A lot depends on how much of a safety net you have. Is the house paid off? Is there an inheritance at some point? Do you have a job where you can go back to work if needed? etc.
So right about the Target Date Funds. My 2015 fund allocation was below even my low risk tolerance. I followed Robs video and rebalanced using a 2 fund portfolio. Now I have the allocation I'm comfortable with. Thank you Rob for the help.
What are your thoughts on the type of bonds to hold? Short, intermediate, or long, treasury tips, or corporate, and in what percentage? I've been learning that long term treasuries might be the best for smoothing volatility because they are volatile and negatively correlated with stocks
Just rewatched this video after a month or so. The first time through, I let my bias interfere with content absorption. Great analysis of asset allocation. Our personal allocations parallel- I’m 80/20 now, with 15% of equities individual stock holdings (about 20). At 65, I don’t rebalance however
I am a believer of high risk investing to only big reputable companies, that have existed and have increased their dividends since late of 1800s. I think those big financial institutions wants us to invest in bonds, because they are actually using our money to invest in high risk stocks with higher returns for themselves . Just my thoughts. Thanks for sharing Rob. New subscriber from Canada
You are really helping me out here thank you. I feel like you are my personnal teacher about things that should have been taught at school. As a canadian I personnaly can't do everything as is, but it does help a lot. Luckily there is some tsx listed "wrappers" I can use to create a portfolio that makes sense.
The Vanguard portfolio returns--the income portfolios only go as high as 30 percent dividend stocks. But each ten percent increase in stocks, starting from zero, looks to be giving about a .5 percent increase in returns--at 100 percent of whatever dividend portfolio they were using, that should put it at 11 percent average annual return, well above the 100 percent growth stock annual return. It also looks like the income portfolio's worst year increases at a rate of 2 percent of portfolio per 10 percent increase in dividend stocks-that would put worst year around -28 percent versus -43.1 for the growth stocks.
In my situation I'm 40 years old and practically just starting out on my investing. I can only afford 150 a month and have about 3900 invested so far unlike alot of others that put hundeds away. So I have 100 percent in stock (3 fund index portfolio without bonds) even for my age because I feel the benefit will outweigh the risk right now with my low balance. I thought about adding bonds when my balance reaches a certain threshold or as I get closer to 50. I have still a good 25 years before retirement age and thinking I need to do some catching up. Any thoughts on if this is a good or maybe complely idiotic decision?
Read JL Collins "Simple Path to Wealth". The title says it all. Great resource to help you understand what is going on and more importantly the BEHAVIORS you MUST have or develop to be successful.
What's important is accounting for risk. A 100% stock portfolio is risky, but in your situation I would probably do the same - max out your potential gains while taking on some risk. It isn't until your portfolio becomes bigger that the risk of loss becomes large enough to consider bonds
60% in large caps 25% in mid cap fund 15% small caps Data show this diversified fund is all you need. Bonds are rubbish at your age and in this market. 0% in bonds.
I am very concerned about linking my investment accounts to a third party. So I use Morningstar portfolios to analyze potential allocations, etc. Also I realized my IRA account is way too complicated. I am going to convert to 3 fund portfolio you discussed in prior video with additional cluster of 15 or 20 Motley fool stocks representing 20% of total portfolio. Very impressed with your videos.
If calculators show, if I retire at 70 and I use 4% rule that the funds will last 25 yrs, don't I only need bonds to in the portfolio to counter inflation?
I think stock / bond % allocation is yesterday's news...old, oversold and incorrect. Here is my new one: Stay 100% in the financial markets, no in/out plan here. You like dividends, right? Let % float over time. No set basis in %. Work with dollar values. Keep 'x' dollars in bond account. When stocks go down 10% or more, sell bonds buy stock. When stock value returns, like 10% or more, sell stocks buy bonds. Over time, keep your 'x' dollars in the bond account stable. Let stock float. Needless to say, stocks will outperform bonds and stock % will rise on profit and over extended market swings brought on by traders. It is going well, pushing 80% stock allocation. I am 67 years old. I am not afraid of market drop, it is 'stocks on sale' time to me.
Not a terrible plan. The explanation does mischaracterize a 60/40 portfolio as not “100% in the financial markets”, but other than that the biggest flaw is having a bond allocation that is premised on a fixed dollar amount rather than as a percentage of the portfolio. As stocks outpace bonds over time, the plan’s risk exposure will rise (e.g., a 60/40 portfolio may become a 70/30 portfolio) which is the opposite of what people generally want as they get older. If you’re someone who isn’t concerned about continually rising risk exposure and volatility as you get older, just go for 100% equities from the beginning and leave it at that.
I use a sumilar plan with set points on how much to switch from bond to stock based on market decline levels. I also set similar set points based on stock market rises to sell stocks and accumulate bonds.
I’m 66 and retired. I’ve never owned bonds. When the market drops 50%, I’ll still have more than had I used a conventional mix during my working years.
I’m 65 and retired collecting SSI survivor benefits. My IRA with Vanguard is and has been 85% bonds because they push the 50/50 rationale on me. I’m just figuring out that the account I will touch last has made very little compared to what it could have had I increased the stock portion. And to beat all, I’ve been paying a PA since 2011. I could kick my own rear end.
What if you are 64 and just started investing 3 years ago and really need dividend income? I guess it's hard to avoid risk. Are there any high-yield Vanguard or Fidelity bonds you would recommend that do not insist on a $3,000 minimum investment? I am a new subscriber and enjoy your approach. Thank you.
You can buy similar ETFs in place of index funds to get around the $3,000 minimum investment requirement, an example would be Vanguard index fund VTSAX to its like ETF VTI. The only difference between them besides price is with index funds once you meet the minimum $3,000 investment you can add whatever amount thereafter $20, $50, $300 it's up to you, whereas with ETF's you have to pay the prevailing price of the ETF on the day of purchase should you want to add more shares. Ron has a great video regarding dividends and why you may not want to go that route.
You should keep in mind if you are an employee your work income is fixed income and if you are a business owner aka entrepreneur your work income is equity income. So when you retire you should rebalance based on the type of income you lost, right?
If i had a job i whould have high stock allocation and when i retire i whould sell stocks and buy bonds before i anounse it to the boss. If i had a business i whould have a high bonds allocation to my public portfolio and when i sell my company i whould buy stocks
Rob if one is following a bucket stradegy with say couple years living expenses along with a pension can someone be more aggresive even if there 5 years from retirement any thoughts?
I'm a few years away from retirement but in a similar situation. Will have a good pension and a couple years cash so that is my bond fund. For my portfolios I'm gonna stay aggressive longer and convert as much as I can before taking SS.
Great analysis. I generally like target date funds. I use them in some of my set and forget accounts, but I like to do the allocation adjustment myself. I like to rebalance my portfolio based on the market environment. For example, the market is at all time highs and extremely overvalued by several metrics right now. I have 20 years left and I’ve chosen to rebalance to 70/30 vs 80/20 for the time being. A target date fund only goes on time horizon and doesn’t factor in anything else.
@@DavidEVogel I definitely try to avoid market timing as I know that’s a fools errand. However, I’m also a realist. It’s hard to ignore the Schiller P/E and Buffett indicators, signaling extreme overvaluation. Tie that in with all the tell tale signs of a bubble(cheap credit, increasing debt, euphoric sentiment towards the market, crypto hype, meme stocks, inflation, insane housing market, the fed printing money with reckless abandon, 18 year old day traders using the casino robinhood app, etc, etc). I’ll never advise trying to time the market, but from what I’m seeing, and having lived through past crashes, it’s definitely time to rebalance and be cautious. This feels a lot like the 2000 dot com era to me, and as you sarcastically pointed out, I could be completely wrong about my outlook. Keep on buying your overpriced mutual funds….diamond hands….stocks to the moon🚀🚀🚀🚀….best of luck with that🙄
Hi Rob, I've enjoyed your videos and have learned a ton from them. Question:. When you pay a financial advisor their fee of say 1 percent to manage a mutual fund, do you also generally pay the expense ratio? Thanks
I note from the comments a lot of people invested with Vanguard. Does Schwab have comparable index funds? I’m considering a move to Schwab so I can go into their office rather than rely on random people at Vanguard.
The old rule of thumb is age equals fixed-income securities. Age 60 you should be 60% fixed-income securities and 40% equities. Funny how these rules change over time depending on if we are in a bull or bear market.
@Rob do you like Personal Capital Wealth Management Investment strategies? for an example 70/30 portfolio: in 70% of equity only holds on about 70 stocks, Is that risky?
Since I manage our own investments, I don't use their wealth management services. I just use their free financial dashboard. In terms of a 70/30 portfolio, I think that's a reasonable approach for a long-term investor. It's not the only approach, but within what i believe to be reasonable. Is it risky? Well if by risk you mean can it lose money in the short-term, absolutely it can.
So this popped up on my list because of the algorithim in 2024. And I noticed that it was from 2022 when interest rates were extremely low. If in 2022 you moved from a 95% equities 5% bond ratio/ to an even 70% equities 30% bond allocation, Two very bad things would have occurred. First, as interest rates rose, especially if you use a bond fund vs buying actual bonds, you would have your portfolio DROP in value. Sutstantially if you purchased long term bonds. Second, you would have left equities, in a year when equities popped, thus you lost a good portion of the potential gain. This is why I HATE age related allocation advice. Much more important is what the interest rates are relative to the mean. If they are low, and cant go much lower, like 2021-2022. Moving into fixed intruments is just fool hardy. On the other hand, if rates are high and likely will drop, it could be a good time to lock in returns. In 2024? I think a toss up.
Good morning, would you consider Wellesley (VWIAX) a bond asset class, what about REIT's? I am 61, husband 67, both still working, hoping to retire in 4 years. Trying to get my asset class allocations in order. As of now between our 2-401k's and 1- HSA, we have 58% stock 10%REIT 20% bond &16% target funds. Thank you, I am learning a lot from your channel, and loved your book easy to read and under stand. Planning to give to my kids, trying to instill some of the financial wisdom I did't get growing up. (I put VWIAX in bond)
I use Wellesley as my bond holding and to get some Large cap value in my portfolio, then I add a stock fund to round out the equity portion. If you wanted a 70/30 portfolio you could do 50% Wellesley and 50% VTSAX for example.
I really struggle with this topic as I’m now in my mid 40s and have now amassed a sizable amount of $$ in investments . Do I not want my $$$ to be more so in stocks to capitalize on compounding interest (over time)? I really don’t want to think about backing down my 90/10 mix until I’m just at my retirement date. As in, literally a year or two before I decide I want to retire. My logic anyways and I plan to have 12 months of expenses banked up all the way to that date in something a tad bit more conservative.
At least part of the motivation for including bonds has centered around the idea of rebalancing, namely if the stock market is down, annual rebalancing will result in the sale of bonds to restore the balance. The problem, at least of late, is that bonds are no longer negatively correlated with the stock market. Any thoughts on the use of US treasuries as an alternative to bonds?
@@rudged123 True. When stock valuations fall I expect investment grade and high yield corporate bonds will also fall as will emerging market debt. Developed market sovereign bonds, especially US Treasuries should rise or at least not fall as much as equities. If the Fed raises interest rates to prevent inflation then everything falls but shorter dated Treasuries will be hit less.
If you have the large index funds The total market FSKAX 30% 500 index FAAIX 40% International FZILX 10% Balanced FBALX 10% Crypto 3% Bonds Treasury 7% age 62 starting retirement Since already very diversified the idea of moving to higher bonds while less risk would leave me risking no growth while withdrawing and possibly running out I do not think we will have a huge stock market crash and if it were to occur, a move to cash and wait out until correction. Your thoughts?
May you please do video on annuities? I’ve hit that age when my portfolio ( 1 mil) is attracting annuity sales with the bait click of secured income for life. While secure income for life sounds good; I e done well self managing and
May you please do video on annuities? I’ve hit that age when my portfolio ( 1 mil) is attracting annuity sales with the bait click of secured income for life. While secure income for life sounds good; I e done well self managing . Am I gambling by staying in market? Should I turn my money over for annuity and security?
Thanks for this. I’m always most curious about retiring early and how this methodology applies. For me I’m targeting retiring by 55 and assume the avg life span to late 80’s. It is difficult to reduce allocation knowing there are 30 yrs of investing time
I am in a similar boat. Currently 100% equities indexed. Once I hit my "number" i will re-allocate to 70% stock and 30% bonds. My plan is to have 10% of that bond money earmarked for when the market tanks (say 20% plus decline) and buy the crash. The other 20% will stay in bonds so I can live off them for multiple years without touching the stocks when the market is in the tank. Also, don't underestimate the power of picking up a part-time gig you ENJOY at some point during all of this. A lousy 10k a year gig equates to an additional 250k in your portfolio (250k x .04%= 10k) applying the 4% rule.
@@philhoffman7361 I'm 60, retired at 48. My current asset allocation is 97% stock & 3% bonds. During a stock crash, I'll take out a $100,000 personal loan at 6%? interest rate. I have $2,000,000 invested.
Why do yo think target date funds are designed with an overly conservative allocation in retirement? They have intelligent people designing these funds so there must be some sound logic behind it.
Watch his '4% Rule' videos. Basically, the 4% rule assumes mostly stocks, and a large bond percentage just doesn't have a high-enough average return to sustain retirement in some cases.
@@SKITTLELA Yup. I am aware of the 4% rule. It starts with something like a 50/50 stock/bond allocation so I am wondering why target date funds get more conservative than that in the retirement phase. I don't think target date funds are designed for the 4% rule.
I don't believe it can help you with accounts at other brokerages. And if you mean 401k, those are through your employer, so M1 can't help. You can roll over a 401k to an IRA at M1 once you leave your job.
With the current, as well as the past three U.S. Presidents printing money in huge amounts, why should we thing that the bond market is safer than the stock market?
No. Bonds are cancer to your portfolio and inflation will just eat away at it. Even if you retire at age 30, you still have another 40-50 years or more of life left. That's a lot of gains you could be missing out of, so I would still be 100% in stocks.
"I'm trying to go down to 70/30, but stocks just keep going up and up". This strategy has worked well for you, but as someone coming into investing late in the game, and with valuation north of 30X earnings or more, do you think it's prudent to even start at 70/30 in 2024? In other words, Bogle admitted to being 20/80 due to overvaluation at one time. I am having a hard time ignoring the irrational exuberance of DOW 40,000 and coming in 80/20 at this time. Is there a time when 50/50 makes sense for a season?
A lot depends on how much of a safety net you have. Is the house paid off? Is there an inheritance at some point? Do you have a job where you can go back to work if needed? etc.
So right about the Target Date Funds. My 2015 fund allocation was below even my low risk tolerance. I followed Robs video and rebalanced using a 2 fund portfolio. Now I have the allocation I'm comfortable with. Thank you Rob for the help.
Loved the behind-the-scenes of your filming set up. Very cool! It's evident you put a lot of work into ensuring your videos are of high quality.
What are your thoughts on the type of bonds to hold? Short, intermediate, or long, treasury tips, or corporate, and in what percentage? I've been learning that long term treasuries might be the best for smoothing volatility because they are volatile and negatively correlated with stocks
Get and index bond fund and be done with it. VBTLX for example.
Just rewatched this video after a month or so. The first time through, I let my bias interfere with content absorption. Great analysis of asset allocation. Our personal allocations parallel- I’m 80/20 now, with 15% of equities individual stock holdings (about 20). At 65, I don’t rebalance however
I am a believer of high risk investing to only big reputable companies, that have existed and have increased their dividends since late of 1800s. I think those big financial institutions wants us to invest in bonds, because they are actually using our money to invest in high risk stocks with higher returns for themselves . Just my thoughts. Thanks for sharing Rob. New subscriber from Canada
You are really helping me out here thank you. I feel like you are my personnal teacher about things that should have been taught at school. As a canadian I personnaly can't do everything as is, but it does help a lot. Luckily there is some tsx listed "wrappers" I can use to create a portfolio that makes sense.
I would not own Wells Fargo anymore because of what they did to their employees and customers.
Agree. Cost my Grandma 65% downfall because of fund churning to get commission.
Great info! I really enjoy your videos and guidance. Keep up the great work!
The Vanguard portfolio returns--the income portfolios only go as high as 30 percent dividend stocks. But each ten percent increase in stocks, starting from zero, looks to be giving about a .5 percent increase in returns--at 100 percent of whatever dividend portfolio they were using, that should put it at 11 percent average annual return, well above the 100 percent growth stock annual return. It also looks like the income portfolio's worst year increases at a rate of 2 percent of portfolio per 10 percent increase in dividend stocks-that would put worst year around -28 percent versus -43.1 for the growth stocks.
Very valuable advice. You are a gem. Thank you.
I wonder what your thoughts are about this for 2023?
Good stuff, subscribed
Helpful info! Thank you!
In my situation I'm 40 years old and practically just starting out on my investing. I can only afford 150 a month and have about 3900 invested so far unlike alot of others that put hundeds away. So I have 100 percent in stock (3 fund index portfolio without bonds) even for my age because I feel the benefit will outweigh the risk right now with my low balance. I thought about adding bonds when my balance reaches a certain threshold or as I get closer to 50. I have still a good 25 years before retirement age and thinking I need to do some catching up. Any thoughts on if this is a good or maybe complely idiotic decision?
Read JL Collins "Simple Path to Wealth". The title says it all. Great resource to help you understand what is going on and more importantly the BEHAVIORS you MUST have or develop to be successful.
What's important is accounting for risk. A 100% stock portfolio is risky, but in your situation I would probably do the same - max out your potential gains while taking on some risk. It isn't until your portfolio becomes bigger that the risk of loss becomes large enough to consider bonds
IMO, the S&P500 is the only fund you need. When you get closer to 60, you can then think about moving some money to a bond fund.
60% in large caps
25% in mid cap fund
15% small caps
Data show this diversified fund is all you need. Bonds are rubbish at your age and in this market. 0% in bonds.
@@rogerdoger9939I'm in a similar situation. Being from Argentina can't save enough... For the moment being I'm investing in an S&P ETF.
I am very concerned about linking my investment accounts to a third party. So I use Morningstar portfolios to analyze potential allocations, etc. Also I realized my IRA account is way too complicated. I am going to convert to 3 fund portfolio you discussed in prior video with additional cluster of 15 or 20 Motley fool stocks representing 20% of total portfolio. Very impressed with your videos.
I also use Morningstar portfolio for my mutual funds. Fast updates at the end of each trading day. And its free.
If calculators show, if I retire at 70 and I use 4% rule that the funds will last 25 yrs, don't I only need bonds to in the portfolio to counter inflation?
I think stock / bond % allocation is yesterday's news...old, oversold and incorrect. Here is my new one: Stay 100% in the financial markets, no in/out plan here. You like dividends, right? Let % float over time. No set basis in %. Work with dollar values. Keep 'x' dollars in bond account. When stocks go down 10% or more, sell bonds buy stock. When stock value returns, like 10% or more, sell stocks buy bonds. Over time, keep your 'x' dollars in the bond account stable. Let stock float. Needless to say, stocks will outperform bonds and stock % will rise on profit and over extended market swings brought on by traders. It is going well, pushing 80% stock allocation. I am 67 years old. I am not afraid of market drop, it is 'stocks on sale' time to me.
Oh so you are a market timer. Best of luck.
Yes, a market crash is a huge sale in the stock market, but what if the US stock market stops growing?
@@DavidEVogel no he's not, he's invested in the market and is a value cost averaging investor
Not a terrible plan. The explanation does mischaracterize a 60/40 portfolio as not “100% in the financial markets”, but other than that the biggest flaw is having a bond allocation that is premised on a fixed dollar amount rather than as a percentage of the portfolio. As stocks outpace bonds over time, the plan’s risk exposure will rise (e.g., a 60/40 portfolio may become a 70/30 portfolio) which is the opposite of what people generally want as they get older. If you’re someone who isn’t concerned about continually rising risk exposure and volatility as you get older, just go for 100% equities from the beginning and leave it at that.
I use a sumilar plan with set points on how much to switch from bond to stock based on market decline levels. I also set similar set points based on stock market rises to sell stocks and accumulate bonds.
I’m 66 and retired. I’ve never owned bonds. When the market drops 50%, I’ll still have more than had I used a conventional mix during my working years.
I’m 65 and retired collecting SSI survivor benefits. My IRA with Vanguard is and has been 85% bonds because they push the 50/50 rationale on me. I’m just figuring out that the account I will touch last has made very little compared to what it could have had I increased the stock portion. And to beat all, I’ve been paying a PA since 2011. I could kick my own rear end.
@Rob Berger - can social security replace the bond portion of my retirement portfolio?
What if you are 64 and just started investing 3 years ago and really need dividend income? I guess it's hard to avoid risk. Are there any high-yield Vanguard or Fidelity bonds you would recommend that do not insist on a $3,000 minimum investment? I am a new subscriber and enjoy your approach. Thank you.
You can buy similar ETFs in place of index funds to get around the $3,000 minimum investment requirement, an example would be Vanguard index fund VTSAX to its like ETF VTI. The only difference between them besides price is with index funds once you meet the minimum $3,000 investment you can add whatever amount thereafter $20, $50, $300 it's up to you, whereas with ETF's you have to pay the prevailing price of the ETF on the day of purchase should you want to add more shares. Ron has a great video regarding dividends and why you may not want to go that route.
You can invest with Fidelity with $1. There are many Bond funds to choose from.
This Vanguard paper is no longer available. A different paper comes up.
You should keep in mind if you are an employee your work income is fixed income and if you are a business owner aka entrepreneur your work income is equity income. So when you retire you should rebalance based on the type of income you lost, right?
If i had a job i whould have high stock allocation and when i retire i whould sell stocks and buy bonds before i anounse it to the boss.
If i had a business i whould have a high bonds allocation to my public portfolio and when i sell my company i whould buy stocks
Rob if one is following a bucket stradegy with say couple years living expenses along with a pension can someone be more aggresive even if there 5 years from retirement any thoughts?
I'm a few years away from retirement but in a similar situation. Will have a good pension and a couple years cash so that is my bond fund. For my portfolios I'm gonna stay aggressive longer and convert as much as I can before taking SS.
When getting close to retirement would a Wellesley or Wellington Vanguard fund be a good move.
Great Question. I'll do a video covering this.
@@tintinet between 1999 to 2019 Wellesley out preformed the Vanguard 60/40 balanced fund. Wellington beat both of them.
I wouldn't recommend investing to much in bonds. It will destroy your growth potential.
Great analysis. I generally like target date funds. I use them in some of my set and forget accounts, but I like to do the allocation adjustment myself. I like to rebalance my portfolio based on the market environment. For example, the market is at all time highs and extremely overvalued by several metrics right now. I have 20 years left and I’ve chosen to rebalance to 70/30 vs 80/20 for the time being. A target date fund only goes on time horizon and doesn’t factor in anything else.
You can always change the target date fund for greater stock allocation
Oh so you are a market timer. Best of luck.
@@DavidEVogel I definitely try to avoid market timing as I know that’s a fools errand. However, I’m also a realist. It’s hard to ignore the Schiller P/E and Buffett indicators, signaling extreme overvaluation. Tie that in with all the tell tale signs of a bubble(cheap credit, increasing debt, euphoric sentiment towards the market, crypto hype, meme stocks, inflation, insane housing market, the fed printing money with reckless abandon, 18 year old day traders using the casino robinhood app, etc, etc). I’ll never advise trying to time the market, but from what I’m seeing, and having lived through past crashes, it’s definitely time to rebalance and be cautious. This feels a lot like the 2000 dot com era to me, and as you sarcastically pointed out, I could be completely wrong about my outlook. Keep on buying your overpriced mutual funds….diamond hands….stocks to the moon🚀🚀🚀🚀….best of luck with that🙄
@@happytravels2480 ...and I could be completely wrong about MY outlook.
Hi Rob, I've enjoyed your videos and have learned a ton from them. Question:. When you pay a financial advisor their fee of say 1 percent to manage a mutual fund, do you also generally pay the expense ratio? Thanks
Yes you do. Some managers can avoid a front or back loaded fee but never heard of not paying the management fee
I note from the comments a lot of people invested with Vanguard. Does Schwab have comparable index funds? I’m considering a move to Schwab so I can go into their office rather than rely on random people at Vanguard.
Yes. Schwab does have great index funds that are comparable to Vanguard.
@@mockensl thanks I’ve transferred my accounts. Going to invest the IRA in something other than 90% bond holdings.
The old rule of thumb is age equals fixed-income securities. Age 60 you should be 60% fixed-income securities and 40% equities.
Funny how these rules change over time depending on if we are in a bull or bear market.
You have it backwards.
What about when cash funds like SPAXX are returning 5% and PE is 31?
@Rob do you like Personal Capital Wealth Management Investment strategies? for an example 70/30 portfolio: in 70% of equity only holds on about 70 stocks, Is that risky?
Since I manage our own investments, I don't use their wealth management services. I just use their free financial dashboard. In terms of a 70/30 portfolio, I think that's a reasonable approach for a long-term investor. It's not the only approach, but within what i believe to be reasonable. Is it risky? Well if by risk you mean can it lose money in the short-term, absolutely it can.
So this popped up on my list because of the algorithim in 2024. And I noticed that it was from 2022 when interest rates were extremely low. If in 2022 you moved from a 95% equities 5% bond ratio/ to an even 70% equities 30% bond allocation, Two very bad things would have occurred. First, as interest rates rose, especially if you use a bond fund vs buying actual bonds, you would have your portfolio DROP in value. Sutstantially if you purchased long term bonds. Second, you would have left equities, in a year when equities popped, thus you lost a good portion of the potential gain. This is why I HATE age related allocation advice. Much more important is what the interest rates are relative to the mean. If they are low, and cant go much lower, like 2021-2022. Moving into fixed intruments is just fool hardy. On the other hand, if rates are high and likely will drop, it could be a good time to lock in returns. In 2024? I think a toss up.
Good morning, would you consider Wellesley (VWIAX) a bond asset class, what about REIT's? I am 61, husband 67, both still working, hoping to retire in 4 years. Trying to get my asset class allocations in order. As of now between our 2-401k's and 1- HSA, we have 58% stock 10%REIT 20% bond &16% target funds. Thank you, I am learning a lot from your channel, and loved your book easy to read and under stand. Planning to give to my kids, trying to instill some of the financial wisdom I did't get growing up. (I put VWIAX in bond)
I use Wellesley as my bond holding and to get some Large cap value in my portfolio, then I add a stock fund to round out the equity portion. If you wanted a 70/30 portfolio you could do 50% Wellesley and 50% VTSAX for example.
I really struggle with this topic as I’m now in my mid 40s and have now amassed a sizable amount of $$ in investments . Do I not want my $$$ to be more so in stocks to capitalize on compounding interest (over time)? I really don’t want to think about backing down my 90/10 mix until I’m just at my retirement date. As in, literally a year or two before I decide I want to retire. My logic anyways and I plan to have 12 months of expenses banked up all the way to that date in something a tad bit more conservative.
45 years old. You are a young buck, and can recover from any bear market. 100% equities for you. Go for the gold.
😊 12:39 😊
At least part of the motivation for including bonds has centered around the idea of rebalancing, namely if the stock market is down, annual rebalancing will result in the sale of bonds to restore the balance. The problem, at least of late, is that bonds are no longer negatively correlated with the stock market. Any thoughts on the use of US treasuries as an alternative to bonds?
US Treasuries are US government bonds.
@@george6977 Yes, but for index investors, there is a distinction to be made between an bond index fund and actual treasuries
@@rudged123
True. When stock valuations fall I expect investment grade and high yield corporate bonds will also fall as will emerging market debt. Developed market sovereign bonds, especially US Treasuries should rise or at least not fall as much as equities.
If the Fed raises interest rates to prevent inflation then everything falls but shorter dated Treasuries will be hit less.
Hear of stop loss orders? Gives cash to start $ cost averaging back in near the bottom.
If you have the large index funds
The total market FSKAX 30%
500 index FAAIX 40%
International FZILX 10%
Balanced FBALX 10%
Crypto 3%
Bonds Treasury 7%
age 62 starting retirement
Since already very diversified
the idea of moving to higher bonds while less risk would leave me risking no growth while withdrawing and possibly running out
I do not think we will have a huge stock market crash and if it were to occur, a move to cash and wait out until correction. Your thoughts?
May you please do video on annuities? I’ve hit that age when my portfolio ( 1 mil) is attracting annuity sales with the bait click of secured income for life. While secure income for life sounds good; I e done well self managing and
May you please do video on annuities? I’ve hit that age when my portfolio ( 1 mil) is attracting annuity sales with the bait click of secured income for life. While secure income for life sounds good; I e done well self managing . Am I gambling by staying in market? Should I turn my money over for annuity and security?
Look at the S&P 500 return for 2000, 2001, 2002. Can you handle this happening to your portfolio?
Thanks for this. I’m always most curious about retiring early and how this methodology applies. For me I’m targeting retiring by 55 and assume the avg life span to late 80’s. It is difficult to reduce allocation knowing there are 30 yrs of investing time
I am in a similar boat. Currently 100% equities indexed. Once I hit my "number" i will re-allocate to 70% stock and 30% bonds. My plan is to have 10% of that bond money earmarked for when the market tanks (say 20% plus decline) and buy the crash. The other 20% will stay in bonds so I can live off them for multiple years without touching the stocks when the market is in the tank. Also, don't underestimate the power of picking up a part-time gig you ENJOY at some point during all of this. A lousy 10k a year gig equates to an additional 250k in your portfolio (250k x .04%= 10k) applying the 4% rule.
@@vanguardvaluist2614 I like your approach.
@@philhoffman7361 I'm 60, retired at 48. My current asset allocation is 97% stock & 3% bonds. During a stock crash, I'll take out a $100,000 personal loan at 6%? interest rate. I have $2,000,000 invested.
Rising equity glide path?
Why do yo think target date funds are designed with an overly conservative allocation in retirement? They have intelligent people designing these funds so there must be some sound logic behind it.
Watch his '4% Rule' videos. Basically, the 4% rule assumes mostly stocks, and a large bond percentage just doesn't have a high-enough average return to sustain retirement in some cases.
@@SKITTLELA Yup. I am aware of the 4% rule. It starts with something like a 50/50 stock/bond allocation so I am wondering why target date funds get more conservative than that in the retirement phase. I don't think target date funds are designed for the 4% rule.
@@johnyjsl9219 Yeah, I don't think they are. TDRFs basically assume you'll die a few years after you retire, haha.
Can M1 assist me with allocation in all my fidelity account including 491k. I read that it can't
I don't believe it can help you with accounts at other brokerages. And if you mean 401k, those are through your employer, so M1 can't help. You can roll over a 401k to an IRA at M1 once you leave your job.
Not sure but you can certainly figure out percentages yourself.
With the current, as well as the past three U.S. Presidents printing money in huge amounts, why should we thing that the bond market is safer than the stock market?
Because in a typical bear market investors will sell equities and buy fixed-income securities.
120 - age = out living your money
Say you retire at 30- Would you do 70-30?
No. Bonds are cancer to your portfolio and inflation will just eat away at it. Even if you retire at age 30, you still have another 40-50 years or more of life left. That's a lot of gains you could be missing out of, so I would still be 100% in stocks.
"I'm trying to go down to 70/30, but stocks just keep going up and up". This strategy has worked well for you, but as someone coming into investing late in the game, and with valuation north of 30X earnings or more, do you think it's prudent to even start at 70/30 in 2024? In other words, Bogle admitted to being 20/80 due to overvaluation at one time. I am having a hard time ignoring the irrational exuberance of DOW 40,000 and coming in 80/20 at this time. Is there a time when 50/50 makes sense for a season?
6.1% return from 100% bonds? Really?
No. That's not true. Inflation is going to erode all the gains. Bonds are cancer to your portfolio.
The four percent rule is silly. Not one person is ever going to follow it
My uncle does. He has been for several years now.
What about hedging inflation/losses with covered call etfs like qyld/xyld vs bonds?
No a fan. Covered calls require guesses about the short term prices of stocks/etfs, and nobody can consistently do this, IMO
Bonds are broken
Bonds 🤮