Author Topic: Why not do 100% allocation, draw 4% at retirement, and yolo it?  (Read 65044 times)

shinn497

  • Bristles
  • ***
  • Posts: 446
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #250 on: June 21, 2018, 01:52:16 PM »
what do you mean your assumption that you will move with what the heard does when a market crashes.  i submit that its a moronic assumption and dont give 2 shits what the general population does.  you on the other hand seem to think you will do what the heard does so if thats the case you had better keep a low SWR sub 2% ...

this entire forum is counter culture.  if you cant control your emotions to leverage amortgage i doubt you can do it to retire on 100% stocks. 

again i give 2 shits what the general culture does and dont view it as valid data b/c the general culture spends more than they make.

So thats a no I take it.

Brother Esau

  • Pencil Stache
  • ****
  • Posts: 648
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #251 on: June 21, 2018, 02:21:02 PM »
why should we care about what research says how the average person handles crises? I've been through the 2000 tech bubble and the 2008 recession. what did i do with my investments? Nothing. Is so hard to believe that some people have actually figured it out and take advantage of cheap mortgage rates and rewards cc's
« Last Edit: June 21, 2018, 02:23:36 PM by Brother Esau »

shinn497

  • Bristles
  • ***
  • Posts: 446
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #252 on: June 21, 2018, 02:25:40 PM »
why should we care about what research says how the average person handles crises? I've been through the 2000 tech bubble and the 2008 recession. what did i do with my investments? Nothing

 So far I haven't seen much research actually posted. Just opinions and anecdotes.

I am VERY wary, however, to take up the opinion that I am anything but average. I don't like the idea that by posting in this forum, reading books, or watching youtube videos, I am so much more special than a normal person (esp. since who's normal? A US citizen? A westerner? An earth denizen?).  I could see maybe being slightly more passionate than the subject, but I do take the opinion that there is not much difference between me and anyone else. I dunno call it humility.

For brevity's sake, would you like to chime in more about the experience? Did you have a more secure job? Any big debts? did you have an interest in finance? A mortgage? I do think memories of times like this should come with more context.

FIRE@50

  • Pencil Stache
  • ****
  • Posts: 553
  • Age: 46
  • Location: Maryland
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #253 on: June 21, 2018, 02:33:08 PM »
I'll chime in. In 2000, I was in grad school and had no investments to speak of. I've had an interest in finance for as long as I can remember. In 2008, I worked for the same company that I work for now. I was 100% in stocks then and I'm 100% in stocks now. I also bought a house with an FHA loan in 2008. I still own that home and I'm still underwater.

I will remain 100% in stocks for the foreseeable future because my investment horizon is about 60 years. I do plan to sell the house in the next few years and buy something bigger however.

boarder42

  • Walrus Stache
  • *******
  • Posts: 9332
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #254 on: June 21, 2018, 02:33:20 PM »
ok if your opinion is youre not different than the herd you probably should leave this site go by brand new car and a large house and eat out everyday and just spend all the money you make b/c thats what the herd does.  you also should definitely not YOLO it with a 100% allocation and 4% SWR b/c the avg person couldnt do that.

Mr. data scientist you're looking at the wrong fucking data.  the data you should look at is what the markets have done historically and create a plan that optimizes your outcome based on your situation.  looking at data of what people typically do isnt really data b/c people are uneducated about finance in general. 

i'm still convinced you're a troll b/c i dont know how many times you can repeat the same worthless shit and not actually reach any conclusion but just ask more bullshit questions that dont apply

shinn497

  • Bristles
  • ***
  • Posts: 446
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #255 on: June 21, 2018, 02:49:03 PM »
I'll chime in. In 2000, I was in grad school and had no investments to speak of. I've had an interest in finance for as long as I can remember. In 2008, I worked for the same company that I work for now. I was 100% in stocks then and I'm 100% in stocks now. I also bought a house with an FHA loan in 2008. I still own that home and I'm still underwater.

I will remain 100% in stocks for the foreseeable future because my investment horizon is about 60 years. I do plan to sell the house in the next few years and buy something bigger however.

Wait, I'm going to go by your username and assume you are over 50. HOW DO YOU STAY SPRY DUDE

shinn497

  • Bristles
  • ***
  • Posts: 446
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #256 on: June 21, 2018, 03:02:09 PM »
ok if your opinion is youre not different than the herd you probably should leave this site go by brand new car and a large house and eat out everyday and just spend all the money you make b/c thats what the herd does.  you also should definitely not YOLO it with a 100% allocation and 4% SWR b/c the avg person couldnt do that.

Mr. data scientist you're looking at the wrong fucking data.  the data you should look at is what the markets have done historically and create a plan that optimizes your outcome based on your situation.  looking at data of what people typically do isnt really data b/c people are uneducated about finance in general. 

i'm still convinced you're a troll b/c i dont know how many times you can repeat the same worthless shit and not actually reach any conclusion but just ask more bullshit questions that dont apply

Its more a matter of attitude. I don't want the notion that I save money and live frugally to go to my head and make me arrogant. It is a way of staying less emotional and involved in this. Since emotion leads to bad financial decisions.

Brother Esau

  • Pencil Stache
  • ****
  • Posts: 648
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #257 on: June 21, 2018, 05:27:36 PM »
why should we care about what research says how the average person handles crises? I've been through the 2000 tech bubble and the 2008 recession. what did i do with my investments? Nothing

 

For brevity's sake, would you like to chime in more about the experience? Did you have a more secure job? Any big debts? did you have an interest in finance? A mortgage? I do think memories of times like this should come with more context.

1. i'm an engineer and have always felt secure in my jobs.
2. no big debts (always lived below my means)
3. interest in finance = yes
4. first mortgage in 2002.  it was a 5/1 adjustable and we were lucky to ride the super low interest rates after the recession

DreamFIRE

  • Handlebar Stache
  • *****
  • Posts: 1593
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #258 on: June 21, 2018, 05:28:30 PM »
I'll chime in. In 2000, I was in grad school and had no investments to speak of. I've had an interest in finance for as long as I can remember. In 2008, I worked for the same company that I work for now. I was 100% in stocks then and I'm 100% in stocks now. I also bought a house with an FHA loan in 2008. I still own that home and I'm still underwater.

I will remain 100% in stocks for the foreseeable future because my investment horizon is about 60 years. I do plan to sell the house in the next few years and buy something bigger however.

Wait, I'm going to go by your username and assume you are over 50. HOW DO YOU STAY SPRY DUDE

Since it says "age 40" beneath his user name, I assumed he was 40 and that his username meant he would FIRE at age 50.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1463
  • Age: 44
  • Location: Texas
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #259 on: June 21, 2018, 06:41:42 PM »
My grandpa is almost 90 and he’s been 100% in stocks his entire life. Although he has quite a few index funds these days he’ll still buy thousands of shares of tech stocks like NFLX and AMZN. He might be slower to find a tech stock because he doesn’t use the technology like we do, but he’s not afraid to buy in big when he finds a company growing like bonkers.

shinn497

  • Bristles
  • ***
  • Posts: 446
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #260 on: June 21, 2018, 06:58:25 PM »
I'll chime in. In 2000, I was in grad school and had no investments to speak of. I've had an interest in finance for as long as I can remember. In 2008, I worked for the same company that I work for now. I was 100% in stocks then and I'm 100% in stocks now. I also bought a house with an FHA loan in 2008. I still own that home and I'm still underwater.

I will remain 100% in stocks for the foreseeable future because my investment horizon is about 60 years. I do plan to sell the house in the next few years and buy something bigger however.

Wait, I'm going to go by your username and assume you are over 50. HOW DO YOU STAY SPRY DUDE

Since it says "age 40" beneath his user name, I assumed he was 40 and that his username meant he would FIRE at age 50.
You sire are perceptive.

shinn497

  • Bristles
  • ***
  • Posts: 446
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #261 on: June 21, 2018, 06:59:05 PM »
My grandpa is almost 90 and he’s been 100% in stocks his entire life. Although he has quite a few index funds these days he’ll still buy thousands of shares of tech stocks like NFLX and AMZN. He might be slower to find a tech stock because he doesn’t use the technology like we do, but he’s not afraid to buy in big when he finds a company growing like bonkers.

NICE!

Any any how he has ridden out recessions and such?

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1463
  • Age: 44
  • Location: Texas
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #262 on: June 21, 2018, 08:32:02 PM »
My grandpa is almost 90 and he’s been 100% in stocks his entire life. Although he has quite a few index funds these days he’ll still buy thousands of shares of tech stocks like NFLX and AMZN. He might be slower to find a tech stock because he doesn’t use the technology like we do, but he’s not afraid to buy in big when he finds a company growing like bonkers.

NICE!

Any any how he has ridden out recessions and such?

He’s the luckiest guy I know. In early 2000 he was about to take a trip around the world with my grandma and he didn’t want to be worried about his stocks on the other side of the world. He sold everything. By the time he came back the meltdown was in full swing. So, he skipped that recession.

2008 caught him by surprise just like most everyone else. He was heavily invested in oil and gas before that as that was the industry he worked in during his career. I asked him how he was doing and he said “I’m not even looking at it, just makes me sick.” He was selling stock on the way down as he has “been on margin for 50 years.”

I couldn’t tell you his compound returns over the years. He’s a millionaire for sure but has told me he’s done better with land deals and oil/gas royalties than anything else. For the first time ever recently he gave my dad an idea of the kind of money he’s slinging around. He was lamenting that he just now learned Roku was publicly traded. He said “if I had known about their IPO I’d have bought $350k worth. Everyone I know has a Roku so it’s probably a good stock.” He’s a Peter Lynch fan, “buy what you know” kind of thing.

His views toward bonds is “why would I buy something that pays 3% when I can be in stocks and make 8-10%? I’ve been in stocks all my life and that’ll never change.”

DreamFIRE

  • Handlebar Stache
  • *****
  • Posts: 1593
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #263 on: June 21, 2018, 09:18:46 PM »
I'll chime in. In 2000, I was in grad school and had no investments to speak of. I've had an interest in finance for as long as I can remember. In 2008, I worked for the same company that I work for now. I was 100% in stocks then and I'm 100% in stocks now. I also bought a house with an FHA loan in 2008. I still own that home and I'm still underwater.

I will remain 100% in stocks for the foreseeable future because my investment horizon is about 60 years. I do plan to sell the house in the next few years and buy something bigger however.

Wait, I'm going to go by your username and assume you are over 50. HOW DO YOU STAY SPRY DUDE

Since it says "age 40" beneath his user name, I assumed he was 40 and that his username meant he would FIRE at age 50.
You sire are perceptive.

No worries - you'll catch on.

shinn497

  • Bristles
  • ***
  • Posts: 446
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #264 on: June 21, 2018, 09:33:17 PM »
My grandpa is almost 90 and he’s been 100% in stocks his entire life. Although he has quite a few index funds these days he’ll still buy thousands of shares of tech stocks like NFLX and AMZN. He might be slower to find a tech stock because he doesn’t use the technology like we do, but he’s not afraid to buy in big when he finds a company growing like bonkers.

NICE!

Any any how he has ridden out recessions and such?

He’s the luckiest guy I know. In early 2000 he was about to take a trip around the world with my grandma and he didn’t want to be worried about his stocks on the other side of the world. He sold everything. By the time he came back the meltdown was in full swing. So, he skipped that recession.

2008 caught him by surprise just like most everyone else. He was heavily invested in oil and gas before that as that was the industry he worked in during his career. I asked him how he was doing and he said “I’m not even looking at it, just makes me sick.” He was selling stock on the way down as he has “been on margin for 50 years.”

I couldn’t tell you his compound returns over the years. He’s a millionaire for sure but has told me he’s done better with land deals and oil/gas royalties than anything else. For the first time ever recently he gave my dad an idea of the kind of money he’s slinging around. He was lamenting that he just now learned Roku was publicly traded. He said “if I had known about their IPO I’d have bought $350k worth. Everyone I know has a Roku so it’s probably a good stock.” He’s a Peter Lynch fan, “buy what you know” kind of thing.

His views toward bonds is “why would I buy something that pays 3% when I can be in stocks and make 8-10%? I’ve been in stocks all my life and that’ll never change.”

Been on margin for 50 years? Like leveraging???? :/

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1463
  • Age: 44
  • Location: Texas
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #265 on: June 24, 2018, 07:26:40 AM »
My grandpa is almost 90 and he’s been 100% in stocks his entire life. Although he has quite a few index funds these days he’ll still buy thousands of shares of tech stocks like NFLX and AMZN. He might be slower to find a tech stock because he doesn’t use the technology like we do, but he’s not afraid to buy in big when he finds a company growing like bonkers.

NICE!

Any any how he has ridden out recessions and such?

He’s the luckiest guy I know. In early 2000 he was about to take a trip around the world with my grandma and he didn’t want to be worried about his stocks on the other side of the world. He sold everything. By the time he came back the meltdown was in full swing. So, he skipped that recession.

2008 caught him by surprise just like most everyone else. He was heavily invested in oil and gas before that as that was the industry he worked in during his career. I asked him how he was doing and he said “I’m not even looking at it, just makes me sick.” He was selling stock on the way down as he has “been on margin for 50 years.”

I couldn’t tell you his compound returns over the years. He’s a millionaire for sure but has told me he’s done better with land deals and oil/gas royalties than anything else. For the first time ever recently he gave my dad an idea of the kind of money he’s slinging around. He was lamenting that he just now learned Roku was publicly traded. He said “if I had known about their IPO I’d have bought $350k worth. Everyone I know has a Roku so it’s probably a good stock.” He’s a Peter Lynch fan, “buy what you know” kind of thing.

His views toward bonds is “why would I buy something that pays 3% when I can be in stocks and make 8-10%? I’ve been in stocks all my life and that’ll never change.”

Been on margin for 50 years? Like leveraging???? :/

Yes, he’s very aggressive. He’s got balls of steel. However, it cuts both ways so I don’t know how much he’s lost as well. He makes more than enough from land deals and oil/gas royalties so that his stock holdings won’t kill him if he blows it up. Most of us don’t have that luxury.

talltexan

  • Walrus Stache
  • *******
  • Posts: 5344
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #266 on: June 26, 2018, 11:29:20 AM »
The personality of the grandpa sounds admirable. But--once again--we're looking only at anecdotal data. He sounds as though he could be similar to a lot of people who've been doing the "dividend growth investing" and don't actually know how their returns compare to what indexing would have done. It's possible this grandfather has done worse than he could have because he's chased things that were already hot.

But missing out on the tech bubble does indeed sound fortuitous. I have no idea why a guy who believes in stocks so strongly that he'd never own bonds would feel as though a trip around the world should imply he needs to cash out, though. There's some cognitive dissonance there.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1463
  • Age: 44
  • Location: Texas
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #267 on: June 27, 2018, 10:03:30 AM »
The personality of the grandpa sounds admirable. But--once again--we're looking only at anecdotal data. He sounds as though he could be similar to a lot of people who've been doing the "dividend growth investing" and don't actually know how their returns compare to what indexing would have done. It's possible this grandfather has done worse than he could have because he's chased things that were already hot.

But missing out on the tech bubble does indeed sound fortuitous. I have no idea why a guy who believes in stocks so strongly that he'd never own bonds would feel as though a trip around the world should imply he needs to cash out, though. There's some cognitive dissonance there.

This was before internet trading (for grandpas at least) so he’d have to find a newspaper in Asia somewhere to see quotes, then spend an ungodly amount of money making a phone call around to world to place a trade if needed. He wanted to enjoy his trip.

At least this is the story he gave me.

I agree about the returns vs the index. I asked him before what his returns were, all he gave me was that he wanted to make 8% or more over the long haul. Once again, he’s been buying more index funds than individual stocks in his late 80s.

As well, I’ve asked my dad and uncles if they can begin getting access to his account to make sure he doesn’t do anything stupid. As in, his mind starts going south and he puts everything in GE or whatever. They agreed that is a good idea and are making steps towards that with him.

talltexan

  • Walrus Stache
  • *******
  • Posts: 5344
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #268 on: June 28, 2018, 07:27:36 AM »
I've heard stories about when Mom and Dad try to take grandpa's car keys. Trying to take grandpa's eTrade login seems wayyyy more drama-y.

When I cruised in Europe, I was too cheap to buy internet, so I made the only news I got each day walking to the exchange desk and checking the USD/Euro exchange rate. As long as that rate wasn't moving too much, I figured things were fine.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1463
  • Age: 44
  • Location: Texas
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #269 on: June 28, 2018, 04:33:08 PM »
The man who most influenced Warren Buffett (besides Benjamin Graham) was Philip Fisher. He was a pretty successful investor who focused on growth stocks that could increase their earnings over the long term. Late in his life, his mind went south and he ended up making very poor investment decisions. He'd buy the stocks he remembered from back in the 50s and 60s, only those companies were poorly run in the 90s. His son (Ken Fisher) said that if his dad had just put it in index funds during that time, he'd have at least twice as much when he died.

jacoavluha

  • Bristles
  • ***
  • Posts: 266
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #270 on: June 30, 2018, 08:47:12 PM »
Back to the original question, "Why not do 100% allocation, draw 4% at retirement, and yolo it?"

Why not? Well, I find the quoted post below, titled Importance of stock/bond allocation, from Taylor Larimore over on the bogleheads.org site instructive. (Bolded text is highlighted by me, not Taylor.)

Quote from: Taylor Larimore" post_id=2120543 time=1405300747 user_id=497]
[quote="longinvest
I guess that the lesson is that it is important to select an appropriate Asset Allocation now, before a downturn comes, as to never face the need for a plan B.

Thanks you!
Longvest:

You are absolutely right.  An investor should never have more in stocks than they can afford to lose.  I learned this from my own family experience:"

Our family owned "Larimore's Diner" in Foxboro, Mass. in 1929. When the depression hit, my parents lost the Diner and we moved to Miami into one of my grandfather's empty homes.

My Grandfather, Christopher F. Coombs, was one of the three principals of American Founders Group, the largest investment trust in the roaring 20s. He lost nearly everything (approximately $50M)--including the Miami home we lived in (next door to where I live today).

These figures show what REAL bear markets are like:

BEAR MARKET OF 1929-1937 One huge loss after another. (Dow plunged 89%)

-1929--1930--1931--1932
(-31%)(-25%)(-43%)(-08%) Large Cap Stocks
(-34%)(-35%)(-47%)(-06%) Mid/Small Cap Stocks
(-47%)(-38%)(-50%)(-05%) Micro Cap Stocks

(+04%)(+07%)(-02%)(+09%) 5-Year Treasury Bonds

BEAR MARKET OF 1973-1976 (S&P fell 43%)
-1973--1974
(-15%)(-26%) Large Caps
(-39%)(-29%) Micro Caps

---(-70%) Coca-Cola
---(-82%) Intel
---(-73%) McDonald's
---(-86%) Merrill Lynch
---(-86%) Walt Disney
---(-71%) Xerox

Figures cannot convey the horrifying and debilitating effects of a deep and long bear market. You watch in agony as month after month your life savings evaporate before your eyes. Gloom and doom articles are in the media, radio, (and now TV and internet). Nearly everyone else is selling. You have no idea when, or if, your portfolio will stop losing money.

Your friends and relatives urge you to sell. Nearly all financial experts recommend "sell". You are ridiculed for trying to hold on. You begin to have self-doubt. Dispair sets in. Buying stocks is unthinkable. Divorce and suicide's increase.

That's what a bad bear market is like.

Best wishes.
Taylor
[/quote]

You can see the thread here: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=142846


boarder42

  • Walrus Stache
  • *******
  • Posts: 9332
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #271 on: July 01, 2018, 06:14:27 AM »
Bogle heads save too much and are overly conservative. Quoting one time when it failed that we're all aware of doesn't mean you should hold more bonds.

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 8683
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #272 on: July 01, 2018, 07:45:03 AM »
Bogle heads save too much and are overly conservative. Quoting one time when it failed that we're all aware of doesn't mean you should hold more bonds.

Yes. Holding a lot of bonds will lower your chances of success in a long retirement. Numbers bellow are for a 40yr FIRE @4%WR using cFIREsim [all settings default unless noted]:

Stocks %/Bonds % = Success %

- 100/0 = 91.7%
- 90/10 = 91.7%
- 80/20 =90.7%
- 70/30 = 88.9%
- 60/40 = 82.4%

These historical success rates include the events jacoavluha is highlighting.
« Last Edit: July 01, 2018, 08:42:45 AM by Retire-Canada »

jacoavluha

  • Bristles
  • ***
  • Posts: 266
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #273 on: July 01, 2018, 09:16:21 AM »
Bogle heads save too much and are overly conservative. Quoting one time when it failed that we're all aware of doesn't mean you should hold more bonds.

The question isn’t more bonds. It’s any bonds.

I just think it’s easy for young folks, me included, to ponder a more (or most) aggressive allocation,  when we haven’t really experienced a bear market where we had real money on the table.

I’m 40, and about 65/35, the 35% bond/cash allocation including emergency fund and additional short term cash for a house project. So my retirement money is more like 80/20. Having never been through it I just don’t know how I’m going to react when I see my retirement accounts accumulate hundreds of thousands in sustained losses over months to years. I’d like to think that I’ll stick to the plan, rebalance occasionally, and be well positioned when the market rebounds. But I just don’t know.

It’s not that big of a deal in the accumulation phase. Heck, I should be down on my knees hoping for a bear now, since I’m saving about half my income these days. But a decade or so from now, just retired, with my kids in college, I don’t think I could stomach a 100% allocation.

Certainly the more you save, and the more you have expenses under control, should allow you to be comfortably more aggressive with your retirement allocation.

boarder42

  • Walrus Stache
  • *******
  • Posts: 9332
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #274 on: July 01, 2018, 09:52:30 AM »
Your AA is so low in equities you have to save more to actually retire to me that's absurd but whatever floats your boat. Just know 4% is crappy with a 65% stock allocation. As seen above you're decreasing your chances of success and if you're still accumulating then your greatly extending time to fire

I'm greatly of the mindset that if you can't understand that the volatility is just a thing you have to deal with and that's forced you to such a suboptimal AA you should learn more if you've learned it and truly understand risks from all sides you should be ok with the higher equity AA.

Also youre 40 you should have lived thru the housing crash already unless you're in an alternate universe
« Last Edit: July 01, 2018, 09:56:38 AM by boarder42 »

jacoavluha

  • Bristles
  • ***
  • Posts: 266
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #275 on: July 01, 2018, 10:19:13 AM »
Haha I really was in an alternate universe 07-09, residency post med school so the housing crisis and bear market really went unnoticed by me.

Statistically of course you’re right. But the question of holding some bonds or not is more about behavior, which is difficult to predict and difficult to “learn.”

boarder42

  • Walrus Stache
  • *******
  • Posts: 9332
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #276 on: July 01, 2018, 10:40:55 AM »
 I disagree it's a choice you make you're here you have a support group you control your behavior.

DavidAnnArbor

  • Handlebar Stache
  • *****
  • Posts: 2266
  • Age: 58
  • Location: Ann Arbor, Michigan
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #277 on: July 01, 2018, 11:10:35 AM »
If we get into a serious full blown trade tariff war then we very well might see a bear market.

Classical_Liberal

  • Handlebar Stache
  • *****
  • Posts: 1171
  • Age: 47
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #278 on: July 01, 2018, 05:13:21 PM »
@jacoavluha
Don't let anyone convince you your risk profile is different than what it is. I like your historically example quote, however, I also think bogleheads are overly conservative.  The MMM tribe is very pro-index equities.  This is for good reason, it tends to work well for fast accumulation, they are younger and frugal so going back to work/cutting spending is an option in highly volatile times.  They tend to forget not everyone is a highly paid 30 year old analytical engineer with the main life goal of RE ASAP.

If you like to view through a historical lens, I suggest you go and grab investment books/publications from various times in US history.  It's fascinating to read the general advice of each era, also fascinating to see how they all would have failed miserably (meaning a different strategy would have performed much better).  Recency bias in investing is huge! 

In the end, do what lets you sleep at night and BE FLEXIBLE, as times (personal and macroeconomic) change. It's important to tailor an investment strategy that is synergistic with your personal goals and needs, while simultaneously considering the macroeconomic changes taking place.

« Last Edit: July 01, 2018, 05:15:45 PM by Classical_Liberal »

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 8683
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #279 on: July 01, 2018, 05:38:31 PM »
But a decade or so from now, just retired, with my kids in college, I don’t think I could stomach a 100% allocation.



Personally I think investment psychology is important and if you really can't handle a 100% stock AA in a significant crash and would likely to something unfortunate like sell at the bottom and buy gold at its peak then it makes sense to do something about it. That said I always wonder...is the person that will flip out at going from $1M to sub-$500K going to hold their shit together at ~$560K or $660K? I mean those loses look marginally better than sub-$500K in the spreadsheet above, but when you have nothing to compare it with and your portfolio is vaporizing will that psychologically weak person not still buckle?

Depending on your answer to the question above 20% or even 40% bonds may not be enough to prevent catastrophe.

boarder42

  • Walrus Stache
  • *******
  • Posts: 9332
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #280 on: July 01, 2018, 06:06:26 PM »
Thanks for illustrating my point much better than I was able to put into words @Retire-Canada. I don't get people who say I need this lower AA and assume that's going to stop them from panicing

jacoavluha

  • Bristles
  • ***
  • Posts: 266
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #281 on: July 01, 2018, 06:23:47 PM »
Forget the behavioral aspect. Serious question: who shouldn’t be 100% equities?

boarder42

  • Walrus Stache
  • *******
  • Posts: 9332
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #282 on: July 01, 2018, 06:28:13 PM »
Forget the behavioral aspect. Serious question: who shouldn’t be 100% equities?

Depends on your withdrawal strategy.  It's been shown that a reverse equity glide path helps prevent sequence of return risk pretty well so starting heavier in bonds and moving towards a 100% equity portfolio. I plan to be 90-10 max and use variable withdrawal.  We have a lot of ways to earn money and alot of fluffy spending. So we can cut withdrawal by 10k and get to a historical 100% success. So like I said above you should he doing more research. Not just assuming you're preventing risk by using bonds.

jacoavluha

  • Bristles
  • ***
  • Posts: 266
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #283 on: July 01, 2018, 06:40:26 PM »
What about before retirement?

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 8683
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #284 on: July 01, 2018, 06:54:10 PM »
Forget the behavioral aspect. Serious question: who shouldn’t be 100% equities?

If people were robots and never did anything harmful/stupid most people should be high equities for a long retirement. If you read these forums much you'll quickly see that you cannot avoid/ignore harmful behaviour for at least a significant chunk of the "population". So my advice would be to select an AA based on performance that you can reasonably stick with through thick and thin. That said it's important to look at the performance implications of your choice and be realistic whether the AA you have chosen will actually do the thing you think it will do. As I pointed out above picking a 60/40 AA for "safety" may actually put your FIRE at greater risk and maybe even 40% bonds won't stop you from panic selling in a big crash.

To give you a personal example I am currently 100% equities and will be until I am close to FIRE. I don't need the money. I have lived through the tech bubble and 2008. I had significant money invested both times and did not do anything stupid. So I am confident I can stay the course when the next crash comes if it is during the accumulation phase.

When I get ready to FIRE I'll hold some cash/bonds. A fixed amount like $100K or maybe even $150K. This would be 2-3 years at full spend or 4-5 at reduced spend that would get me through an early crash during FIRE. The performance hit for my portfolio over 100% equities is little to nothing, but I know when I need to live off my investments that will make me feel better and I can put my head down for the likely duration of a big crash early in FIRE. Beyond that I won't buy more bonds or rebalance to them so they'll either get spent or will be out run by my stocks and become insignificant and I'll be back to ~100% equities. I think this will work for me and my psychology.


steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #285 on: July 01, 2018, 07:13:34 PM »
What about before retirement?

I like the idea of Bonds increasing slowly up until retirement and then slowly decreasing to 100% stocks. The problem with this approach is to me it is a little more art than science. I don't want to sell my bonds in the first year of retirement if the market goes up 20%. I want the bonds for when my portfolio drops by 20%. At the same time 5 years of 20% growth would mean you are probably fine to handle a 50% portfolio drop.

I don't think any of us are going to obtain the perfect portfolio. I think it's more about getting it close to right which to me means having firstly a reasonable expectation of your expenses in retirement, getting to a 5% WR (or lower) and having some ability to handle SORR.

I am aiming for 20% bonds in a portfolio that will have a WR of 5%. Once I am at that level I intend to work a little and save up a little extra into cash. I also will have 6 months paid leave which should last at least one years withdrawal. The plan at this point is to have enough cash/leave to not withdraw for 2 years and at that point to have gotten to a 5% WR.

The trick to me is not to over save and honestly this is hard. If you are cool with working for longer and getting to a lower WR (say 3%) then I think you can decrease your safety margin for SORR. So you could have more equities and just be prepared to handle a down turn by having a lower WR.
« Last Edit: July 01, 2018, 07:52:31 PM by steveo »

Classical_Liberal

  • Handlebar Stache
  • *****
  • Posts: 1171
  • Age: 47
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #286 on: July 01, 2018, 08:47:29 PM »
What about before retirement?

Have you played with Portfolio Charts? Data is only back to 1970's due to the number of asset classes being utilized. 

Forget the behavioral aspect. Serious question: who shouldn’t be 100% equities?

Me! 

I can never, nor will I ever be able to stomach a 50% loss of assets.  This goes doubly so for when the assets are providing most of my income.

I can tolerate fluctuation of 25% or so and keep my head in the game.  I'm more than happy to trade CAGR for peace of mind.  Particularly the upper end outliers, since I have no interest in legacy or score-keeping.
« Last Edit: July 01, 2018, 08:52:18 PM by Classical_Liberal »

Classical_Liberal

  • Handlebar Stache
  • *****
  • Posts: 1171
  • Age: 47
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #287 on: July 01, 2018, 08:56:03 PM »
The problem with this approach is to me it is a little more art than science.
Nothing about equity ownership is pure science.  If you think otherwise you will end lucky or burned.

steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #288 on: July 01, 2018, 09:11:22 PM »
The problem with this approach is to me it is a little more art than science.
Nothing about equity ownership is pure science.  If you think otherwise you will end lucky or burned.

The problem is that when we talk about this stuff we tend to talk in terms of science or maybe better put we are too precise with all our analysis. I suppose you need that precision but you have to accept that you are betting on a future event.

My FIL was a foreign currency trader/hedge fund manager. It's interesting because I was interested in trading when I was younger and I read a bunch of books on how to trade. They all have as the best practice approach that you need a stop-loss. This is considered the only way to protect your account. My FIL thought this idea was stupid. People with set in stone stop-losses in his opinion tended to blow out whereas he made money. His idea is that you need the stomach to hold onto your position. When it came to picking a position to be in there was also a high degree of how the market feels rather than just fundamentals or technical analysis.

Taking it further if you think at some carefully defined point you will pull your bonds out and reinvest in equities then I think you may be deluding yourself. My opinion is to have some buffer available and use it when you think the time is right.

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 8683
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #289 on: July 01, 2018, 09:22:02 PM »
Me! 

I can never, nor will I ever be able to stomach a 50% loss of assets.  This goes doubly so for when the assets are providing most of my income.

I can tolerate fluctuation of 25% or so and keep my head in the game.  I'm more than happy to trade CAGR for peace of mind.  Particularly the upper end outliers, since I have no interest in legacy or score-keeping.

What's your AA?

Classical_Liberal

  • Handlebar Stache
  • *****
  • Posts: 1171
  • Age: 47
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #290 on: July 01, 2018, 09:41:41 PM »
@Stevo
Your FIL sounds like a smart man.  I would look at stop losses as essentially saying; at point "X", I'll agree with the markets current opinion and admit I was wrong. 

100% indexing in equities is more like thinking "the market is always right", I have no opinion.

I look at my position as not needing a stop loss, because I can ride my opinion all the way down.  If I have enough in relatively stable funds to wait out the market's current "wrong" opinion. If it ends up I'm wrong, I have the ability to play the next game.

Something along the lines of Warren Buffets paraphrased quote of "The markets can remain irrational for longer than you can remain solvent". :)

Anyway, I have no opinion on what you, or anyone else should do.   I just know what I should do.

Taking it further if you think at some carefully defined point you will pull your bonds out and reinvest in equities then I think you may be deluding yourself. My opinion is to have some buffer available and use it when you think the time is right.

I really don't intent to do that.  What I intend to do is look at my personal situation to understand the risk I'm taking with investments and determiner how much of it is truly needed. 

If I owned personal real estate and knew it was my "forever" home, I know my housing expenses are relatively inflation resistant.  So I need less protection from inflation than if I kept renting. 

OR

If I have maintained a relatively high paying, recession resistant skill and live on less than 20K a year, I really don't have to worry too much about cash flow, I can just work a few months every year.  The questions become; would I rather spend time selling this skill, or typing to Steveo on the interweb?  How much do I prefer the typing over work?  How much risk should I take to ensure I never need my skilled income? IOW, How much stable value holdings do I really need for my life right now?

Couple these personal items with macroeconomic conditions.  If 10 year Tbills are Yielding 2.8% and I can get 2.5% on one year CD's. What's the inflation risk look like? Are TIPS paying based on that risk? What are the chances of a recession the near future? 10yr - 2ys yields?  IOW, Whats the best way for me to hold my determined amount of stable value funds for the short to mid term based on this information?

This is how I think and invest.  Certainly not "set it and forget it".  Like I stated up-thread, historically, those types of recency biased strategies ended less than well.
« Last Edit: July 01, 2018, 10:21:51 PM by Classical_Liberal »

Classical_Liberal

  • Handlebar Stache
  • *****
  • Posts: 1171
  • Age: 47
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #291 on: July 01, 2018, 10:11:16 PM »
What's your AA?

I am taking a sabbatical in the near future  for 6 to 12 months. It will begin in 3-18 mos depending on the outcome of quality of life job issues currently being discussed.  AA is reflective of that. 

I'm also plan a long term semi-FIRE after sabbatical with period of FT work intermixed with additional sabbaticals, some periods of PT work. 

I have two mental buckets, longer term for "older age retirement" which has some tax advantaged funds, post tax, and roth.   IOW, RE inevitability fund.  Also, a shorter term liquid fund.  The allocation is subdivided in these bucket to maximize investment type,  tax advantages, length until it may be needed, potential for growth, etc.  (ex) all cash is in liquid bucket for obvious reasons.

Current totals as of 6/3/18 are about:

28% Total US (Index)
22% Total World (Index)
9% Small Cap Value (VISVX)
5% REIT (Individual Stocks)
2% Emerging (Index)
----  66% Stock
6% I-Treauries
----  6% Bonds
8% Gold (mostly ETF's some physical and some silver in the pysical as well)
---- 8% Gold
20% Cash (MM/CD ladders/taking advantage of deposit bonuses)
---- 20% Cash

Some of the cash is waiting to be DCA to more Treasuries when 10 year yield is above 3% again (If it happens), some is for sabbatical.  I tend to not believe in holding more than 10% cash at any given time with out a plan for it, beyond that doesn't seem justifiable historically. Total is about 14x 12 mo rolling spend.


I showed you mine... :)

shinn497

  • Bristles
  • ***
  • Posts: 446
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #292 on: July 02, 2018, 02:30:37 AM »
Really all I am getting from this thread is if you are confident in your emotions, then 100% equities and YOLO it.

Otherwise hold bonds.

The comment about not everyone being a 30 something tech worker is interesting. I am really curious if there is a correlation between older people, people with kids, and people with health concerns vs someone younger and with less responsibilities or needs.

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 8683
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #293 on: July 02, 2018, 07:49:18 AM »
I showed you mine... :)

Thanks. I appreciate the detail and explanation.

I'm closing in on a 5%WR this year and should hit 4%WR in the next couple years barring a huge market crash.

Current AA

- CDN Total Stock - 20%
- US Total Stock - 50%
- International Dev - 15%
- International EM - 15%

When I get close to pulling the FIRE trigger I'll add in a static 2-3 yrs at full spend in cash/bonds. This will provide some sequence of returns risk peace of mind. I'll either spend it or let my stocks outrun it if I don't spend it.

« Last Edit: July 02, 2018, 08:25:46 AM by Retire-Canada »

steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #294 on: July 02, 2018, 06:54:37 PM »
Really all I am getting from this thread is if you are confident in your emotions, then 100% equities and YOLO it.

Otherwise hold bonds.

The comment about not everyone being a 30 something tech worker is interesting. I am really curious if there is a correlation between older people, people with kids, and people with health concerns vs someone younger and with less responsibilities or needs.

I still don't see this as being as simple as the initial statement however there is nothing wrong with 100% equities. I think the big risk is SORR. That is why you have some bonds/cash as a buffer. You may retire and stocks drop 50%, you are 100% equities and you have to go back to work as you are withdrawing way too much stock to survive 30+ years. That to me is an ER failure.

If you have a way to manage SORR and you are okay with taking up that option then I suppose 100% equities is good.

In some ways I also view this as a keeping score approach compared to a conservative I've won and all I have to do is stay in the game. You can go 100% equities and you will probably end up with the biggest stache but does that really matter to you.

I've reflected on the idea of having the biggest stache when I die and it is appealing but it's not as appealing to me as being able to stay retired if the markets crash at the wrong time for me.

Some people only care about having the biggest stache. Some people want to work till the day they die.
« Last Edit: July 02, 2018, 08:27:09 PM by steveo »

boarder42

  • Walrus Stache
  • *******
  • Posts: 9332
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #295 on: July 03, 2018, 05:21:39 AM »
Really all I am getting from this thread is if you are confident in your emotions, then 100% equities and YOLO it.

Otherwise hold bonds.

The comment about not everyone being a 30 something tech worker is interesting. I am really curious if there is a correlation between older people, people with kids, and people with health concerns vs someone younger and with less responsibilities or needs.

I still don't see this as being as simple as the initial statement however there is nothing wrong with 100% equities. I think the big risk is SORR. That is why you have some bonds/cash as a buffer. You may retire and stocks drop 50%, you are 100% equities and you have to go back to work as you are withdrawing way too much stock to survive 30+ years. That to me is an ER failure.

If you have a way to manage SORR and you are okay with taking up that option then I suppose 100% equities is good.

In some ways I also view this as a keeping score approach compared to a conservative I've won and all I have to do is stay in the game. You can go 100% equities and you will probably end up with the biggest stache but does that really matter to you.

I've reflected on the idea of having the biggest stache when I die and it is appealing but it's not as appealing to me as being able to stay retired if the markets crash at the wrong time for me.

Some people only care about having the biggest stache. Some people want to work till the day they die.

i think you're dramatically overstating the risk but thats just my opinion.  you 100% guarantee you have failed at FIRE every extra year you work to have a lower equity AA.  in general with 90% + equities it takes 10-15% of your withdrawal that is either cut by spending less or just earning that little bit extra in FIRE if you hit SORR in the first few years. 

jacoavluha

  • Bristles
  • ***
  • Posts: 266
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #296 on: July 03, 2018, 07:55:21 AM »
you 100% guarantee you have failed at FIRE every extra year you work to have a lower equity AA.

That is, unless bonds beat equities over the time period. Which you have to admit is possible.

boarder42

  • Walrus Stache
  • *******
  • Posts: 9332
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #297 on: July 03, 2018, 07:57:03 AM »
you 100% guarantee you have failed at FIRE every extra year you work to have a lower equity AA.

That is, unless bonds beat equities over the time period. Which you have to admit is possible.

its possible to bet on green on a roulette wheel and win as well.  i choose to place my bets on the highest probability of success so i'll take the rest of the wheel. 

jacoavluha

  • Bristles
  • ***
  • Posts: 266
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #298 on: July 03, 2018, 08:20:20 AM »
I think you’re dramatically overstating the probability of an equities win with your roulette wheel analogy. But then we didn’t define the game. To be clear we’re talking about pre-FIRE.

If the time horizon is 20-25 years then your analogy may be reasonable. Equities are almost guaranteed to win.

If the time horizon is 3-5 years then about 1/3 of the wheel should be green.

And, your risk of suffering a large and sustained loss is much greater betting against green.

boarder42

  • Walrus Stache
  • *******
  • Posts: 9332
Re: Why not do 100% allocation, draw 4% at retirement, and yolo it?
« Reply #299 on: July 03, 2018, 08:26:11 AM »
I think you’re dramatically overstating the probability of an equities win with your roulette wheel analogy. But then we didn’t define the game. To be clear we’re talking about pre-FIRE.

If the time horizon is 20-25 years then your analogy may be reasonable. Equities are almost guaranteed to win.

If the time horizon is 3-5 years then about 1/3 of the wheel should be green.

And, your risk of suffering a large and sustained loss is much greater betting against green.

not really - your still guessing and youre guessing wrong.

 

Wow, a phone plan for fifteen bucks!