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That's why I asked here. I knew what he was doing wasn't working, but I wasn't sure why. We have always heard "buy and hold" and that is what he was doing, and we understood that there would be some losses short term but in the long run it would (should) pay off. But I knew that other people WERE making money even in a down market and he wasn't, and that the econominc climate is different now than it used to be.
You said you knew there would be some losses in the short term.
Investing is for the long term. If you are too impatient or you cannot sleep at night then your asset allocation is off balance...you are invested too much in equities and should go more to a 40/60 mix of bonds/stocks or even 30/70......
I'm diversified however I have a heavy equity allocation in low cost mutual funds. I can sleep at night even w/this AA. I am definitely on track to retire when I plan to....
You said you knew there would be some losses in the short term.
Investing is for the long term. If you are too impatient or you cannot sleep at night then your asset allocation is off balance...you are invested too much in equities and should go more to a 40/60 mix of bonds/stocks or even 30/70......
I'm diversified however I have a heavy equity allocation in low cost mutual funds. I can sleep at night even w/this AA. I am definitely on track to retire when I plan to....
Different strokes....
I have no problem sleeping at night! But we did get used to the gains we saw in the 90s, and now to be putting $1000 a month in and the balance say the same despite that $1000 is kind of disheartening, especially now that we are a lot closer to retirement age than we were in the 90s.
especially now that we are a lot closer to retirement age
BINGO!
There's your problem.
As you get older and (I'm assuming) you are getting closer to withdrawing the money, you need to take some risk off the table.
That's what funds like "target retirement" funds do...they get more conservative as you get closer to your target retirment date (or whenever you set it up to start relying more on that....)
This is not the fault of the stock market or equities....equities are doing exactly what they are supposed to be doing.
You need to review your portfolio w/your husband...(and I recommend like the other poster said to get advice from the bogleheads forum.)
Is this your "stable" fund ..usually available only to 401K accounts. Your principal is protected with insurance and you earn interest and is not risky as compared to equities:
Guaranteed Portfolio FundFixed
If so put some money in that. IMO the market is too unstable right now and you can't be switching back and forth too often in the 401K investment options.
its never about age.. its only about your stomach for risk and buying assets as well as buying time.
what do i mean?
the worst thing that can happen to a retiree spending down is to sell into a loss.
what ray lucia calls the science of money is the fact that in over 100 years of history markets always recover.
the question is over what time frame?
the answer as it stands is 15 years. so far you would never have sold into a loss if you had 15 years of time.
so buying time is as important as buying assets.
even at 65 the money you have that you wont need for 15 to 30 years is still long term money and should be invested just the same as if you were 25.
think about this:
the odds of losing money in a bank after taxes and inflation over 15 years or more are just about 95% ,almost a guaranteed loss and you thought you were being safe.
the odds of not losing money 15 years out or more in the markets is 95%.
actually its been 100% but i never like to say never. its just the opposite of what those who want to play it safe are doing.
good planning means setting up a structure that allows you to assemble your money by time frame well in advance of retiring.
pre-retirement and retirement are no longer about growing richer,its all about not growing poorer and having our money last a lifetime.
no longer are we interested in maximizing every penny of gains , the entire rules of play change.
im 60 and my wife will be 62 , we are still working but we set up our structure 6 years ago.. did we lose alot of potential gains by having so much in cash and fixed income in buckets already ?
sure we did but we also watched 2008 unfold with about 28% in equities and watched more as a spectator than a participant even though we had 7 figures at risk.
we knew time would heal all,all we needed was a structure that bought time for our longer term money .
we follow a newsletter model portfolio so our exposure to equities changes ofton. we are at an all time low of about 18% right now but were 30% right up until yesterday when a change came down the pike.
up until we shifted 6 years ago to pre-retirement mode i was about 80% equities my entire investing life.
thats not to say we are 82% fixed income now either. the portfolio is very well mixed and can respond to any economic scenerio . the fixed income we do have is not very rate sensitive so its not a blood bath when rates rise.
there is no easy answer and it can take years to find a mix that works for you.
dont forget the less money you have the more aggressive you may need to stay to meet the income levels you need through retirement. if our nest egg wasnt what it is at this point i would never get the income we want having our equities position so low.
thats why there is no easy answer. its not as simple as wall street makes it where if your this age you should have this much in equities. its nothing like that crap they pass off to folks.
your age is the smallest criteria for setting up allocations.
what good is putting a 25 year old 80-100% in equities because he is young when he gets scared and bails out at every drop and loses money.
age based allocating is just stupid over simplified thinking that wall street hasnt learned from 2008 just doesnt work.
i have been working on an article for the wall street journal for a while now calling attention to just that fact,that age based allocating really has to stop.
Last edited by mathjak107; 07-03-2012 at 03:58 AM..
Age based allocation works for many many smart people for instance on the vanguard diehards forum. They are endorsed by jack bogle who knows a little about investing. Different strokes.....
some are not really aged based as much as goal based.
as i said what good is any aged based plan that has a 25 year old 100% in equities who has no stomach for risk.
on the other hand a 65 year old who doesnt mind risk, has other sources of income can be very aggressively invested ,especially if he has set aside 15 years of withdrawals in cash and fixed income..
when i talk of age based investing im referring to things like the 100 less your age should be equities or the way target date funds work.
target date funds are horrible ideas . just wait until all these retirees or those retiring that are almost all in bonds at the lowest rates get hit with a rate rise.
retirees will freak when their investments fall 8-10% as rates rise even 1%.
think about what these funds do . as you age they are loading up on more and more in bonds just at the wrong time for bonds. they look at age and not whats happening around them.
how many youngins bailed from their target funds in 2008 as they panicked and fled because the equities allocation was more than they could stand.?
there are some very good profiling tests brokerages can use but they cost money to buy the license for. these can get an idea of a persons risk tolerance and then mold an allocation to match that instead of their age which really is useless.
markets are more about time in the markets then timing the markets. finding the right,comfortable allocation that keeps you in the game all the time is paramount. anything that has you up at night worrying is the wrong allocation regardless of your age.
Last edited by mathjak107; 07-03-2012 at 07:58 AM..
Even in drawing mode they still have long term money to deal with. the money they have to eat in the next 15-30 years is still money that can be invested in funds as long as they have the pucker factor for the swings
To the OP, take everything in this thread with a gigantic grain of salt, as there is no sure thing in this market, and contrary to the rhetoric that plagues this board -- past performance does not guarantee future results.
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