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Subject:  Re: Community Question Date:  9/25/2013  11:07 PM
Author:  Rayvt Number:  73321 of 100126

...retirement portfolio is currently 95% stock ...
Either your portfolio is worth millions (at least 4 or 5 million) or you are very young and can afford to lose when the market crashes.

Nah, it's not neccessary for either to be the case. And, of course, being retired probably means "not very young".

Spend some time reading threads on this board: and you'll see lots of people who are in every age of retirement (from 40 to 85) and are 90%+ in stocks.

In fact, there was a recent thread asking people about their stock allocation and about how much cash reserves people kept. Almost all of the replies said 90%-99% stocks, and anywhere from 1 month to 6 months of living expenses in cash. Including "Just enough to avoid the low-balance fee in the checking account. When I need money I can transfer money from my broker in 2 days."

As intercst implied, people (smallish investors) who are well-informed financially are pretty much totally out of bonds because of the risk.
Innocents who believe the party line that bonds are safe are going to get a big hard expensive lesson in the next few years.

I'm not very young and don't have 4 or 5 million. I can't afford to lose in a big market crash.

Okay. Does that mean that you *can* afford to lose it in a bond market crash? One of my favorite quotes is: "Investment market history is littered with people who misunderstood the risks they were taking on."

It's not that hard to watch the state of the market and move from stocks to cash and avoid the brunt of a bear market. Read up on the basics starting here:

I taught my son & his wife how to do this in about 30 minutes. It now takes them about 5 minutes of work, once a month.

There's two ways to control your risk. One is to run scared and pay somebody like an insurance company to take on your risk. The other is to actively manage your investments witha close eye to the risk.

... can [not] afford to lose when the market crashes.
The real risk is not the occasional market crash, but the loss of purchasing power due to inflation that you'll face by playing it too safe.

4% per year withthdrawal, increased each year for inflation is the safe amount you can take from a properly balanced stock/bond portfolio. (Maybe less if the US and Euro governments keep doing what they're doing.)
4% of a $1,000,000 portfolio is $40,000 a year. Not a magnificient income but easily possible to live on. On $2,000,000 that's $80,000.

So, if youhave an asset that pays you $40K - $80K a year ... if you have a $1M or $2M portfolio, doesn't it make sense to put in some work and manage it yourself? Is there anybody else in the world who cares about your money more than you do? Is there anybody else who cares if your retirement account pays you $80K/yr vs. $20K/yr? Wellington doesn't. Wellesley doesn't. Allianz doesn't.
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