Down goes the Dow

Bummbull wrote:

If you’re long term investor and have sound portfolio, stay the course.

I repeat, stay the course.

If you are a buy and hold stock investor, and within five years of retirement, you would be wise to revisit your financial plan. Better to adjust your risk exposure at market high, then be forced to revise your retirement date, or future spending dreams. Unfortunately at market highs many are retiring early, assuming rates of return will replicate the last ten years. Two truths of financial plans are longevity risk and sequence of return in the withdrawal phase.

Ghost of Igloi wrote:

Bummbull wrote:

If you’re long term investor and have sound portfolio, stay the course.

I repeat, stay the course.

If you are a buy and hold stock investor, and within five years of retirement, you would be wise to revisit your financial plan. Better to adjust your risk exposure at market high, then be forced to revise your retirement date, or future spending dreams. Unfortunately at market highs many are retiring early, assuming rates of return will replicate the last ten years. Two truths of financial plans are longevity risk and sequence of return in the withdrawal phase.

If you’re within 5 years of retirement, you should have already planned to reduce risk and stick to your plan.

If you retired early at market highs, then your plan needs to change accordingly to reduce risk.

Retiring early and still counting on replicating recent market returns to live off of is quite foolish. Not sure if this is straw man argument as I don’t know too many people who would do this.

Usually when you retire, your nest egg is large enough to live off of and your goal is to preserve your wealth more than trying to accumulate at the same rate as while you’re working.

Reference, see page 7 chart: Sequence of Return Risk:

https://moshemilevsky.com/wp-content/uploads/2018/02/WHITEPAPER_2.pdf

agip wrote:

Vix still below 20 - quite low.

Which suggests we still have a good ways to fall.

I wouldn't expect the market to bounce much until VIX 25 at a minimum.

Can't even get backwardation ( inverted ) at the front end.

See article, and there are others, one reason for labor shortages:

https://news.yahoo.com/fat-401-ks-causing-people-to-retire-early-oxford-economics-202802644.html

Ghost of Igloi wrote:

See article, and there are others, one reason for labor shortages:

https://news.yahoo.com/fat-401-ks-causing-people-to-retire-early-oxford-economics-202802644.html

That kind of labor is easily replaceable. No one is bemoaning the lack of overpaid middle-managers who haven't done anything in years but would cost too much to fire. You can easily replace them usually from within the company.

A much more significant driver, in my opinion, is that the available labor is spread too thinly across too many businesses, about 30% of which (at least) probably shouldn't exist anymore. There's way too many faux blockchain/AI/bullsh!t start ups, too many restaurants and Starbucks and knick-knack shops, and too many grocery/food delivery apps. Those places should have been btfo'd by a recession which keeps the economy running efficiently.

America has always been a place where the free market decides winners and losers, except after the Great Recession it was decided that everyone would be a winner. So congrats boomers - you all managed to create a participation award economy.

Advisors, as well as pension managers, go further out the risk curve on account of low yielding safe Treasuries. Some advisors even recommending lower allocation to bonds in the retirement phase. The risk taking is there, encouraged by unprecedented fiscal and monetary policies. All of which would be turned upside down with market interest rates, or higher inflation.

If that’s the case and your money is being managed taking unnecessary risks at retirement, I would not recommend.

Anyways, I’d be staying the course. Of course, if you have fringe cases like what Iggy is bringing up, then staying the course may be bad.

Or, if you’re stock picking and changing investments everyday, there’s not really any course to stay on.

Ghost of Igloi wrote:

Bummbull wrote:

If you’re long term investor and have sound portfolio, stay the course.

I repeat, stay the course.

If you are a buy and hold stock investor, and within five years of retirement, you would be wise to revisit your financial plan. Better to adjust your risk exposure at market high, then be forced to revise your retirement date, or future spending dreams. Unfortunately at market highs many are retiring early, assuming rates of return will replicate the last ten years. Two truths of financial plans are longevity risk and sequence of return in the withdrawal phase.

There was an interesting investing article in the NY Times this week and it put forth an emerging belief among some financial planners that the time to most invested in stocks is actually for the young and for the old. It is not too hard to understand the young portion, but the new line of thinking as those in the later portion of retirement will likely have a fixed income portion of their portfolio to rely upon in the terms or social security benefits and/or a pension (in some cases). So, though individual circumstances must always take precedent, it may very well be the case that those receiving a defined S.S. benefit may allow them the freedom to be slightly more weighted towards stock exposure with the remainder of their portfolio.

And interestingly, they called upon data to support their contention that investors should not rely upon stocks "reliably" going up in the long run, by any means.

Article, an opinion piece, stemming from a new book by an economist, coming out this week:

You can thank Congress and the Fed for participation economy. We can all rest assured that millennials have created a decentralized economy where no one works, trading crypto and stocks to one another. Meanwhile AOC and her minions in the Squad engineer MMT to benefit those that fit the woke profile. The remaining racist population will be subservient to right thinking peoples, and relegated to manual labor.

Bummbull wrote:

Ghost of Igloi wrote:

Advisors, as well as pension managers, go further out the risk curve on account of low yielding safe Treasuries. Some advisors even recommending lower allocation to bonds in the retirement phase. The risk taking is there, encouraged by unprecedented fiscal and monetary policies. All of which would be turned upside down with market interest rates, or higher inflation.

If that’s the case and your money is being managed taking unnecessary risks at retirement, I would not recommend.

Anyways, I’d be staying the course. Of course, if you have fringe cases like what Iggy is bringing up, then staying the course may be bad.

Or, if you’re stock picking and changing investments everyday, there’s not really any course to stay on.

I've seen some interesting research lately that finds the only time to be light on stocks is the few years before and after retirement. Otherwise, there is more risk from not making enough money than there is from falling stocks.

I wonder if this kind of research is reliant on the last 20 or 13 years of great returns...that when returns regress to the mean stocks won't be as 'safe.'

and, of course, each investor is a human being not a statistic, and playing the odds rather than protecting what you have...can put you on the street. Point is, one big investing failure is all it takes to ruin a person, even if the odds say he did the right thing. I'd probably rather stick with more bonds in retirement than the math suggests, just to preserve wealth in the face of black swans.

this, for ex, if you can get through the paywall

hah this was what I was referring to along with the WSJ piece I linked to.

still, I do wonder if the data are too dependent on recent high returns. If we hit another 10 year period of negative real returns...maybe this kind of research will find a different, and less friendly to stocks, result.

My personal hero:

After decades of investing, Rashmi Doshi, a 69-year-old retired telecommunications executive in the San Diego area, regularly monitors his portfolio only four times a year. Each time he prepares his estimated quarterly income taxes, Mr. Doshi uploads his investment account values into a spreadsheet. There, he checks their returns over the prior three months and the past one, three and five years.

If any holding has moved at least 5% outside the target Mr. Doshi has set for it, he either buys or sells as needed to get it back in balance. More often than not, he does nothing. “Most of the gyrations are just noise,” he says, “and as a radio-frequency engineer, I’m used to dealing with noise.”

What does Mr. Doshi do when the portfolio drops 30% between reviews?

Ghost of Igloi wrote:

What does Mr. Doshi do when the portfolio drops 30% between reviews?

"he either buys or sells as needed to get it back in balance"

I think it’s fine to reduce your risk in retirement, and go higher in bonds, but still hold equity.

Yea, there’s definitely risk of not making as much for holding too much bond, and it depends on the individual’s circumstances. I guess my view is that if you’re in retirement, you’ve won the game and have accumulated enough to do what you want in retirement. It doesn’t matter if you make another million or not.

If you’re still having to rely during retirement for you to make significant gains to stay afloat, that’s a different scenario.

Anyways, my whole point was more to someone who’s still in the accumulation phase and to stay the course. Don’t get spooked or try to time the correction. More money is lost preparing for correction than correction itself.

agip wrote:

Ghost of Igloi wrote:

What does Mr. Doshi do when the portfolio drops 30% between reviews?

"he either buys or sells as needed to get it back in balance"

Yea, mr Doshi gets it. By always rebalancing, he’s always able to buy low and sell high.

Importance of asset allocation.

I tend to favor this line of thought. And I started reading your WSJ article, Agip, yes, it was this is sounding familiar...

The real value of the NY times Opinion piece strategy is simply this: Consider the role of a defined benefits component in your later retirement years and adjust your allocations with that as a starting point. But just because it might allow for a higher bias towards equities, it doesn't mean that doing so would be preferred or preferable for the individual investor, as Bumbull noted.

And I wouldn't underestimate the formidable costs of assisted living facilities, nursing homes, etc., and the impact that will have on even the most respectable of retirement nest-eggs. I say that with the understanding that few of us will know if that is in our future, and if so, for how long.