Seeking Advice on Rebalancing Portfolio for FIRE with Recent Liquidity
I’m 55 and recently exited my business, achieving a solid return. I’ve chosen the FIRE route and am now primarily invested with a 62% allocation in Treasuries. Occasionally, I use other funds to trade and aim for an overall 9% return. Importantly, I don’t need to draw any income until 2026.
My goal is to rebalance towards an 80/20 portfolio, but I’ve been hesitant due to the current economic climate—essentially, waiting for the potential “recession smoke” to clear (even though I know timing the market isn’t ideal). My question is, with around 6–7 million to deploy, should I move forward with a lump sum investment, or would a DCA (dollar-cost averaging) strategy be wiser in this context? I’m torn between starting now or waiting for a possible market pullback. Any insights or strategies you’d suggest are greatly appreciated. Thank you!
To get a 9% overall return, you'd have to achieve a 17% return on the rest of your investments if your 62% allocation in treasuries yields a 4% average return. Moreover the real return on equities has historically only been 7% so you'd have to be at something like 167% equities (i.e. highly leveraged, perhaps on margin or using leveraged funds) to get there on average, which is HUGELY risky.
Good luck with either of those approaches, you'd need it!
However... what is your annual spend? If you were spending, say, $200k/yr (incl. taxes) you'd only need a 3% withdrawal rate, which your current allocation could probably sustain.
As far as your 'waiting for potential "recession smoke" to clear' goes - what RWD said.
A further note, however - you are planning to start drawing on these funds in two years, and you're 55. I'd suggest that, unless you are intensely focused on leaving legacies for children or charities, your 80/20 plan is perhaps a bit too aggressive and something like 60/40 might be more advisable.
