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I like lots of liquidity. 2008 saw banks cut or stop helocs. Losing A job and having all your extra money trapped in the house can be pretty miserable. Having at least bonds to sell can be very comforting
Cash buffers are a mental mirage .. over and over it has been shown they add no additional protection at all over either standard rebalancing between stocks and bonds or even heaven forbid spending down directly from 100% equities.
The reason is the lack of the weight of cash and bonds in up markets grows so much more that spending down in downturns is cushioned .
At the end of the day a 50/50 portfolio has a 95% success rate of getting through all 119 30 year cycles to date .. 100% equities has a 93% success rate ....
Using cash buffers is mentally comforting to our brains but it really is a case of the emperors new clothes.
Pretty much the cycles that caused 100% equities to fail also killed off 50/50 with and without cash buffers as well
Do you still have a mortgage? If so, I'd rather be paying off my mortgage than investing in bonds. I'd go 100% stocks in my 401k and pay off my mortgage with what would have been the bond allocation.
interesting.... yes I do have a mortgage. I can double up and it would be paid off when I retire. Good Advice.
Hello guys! I've been pretty aggressively risky with my 401K, because I started rather late (age 43). 98% in stocks with a 13% average rate of return since starting (2009) saving 15% of my income with a 2% match.
At what point should I scale down my risk. I keep hearing a recession is coming and I ideally would like to retire by age 60/62. What percentage of bonds/mutual fund is appropriate if I don't want to take a huge risk anymore or should I even change the allocation.
Thanks for your help.
Just to clarify, a mutual fund can invest in stocks or bonds or a mix of both. So I think you meant to say "what percentage of stocks/bonds".
Personally, I wouldn't be 98% in stocks. I just can't handle the volatility. At this point, I'd say you should at least be 20% in bonds. If you have a stable value fund in your 401, I'd use that as my bond portion. You don't have to move the money all at once, but I'd move at least some of it now...say go from 2% bonds to 5% tomorrow.
Just to clarify, a mutual fund can invest in stocks or bonds or a mix of both. So I think you meant to say "what percentage of stocks/bonds".
Personally, I wouldn't be 98% in stocks. I just can't handle the volatility. At this point, I'd say you should at least be 20% in bonds. If you have a stable value fund in your 401, I'd use that as my bond portion. You don't have to move the money all at once, but I'd move at least some of it now...say go from 2% bonds to 5% tomorrow.
Even 20% in bonds is still fairly aggressive.
You are absolutely correct. Thanks for the clarity!
Great advice!
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