much more painful than losing 50% on a $100,000 portfolio.

So no, you shouldn't time the market, but you should think about whether your current asset allocation is appropriate given your risk tolerance at your current age and your current portfolio value.

-WSP

[VagabondMD]

^^
I agree with the above . When you have won the game, no need to keep my playing it. Or at least play less aggressively by taking down the equity percentage and modifying the AA going forward.

[Dr. Mom]

In 2008 I learned I have a very high risk tolerance and willingness to take it.  I dialed up to almost 100% equities.  As I have gotten older, I have realized that my need to take risk has decreased because of past luck or good choices.  I decided my need to take risk outweighs my willingness and tolerance for risk.  As such, I dialed back to 70/30 a couple of years ago and now 60/40.  I could pretend it was because I am nearing retirement or I've won the game.  But truthfully, my old tactical asset allocation tendencies are a major motivating factor.  If the market in 2008 was the environment that I was comfortable at 100% equities, that environment no longer exists so I adapt.  YMMV.

[Complete_newbie]

I know they teach this inverse thing about equity and bonds but is that iron clad basic fundamental truth of universe? I mean what if bonds suck as well during equity meltdown. How is anything but 100% equity any different then?

[Rando]

Was thinking about this in some of the other threads - what happened to the old John Bogle advice of keeping your % of bonds about the same as your age?  Seems like it's gone by the wayside the same time as the market's going on a tear.  While the feeling now isn't the same "I can't lose" feeling like the late 90's, maybe it's still overly enthusiastic.

 

To answer the original post I'm sticking with my original plan, which at this point is putting most new money into bonds and letting the stocks ride.  I do have a couple years expenses in cash mainly to provide a transition for my wife if something happens to me, but should also help allow me to ride out market downturns.

[wawot1]

I always like what J Collins has to say....he had an interesting post about the "Wasting Asset Retirement Model" (which he didn't actually endorse).

http://jlcollinsnh.com/2017/09/09/sleeping-soundly-thru-a-market-crash-the-wasting-asset-retirement-model/

 

But it does bring up some interesting ideas - if you're fairly confident in your level of retirement spending and you don't have great ambitions to pass along wealth, why take unnecessary risk?  Isn't enough enough at some point?

 

[Antares]

wawot1 wrote:

I always like what J Collins has to say….he had an interesting post about the “Wasting Asset Retirement Model” (which he didn’t actually endorse).

http://jlcollinsnh.com/2017/09/09/sleeping-soundly-thru-a-market-crash-the-wasting-asset-retirement-model/

 

But it does bring up some interesting ideas – if you’re fairly confident in your level of retirement spending and you don’t have great ambitions to pass along wealth, why take unnecessary risk?  Isn’t enough enough at some point?

 

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Yes, if you are at enough, or have reason to believe that you will get to enough with less risk, sure. I stay at 70/30 at age 59 because I’m not at enough yet. I could not put another dime in the market if I were ok with waiting until 70 to retire and collect SS, but if I want to retire by my mid 60s, I need more growth. I’m not afraid of a crash, because history and experience tells me these are temporary. It is IMO obligatory to go through those bear markets if you want to benefit from the overall strategy of taking what the market gives you and not thinking you are smart enough to do better. I don’t worry about temporary downturns. You just ride them out, because anything else you try to do is less likely to be successful.

[q-school]

it was just another way of finding out who is old besides me.   ha ha

thanks for the responses.

for myself in response the question of bonds, we have pensions that pay more than our anticipated needs so we felt those were adequate to maintain higher stock allocation than most.  we also have quite a bit in variable life (although subject to market) that we could draw out tax free that would shield us from fluctuations.  lastly, I have over the last couple years more through inattentiveness than anything accumulated a large emergency fund--six years+ worth of expenses currently.  and I have some funds I plan on investing in real estate, but those could be reassigned if necessary.  I still don't like bonds in general for my family situation.

 

[Rando]

It was kind if deflating to realize how readily I considered myself an old fart.

[Kamban]

q-school wrote:

1)take the 20%+ profit of past two years and cash out. big tax bill, but more defensive stance and ready to get in when correction appears 2)keep chugging along, don’t try to time market, still have plenty of time for next correction. amass a larger ’emergency fund’ to try and steady the emotions during the correction so you can go five years without touching investments.

Click to expand...

q-school wrote:

for myself in response the question of bonds, we have pensions that pay more than our anticipated needs so we felt those were adequate to maintain higher stock allocation than most. we also have quite a bit in variable life (although subject to market) that we could draw out tax free that would shield us from fluctuations. lastly, I have over the last couple years more through inattentiveness than anything accumulated a large emergency fund–six years+ worth of expenses currently. and I have some funds I plan on investing in real estate, but those could be reassigned if necessary. I still don’t like bonds in general for my family situation.

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The taking of 20% off the table and increasing an allocation to bonds of 30% or your age is for people who have only the stock market as the only source of income (+ maybe SS) if they retire or laid off.

For quite a few here, there are other sources of income. I don't have a pension but have a large cash holding to be invested in real estate than can be reduced or diverted if necessary. I also have few town home/ SFH that I rent out. I have half ownership of another business that is somewhat recession proof. So even though I am 100% in stocks they make up only 1/3 of my wealth and not worth rearranging now. If the bear comes, so be it. I would not be so cavalier if I did not have these other investments.

[Zaphod]

q-school wrote:

it was just another way of finding out who is old besides me.   ha ha

thanks for the responses.

for myself in response the question of bonds, we have pensions that pay more than our anticipated needs so we felt those were adequate to maintain higher stock allocation than most.  we also have quite a bit in variable life (although subject to market) that we could draw out tax free that would shield us from fluctuations.  lastly, I have over the last couple years more through inattentiveness than anything accumulated a large emergency fund–six years+ worth of expenses currently.  and I have some funds I plan on investing in real estate, but those could be reassigned if necessary.  I still don’t like bonds in general for my family situation.

 

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You're gonna be okay I'll go out on a limb and say.

[Hatton]

I believe myself to be older than you q-school.

[Neuro-doc]

Vagabond MD wrote:

When you have won the game, no need to keep my playing it

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I think that William Bernstein has written about this. Hopefully he will discuss this concept during his talk at the WCI conference.