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Participant ○

Re: ideas for downside protection


@Scrivener wrote:

Thanks for sharing all that research and rationale...and typing.    I am going to explore a bunch of those further.


Good luck!

Happy to share anything else I learned along the way.  I didn't get into my experience with using put options on SPY or call options on the VIX.  They work (if you buy BEFORE the crash), but they're super expensive and you're basically throwing money at declining assets waiting until that one single time for your "insurance" to pay off.  I could never figure out if long term the amount I would spend on put options would make up in gains for that one market crash.  Maybe you'll come to a different conclusion.

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Re: ideas for downside protection


@3M wrote:

The OP is asking for Unobtainium.   The thing is, he's not the only person either.

Unobtainium.jpg


I agree. Personally I don't believe in using managed futures, merger arbitrage, long short, hedges and inverse funds, minimum volatility funds, or the latest blingy alpha-centric, minimum-beta, maximum-gamma, inverse-delta, quantum-epsilon fund. All these things sound great in theory. In practice, they are expensive and they invariably fail, sometimes catastrophically, when they hit bumps in the road that they didn't anticipate.

Long term, I don't think you can beat KISS. You make money with equity. The stock market goes up in the long term. The market will hit infinitely many all-time highs (at least until the Sun turns into a red giant and absorbs the Earth). Balance your portfolio with ballast (I would suggest something like BIV) to limit the maximum down-turn you can ever expect to suffer, according to your risk appetite and age. Tinker with the stocks and bonds to adjust the income level if you want, although the truth is that it doesn't matter: "income" is a myth, and all returns are "total returns". (To see this, pretend that all dividends are reinvested, and that assets are always sold to meet financial needs.)

The trick is simply to figure out your risk level / tolerance. There are many ways of doing this. "Bonds = Age minus 10" is the Boglehead formula. I remember about 10-15 years ago, @Dawgie said that your AA is right when you wish you had more stock on up-days and less stock on down-days. There are many perspectives and recommended ways to choose your risk level. Just pick one, and try to do as little tinkering / trading as possible. (That's the hard part!)

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Re: ideas for downside protection

For me the best solution is a "funny money" account which has considerably less money in it than my primary accounts.  Here I do all my trading in stocks, and latest investing themes.  So far the returns are about the same across my long term accounts but I have to admit it's a lot more fun trading gold, TLT and Apple!

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Re: ideas for downside protection


@chang wrote:

@3M wrote:

The OP is asking for Unobtainium.   The thing is, he's not the only person either.

Unobtainium.jpg


I agree. Personally I don't believe in using managed futures, merger arbitrage, long short, hedges and inverse funds, minimum volatility funds, or the latest blingy alpha-centric, minimum-beta, maximum-gamma, inverse-delta, quantum-epsilon fund. All these things sound great in theory. In practice, they are expensive and they invariably fail, sometimes catastrophically, when they hit bumps in the road that they didn't anticipate.

Long term, I don't think you can beat KISS. You make money with equity. The stock market goes up in the long term. The market will hit infinitely many all-time highs (at least until the Sun turns into a red giant and absorbs the Earth). Balance your portfolio with ballast (I would suggest something like BIV) to limit the maximum down-turn you can ever expect to suffer, according to your risk appetite and age. Tinker with the stocks and bonds to adjust the income level if you want, although the truth is that it doesn't matter: "income" is a myth, and all returns are "total returns". (To see this, pretend that all dividends are reinvested, and that assets are always sold to meet financial needs.)

The trick is simply to figure out your risk level / tolerance. There are many ways of doing this. "Bonds = Age minus 10" is the Boglehead formula. I remember about 10-15 years ago, @Dawgie said that your AA is right when you wish you had more stock on up-days and less stock on down-days. There are many perspectives and recommended ways to choose your risk level. Just pick one, and try to do as little tinkering / trading as possible. (That's the hard part!)


There are many ways to have a diversified portfolio. I have 20% of my assets in high dividend stocks which are proxies for the bonds I used to own. The stocks e.g., T, VZ, UTG, Etc, pay dividends well above the 2.44% yield of BIV and are taxed at cap gains rates. And they have capital appreciation. 70% of the portfolio is invested in growth stocks many of which pay dividends,  e.g, 2.4% dividend on JNJ. AAPL dividend is 0.73% which pays me 3K a year. MSFT dividend is 1%. The Dividends when added to the rest of my investment income, SS, retirement benefits and other income exceeds my expenses and taxes by 50%. When markets crashed in March and April I didn’t need to sell stocks at depressed prices to pay expenses. I don’t need an emergency fund or low yield bond funds as ballast in my portfolio because I have a Roth IRA invested in tech, recovery stocks and QQQ where I can withdraw Funds at any time without paying any taxes.

Asset allocation formulas such as Bond % = age minus 10 will result in retired investors receiving lower amounts of income than they will need to cover expenses because of the low bond yields Below inflation rate which will extend for the foreseeable future and will result in retiree having to sell fixed income assets prematurely. I have less than 10% of my assets in fixed income mostly in Munis and an annuity yielding 4.3%.

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Explorer ○○

Re: ideas for downside protection

Chang: "I don't believe in using . . . the latest blingy alpha-centric, minimum-beta, maximum-gamma, inverse-delta, quantum-epsilon fund."

Hilarious! One of my hardest laughs in a while.

 

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Contributor ○○○

Re: ideas for downside protection


@chang wrote:

I agree. Personally I don't believe in using managed futures, merger arbitrage, long short, hedges and inverse funds, minimum volatility funds, or the latest blingy alpha-centric, minimum-beta, maximum-gamma, inverse-delta, quantum-epsilon fund. All these things sound great in theory. In practice, they are expensive and they invariably fail, sometimes catastrophically, when they hit bumps in the road that they didn't anticipate.

<snip>

I'm also not a fan of "alternative" funds.
As chang mentioned, they are often expensive and performance can be unpredictable.
Also, alternative funds could be difficult to use properly.
Investor returns for these funds are often considerably lower than the funds' actual returns.

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Re: ideas for downside protection


@rila3400 wrote:

@chang wrote:

I agree. Personally I don't believe in using managed futures, merger arbitrage, long short, hedges and inverse funds, minimum volatility funds, or the latest blingy alpha-centric, minimum-beta, maximum-gamma, inverse-delta, quantum-epsilon fund. All these things sound great in theory. In practice, they are expensive and they invariably fail, sometimes catastrophically, when they hit bumps in the road that they didn't anticipate.

<snip>

I'm also not a fan of "alternative" funds.
As chang mentioned, they are often expensive and performance can be unpredictable.
Also, alternative funds could be difficult to use properly.
Investor returns for these funds are often considerably lower than the funds' actual returns.


Even though I put a couple alternatives in my "soft" recommendations, I do want to second Chang and Rila's observations.  I've dabbled in the "alternatives" for years and the pattern usually is "buy a little" and then sometime later "sell for a little less" due to manager mistake, underperformance, failure to live up to billing, etc.  The few funds I mentioned at least survived March unlike most others.  But I harbor reservations of their consistent capability for repeat performances.  It is only due to the egregiously high interest rate risk in the long treasury market which made me seek "alternatives" to dampen equity volatility.  I'm not convinced long treasuries offer the same safe harbor in a March-like crash at current rates.  So...I'm basically TOFT by investing a little capital in these strategies and I'll be happy to report back on my observations over time.

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Re: ideas for downside protection


@Intruder wrote:

@chang wrote:

@3M wrote:

The OP is asking for Unobtainium.   The thing is, he's not the only person either.

Unobtainium.jpg


I agree. Personally I don't believe in using managed futures, merger arbitrage, long short, hedges and inverse funds, minimum volatility funds, or the latest blingy alpha-centric, minimum-beta, maximum-gamma, inverse-delta, quantum-epsilon fund. All these things sound great in theory. In practice, they are expensive and they invariably fail, sometimes catastrophically, when they hit bumps in the road that they didn't anticipate.

Long term, I don't think you can beat KISS. You make money with equity. The stock market goes up in the long term. The market will hit infinitely many all-time highs (at least until the Sun turns into a red giant and absorbs the Earth). Balance your portfolio with ballast (I would suggest something like BIV) to limit the maximum down-turn you can ever expect to suffer, according to your risk appetite and age. Tinker with the stocks and bonds to adjust the income level if you want, although the truth is that it doesn't matter: "income" is a myth, and all returns are "total returns". (To see this, pretend that all dividends are reinvested, and that assets are always sold to meet financial needs.)

The trick is simply to figure out your risk level / tolerance. There are many ways of doing this. "Bonds = Age minus 10" is the Boglehead formula. I remember about 10-15 years ago, @Dawgie said that your AA is right when you wish you had more stock on up-days and less stock on down-days. There are many perspectives and recommended ways to choose your risk level. Just pick one, and try to do as little tinkering / trading as possible. (That's the hard part!)


There are many ways to have a diversified portfolio. I have 20% of my assets in high dividend stocks which are proxies for the bonds I used to own. The stocks e.g., T, VZ, UTG, Etc, pay dividends well above the 2.44% yield of BIV and are taxed at cap gains rates. And they have capital appreciation. 70% of the portfolio is invested in growth stocks many of which pay dividends,  e.g, 2.4% dividend on JNJ. AAPL dividend is 0.73% which pays me 3K a year. MSFT dividend is 1%. The Dividends when added to the rest of my investment income, SS, retirement benefits and other income exceeds my expenses and taxes by 50%. When markets crashed in March and April I didn’t need to sell stocks at depressed prices to pay expenses. I don’t need an emergency fund or low yield bond funds as ballast in my portfolio because I have a Roth IRA invested in tech, recovery stocks and QQQ where I can withdraw Funds at any time without paying any taxes.

Asset allocation formulas such as Bond % = age minus 10 will result in retired investors receiving lower amounts of income than they will need to cover expenses because of the low bond yields Below inflation rate which will extend for the foreseeable future and will result in retiree having to sell fixed income assets prematurely. I have less than 10% of my assets in fixed income mostly in Munis and an annuity yielding 4.3%.


Sure, a slug of dividend paying stocks (or SCHD, I happen to own this) can replace bonds in a portfolio. But with more equity risk. Compare VYM to BIV this year. You may match or exceed the income, but with more short-term volatility (which shouldn’t matter that much) and more long-term volatility (which does matter!).

Also, again, the idea of dividend paying stocks for income is an illusion. The only return is total return. Compare a slug of dividend paying stocks paying $X per month (not reinvested) to VIGAX with $X per month withdrawn by selling shares. What’s the end result after a specified period of time? It’s all the same thing, whether the stocks/fund distribute income or whether you sell shares. There is no difference. 

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Re: ideas for downside protection


@chang wrote:

@Intruder wrote:

@chang wrote:

@3M wrote:

The OP is asking for Unobtainium.   The thing is, he's not the only person either.

Unobtainium.jpg


I agree. Personally I don't believe in using managed futures, merger arbitrage, long short, hedges and inverse funds, minimum volatility funds, or the latest blingy alpha-centric, minimum-beta, maximum-gamma, inverse-delta, quantum-epsilon fund. All these things sound great in theory. In practice, they are expensive and they invariably fail, sometimes catastrophically, when they hit bumps in the road that they didn't anticipate.

Long term, I don't think you can beat KISS. You make money with equity. The stock market goes up in the long term. The market will hit infinitely many all-time highs (at least until the Sun turns into a red giant and absorbs the Earth). Balance your portfolio with ballast (I would suggest something like BIV) to limit the maximum down-turn you can ever expect to suffer, according to your risk appetite and age. Tinker with the stocks and bonds to adjust the income level if you want, although the truth is that it doesn't matter: "income" is a myth, and all returns are "total returns". (To see this, pretend that all dividends are reinvested, and that assets are always sold to meet financial needs.)

The trick is simply to figure out your risk level / tolerance. There are many ways of doing this. "Bonds = Age minus 10" is the Boglehead formula. I remember about 10-15 years ago, @Dawgie said that your AA is right when you wish you had more stock on up-days and less stock on down-days. There are many perspectives and recommended ways to choose your risk level. Just pick one, and try to do as little tinkering / trading as possible. (That's the hard part!)


There are many ways to have a diversified portfolio. I have 20% of my assets in high dividend stocks which are proxies for the bonds I used to own. The stocks e.g., T, VZ, UTG, Etc, pay dividends well above the 2.44% yield of BIV and are taxed at cap gains rates. And they have capital appreciation. 70% of the portfolio is invested in growth stocks many of which pay dividends,  e.g, 2.4% dividend on JNJ. AAPL dividend is 0.73% which pays me 3K a year. MSFT dividend is 1%. The Dividends when added to the rest of my investment income, SS, retirement benefits and other income exceeds my expenses and taxes by 50%. When markets crashed in March and April I didn’t need to sell stocks at depressed prices to pay expenses. I don’t need an emergency fund or low yield bond funds as ballast in my portfolio because I have a Roth IRA invested in tech, recovery stocks and QQQ where I can withdraw Funds at any time without paying any taxes.

Asset allocation formulas such as Bond % = age minus 10 will result in retired investors receiving lower amounts of income than they will need to cover expenses because of the low bond yields Below inflation rate which will extend for the foreseeable future and will result in retiree having to sell fixed income assets prematurely. I have less than 10% of my assets in fixed income mostly in Munis and an annuity yielding 4.3%.


Sure, a slug of dividend paying stocks (or SCHD, I happen to own this) can replace bonds in a portfolio. But with more equity risk. Compare VYM to BIV this year. You may match or exceed the income, but with more short-term volatility (which shouldn’t matter that much) and more long-term volatility (which does matter!).

Also, again, the idea of dividend paying stocks for income is an illusion. The only return is total return. Compare a slug of dividend paying stocks paying $X per month (not reinvested) to VIGAX with $X per month withdrawn by selling shares. What’s the end result after a specified period of time? It’s all the same thing, whether the stocks/fund distribute income or whether you sell shares. There is no difference. 


What equity risk are you worried about? Unlike you I look at a decline in stocks as an opportunity to buy outperforming stocks at a discount. The equity gains on my stocks this year have resulted in a portfolio value higher than it was in February because of the gains in Faangsm, recovery stocks, large cap growth and QQQ that I bought. My dividend stocks provide steady income which allows me to invest 70% of the portfolio in growth stocks without needing underperforming bonds for yield. Unlike bonds which are valued at par when they mature, dividend stocks appreciate over the long term.

Why can’t you accept that High dividend stocks can be substituted for bonds in a portfolio to provide a higher % of income than would be paid by bond yields at a lower tax rate with less capital investment which is why I don’t need to invest in bonds? You seem to have a weird idea that dividend stocks are more risky than bonds. My dividend stocks provide a higher yield than VYM and have low volatility. Dividend stocks add diversification to a Investment portfolio that is focused on growth and momentum.

Why do you object to investing in dividend stocks instead of bonds? Bernard Malkiel has recommended substituting high quality dividend stocks (Bond proxies) for bonds in the latest edition of A Random Walk down Wall Street. According to Malkiel “safe bonds do not now provide income and in the long run have some real risk, because if there is some inflation in the future, yields will rise and the price of bonds will go down.“ 

If an investor receives enough income from dividend stocks to cover expenses why should stock be sold instead of using the dividends to cover costs? That makes no sense to an intelligent investor. When the stock market Crashes as happens periodically, there is no need to sell equities at depressed prices if dividends cover expenses. And shares that are not sold appreciate over the long term and receive stepped up basis on the capital gains.

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Re: ideas for downside protection

Equities carry equity risk. I’m not the only person who is not comfortable with 80-100% equity. Crashes happen. If I had 50 more years to live, then yeah maybe I’d go to 80% equity.

Your divvy portfolio is better than VYM—well done, good for you. So is mine (SCHD). I just used VYM as an example. It crashed badly in March, and recovered poorly as well.

Let’s not restart the “seed corn” debate. That’s been done to death here. 

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Re: ideas for downside protection

By the way, I did gobble up some growth stocks when they declined a couple of weeks ago.

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Re: ideas for downside protection

And one more note: VWEAX is yielding 4.09% and has very little volatility. It’s closed flat many a day when stocks have plunged.

https://investor.vanguard.com/mutual-funds/profile/overview/vweax

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Re: ideas for downside protection


@Intruder wrote:

@chang wrote:

@Intruder wrote:

Also, again, the idea of dividend paying stocks for income is an illusion. The only return is total return. BINGO!!!! Compare a slug of dividend paying stocks paying $X per month (not reinvested) to VIGAX with $X per month withdrawn by selling shares. What’s the end result after a specified period of time? It’s all the same thing, whether the stocks/fund distribute income or whether you sell shares. There is no difference. 


What equity risk are you worried about?  Your kidding right? 90% equity for a retired school teacher and you ask what risk? Unlike you I look at a decline in stocks as an opportunity to buy outperforming stocks at a discount. Where is the cash going to come from if you are already 90/10?

Why can’t you accept that High dividend stocks can be substituted for bonds in a portfolio to provide a higher % of income than would be paid by bond yields at a lower tax rate with less capital investment which is why I don’t need to invest in bonds? Have you already forgotten how some of your high divdend energy sector plays turned out?

Why do you object to investing in dividend stocks instead of bonds? Equity risks, dividend cut etc.

 


 

 Agree 100% with chang on this one. A 90/10 allocation for a retiree is inappropriate for most all investors let alone a retired school teacher. Those who adopt these types of strategies at near market highs suffer from many afflictions, recency bias being one. A few years ago it MLPs, now, "Faangsm"? Good luck.

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Re: ideas for downside protection


@Bentley wrote:

@Intruder wrote:

@chang wrote:

@Intruder wrote:

Also, again, the idea of dividend paying stocks for income is an illusion. The only return is total return. BINGO!!!! Compare a slug of dividend paying stocks paying $X per month (not reinvested) to VIGAX with $X per month withdrawn by selling shares. What’s the end result after a specified period of time? It’s all the same thing, whether the stocks/fund distribute income or whether you sell shares. There is no difference. 


What equity risk are you worried about?  Your kidding right? 90% equity for a retired school teacher and you ask what risk? Unlike you I look at a decline in stocks as an opportunity to buy outperforming stocks at a discount. Where is the cash going to come from if you are already 90/10?

Why can’t you accept that High dividend stocks can be substituted for bonds in a portfolio to provide a higher % of income than would be paid by bond yields at a lower tax rate with less capital investment which is why I don’t need to invest in bonds? Have you already forgotten how some of your high divdend energy sector plays turned out?

Why do you object to investing in dividend stocks instead of bonds? Equity risks, dividend cut etc.

 


 

 Agree 100% with chang on this one. A 90/10 allocation for a retiree is inappropriate for most all investors let alone a retired school teacher. Those who adopt these types of strategies at near market highs suffer from many afflictions, recency bias being one. A few years ago it MLPs, now, "Faangsm"? Good luck.


Brantley 

my discussion with Chang was limited to substituting dividends stocks for bonds for 20% of investment assets. You injected a retired teacher’s AA in to the discussion for which I am not interested. It is up to each investor to determine the AA for their portfolio.

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Re: ideas for downside protection


@chang wrote:

Equities carry equity risk. I’m not the only person who is not comfortable with 80-100% equity. Crashes happen. If I had 50 more years to live, then yeah maybe I’d go to 80% equity.

Your divvy portfolio is better than VYM—well done, good for you. So is mine (SCHD). I just used VYM as an example. It crashed badly in March, and recovered poorly as well.

Let’s not restart the “seed corn” debate. That’s been done to death here. 


Yes equities carry equity risk. And yes stocks do crash. They declined 50% from 2000-2003, 60% from 2007-2009, and 40% in March-april. And every time the price of equities has rebounded to a higher level after the crash. If a retiree’s income from all sources , e.g., investments, SS, retirement plans and outside employment  exceeds expenses, a decline in equities should not have any impact on the retirees ability to pay expenses and taxes.

You need to focus on a longer investment horizon than the next stock market crash.

you have not responded to my questions about why dividend stocks cannot be substituted for bond income as Malkiel recommends. 

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Re: ideas for downside protection


@Intruder wrote:

@Bentley wrote:

@Intruder wrote:



@Intruder wrote:

 


What equity risk are you worried about?  Your kidding right? 90% equity for a retired school teacher and you ask what risk? Unlike you I look at a decline in stocks as an opportunity to buy outperforming stocks at a discount. Where is the cash going to come from if you are already 90/10?




 


 

 Agree 100% with chang on this one. A 90/10 allocation for a retiree is inappropriate for most all investors let alone a retired school teacher. Those who adopt these types of strategies at near market highs suffer from many afflictions, recency bias being one. A few years ago it MLPs, now, "Faangsm"? Good luck.


Brantley 

my discussion with Chang was limited to substituting dividends stocks for bonds for 20% of investment assets. You injected a retired teacher’s AA in to the discussion for which I am not interested. It is up to each investor to determine the AA for their portfolio.


 

Intruder,

 Your promotion of a 90% allocation to equities at all-time markets highs ties into your discussion when you asked chang;

"What equity risk are you worried about?   Unlike you I look at a decline in stocks as an opportunity to buy outperforming stocks at a discount."

Where does the cash come from to buy stocks at a discount if you are already 90% equity? If you want to be able to take advantage of significant dips in the market, a 60/40 or even a 70/30 allocation would give you more opportunity to take advantage of what the market offers with any large pull back. Sitting on a 90% equity allocation for a retired investor is not something any fiduciary, informed advisor, or credible money manager would recommend. I have seen but one other member endorse your risky strategy.

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Re: ideas for downside protection


@Intruder wrote:

@chang wrote:

Equities carry equity risk. I’m not the only person who is not comfortable with 80-100% equity. Crashes happen. If I had 50 more years to live, then yeah maybe I’d go to 80% equity.

Your divvy portfolio is better than VYM—well done, good for you. So is mine (SCHD). I just used VYM as an example. It crashed badly in March, and recovered poorly as well.

Let’s not restart the “seed corn” debate. That’s been done to death here. 


Yes equities carry equity risk. And yes stocks do crash. They declined 50% from 2000-2003, 60% from 2007-2009, and 40% in March-april. And every time the price of equities has rebounded to a higher level after the crash. If a retiree’s income from all sources , e.g., investments, SS, retirement plans and outside employment  exceeds expenses, a decline in equities should not have any impact on the retirees ability to pay expenses and taxes.

You need to focus on a longer investment horizon than the next stock market crash.

you have not responded to my questions about why dividend stocks cannot be substituted for bond income as Malkiel recommends. 

I did answer the question. 80-100% equity is too much risk of loss for me. My net worth right now is $X. Under no circumstances will I allow it to fall below $Y. I want some control over my wealth W and the maximum speed with which it could fall dW/dt. 80-100% equity doesn’t give me that.

Also, as I said, I don’t believe in income, I only believe in total return—but I won’t enter into that debate (again).

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Re: ideas for downside protection


@chang wrote:

@Intruder wrote:

@chang wrote:

Equities carry equity risk. I’m not the only person who is not comfortable with 80-100% equity. Crashes happen. If I had 50 more years to live, then yeah maybe I’d go to 80% equity.

Your divvy portfolio is better than VYM—well done, good for you. So is mine (SCHD). I just used VYM as an example. It crashed badly in March, and recovered poorly as well.

Let’s not restart the “seed corn” debate. That’s been done to death here. 


Yes equities carry equity risk. And yes stocks do crash. They declined 50% from 2000-2003, 60% from 2007-2009, and 40% in March-april. And every time the price of equities has rebounded to a higher level after the crash. If a retiree’s income from all sources , e.g., investments, SS, retirement plans and outside employment  exceeds expenses, a decline in equities should not have any impact on the retirees ability to pay expenses and taxes.

You need to focus on a longer investment horizon than the next stock market crash.

you have not responded to my questions about why dividend stocks cannot be substituted for bond income as Malkiel recommends. 

I did answer the question. 80-100% equity is too much risk of loss for me. My net worth right now is $X. Under no circumstances will I allow it to fall below $Y. I want some control over my wealth W and the maximum speed with which it could fall dW/dt. 80-100% equity doesn’t give me that.

Also, as I said, I don’t believe in income, I only believe in total return—but I won’t enter into that debate (again).


On the money for most retirees: 1) 80+% in equity is too high  2) I only believe in total return

Several investors, including me, have different approach but it's not recommended for most investors.

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Re: ideas for downside protection


@FD1001 wrote:

@chang wrote:

@Intruder wrote:

@chang wrote:

Equities carry equity risk. I’m not the only person who is not comfortable with 80-100% equity. Crashes happen. If I had 50 more years to live, then yeah maybe I’d go to 80% equity.

Your divvy portfolio is better than VYM—well done, good for you. So is mine (SCHD). I just used VYM as an example. It crashed badly in March, and recovered poorly as well.

Let’s not restart the “seed corn” debate. That’s been done to death here. 


Yes equities carry equity risk. And yes stocks do crash. They declined 50% from 2000-2003, 60% from 2007-2009, and 40% in March-april. And every time the price of equities has rebounded to a higher level after the crash. If a retiree’s income from all sources , e.g., investments, SS, retirement plans and outside employment  exceeds expenses, a decline in equities should not have any impact on the retirees ability to pay expenses and taxes.

You need to focus on a longer investment horizon than the next stock market crash.

you have not responded to my questions about why dividend stocks cannot be substituted for bond income as Malkiel recommends. 

I did answer the question. 80-100% equity is too much risk of loss for me. My net worth right now is $X. Under no circumstances will I allow it to fall below $Y. I want some control over my wealth W and the maximum speed with which it could fall dW/dt. 80-100% equity doesn’t give me that.

Also, as I said, I don’t believe in income, I only believe in total return—but I won’t enter into that debate (again).


On the money for most retirees: 1) 80+% in equity is too high  2) I only believe in total return

Several investors, including me, have different approach but it's not recommended for most investors.


Whatever floats your boat. 

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Re: ideas for downside protection

Super low yields have retirees between a rock and a hard place.

Our balance between long term risk (running out of money) vs short term risk (portfolio volatility) is 50% equities.

We'd RATHER be at 30% equities. 

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