Author Topic: What is the appropriate time horizon to use for investing prior to FIRE?  (Read 14082 times)

BBub

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Re: What is the appropriate time horizon to use for investing prior to FIRE?
« Reply #50 on: February 25, 2016, 10:48:03 PM »
I think another factor worth considering is that rates are so low right now, which tempts investors to take on more risk.  Consider that the 10yr treasury yields 1.7% and the 30 year yields 2.6%.  2.6 for THIRTY YEARS.  That is absurd - "why bother?" is the natural response.  This factor alone is primarily responsible for investors developing asset allocation plans in the 80%+ range to fund retirement income.  80%+ equities for retirement income is extreme, yet it has been adopted as acceptable & optimal by investors who are using MPT based methodology which only looks backwards.  IMO once many of the investors on this forum experience a prolonged downturn, the appetite for risk will subside.  Today's ridiculous rate environment is essentially forcing investors into risk assets who otherwise would have no desire to be exposed to such high levels of risk.  I think we'll look back on these times & see that clearly.

steveo

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Re: What is the appropriate time horizon to use for investing prior to FIRE?
« Reply #51 on: February 25, 2016, 10:53:45 PM »
Good point BBub. I think that my current allocation is a little too equity heavy.

arebelspy

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Re: What is the appropriate time horizon to use for investing prior to FIRE?
« Reply #52 on: February 26, 2016, 03:52:06 AM »
Today's ridiculous rate environment is essentially forcing investors into risk assets who otherwise would have no desire to be exposed to such high levels of risk.  I think we'll look back on these times & see that clearly.

Perhaps, but I think we'd also look back and go "well, what else was there to have done?"

I know I wouldn't have accepted a sub-1% CD rate in the late 90s/early 2000s, even knowing stuff may be overvalued, because of the nature of equities themselves.
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BBub

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Re: What is the appropriate time horizon to use for investing prior to FIRE?
« Reply #53 on: February 26, 2016, 03:59:23 PM »
Today's ridiculous rate environment is essentially forcing investors into risk assets who otherwise would have no desire to be exposed to such high levels of risk.  I think we'll look back on these times & see that clearly.

Perhaps, but I think we'd also look back and go "well, what else was there to have done?"

I know I wouldn't have accepted a sub-1% CD rate in the late 90s/early 2000s, even knowing stuff may be overvalued, because of the nature of equities themselves.
Yeah, there's not really a silver bullet & the alternatives aren't too sexy. Options include saving more, working longer, spending less or having more spending flexibility, side gigs, diversification into income producing assets such as real estate or notes. 

Of course, simply planning to have a high equity allocation is an option.  But it's a risky option that has become widely adopted lately, and i think it's worthwhile to challenge the idea.

steveo

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Re: What is the appropriate time horizon to use for investing prior to FIRE?
« Reply #54 on: February 26, 2016, 04:24:57 PM »
Of course, simply planning to have a high equity allocation is an option.  But it's a risky option that has become widely adopted lately, and i think it's worthwhile to challenge the idea.

I have a high equity allocation and I agree with what you are stating. It's good to question this idea and think about the alternatives.