General Discussion > Post-FIRE

What do you invest in during financial independence?

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greencooper:
My understanding is that with the target date funds that schwab or vanguard offer, the funds are mostly in bonds during retirement age, but that wouldnt have good returns since 4% withdrawl rule expects better return than what bonds would offer

So should target date funds be avoided if one wants to be financially independent? If so, should one invest in only index funds during financial independence?

Financial.Velociraptor:
I'm 60/40 but my 40-fixed income is mostly in closed end funds bought below NAV.  The munis are earning a little over 6% and the taxable are earning 8 to 12%.

AdrianC:
I looked up the Vanguard target date funds. The retire right now fund is about 40% stocks 60% bonds, but it’s aimed at 65-70 years olds. I think that’s too conservative for a younger retiree.

The usual advice is don’t put money in stocks you’ll need within five years. At a 4% withdrawal rate that implies a max allocation to stocks of 80%. Then you have about five years expenses in bonds. Vanguard Lifestrategy growth is a good choice for 80/20.

Dicey:

--- Quote from: greencooper on March 18, 2018, 04:36:02 PM ---So should target date funds be avoided if one wants to be financially independent? If so, should one invest in only index funds during financial independence?

--- End quote ---
You are aware that you're getting a little mixed up here? One can purchase bonds in index funds as well?

I personally feel bonds are somewhat overrated. I do not prize safety over growth. I want to retire early, but I don't want my money to. It works so I don't have to.

As you might guess, I am not a fan of target date funds, unless you tweak the dates to prevent excessive bond holdings-driven portfolio atrophy.

Eric:

--- Quote from: greencooper on March 18, 2018, 04:36:02 PM ---My understanding is that with the target date funds that schwab or vanguard offer, the funds are mostly in bonds during retirement age, but that wouldnt have good returns since 4% withdrawl rule expects better return than what bonds would offer

So should target date funds be avoided if one wants to be financially independent? If so, should one invest in only index funds during financial independence?

--- End quote ---

Which specific TDF are you looking at?  It should tell you exactly what the allocation is now and what it moves towards.  That way you don't have to guess.

But in general, of course you can hold bonds, even a lot of bonds, and still come out just fine with a 4% WR.  The original Trinity Study used a 50/50 stock/bond allocation.  The updated versions had multiple asset allocations that they tested, but there's little difference between them as long as you hold at least 50% stock.  A TDF could be fine for this.  If you think it's too conservative, then either pick one with a date further out or add more stock on the side.

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