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Professornator
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Advice on Portfolio Re-distribtution

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Dear Friends,

Over the years, I've benefitted by reading your advice on TREA. I'm not a very sophisticated investor so it's been reaffirming to find others dig TREA as much as me.

Since about 2008 I've bought solely equities and I've kept it pretty simple--about 30% in TREA and 70% in TIAA Growth. Now at 62, soon 63, I'm thinking it's time for me to get a wee bit more conservative. This year has been good, up 17%.

TIAA ran a recommendation report for me that suggests 14.6% fixed income, .9% cash, 7.2 Real Estate, 10.4% Guaranteed, and 66.9 equity. The equities are split b/n global equities, growth, stock, oppenheimer, royce, international, and mid cap.

I'm comfortable now making some minor changes. I like the 30% TREA. I'll keep that or add to it.  But, well, I do think I should pull out of Growth a bit. In addition to this holding, I have loads of $ invested in FANG stocks so I'm pretty squarely over committed to the IT stocks.

So--if you were to take from the 70% in Growth stock, would you leave say 50% of it and then put the other 20% where?  Which of the main TIAA equity choices are the most opposite to Growth?

Personally I think BREXIT is gonna drag down international funds even more and I think we're ready for a dip so I'd like to not be a pig and count some winnings.  And I think TREA is still better than TIAA Traditional. But I just really have a hard time moving out of this position since its worked well for last 11 years.

 

 

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GLI2019
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Re: Advice on Portfolio Re-distribtution

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I agree that risk profile is dynamic.

We experience investing in dollars long before percents. I don't consume in percents. I spend and save in dollars.

I further accept Larry Swedroe's recommendation to think of "risk" in three dimensions: your willingness, need, and ability to take on risk.

Example: my annuity income has increased my ability to take on more risk but reduced my need.  Ditto for dividend income and Social Security.

Correspondingly, my willingness to take on more risk at my age is reduced even though the ability is there. I embrace the concept of "enough."

Bob

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16 Replies
GLI2019
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Re: Advice on Portfolio Re-distribtution

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TIAA ran a report based on what?

Did they simply use some formula for your age or did you specify some sort of scenario based on an expected retirement date, for example.

If you never expect to retire then ride your current portfolio (and hunches) until you feel you have more than enough or, alternatively, until your portfolio drops like a rock.

Dig?

Bob

P.S. Do you think the next eleven years will be like the previous eleven?  If so, based on what? If not, maybe a rethink is appropriate. 

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Learner
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Re: Advice on Portfolio Re-distribtution

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If I were you...

1.  I would decide what my total % allocation to stocks (domestic and international) should be.  I would think about what I would do if stocks lost 50-60% and how I would react to that.  To the best of my ability, I would try to find my sleeping point, not mentally, but in real life.  It depends but, for most people at your age, 45-55% is not unreasonable.  In my particular condition, I prefer lower than 45%.

2. I would decide what my % allocation to international stocks should be.  If you have no idea, a ratio of domestic/international=3-4 is not unreasonable.  Different persons have different opinions.  I would use broad-based indexes for domestic and international stocks, one for domestic and one for international.   

3.  I would keep some of it in cash or cash equivalents.  How much depends on your situation.  Rather than using a %, I would choose a $ amount for this.  Then you can calculate what % that is.

4.  Now the remaining money.  I would divide it between TREA and Traditional.  The TREA part would require monitoring, even vigilance.  To the extent that you are unable to do it or to the extent that you might need some of these funds in the not-so-distant future, I would tilt in the direction of Traditional.  If my condition is secure and if I am comfortable with it, I would tilt in the direction of TREA.

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crefwatch
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Re: Advice on Portfolio Re-distribtution

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Before TIAA will give me an Asset Allocation suggestion, they make me fill out their Risk Questionnaire. I'm not crazy about it, but it does "measure" some things. What verbal category did they rate your response? (I mean, "Agressive", "Moderate", or so on?)

It's not that important a detail, but did you mean "CREF Growth", or were you abbreviating the name of an open-end mutual fund distributed by TIAA?

Have you thought about whether your types of accounts would put withdrawal limits on TIAA Traditional? I personally don't care, and love the extra interest. But lots of people seem to care quite a bit. OTOH, do you predict rising interest rates? TIAA Traditional could be a good tool for managing Interest Rate Risk.

In general, I lean toward's Bob's advice to you.

Tim

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GLI2019
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Re: Advice on Portfolio Re-distribtution

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Hi Tim,

Prior to the Morningstar "upgrade," the OP posted as Moxie.

He definitely means CREF Growth.

Bob

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yogibearbull
Valued Contributor

Re: Advice on Portfolio Re-distribtution

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CREF Growth has done well in the last few years. But remember that it took almost 13 years to just reach its 2000 peak. It is a swinger.

YBB
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TheWizard
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Re: Advice on Portfolio Re-distribtution

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Learner's reply is closest to my recommendation.

Some depends on what funds are available in the OP's plans. I have the Institutional S&P 500 fund TISPX available and am happy with its performance.

I agree on avoiding bond funds and holding a mix of TREA and Trad for your non stock portion...

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Professornator
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Re: Advice on Portfolio Re-distribtution

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I'd sell at -15% or at least 15 to 20% and then ride it down w/ % trims.

Not sure of their logic regarding the projections other than that they find my portfolio high risk and my profile is moderate. But--to answer the post below I find the notion you have one risk profile to be way too simplistic.  My risk profile depends on market conditions. I believe in Timing the Market or at least assuming the trend in your friend..

I don't think the next 10 years will be similar. We are printing $, we have huge pension obligations, we are running up the deficit, and the VC $ has been dumb $ based on froth and that era is coming to an end.

I personally think 30% in TREA is a bit low.....

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Learner
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Re: Advice on Portfolio Re-distribtution

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"I believe in Timing the Market or at least assuming the trend in your friend.."

You have my best wishes.

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GLI2019
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Re: Advice on Portfolio Re-distribtution

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I agree that risk profile is dynamic.

We experience investing in dollars long before percents. I don't consume in percents. I spend and save in dollars.

I further accept Larry Swedroe's recommendation to think of "risk" in three dimensions: your willingness, need, and ability to take on risk.

Example: my annuity income has increased my ability to take on more risk but reduced my need.  Ditto for dividend income and Social Security.

Correspondingly, my willingness to take on more risk at my age is reduced even though the ability is there. I embrace the concept of "enough."

Bob

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Professornator
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Re: Advice on Portfolio Re-distribtution

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That's brilliant. Love it.

I can take on more risk. That said, I know it's an election year and stocks typically go up......but I just have a bad feeling right now.............so I wanna take say $200K and move it out of Growth.Then maybe move another $100 later on.

Today people have recommended TIAA Traditional. I just don't get that. To me that's b-**** crazy.

And the bonds look terrible.

I don't get the SP 500 as a choice. Wish TIAA had a dividend portfolio. Do they? I'd be happy w/ that I guess.

 

 

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GLI2019
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Re: Advice on Portfolio Re-distribtution

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Go for it!

Sounds like you have the willingness and ability and, I guess, you feel some need (or the spirit of adventure?).

Perhaps--if and when you retire--you may think differently.

Anyway, good luck!

Bob

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Learner
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Re: Advice on Portfolio Re-distribtution

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Both percentages and dollar amounts have their place and time.  It does not need to be one or the other.  Besides, after one decides what to do, it is easy to do the conversion.  When it comes to portfolio allocations, the norm is to speak with percentages.  No need to provide examples or to cite sources.  It is everywhere.  During deliberations on what to do, one can certainly think of dollars, especially when it comes to cash needs or maximum dollar amount one may risk to lose.  If someone tries to summarize the general idea, obviously, it is not easy to speak with dollars.  But one can communicate it with percentages.  I don't see why such a basic and very common thing should cause misunderstanding or excitement.

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Juris2
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Re: Advice on Portfolio Re-distribtution

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I agree with the OP's plan to reduce his holding of CREF Growth substantially. I owned it a long time ago, but for the past 10-12 years I have had better LCG funds in my TIAA 403b GRA.

LCG is my largest percentage holding in my TIAA 403b GRA (my main investment retirement account**), but as a retiree in my mid-70's my overall percentage in stocks in this account is currently 45%. That 45% includes investments in TRLGX (LCG), VINIX (SP500), DODGX (LCV), VIEIX (extended market index), and RERGX (Europacific growth).

The rest of my 403b GRA consists of TREA (11%), TIAA Traditional (11%), bond funds (25%), and a Money Market Fund (8%).

I recently began a TPA to turn all of my Trad into cash to contribute to my RMD's.

My port is a lot more conservative than it was 5 years ago when I retired -- I had ca. 65% in equities in the last years before I retired in 2014. I expect to stick with a moderate, but diverse, set of holdings in future. It is not an "age in bonds" allocation.* It's more aggressive than that. But I'm comfortable with this amount of risk.

* For interesting commentary on "age in bonds," see this Bogleheads article: https://www.bogleheads.org/forum/viewtopic.php?t=255850

** The list of holdings that I give in the text below refers to my TIAA main 403b retirement account. In addition to that account I have a brokerage account plus three small tax-deferred accounts (two 403b SRA accounts and one 457b), all at Fidelity. The allocations within those accounts differ greatly from my TIAA account. Together the investments in those accounts increase my total accumulation by about 40% above the TIAA account balance. Major LCG holdings in the tax deferred accounts are FCNTX and RNPGX.

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GLI2019
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Re: Advice on Portfolio Re-distribtution

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Here's what I wrote in response to the OP:

"I agree that risk profile is dynamic.

We experience investing in dollars long before percents. I don't consume in percents. I spend and save in dollars."

The OP clearly understood that my comments were about "risk."  (He seems to have appreciated it.)

What I said requires no translation.   The figure "5%" or "10%" pales in comparison to $50,000 or $100,000 (the OP is talking of shifting several hundred thousands of dollars--a language I understand).  The use of percents is a major shortcoming of retirement calculators.

In my experience percents gave way to dollars once my portfolio reached a certain level (that's when I retired), and in the retirement planning discussions I had with three separate financial advisors (one from TIAA) the discussions focused on dollars long before portfolio allocation.

Happy trails to us all.

Bob

 

 

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Learner
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Re: Advice on Portfolio Re-distribtution

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My previous post already addressed all the points about percents and dollars. 

Helping the OP did not require an unnecessarily strong emphasis on percents to make the point.  Doing so is perfectly fine in a discussion but then so is a response to it.

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TheWizard
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Re: Advice on Portfolio Re-distribtution

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Percentages in your portfolio split between stocks, fixed income, and real estate makes sense during your incremental accumulation years.

But if you get a large lump sum from inheritance or sale of a business, then it impacts your entire situation and allows you to change your % allocation to take on more or less risk/reward, as desired.

In retirement years, it depends on where your income comes from. Heavily dependent on portfolio is quite different from minimally dependent.

In my case, I start good-sized age 70 SS next spring, on top of an already hefty TIAA annuity income. So I'll be minimally dependent on portfolio henceforth. So I'm letting my stock percentage drift upward toward 70% or more, as Mr. Market allows...

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