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Time to get more conservative with your investments. Just moved my retirement accounts from 100% in a 2050 lifecycle fund to 75% in a 2030 lifecycle fund and 2

Time to get more conservative with your investments. Just moved my retirement accounts from 100% in a 2050 lifecycle fund to 75% in a 2030 lifecycle fund and 25% in just government bonds. Not all investment vehicles have a "lifecycle" fund but its intent is to be appropriately conservative for a target date. As the date grows closer, the fund gets more conservative in order to lessen the risk of sudden swings right before you retire. I don't recommend day-trading, or liquidating all your investments, or anything like that. However, if there's a professionally managed fund with the specific goal of being stable along the timeframe of 11 years, I'm gonna take it.

jermaustin1 7y ago
I'm 40% in cash, 50% in S&P and 10% in small-cap. The last few months, all of my contributions have been going into cash, so that when the fall happens, I can hopefully scoop up a deal.
- wil421 7y ago
  Let’s talk in 10 years and see if your cash will beat my S&P allocation.
  - Retric 7y ago
    It’s about diversification and timing the market not simply holding cash for 10 years. I also just sold some stock, but I am still 75% in stocks.
    - dboreham 7y ago
      "and timing the market" Hmm. Isn't that known to be impossible?
      - leetcrew 7y ago
        not impossible, but very unlikely for a layman. it's like trying to win a 1v1 against an NBA player.
        Retric 7y ago
        Depends on what you mean by timing the market. Several strategies like keeping a fixed ratio of stocks to bond are effectively timing the market. You pull money out of stocks when they go up, and put money into them when they go down. Personally, I am less interested in absolutely maximizing my returns as I am maximizing the likelihood of reaching a return threshold.
        wil421 7y ago
        Timing the market is exactly what you said about saving cash. Changing your asset allocations based on age or other milestones is not timing the market in any way. It’s reducing risk if you are about to retire. Changing your asset allocation yearly or quarterly based on news is foolish. I’d call that timing too.
        Retric 7y ago
        As I said a fixed asset ratio is timing the market. The expected returns for socks are higher than bonds, it’s rebalancing that makes fixed ratios a good idea. As to changing asset ratios, it likely reduces maximum returns. But, wealth has diminishing marginal utility. I can save a little more to make up for a small loss in returns for a few years, it’s much harder to make up for a 50% market dip.
        refurb 7y ago
        A fixed ratio like rebalancing? That’s not really timing the market as you typically rebalance after a set period regardless of how the market has moved.
        Retric 7y ago
        But you still money money the opposite of how the market moved. Rebalancing is really taking money out of whatever the better investment was and putting it into what was the worse investment. Consider what would happen if you rebalance an asset like a stock that’s slowly going to 0. Over time your portfolio also hits ~zero even if everything else was going well. Sure, for a sufficiently diversified investment like the S&P 500 it’s unlikely to hit zero. But the question stands why take money out of the better investment for 50+ years? You could be moving from 10% returns to 2% returns. The theory is about timing the market, you get better returns investing after ups than downs. PS: Though better may in fact relate to stability more than absolute percentages.
    - wil421 7y ago
      Warren Buffet made the same bet, S&P 500 vs some hedge funds. From 2007 to 2017 S&P gained 7.1% vs 2.2% for the hedge funds. The hedge funds arguably know more than you.
      - Retric 7y ago
        The hedge fund must have been doing a different strategy as I did much better than 7.1% from 2007 to 2017. Left at 1500 got back in at 930 and then ignored the market for 10 years.
        hylaride 7y ago
        The bet was for returns AFTER fees, though. S&P was its return minus 0.05%/yr (or whatever it is for vanguard). The hedge funds was their returns (which did suck compared to the S&P500 IIRC) minus 2%/yr plus 20% of final profits.
        wil421 7y ago
        For the individual investor Buffetts advice was still right. Unless you have millions or billions to manage.
    - WillDaSilva 7y ago
      As a person who isn't in any way confident in my ability to time the market, I think I'll stick to the old adage of time in the market not timing the market.
  - andreilys 7y ago
    Well if this was Nov 1999 (one year before the crash), S&P 500 was at $1.4k, so it would've taken you 14 years for your position to be in the green again
    - ahelwer 7y ago
      Now do this experiment with reinvesting dividends instead of just looking at the chart.
      - BozeWolf 7y ago
        Additionally you should not spend all your money buying stocks at once. Spreading it across those 14 years would have been quite profitable.
      - andreilys 7y ago
        27% return over 14 years with dividends reinvested (1.86% annualized)[1]. Although when we calculate it with inflation its -7% and -0.5% annualized. Not exactly a compelling argument since you could've made a risk-free return via savings accounts (Wealthfront currently has 2.3%, which I'm sure has been higher in the past). [1] Nov 1999 one year prior to crash, to Nov 2012 https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/
  - mywittyname 7y ago
    Yup. I "called" the recession in 2017 and spent 2016 building cash reserves instead of investing. I was wrong.
  - jermaustin1 7y ago
    I just sold half of my holdings to have cash for the inevitable dip thats coming
- deleted 7y ago
  [deleted]
- marcusverus 7y ago
  There’s nothing wrong with trying to buy a dip... so long as you know that you’ve left off investing and started gambling instead.
- turk73 7y ago
  If you're under age 50, don't fucking bother. Just buy S&P 500 and leave it there. Small caps are such bs as are most mutual fund and ETF offerings. Don't take my word for it. Go over to portfolio visualizer and compare your allocation to a simple 1 fund S&P 500 at 100%, compare over 30 years and draw your own conclusions. I'm not recommending a 1 fund portfolio, btw, but that you do that as a basis for comparison. As far as cash goes, have 3-6 months of expenses available not in a brokerage but in a bank account, checking, or actual cash. Waiting to "scoop up a deal" is a shitty strategy.
whateveryou381 7y ago
Why does low or negative yield bonds mean that you are going to be ok with govt bonds? This is exactly the problem, where bonds are no longer providing interest payments. I agree that being more conservative is probably necessary, however I think other than specific investments and... burying your cash might be the "conservative" options. Bonds were those, and no longer are now.
- rolltiide 7y ago
  The bond interest payments are separate from the value of the bond. Which you can sell back at a greater premium and faster than even worrying about maturity. This is the greatest bull market in bonds of all time and they are starting to behave like cheap deep in-the-money options contracts, which decline slightly in value over time due to theta (time value). Options are fun.
  - pmart123 7y ago
    I’m not sure how I get your logic? I do think the US bond yields have a large discrepancy versus other developed market yields, but convexity greater increases as yields fall towards zero. So how is that behavior similar to a deep ITM option?
    - rolltiide 7y ago
      the only similarity is that a deep ITM option is an asset that decreases in value in one way while gaining in value in another way, due to the same forces. a negative yielding bond - or a bond going towards negative yield - decreases in value one way while gaining in a value another way, the more it gains in value the deeper the negative yield goes.
- dragontamer 7y ago
  > This is exactly the problem, where bonds are no longer providing interest payments. If interest rates drop even more, the value of bonds go up. Right now, a 1.68% 10-year bond looks like it sucks. But next year, a 1.68% 9-year bond will beat the pants off of a 1.3% 10-year. You can sell a 1.68% 9-year bond for a lot more money when everyone else only has 1.3% 10-year bonds. If the 10-year drops to 1%, you'll make even more money. A falling interest rate market benefits those who buy bonds, especially if no one knows where the bottom is.
davedx 7y ago
Or cash out what you can and wait for the dip to reinvest... Personally I'm sitting tight, but that's because I'm a long term investor not a day trader.
- criddell 7y ago
  I missed the big downturn twelve years ago because I procrastinated. My 401k money was in some fund that was no longer being offered, so the money was transferred into a currency fund (I don't recall what it was). I kept meaning to move it to an index fund, but never got around to it and then the market dropped. A year later I did the transfer and as a result I did very well. I haven't touched it since but now with yield curve warnings popping up, I'm starting to think I should.
refurb 7y ago
I'd disagree with this approach. If your target retirement date really is 2050, you have more than enough time to weather a downturn in the market. The key problem with timing the market is it's easy to miss out on the recovery. Most people get back in once the recovery is obvious and the big gains have already happened. During 2008 I tried to put my money where my mouth was and not touch my investments. My portfolio went down by 35% (several hundreds of thousands). But I was in at the bottom. However, it recovered in less than 2 years and is now up about 250%, mainly because I was fully invested during all the big gains.

jermaustin1 7y ago

I'm 40% in cash, 50% in S&P and 10% in small-cap. The last few months, all of my contributions have been going into cash, so that when the fall happens, I can hopefully scoop up a deal.

wil421 7y ago
Let’s talk in 10 years and see if your cash will beat my S&P allocation.
- Retric 7y ago
  It’s about diversification and timing the market not simply holding cash for 10 years. I also just sold some stock, but I am still 75% in stocks.
  - dboreham 7y ago
    "and timing the market" Hmm. Isn't that known to be impossible?
    - leetcrew 7y ago
      not impossible, but very unlikely for a layman. it's like trying to win a 1v1 against an NBA player.
      - Retric 7y ago
        Depends on what you mean by timing the market. Several strategies like keeping a fixed ratio of stocks to bond are effectively timing the market. You pull money out of stocks when they go up, and put money into them when they go down. Personally, I am less interested in absolutely maximizing my returns as I am maximizing the likelihood of reaching a return threshold.
        wil421 7y ago
        Timing the market is exactly what you said about saving cash. Changing your asset allocations based on age or other milestones is not timing the market in any way. It’s reducing risk if you are about to retire. Changing your asset allocation yearly or quarterly based on news is foolish. I’d call that timing too.
        Retric 7y ago
        As I said a fixed asset ratio is timing the market. The expected returns for socks are higher than bonds, it’s rebalancing that makes fixed ratios a good idea. As to changing asset ratios, it likely reduces maximum returns. But, wealth has diminishing marginal utility. I can save a little more to make up for a small loss in returns for a few years, it’s much harder to make up for a 50% market dip.
        refurb 7y ago
        A fixed ratio like rebalancing? That’s not really timing the market as you typically rebalance after a set period regardless of how the market has moved.
        Retric 7y ago
        But you still money money the opposite of how the market moved. Rebalancing is really taking money out of whatever the better investment was and putting it into what was the worse investment. Consider what would happen if you rebalance an asset like a stock that’s slowly going to 0. Over time your portfolio also hits ~zero even if everything else was going well. Sure, for a sufficiently diversified investment like the S&P 500 it’s unlikely to hit zero. But the question stands why take money out of the better investment for 50+ years? You could be moving from 10% returns to 2% returns. The theory is about timing the market, you get better returns investing after ups than downs. PS: Though better may in fact relate to stability more than absolute percentages.
  - wil421 7y ago
    Warren Buffet made the same bet, S&P 500 vs some hedge funds. From 2007 to 2017 S&P gained 7.1% vs 2.2% for the hedge funds. The hedge funds arguably know more than you.
    - Retric 7y ago
      The hedge fund must have been doing a different strategy as I did much better than 7.1% from 2007 to 2017. Left at 1500 got back in at 930 and then ignored the market for 10 years.
      - hylaride 7y ago
        The bet was for returns AFTER fees, though. S&P was its return minus 0.05%/yr (or whatever it is for vanguard). The hedge funds was their returns (which did suck compared to the S&P500 IIRC) minus 2%/yr plus 20% of final profits.
        wil421 7y ago
        For the individual investor Buffetts advice was still right. Unless you have millions or billions to manage.
  - WillDaSilva 7y ago
    As a person who isn't in any way confident in my ability to time the market, I think I'll stick to the old adage of time in the market not timing the market.
- andreilys 7y ago
  Well if this was Nov 1999 (one year before the crash), S&P 500 was at $1.4k, so it would've taken you 14 years for your position to be in the green again
  - ahelwer 7y ago
    Now do this experiment with reinvesting dividends instead of just looking at the chart.
    - BozeWolf 7y ago
      Additionally you should not spend all your money buying stocks at once. Spreading it across those 14 years would have been quite profitable.
    - andreilys 7y ago
      27% return over 14 years with dividends reinvested (1.86% annualized)[1]. Although when we calculate it with inflation its -7% and -0.5% annualized. Not exactly a compelling argument since you could've made a risk-free return via savings accounts (Wealthfront currently has 2.3%, which I'm sure has been higher in the past). [1] Nov 1999 one year prior to crash, to Nov 2012 https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/
- mywittyname 7y ago
  Yup. I "called" the recession in 2017 and spent 2016 building cash reserves instead of investing. I was wrong.
- jermaustin1 7y ago
  I just sold half of my holdings to have cash for the inevitable dip thats coming
deleted 7y ago
[deleted]
marcusverus 7y ago
There’s nothing wrong with trying to buy a dip... so long as you know that you’ve left off investing and started gambling instead.
turk73 7y ago
If you're under age 50, don't fucking bother. Just buy S&P 500 and leave it there. Small caps are such bs as are most mutual fund and ETF offerings. Don't take my word for it. Go over to portfolio visualizer and compare your allocation to a simple 1 fund S&P 500 at 100%, compare over 30 years and draw your own conclusions. I'm not recommending a 1 fund portfolio, btw, but that you do that as a basis for comparison. As far as cash goes, have 3-6 months of expenses available not in a brokerage but in a bank account, checking, or actual cash. Waiting to "scoop up a deal" is a shitty strategy.

whateveryou381 7y ago

Why does low or negative yield bonds mean that you are going to be ok with govt bonds? This is exactly the problem, where bonds are no longer providing interest payments. I agree that being more conservative is probably necessary, however I think other than specific investments and... burying your cash might be the "conservative" options. Bonds were those, and no longer are now.

rolltiide 7y ago
The bond interest payments are separate from the value of the bond. Which you can sell back at a greater premium and faster than even worrying about maturity. This is the greatest bull market in bonds of all time and they are starting to behave like cheap deep in-the-money options contracts, which decline slightly in value over time due to theta (time value). Options are fun.
- pmart123 7y ago
  I’m not sure how I get your logic? I do think the US bond yields have a large discrepancy versus other developed market yields, but convexity greater increases as yields fall towards zero. So how is that behavior similar to a deep ITM option?
  - rolltiide 7y ago
    the only similarity is that a deep ITM option is an asset that decreases in value in one way while gaining in value in another way, due to the same forces. a negative yielding bond - or a bond going towards negative yield - decreases in value one way while gaining in a value another way, the more it gains in value the deeper the negative yield goes.
dragontamer 7y ago
> This is exactly the problem, where bonds are no longer providing interest payments. If interest rates drop even more, the value of bonds go up. Right now, a 1.68% 10-year bond looks like it sucks. But next year, a 1.68% 9-year bond will beat the pants off of a 1.3% 10-year. You can sell a 1.68% 9-year bond for a lot more money when everyone else only has 1.3% 10-year bonds. If the 10-year drops to 1%, you'll make even more money. A falling interest rate market benefits those who buy bonds, especially if no one knows where the bottom is.

davedx 7y ago

Or cash out what you can and wait for the dip to reinvest... Personally I'm sitting tight, but that's because I'm a long term investor not a day trader.

criddell 7y ago
I missed the big downturn twelve years ago because I procrastinated. My 401k money was in some fund that was no longer being offered, so the money was transferred into a currency fund (I don't recall what it was). I kept meaning to move it to an index fund, but never got around to it and then the market dropped. A year later I did the transfer and as a result I did very well. I haven't touched it since but now with yield curve warnings popping up, I'm starting to think I should.

refurb 7y ago

I'd disagree with this approach. If your target retirement date really is 2050, you have more than enough time to weather a downturn in the market. The key problem with timing the market is it's easy to miss out on the recovery. Most people get back in once the recovery is obvious and the big gains have already happened. During 2008 I tried to put my money where my mouth was and not touch my investments. My portfolio went down by 35% (several hundreds of thousands). But I was in at the bottom. However, it recovered in less than 2 years and is now up about 250%, mainly because I was fully invested during all the big gains.