Down goes the Dow

I’m sorry, but that article doesn’t apply. It’s too simplistic and overly aggressive with distributions.

Now, how about your strategy?

Financial Advisor wrote:

Before reading that article, I’d never heard of a retirement strategy with only two buckets. Every example I’ve encountered has always used at least three buckets and this article supports that idea.

And what responsible advisor would ever suggest a retiree withdraw 9% per annum?

Igy, maybe now you can offer your strategy for an average 65 year old retiree?

FA,

Sure. At CURRENT valuations and in the DISTRIBUTION phase:

5% cash

10% US Equity

10% International Equity

10% Intermediate Bonds

45% Short Term Bonds

5% Senior Floating Rate Loans

5% Managed Futures

10% Multi-Hedged Strategy

I fully intend to reduce short term bonds in favor of equity over the completion of the market cycle. This portfolio is growing faster than a 4% distribution rate with little risk of plan failure.

Interestingly the managed futures position would have been the largest performance drag until recently. And managed futures was one of the top asset classes in the last two bear markets.

Just my thoughts on an average 65 year old in the distribution phase. Of course so many other variables to consider.

Igy

You fools! Only a barbell portfolio will survive what's coming.

1. When do you believe we will see the completion of the market cycle?

2. Why do you think this is better than what FA mentioned?

Ghost of Igloi wrote:

5% cash

10% US Equity

10% International Equity

10% Intermediate Bonds

45% Short Term Bonds

5% Senior Floating Rate Loans

5% Managed Futures

10% Multi-Hedged Strategy

Igy

Why would you think being in this allocation for the past 3 years would be better than being much heavier into equities and moving to this allocation today?

mellon wrote:

Ghost of Igloi wrote:

5% cash

10% US Equity

10% International Equity

10% Intermediate Bonds

45% Short Term Bonds

5% Senior Floating Rate Loans

5% Managed Futures

10% Multi-Hedged Strategy

Igy

Why would you think being in this allocation for the past 3 years would be better than being much heavier into equities and moving to this allocation today?

Simple answer, it was not the same allocation three years ago.

wondering wrote:

1. When do you believe we will see the completion of the market cycle?

Closer than it was a week ago. If the market continues to move higher portfolio equities will continue to be trimmed in favor of bonds and alternatives.

2. Why do you think this is better than what FA mentioned?

FA did not define his allocation. I am assuming the Igy portfolio has a much better chance of compounding at a faster rate over a full market cycle.

Ghost of Igloi wrote:

wondering wrote:

1. When do you believe we will see the completion of the market cycle?

Closer than it was a week ago. If the market continues to move higher portfolio equities will continue to be trimmed in favor of bonds and alternatives.

2. Why do you think this is better than what FA mentioned?

FA did not define his allocation. I am assuming the Igy portfolio has a much better chance of compounding at a faster rate over a full market cycle.

1. But if you’re moving from bonds to equities through the completion of the cycle, don’t you need to know when the cycle will end?

2. So you’re just guessing?

Valuation gives you an indication when the cycle will end. Look at it this way, at age 65 if you have accumulated your retirement portfolio, you have more to lose than to gain. The greater risk of guessing is in the FA plan, which assumes the next year will be like the last 130 years.

Of course if you are 30 and you have $10,000 in savings, little of this matters.

Ghost of Igloi wrote:

Valuation gives you an indication when the cycle will end. Look at it this way, at age 65 if you have accumulated your retirement portfolio, you have more to lose than to gain. The greater risk of guessing is in the FA plan, which assumes the next year will be like the last 130 years.

Of course, if you are 30 and you have $10,000 in savings, little of this matters.

I found this article by Vanguard Mutual Funds very informative. They seem to call into question the ability to use valuation as indicative of performance cycles. And i quote:

"We’ve shown that forecasting stock returns is a

difficult endeavor, and essentially impossible in the

short term. Even over longer time horizons, many

metrics and rough “rules of thumb” commonly

assumed to have predictive ability have had little

or no power in explaining the long-run equity return

over inflation"

Full article "Forecasting stock returns: What signals matter, and what do they say now?" :

The Vanguard piece is typical of what one would expect to see from a long only investment firm. A very common piece of literature. It is pretty clear stock and bond valuations are among the highest levels in history. Quite a bit higher than March of 2009 when the S&P 500 retreated to 1995 levels. Now one can assume that $16 Trillion of Central Bank liquidity has created a permanently high plateau for stocks, or one can have a more skeptical view.

Seattle,

Here is a much more relevant piece, with rather unpleasant conclusions over the short run.

http://www.fasanara.com/investment-outlook-03052017

Remember, the worst investment environment is at peak valuations, and these things can be measured. The best investment opportunities come at trough valuations. How do you learn the difference? Be informed, educate yourself, read.

If one feels differently or believes it doesn’t matter. Fine. I am just offering my view and points to consider.

Igy

Ghost of Igloi wrote:

The Vanguard piece is typical of what one would expect to see from a long only investment firm. A very common piece of literature. It is pretty clear stock and bond valuations are among the highest levels in history. Quite a bit higher than March of 2009 when the S&P 500 retreated to 1995 levels. Now one can assume that $16 Trillion of Central Bank liquidity has created a permanently high plateau for stocks, or one can have a more skeptical view.

So they experienced a downturn that temporarily erased a few years of gains. Stock markets fluctuate. Importantly, and this is the point, where have they gone since then?

Igy, it's not too late to abandon your losing strategy. It's early in the year in what's sizing up to be a very good one. Nothing drastic, just dip your toe in.

Seattle,

Take the time to read the Fasanara piece, about 45 minutes of careful reading.

Igy

Ghost of Igloi wrote:

Seattle,

Take the time to read the Fasanara piece, about 45 minutes of careful reading.

Igy

if it ain't broke, don't fix it. Sorry.

Seattle,

OK.

Financial plans do fail, never to be fixed again.

Best wishes though.

Igy

Ghost of Igloi wrote:

The greater risk of guessing is in the FA plan, which assumes the next year will be like the last 130 years.

That is a very unfair assessment of the plan I discussed. In fact, it is the polar opposite of what I outlined. Why would I recommend an asset buffer, if I think the market will constantly be on the rise?

On the other hand, I find some questionable strategies associated with what you outlined.

same to you, Igy.

I do feel confident in being able to cut my losses if it should become necessary.

At the moment, i do have a bit more cash on the sidelines available to capitalize on a downturn if one should arise.

I never liked bonds, treasuries, etc. and stil don't.

Any thoughts on earnings from the tech. big boys announcing this week? Apple, Google, Amazon, Facebook, Microsoft?

Netflix was a blowout about a week ago.

I'm expecting good things, and I've had good luck in past quarters adding to positions just prior to the release of earnings.