NFA?

But then you wouldn't be able to flex this car and people know how you made your $

permabull said:

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I say 100% stocks until you are 15-20 years away from retiring. Retiring early you will need more stocks bc the classic 60/40 is generally a 30 year retirement. So if you retire before 65 I would glide into a 70/30 portfolio and then as you go through retirement glide into 60/40 when you start collecting social security.

So no, 60/40 likely doesn't make any sense unless you are currently collecting social security

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Sounds about right. Currently at 21% bonds at 55 yrs old but would also consider moving some of that into stocks during a major drawback in the market. Pretty much all of my current mixed bag of broad market bonds were purchased when the 10 year was over 4%. I got a little more today in fact

Start moving towards 30% as I near 65 yrs old

Also will keep an eye on yields. Much of the 2000s, yields were worthless

Asset allocation in the current environment is very confusing to me. Currently 55 with a target allocation of 7.5% cash, 12.5% bonds, 7.5% REITs, 7.5% alternative (includes PE and Bitcoin), 45% large cap, 10% midcap/small cap, and 10% international equity.

I really don't know how to think about risk right now with national debt, inflation, crypto, AI, and geopolitical stuff.

txaggie_08 said:

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Sounds pretty high on bonds, unless you're close to retirement and pretty risk averse.

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every single bond fund I have been in the last two years is showing a loss

I can't imagine tying up hundreds of thousands of dollars in something that not only loses ground to inflation, but literally goes negative as an investment!

Agreed but some 401ks don't have an option outside of equities other than a broad spectrum bond fund. My wife's is like this.

OldArmyCT said:

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I'm 78 and have never bought a bond fund in my life. I take RMD's every year, my account today is maybe 80% higher than it was when I retired (2018).

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Second this.

Bonds lower volatility, but historical data actually shows 100% equities outperforms a mixed portfolio in all cases I've been able to find.

Binds just lower volatility so the dips are smaller which helps some people sleep better.

If you follow the 3-4% drawdown guidance, 100% equities beat bonds.

If the volatility causes you to lose sleep, or temps you to trade or sell in bear markets and big pull backs, then maybe consider bonds.

You can also lower volatility by holding a S&P500 utility sector ETF instead of bonds.

Equity market volatility for retirees or someone approaching retirement is only an issue if there aren't sufficient cash reserves to rely on in the event of unfortunate timing.

Bonds pay fixed income in a world where costs are constantly rising. If your income isn't rising too then you either eventually run out of money or greatly diminish your legacy.

Here's an episode recently of a podcast I follow that discusses how to build an alternative to the 60/40 portfolio. The guest, who I'm vaguely familiar with, indicates it historically supports a 5% withdrawal rate.

If I recall it's 42% stocks, 26% bonds (interim and long term), 16% gold, 10% managed futures fund, and 6% cash.

More info here, this is the Golden ratio portfolio:

https://www.riskparityradio.com/portfolios

jamey said:

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Is this investment strategy still valid or old school


If not, what is a more modern strategy?

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I was 90% stocks during my working/saving years. Now in retirement, I'm 60/40 and sleep well at night with a good return. I rebalance yearly and I have 6 asset classes for stocks and 3 asset classes for bonds. My bond allocation is:

7yr TIPS 50%
7yr International Gov Bonds Unhedged 25%
Short Term / Money Markets 25%

pfo said:

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The purchasing power of the dollar has fallen 10.8% so far this year. With the debt and deficit being out of control and our Congress being unwilling to reduce spending, I would think bonds would be a very poor investment.

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My international bonds (as well as stocks) have outperformed this year. USD falling

LMCane said:

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txaggie_08 said:

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Sounds pretty high on bonds, unless you're close to retirement and pretty risk averse.

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every single bond fund I have been in the last two years is showing a loss

I can't imagine tying up hundreds of thousands of dollars in something that not only loses ground to inflation, but literally goes negative as an investment!

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SCHP Total Return (7/19/23-7/18-25) = 8.1%


SCHP is Schwab U.S. TIPS ETF

Unless you're retired or getting close to it, I probably wouldn't worry too much about bonds.

If you're chasing total returns and maximum growth, they are just going to be a drag. Until the economy slows, that translates to a drop in stocks, and that's when you're happy you own some bonds.

JohnClark929 said:

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jamey said:

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Is this investment strategy still valid or old school


If not, what is a more modern strategy?

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I was 90% stocks during my working/saving years. Now in retirement, I'm 60/40 and sleep well at night with a good return. I rebalance yearly and I have 6 asset classes for stocks and 3 asset classes for bonds. My bond allocation is:

7yr TIPS 50%
7yr International Gov Bonds Unhedged 25%
Short Term / Money Markets 25%

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What are the different classes of equity? What funds do you use for those?

chris1515 said:

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JohnClark929 said:

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jamey said:

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Is this investment strategy still valid or old school


If not, what is a more modern strategy?

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I was 90% stocks during my working/saving years. Now in retirement, I'm 60/40 and sleep well at night with a good return. I rebalance yearly and I have 6 asset classes for stocks and 3 asset classes for bonds. My bond allocation is:

7yr TIPS 50%
7yr International Gov Bonds Unhedged 25%
Short Term / Money Markets 25%

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What are the different classes of equity? What funds do you use for those?

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My 6 equity asset classes are:

S&P500 37% (VOO)
Intl Stocks 25% (VXUS)
AI/Robotics 16% (Personal portfolio of 25 AI/Robotic stocks since I haven't found an ETF I like)
Value Stocks 8% (VTV)
REITS 8% (XLRE)
Small Cap 6% (VB)


BTW, I use the following for my bond funds:

SCHP
IGOV
VMFXX

BTW, TIPS really behave like regular treasuries when the Fed moves rates up to fight inflation or moves rates down to fight deflation/recession. The true value of TIPS is if the Fed decides to keep rates low during high inflation basically devaluing the USD; that is when TIPS will outperform regular treasuries and most asset classes for that matter. Just keep in mind, once the USD devalue event takes place, TIPS will be repriced to a very expensive level. That is why I choose to own some TIPS now, just in case.

JohnClark929 said:

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pfo said:

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The purchasing power of the dollar has fallen 10.8% so far this year. With the debt and deficit being out of control and our Congress being unwilling to reduce spending, I would think bonds would be a very poor investment.

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My international bonds (as well as stocks) have outperformed this year. USD falling

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Great point! And the dollar's fall should continue once US interest rates fall. I too have increased my ownership of foreign companies for the same reason.

' And the dollar's fall should continue once US interest rates fall.'

Absolutely! Especially if the Fed drops those rates as inflation is running hot.

From reading through all the replies, I think many posters have recency bias where events and financial markets have been unusual to say the least.

There is definitely some recency bias. But, there is also a recency variable of the current debt levels with no slow down in deficits anywhere in sight. What does that mean to the optimal asset allocation moving forward? If I knew that, I would become a rich man....

JohnClark929 said:

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From reading through all the replies, I think many posters have recency bias where events and financial markets have been unusual to say the least.

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Explain to me how financial markets have been unusual

Depends on the individual situation but the longer I think about it and the older I get the less I like having as much 40% outside of equities. I'm retired and I have 70% in equity based investments and I had as much as 90% when I was in my working years.

Lately I got out of bonds and put that moolah into JEPI.

Is it more risky...sure.

Baby Billy said:

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JohnClark929 said:

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From reading through all the replies, I think many posters have recency bias where events and financial markets have been unusual to say the least.

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Explain to me how financial markets have been unusual

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ZIRP in effect 2008-2022. Times have been and are tough for working class Americans but not for higher income folks who invest money. Since the GFC, the investor class has enjoyed incredible low employment rates. When investors have income security like that, they can HODL, YOLO, etc...

Total Returns for past 15 years:
S&P500 - 660%
Nasdaq - 1,290%
Crypto/Meme Stock returns were astronomical

I was 90% stocks during those years including overweight tech, but I recognize this recent period as unusual and wouldn't assume these high consistent returns during the next 15 years. I'm retired now and more diversified. Like most investors, I'm worried about the USD, that is why my bond allocation is comprised of TIPS, Intl bonds unhedged, and very short term.

are US Government bonds T Bills treated better for tax purposes than other investments?

the Israel Government Emazal Tov 5 year Bond yield is currently 5.28% which is pretty great for a guaranteed no loss return.

Baby Billy said:

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JohnClark929 said:

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From reading through all the replies, I think many posters have recency bias where events and financial markets have been unusual to say the least.

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Explain to me how financial markets have been unusual

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Look up a guy named Howard Marks and read his memo titled "Sea Change". Or listen to him discuss it on the Oak Tree podcast. We've been in an unusual period for interest rates and fixed income, which impacted equities.

Bonds and stocks have traditionally been uncorrelated. That's changed now we believe and they've moved in lock step lately.

Aggie09Derek said:

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Not technically guaranteed

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I bought $5000 of the EMAZAL Israel Bonds at 5.28%

when you say "technically" do you mean that the government could just decide not to repay you?

or that Tel Aviv might be nuked and unable to pay.

the Israel Bonds salesman claims they have 9 billion in savings in case something happens to backstop all the bonds being redeemed.

Only backed as long as the government is around and wants to pay.

Suddenly feel less secure about my TIPS investments this afternoon. May have to find a better asset class, but will hold for now.

If it's long term in nature like More than five years. I'd look for other opportunities in private credit or asset back loans.