All the negativity is already priced in!
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I’m currently pessimistic as well. But still parked in S&P. If I could time the market I’d be making way, way more money than I am.
That said, with an 11-figure cash hoard still on its balance sheet, Buffett and Munger clearly have a lot of dry powder left over and are hardly endorsing an all-in approach to investing in today’s markets. As Mr. Munger recently explained:
In my whole adult life, I have never hoarded cash, waiting for better conditions. I’ve just invested in the best thing I could find…[Berkshire isn’t buying anything] because there’s nothing we can stand buying.
I’m curious at what ages anybody started moving away from stocks to plan for stability and retirement?
Right now I’m still 100% in stocks but I’m young enough this doesn’t bother me. I know there’re arguments for auto-rebalancing with at least a small amount of bonds, but I’m just here to ride the tides for the near future. Perhaps by 40 I’ll start considering going 10 or 20% into bonds.
I read a rule of thumb that suggested you should put your age % in fixed income which I thought was kind of fun.
Practically speaking I think any time horizon over 10-15 years is effectively long enough to just do 100% equity. When I’m 10-15 years from thinking I’ll need the money I imagine I’ll do some steady increase in fixed income (1/10 or 1/15) each year till retirement
maybe (age - 15)%. Assuming people start having income at age 20
I like this. There’s never been a decade where bonds outperformed equities, iirc. All of the work I’ve seen around the Trinity study types of analysis show that 50% bonds isn’t great if your horizon is decades. There might be a little benefit to 10-25% bonds, and/or holding some cash instruments early in retirement to minimize sequence of returns risk.
And that’s my plan, move to 10-20% bonds when I retire. I may additionally save up an extra cushion of 1-2 years worth of expenses and hold them in CDs or whatever. And if the market doesn’t tank then DCA that into investments at whatever allocation.
Any Chicken Little you hear from me right now is focused on the next 2 years or so. My long-term target certainly isn’t a 50/50 mix either. During most of my 40’s there has been so little yield that it has pushed me to remain 100% stocks. Now that yield is back and assets look pricey, it’s like 2023 is the year I more than make up for that and swing farther than expected towards bonds. I do think that 75/25 seems about right for my risk tolerance now generally, but I’m happy to hunker down and swing to 50/50 or 25/75 right now.
That’s about what I’m thinking as well. I’m hoping to retire no later than 60, hopefully more like 55-57, so maybe I’ll wait till more like age 45 to start creeping the bonds in.
Either way, planning to die with a few hundred thousand in the bank, so if I do live longer then it’s all good, if not then my partner or kid get a nice boost.
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I’m pretty sure this post carries with it the cheerful ring of sarcasm, but the S&P did find 3.3% more negativity on Thursday and Friday alone.
I will give this a shot.
- Put in £30k into Education fund
- Put £60k into Pension (maxes out annual now)
- Start saving liquid a bit (currently zero deposits)
(Not a big fan of cash because you are losing 10% of the value per year. I usually do have money in liquid money market funds). Given current liquidity problems in the wider economy I do think I need to have a bit of cash around. - Burning a lot of funds on travel (£40k/year). Going to see if I can bring this down a bit as prices have gone through the roof in Europe. Happy if I can reduce that to £30k/year. Will aim for this, but its tough to convince the wife that we don’t need to travel that much (little one is older now (3) so she does more activities. Travel is not really boosting her development much more at this point).
Mostly I am using my pension contributions to drive down my taxable income as much as possible (tax rates in the UK are awful if you are a high earner). My main long-term expenses are all educational really so am planning on taking the 25% tax free lump sum from my pension pot (Lifetime limit was also just raised in the UK to £1.8M) to pay for undergraduate, postgraduate etc in the US/UK/Canada.
I am not really aiming for a retirement age. Whenever I feel I am bored of it all I will stop (I have a properties coming my way via inheritance that I can sell/rent/whatever so have a cushion regardless). But that “age” could be at 70 for all i know so we will see how it goes.
Lifestyling (moving from equity to bonds) also carries risks as we are seeing right now.
Both equities and bonds are getting hit. The consensus in financial risk is that this “rare” phenomenon (historically-speaking), won’t be so rare moving forwards so I would be careful with a bond portfolio closer to retirement.
Not sure how it works in the US, but targetting companies that offer a reasonably safe dividend is a good diversification option as well (also usually more tax effective).
Damn that’s a lot of traveling.
rich parents come through
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We spent $20k on travel in 2018 I think (for three people), and I felt like that was a good amount of that! We dropped it back to like $10k-$12k.
Well sure, if the bonds have little or no yield when you buy them, then the risk that interest rates normalize and the value tanks. I’d rather invest directly in Treasury bonds and get the higher yield, investing in a bond fund makes me think I’m going to get lower yield bonds that are declining in value.
I was originally shooting for 50, but I don’t have an inheritance I can count on. As that age approached, I decided I’d keep going until the aggravation/PITA parts of the job exceeded the parts I enjoyed. I wound up hitting that not too long past 50.
Once the kid is 2 or over they stop being “cheap” when you travel due to air fares (child less than 2 is 10% of adult ticket with a 2-12 child being 75% (minimum) to 100% of adult ticket).
Europe is stupidly expensive right now. You are basically paying 2x what you did in 2019 for the same holiday. I don’t feel like we are getting any value for money now so looking to reduce that a bit.
Travel prices are pretty crazy here too. Maybe not quite 2x what it was in 2019 but it’s expensive. Still trying to figure out where we might go this year. Was hoping for South America but prices are super high now.
Tried to sell the family on a trip to Acadia National Park but it wasn’t well received!
Their loss as Acadia is gorgeous!
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