Author Topic: Stock/Bond mix over time - is 100% stocks a bad idea?  (Read 1749 times)

Beach_Stache

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Stock/Bond mix over time - is 100% stocks a bad idea?
« on: August 30, 2019, 07:04:42 AM »
I hear more talk about the recession coming, which seems long overdue.  I'm prepared, I keep reminding DW that it will come, it's not a matter of if but when.  We've been investing since 2000, so seen some ups and downs and have just stayed the course, and will continue to stay the course of consistent low cost index fund investing.  We're pretty much in 100% stocks though, minus 6 months or so of emergency savings.  We have my TSP, Roth IRA, her 401k and post-tax investments then emergency funds (that's the only part that's just in a 2% money market at Capital One).  The plan is to keep working for at least another 19 years at which point I'll have 30 years in the gov't and can retire at 58 w/full benefits.  I heard a few say that they consider their pension as the "bond" part of their retirement.  So is there any reason to not have 100% in stocks?  I realize I'll take a bigger hit during a recession, but if I won't need the money for another 20 years.  Even at that point, earning 7%/year we'll have more than double the money we would need to retire, so through retirement, is there any reason to not just let it ride forever? 

If you are asking yourself, we could probably technically retire in 10 years, but at that point our 2nd of 3 boys will be in college and we enjoy working for the most part and keeping busy.  That may change, but for now the plan is to keep working.  Any reason to not let it ride at 100% stocks?  Or should I be re-thinking asset allocation and change it up and put some money in bonds?  Any advice is much appreciated!

SwordGuy

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Re: Stock/Bond mix over time - is 100% stocks a bad idea?
« Reply #1 on: August 30, 2019, 07:30:04 AM »
If you and your wife can avoid panicking and selling when the market drops 30%, it's a workable investment plan.  If not, it's a guaranteed way to lose a huge chunk of your life's savings.

19 years is a very long time.   You are only one sociopathic boss away from being sick to death of going to work.   If I were in your shoes I would get FU money ASAP.   Then I would really focus on getting to leanFIRE, i.e., you have enough passive income to cover basic life expenses.   At that point you don't need to put up with a lot of BS at work and can negotiate from a really solid position of strength. 

Plus, if you get sick of working and want to FIRE sooner than 58, you'll be in a good position to do so.






Beach_Stache

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Re: Stock/Bond mix over time - is 100% stocks a bad idea?
« Reply #2 on: August 30, 2019, 07:40:45 AM »
If you and your wife can avoid panicking and selling when the market drops 30%, it's a workable investment plan.  If not, it's a guaranteed way to lose a huge chunk of your life's savings.

19 years is a very long time.   You are only one sociopathic boss away from being sick to death of going to work.   If I were in your shoes I would get FU money ASAP.   Then I would really focus on getting to leanFIRE, i.e., you have enough passive income to cover basic life expenses.   At that point you don't need to put up with a lot of BS at work and can negotiate from a really solid position of strength. 

Plus, if you get sick of working and want to FIRE sooner than 58, you'll be in a good position to do so.

Yes, that's exactly the plan!  We have a very good amount of money saved up, plenty if I were full mustacian, however have 3 boys so plenty of expenses.  We are doing very well though and the plan is to have FU money and be in a position to fully retire everyone in 10 years if needed (probably in a few years if needed) as I completely agree that while the job is good now, I could have a boss that's terrible in a few years (mine will retire w/in 5 years I'm sure), so I know it could go downhill really fast.  I have the same conversation w/one of my friends who's  had to outlast his terrible boss of the last 5  years (he did win though - his boss is now gone), but I've always been a "plan for the worst" type of person.  Even after 10 years, if we did lose 30% at any one point, we should still be fine.  I'm sure my "safe estimate" of what I need to retire is probably triple what most MMMers would consider their numbers are.  So my "last resort" is to work for 19 more years, w/the hope of being able to retire as early as 5-10 years if I really wanted.  Thanks for checking my numbers, I think we'll continue on the path of 100% stocks for the foreseeable future!

DeniseNJ

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Re: Stock/Bond mix over time - is 100% stocks a bad idea?
« Reply #3 on: August 30, 2019, 07:52:09 AM »
You can consider your pension your "bond" money, a safe garenteed return.  Or you can consider your pension as income and your asset allocation for your investment would be based on how much you need to supplement your income.  But with 19 years ahead of you, yes, stock index funds are the way to go.  That's plenty diversification and given your history of staying the course, I think you'll do great.

Also consider that if you retire early from gov't you will still get a pension at your full retirement age, but obviuosly not as much.

jfer_rose

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Re: Stock/Bond mix over time - is 100% stocks a bad idea?
« Reply #4 on: August 30, 2019, 08:08:12 AM »
The JL Collins Stock Series is quite popular on this forum. The advice given there advocates for 100% stocks before retirement. Of course, this does assume you can stomach drops in value without selling (and ideally, keep buying lots more index funds while the value is low and they are effectively "on sale").

https://jlcollinsnh.com/stock-series/

frugaliknowit

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Re: Stock/Bond mix over time - is 100% stocks a bad idea?
« Reply #5 on: August 30, 2019, 02:17:11 PM »
15+ years out, pedal to the metal!

secondcor521

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Re: Stock/Bond mix over time - is 100% stocks a bad idea?
« Reply #6 on: September 08, 2019, 12:45:07 AM »
Consider keeping some of your kids' college funds in bonds when the time gets closer and if you have fully funded your budgeted amount of savings for them.

If you want to nitpick, over a 40 year time horizon, a 90/10 or 95/5 AA provides slightly better portfolio survival metrics for a given WR if the WR is close to the historically safe max WR of 4%.  So that's what I use for the portion of my portfolio I expect to use (basically 25x actual expenses).  The portion of my portfolio I don't expect to use I leave in 100% stocks because I expect my kids will inherit that in 30-40 years.