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Author: IEABarry Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19021  
Subject: defined benfit -- bond equivalent Date: 12/27/1999 9:56 PM
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I have been calculating portfolio asset allocations using [expected] defined benefit payments as a bond equivalent. This allows me to be less conservative in equity allocations. Anyone see a problem with this point of view/strategy?
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1156 of 19021
Subject: Re: defined benfit -- bond equivalent Date: 12/28/1999 12:39 PM
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Greetings, IEABarry, and welcome

<<I have been calculating portfolio asset allocations using [expected] defined benefit payments as a bond equivalent. This allows me to be less conservative in equity allocations. Anyone see a problem with this point of view/strategy? >>

It sounds reasonable enough to me. The pension payments are a steady source of income that you could use as an equivavlent of interest payment income. However, your needs over and above that amount must be met with a fluctuating principal. As long as you can ride out the dips in equities so your supplemental income needs won't decline, then using a broader exposure to equities is okay IMHO.

Regards..Pixy

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Author: Chipsboss Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1175 of 19021
Subject: Re: defined benfit -- bond equivalent Date: 12/29/1999 11:32 AM
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for IEABarry:

I do the same thing, taking the discounted present value of my small private pension and (gulp) even my social security as bond equivalents. You have to pick a life expectancy and an interest rate to do that calculation, of course. While I'm at it, I include the conservatively estimated current value of the house I own and live in as a bond equivalent, since it pays me the equivalent of free rent. (OK, OK, I have to pay property taxes, maintenance, utilities, and insurance for the house, but I don't pay income taxes on the rental value.) The government statisticians include the rental value of owner-occupied houses as part of Gross National Product (according to my econ professor thirty years ago).

Regards,

Chips

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