agip wrote:
danube steak wrote:
I wouldn't start selling my equity funds until about early 60s if even then. You figure you are going to live to around 75 or 80 or older and that is just too young to be getting rid of those funds.
I can understand that argument.
but
In my work I've seen enough 50-60 year old people get into job crises that I start to think some bonds when they hit 50.
When you lose a job in your 50s, even in this booming job market, it becomes very hard and rare to replace your income 100%.
Are you familiar with the sequence of returns problem? If you lose your job and start taking money out of a portfolio in a bear market, even if you use the 4% rule prudently, your net worth will likely be permanently impaired. Early returns in the withdrawal phase are almost unrecoverable. Even if the market recovers well.
It's an interesting phenomenon that only shows itself when withdrawals are made. Otherwise sequence of return doesn't matter.
Owning some bonds is an insurance policy - it is likely a financial loser but it can help a lot if things go wrong.
I think this is a very prudent and advisable approach, and one that i am very glad that gets disseminated here for the greater good.
I believe there are reasons why an investor might take different approaches, like if their margins are sufficient to withstand a market downturn without having to liquidate at a particularly depressed price, but those cases would be the outlier rather than the norm.