Author Topic: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”  (Read 11981 times)

AdrianC

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #50 on: January 04, 2017, 08:09:12 AM »
A problem if he thinks he's going to be getting the kind of equity and bond returns we've seen over the last 35 years or so.

Who knows what the returns will be over the next 35 years though.

There are ways to estimate future returns for asset allocation purposes.

See:
https://www.bogleheads.org/wiki/Historical_and_expected_returns#Expected_future_returns

https://www.bogleheads.org/forum/viewtopic.php?t=195031

https://www.researchaffiliates.com/en_us/asset-allocation.html

Also see the general investing books by Bernstein, Malkiel, Swedroe, Ellis. Are they all nuts?

Quote
1. Use low cost diversified index funds.
2. Pick an asset allocation that works for you.
3. Invest regularly while working.
4. Withdraw and rebalance when you retire

It doesn't have to be more complicated than that.

Completely agree, with the observation that #2 is not easy, not easy at all.


AdrianC

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #51 on: January 04, 2017, 09:01:45 AM »
Another financial guru comes out against bonds:

http://www.daveramsey.com/blog/daves-investing-philosophy/?et_cid=6218535&et_rid=51b0c9c24bd2dd2f56f41e7a59b7089a&linkid=Art1Title

Bonds

Dave does not own any bonds as part of his retirement strategy. Bonds have a reputation for being "safe" investments, but their values rise and fall like stocks and mutual funds.

You can find out more about bonds, how they work, and if they are appropriate for your retirement plan by talking with your investing professional.





This is, of course, a joke...Dave Ramsey's investing advice is aimed at pushing newbies towards his "SmartVestor investing professionals", from whom he gets referral kickbacks.

OurTown

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #52 on: January 04, 2017, 10:15:27 AM »
Jesus H. Tap Dancing Christ.  I am 47.  I have 37% of the portfolio in bonds.  This year, assuming I live through my birthday, I turn 48.  I will adjust to 38% of the portfolio in bonds.  Lather, rinse, repeat.

OurTown

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #53 on: January 04, 2017, 10:16:19 AM »
^^^ This advice is free, yet it is 1000% more valuable than the links to the guys who say bonds are dangerous. ^ ^ ^

frugledoc

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #54 on: January 04, 2017, 12:33:21 PM »
^^^ This advice is free, yet it is 1000% more valuable than the links to the guys who say bonds are dangerous. ^ ^ ^

Don't sell yourself short lol

steveo

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #55 on: January 04, 2017, 04:11:37 PM »
Jesus H. Tap Dancing Christ.  I am 47.  I have 37% of the portfolio in bonds.  This year, assuming I live through my birthday, I turn 48.  I will adjust to 38% of the portfolio in bonds.  Lather, rinse, repeat.

Personally I disagree with this approach. I like the idea of having a safe portion of my portfolio that is in bonds. Maybe have some cash. Then you put the rest into stocks.

I see no reason to adjust my portfolio based upon my age.

OurTown

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #56 on: January 05, 2017, 06:29:27 AM »
It's just a simplified glide path.

SeattleCPA

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #57 on: January 05, 2017, 07:44:31 AM »
Jesus H. Tap Dancing Christ.  I am 47.  I have 37% of the portfolio in bonds.  This year, assuming I live through my birthday, I turn 48.  I will adjust to 38% of the portfolio in bonds.  Lather, rinse, repeat.

Personally I disagree with this approach. I like the idea of having a safe portion of my portfolio that is in bonds. Maybe have some cash. Then you put the rest into stocks.

I see no reason to adjust my portfolio based upon my age.

Okay, I am at 30% treasuries and don't plan to adjust that in future. But there is a concrete reason to adjust your bonds percentage up as you age: You (and I) have fewer years of employment left or fewer years where we have the opportunity, should need arise, to return to the workforce and pad our portfolios with some additional savings or compounding.

Personally and professionally, I'm in favor of any systematic, disciplined approach to managing your portfolio risk.

Metric Mouse

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #58 on: January 05, 2017, 07:51:21 AM »
Jesus H. Tap Dancing Christ.  I am 47.  I have 37% of the portfolio in bonds.  This year, assuming I live through my birthday, I turn 48.  I will adjust to 38% of the portfolio in bonds.  Lather, rinse, repeat.

Personally I disagree with this approach. I like the idea of having a safe portion of my portfolio that is in bonds. Maybe have some cash. Then you put the rest into stocks.

I see no reason to adjust my portfolio based upon my age.

Okay, I am at 30% treasuries and don't plan to adjust that in future. But there is a concrete reason to adjust your bonds percentage up as you age: You (and I) have fewer years of employment left or fewer years where we have the opportunity, should need arise, to return to the workforce and pad our portfolios with some additional savings or compounding.

But by doing so, one locks themselves into years of lower returns, thus raising their risk of having to return to the workforce.

If retirement was only 10-15 years, this might be sound advice. If one retires at 50, or even 60, there is likely 30 years of retirement earnings and growth that one is kneecapping. Certainly some bonds are ok, but at the current rates it's hard argue 30+ percent for someone in their 30's or 40's is mathematically superior.

AdrianC

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #59 on: January 05, 2017, 10:59:40 AM »
Jesus H. Tap Dancing Christ.  I am 47.  I have 37% of the portfolio in bonds.  This year, assuming I live through my birthday, I turn 48.  I will adjust to 38% of the portfolio in bonds.  Lather, rinse, repeat.

Well...good luck and all that.

I happened to read this just last night:

10 "commandments" for the individual investor:

"8. Don't invest in bonds just because you've heard that bonds are conservative or for safety of either income or capital. Bond prices can fluctuate nearly as much as stock prices do, and bonds are a poor defense against the major risk of long-term investing - inflation."

Winning the Loser's Game pp150, Charles D. Ellis.

What an idiot that Charlie Ellis guy is! ;-)

By the way, for you gold bugs, his #5 commandment:
"5. Don't do commodities. Dealing in commodities is really only price speculation. It's not investing because there's no economic productivity or value added."

OurTown

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #60 on: January 05, 2017, 11:51:57 AM »
https://www.bogleheads.org/wiki/Asset_allocation

Obviously, everyone can do whatever the hell they want with their own money.  I'm personally as likely to invest in 100% stocks as I am to engage in auto-erotic asphyxiation.  Risk, you know.  RIP David Carradine. 

frugledoc

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #61 on: January 05, 2017, 01:43:09 PM »
https://www.bogleheads.org/wiki/Asset_allocation

Obviously, everyone can do whatever the hell they want with their own money.  I'm personally as likely to invest in 100% stocks as I am to engage in auto-erotic asphyxiation.  Risk, you know.  RIP David Carradine.

It is each to their own.  I couldn't stand to be any less than 90% stocks but I still have 10 - 20 years of earnings ahead.

steveo

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Re: Why Long-term Investors Should Own Stocks: Bonds are “Dangerous”
« Reply #62 on: January 05, 2017, 11:54:00 PM »
https://www.bogleheads.org/wiki/Asset_allocation

Obviously, everyone can do whatever the hell they want with their own money.  I'm personally as likely to invest in 100% stocks as I am to engage in auto-erotic asphyxiation.  Risk, you know.  RIP David Carradine.

It is each to their own.  I couldn't stand to be any less than 90% stocks but I still have 10 - 20 years of earnings ahead.

This is a bit different though. I can understand having 100% stocks if I had 10-20 years or earnings ahead of me. You are just buying in down markets if the markets go down. It's like a bonus.

I'm say 3-4 years from retirement. I like having some bonds so that if the markets tank I can rebalance especially during the initial retirement years.