Keep An Eye On Your Portfolio As Inflation Is Heading Our Way

fmdog44

fmdog44

Well-known Member
Location
Houston, Texas
With a possible democrat sweep in the midterm election in Nov. combined with inflation on the way it may be time to consider taking some profits in the near future. Also the trade war Trump started may whack the market sectors related to China. Just sayin'.
 

Thank you for the warning but there doesn't appear to be a "trade war" as once feared. Turns out, it's not impacting anyone very much at all.

A "democratic sweep" would probably send the market tumbling...you might be right there. Inflation is always bearing down on us.

If you take out some profit, what do you plan to reinvest in, or are you going to plan on spending it?
 
dollars to donuts these higher inflation fears will turn out to be way over blown . i think rates will fall on bonds as investors realize that with the consumer debt levels we are at and the low savings rates , gdp will be stuck in the 1.50% range. that is closer to recession than inflation .

it takes money and consumer spending to grow gdp in an economy based on 70% consumer spending .

the bottom line numbers say there ain't much of that available to buy new goods and services creating higher inflation . basically we buy this or that and not this and that so for everything that goes up in price that is less we spend on something else. that is not inflationary .
 
believe me , i am not that smart . i just make it a practice to know who the brightest people are in the area of investing or retirement planning. not predictors as no one can predict , but in researchers like michael kitces or milevsky , blanchette , etc .then it is simple. i steal their views if i agree and they make sense
 
Lara said:
Thank you for the warning but there doesn't appear to be a "trade war" as once feared. Turns out, it's not impacting anyone very much at all.

A "democratic sweep" would probably send the market tumbling...you might be right there. Inflation is always bearing down on us.

If you take out some profit, what do you plan to reinvest in, or are you going to plan on spending it?
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Wage increases and material prices are going up and that feeds inflation. I would not turn my back on a trade war coming. Germany is already feeling the crunch and messing with China is not a wise move. I own Apple and China could send that stock through the floor so my hand is on the SELL button for that one. Any money I pull out will go to a CD. This market has had a nine year run and that is a little scary. I'm 70 and I really don't need to be in the market like I am even though I am conservative relative to recommendations for people of my age and money status. I am enjoying retirement not having to worry about how I spend and that is what I worked for all of my life. Having gone through the steep falls in the market is different now because I was earning a very good wage and that cushioned the pain of watching my monies shrink back then. Trump is a factor as well as we never know what is going to come out of his mouth like when he criticized Amazon. It's all a guessing game in the end.
 
fmdog44 said:
Wage increases and material prices are going up and that feeds inflation. I would not turn my back on a trade war coming. Germany is already feeling the crunch and messing with China is not a wise move. I own Apple and China could send that stock through the floor so my hand is on the SELL button for that one. Any money I pull out will go to a CD. This market has had a nine year run and that is a little scary. I'm 70 and I really don't need to be in the market like I am even though I am conservative relative to recommendations for people of my age and money status. I am enjoying retirement not having to worry about how I spend and that is what I worked for all of my life. Having gone through the steep falls in the market is different now because I was earning a very good wage and that cushioned the pain of watching my monies shrink back then. Trump is a factor as well as we never know what is going to come out of his mouth like when he criticized Amazon. It's all a guessing game in the end.
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a trade war is recessionary because once prices start going up we all have to decide what we buy and what we don't . most americans are feeling poorer at this point not wealthier . so while some things will cost more other areas of the economy are going to take a hit . we merely will be dividing up what money we have differently .

rising rates will suck way more money out of consumers pockets acting like a tax so that is not inflationary .

in the end i think we have more of a recession to worry about , which is good for bonds , that inflation which is bad for bonds . of earnings stay strong markets can have a nice run left .

it is silly trying to predict and act upon our visions. a diversified portfolio than can spin off years of spending cash from the bond portion is all you need . 40-60% equities works fine . if you really have visions of doom 45/45 and 10% gold is not a bad way to go .

but i think anyone who thinks they are going to go to cd's and totally pull out will once again shoot themselves in the foot . odds are they will never get back in time to catch the early stage biggest gains .

things reverse long before there are any positive signs
 
over , over , and over , more money is lost or given up in preparation or in reaction to the next anticipated downturn than has ever been lost in a downturn with diversified funds. it is always poor investor behavior that hurts , not markets . markets have only gone higher and higher over time by waiting things out .

if you bought equities with money you need shorter term , well that is poor investor behavior . even at 65 we have money we won't eat with for 20 to 30 years .
 
mathjak107 said:
a trade war is recessionary because once prices start going up we all have to decide what we buy and what we don't . most americans are feeling poorer at this point not wealthier . so while some things will cost more other areas of the economy are going to take a hit . we merely will be dividing up what money we have differently .

rising rates will suck way more money out of consumers pockets acting like a tax so that is not inflationary .

in the end i think we have more of a recession to worry about , which is good for bonds , that inflation which is bad for bonds . of earnings stay strong markets can have a nice run left .

it is silly trying to predict and act upon our visions. a diversified portfolio than can spin off years of spending cash from the bond portion is all you need . 40-60% equities works fine . if you really have visions of doom 45/45 and 10% gold is not a bad way to go .

but i think anyone who thinks they are going to go to cd's and totally pull out will once again shoot themselves in the foot . odds are they will never get back in time to catch the early stage biggest gains .

things reverse long before there are any positive signs
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Personally, when I get out of stocks I don't go back in so I am reducing my $ in equities and because of my situation I don't need to be in any stocks. A "diversified" portfolio tanked in 2008 like everything else. That idea is good only for long term and at my age like I said long term does not exist. I will most likely pull out 100% at the end of this year because like you stated, a recession could be around the corner next year. It will be nice to not worry when I see the Dow is down 500 or 600 in one day like we are seeing now.
 
fmdog44 said:
Personally, when I get out of stocks I don't go back in so I am reducing my $ in equities and because of my situation I don't need to be in any stocks. A "diversified" portfolio tanked in 2008 like everything else. That idea is good only for long term and at my age like I said long term does not exist. I will most likely pull out 100% at the end of this year because like you stated, a recession could be around the corner next year. It will be nice to not worry when I see the Dow is down 500 or 600 in one day like we are seeing now.
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well im am 65 and my wife 67 and long term money for us is still looking at 20-30 years out , as was well as for heirs ..

we are 40-50% equities in retirement always .

we live off our portfolio and need to safely draw at least 4% inflation adjusted . once you go lower than 40% equities the risk runs very high of going broke to soon unless you cut your draw to 3% or less and that is a 25% pay cut from 4% .

i would never want to take a 25% pay cut if i could safely draw 25% more with almost no risk .

50/50 has run out of money only 6x out of the 117 30 year cycles to date , a 96% success rate . no equities has failed 34x making it to risky to use for anything but the lowest draw rates
 
I suppose it depends on how you approach investing.

I don't own any individual stocks so I don't really think in terms of selling at a profit or worrying about when a stock will run out of gas.

I look at steady growth over time.

I keep a boring bundle of mutual funds and a pool of cash to smooth out the bumps in my financial life. My overall allocation has been the same since I retired and will probably remain the same for many years to come.

IMO if you plan on dying with money in the bank you can safely increase your equity position as your short-term investment horizon decreases due to advanced age. Always be conservative enough to keep you comfortable on the way to the cemetery and adventurous enough to benefit your heirs.

We all need to do what we feel is best for our own personal situation because at the end it is the only one that matters!:playful:
 
mathjak107 said:
well im am 65 and my wife 67 and long term money for us is still looking at 20-30 years out , as was well as for heirs ..

we are 40-50% equities in retirement always .

we live off our portfolio and need to safely draw at least 4% inflation adjusted . once you go lower than 40% equities the risk runs very high of going broke to soon unless you cut your draw to 3% or less and that is a 25% pay cut from 4% .

i would never want to take a 25% pay cut if i could safely draw 25% more with almost no risk .

50/50 has run out of money only 6x out of the 117 30 year cycles to date , a 96% success rate . no equities has failed 34x making it to risky to use for anything but the lowest draw rates
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"Going broke" depends on how much money one has and spending responsibly. I have no concerns with growing broke. This is why I started to make my money work for me when I turned 32. I had one goal back then to not worry about money when I retire and that is where I am today. Some of my friends thought I was nuts not spending on things they thought was "fun" or whatever while I just sat back and knew I was doing what I was taught to do by my father. Now I see so many living in fear of an unexpected bill because they never planned for their future. Investment models are just that, models. Good common sense and avoiding greed is all one needs.
 
going broke depends on allocation ,draw rate and sequence of returns not the size of the portfolio .

how long the money lasts is not dependent on amount . a portfolio of 10 million or 250k at 4% stands the same chances of success or failure trying to draw 4% . only the amount in dollars changes .

trying to draw 4% from a portfolio of 250k vs 10 million from just fixed income stands the same poor chance of doing it , the math is the same.

no one likes pay cuts , not in retirement and not when we were working

the actual math says that to draw 4% inflation adjusted for 30 years you need an average of at least 2% real returns for the first 15 years .real return is after inflation .

fixed income has failed to be able to do that 34x so far out of the 117 30 year cycles we have had .

100% equities failed to do it only 8x and 50/50 6x .

which is riskier at the end of the day ?

having more money , but no equities or little equities lets you draw around 3% and if that works for you , great . but that is also very inefficient use of the money you worked so hard to accumulate . drawing 25% less with a 3% draw than 4% is a big difference in your pay . but without using at least 40% equities you cannot safely draw 4% so it becomes rather inefficient use of the money .

especially when you consider that a 60/40 allocation has ended 30 years with more than you started 90% of the time . so there can be a big difference both in pay and balance left when equities are used in levels high enough to do the job .

over the long term things work opposite . it is the balanced portfolio's that become safer and more efficient and the fixed income ones that become riskier or else they are just an inefficient use of your saved money .

what someone does is up to themselves , but these guidelines are in place for a reason - because these stress tested models provide the highest , safe income draws with the greatest chance of success because they are based around only the worst of times , not average outcomes or the best .
 
mathjak107 said:
going broke depends on allocation ,draw rate and sequence of returns not the size of the portfolio .

how long the money lasts is not dependent on amount . a portfolio of 10 million or 250k at 4% stands the same chances of success or failure trying to draw 4% . only the amount in dollars changes .

trying to draw 4% from a portfolio of 250k vs 10 million from just fixed income stands the same poor chance of doing it , the math is the same.

no one likes pay cuts , not in retirement and not when we were working

the actual math says that to draw 4% inflation adjusted for 30 years you need an average of at least 2% real returns for the first 15 years .real return is after inflation .

fixed income has failed to be able to do that 34x so far out of the 117 30 year cycles we have had .

100% equities failed to do it only 8x and 50/50 6x .

which is riskier at the end of the day ?

having more money , but no equities or little equities lets you draw around 3% and if that works for you , great . but that is also very inefficient use of the money you worked so hard to accumulate . drawing 25% less with a 3% draw than 4% is a big difference in your pay . but without using at least 40% equities you cannot safely draw 4% so it becomes rather inefficient use of the money .

especially when you consider that a 60/40 allocation has ended 30 years with more than you started 90% of the time . so there can be a big difference both in pay and balance left when equities are used in levels high enough to do the job .

over the long term things work opposite . it is the balanced portfolio's that become safer and more efficient and the fixed income ones that become riskier or else they are just an inefficient use of your saved money .

what someone does is up to themselves , but these guidelines are in place for a reason - because these stress tested models provide the highest , safe income draws with the greatest chance of success because they are based around only the worst of times , not average outcomes or the best .
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If one has enough money then there is no reason to add any risk so as I have said, not everyone needs to be in the market. I and others are proof of that. I am in the market but I don't need to be. I get a hefty social security check every month that covers most of my expenses every month. To believe one must never stop investing in stocks and bonds is dreaming. My first two years of retirement I documented every single dollar I spent and it turned out my SS check covered most all of it and in most months 100% of my monthly bills and spending. So this 4% "rule" does not apply to all persons, plain and simple. One thing yet to be mentioned is how long does it take for the typical portfolio to recover from a bear market? How much money was lost in the 2008 fall? 1987? Factor in one's age at the time of these plunges and in some cases you have people now scared to death as they watch their money dissolve.
 
I NEVER SAID EVERYONE NEEDS EQUITIES .

i said that your draw , success rate and allocation are all joined at the hip . when you shift one the others change .

if you need less than a 3% draw fixed income is fine . if you need or want 4% it is very risky and at 5% you better buy a good shopping cart .

so everything is related .

personally i could never see us saving for decades only to have a limited draw by using fixed income only , when i could have a 25% bigger pay check in retirement by using 40% equities which while volatile has never been risky . but what you do is up to you.

when you have a diversified portfolio 40-60% equities the bond side can support more than a decade of withdrawals if need be . over time the stock side is so much higher that even spending equities when they are still down would almost always still have a higher over all balance than avoiding them .

even at 65 we have money we won' t eat with for 20 to 30 years and that is still very long term money. worrying about the short term with money not being needed for decades has little logic to it .
 
Risk Management
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I'm in it for the long haul so inflation can do what it wants. I don't intend to have to take withdrawals except for my RMDs and make frugal moves regularly to cut costs. Credit card cash back rewards for buying and paying for everything I otherwise would have paid with checks or debit cards really help as well.
 
mathjak107 said:
I NEVER SAID EVERYONE NEEDS EQUITIES .

i said that your draw , success rate and allocation are all joined at the hip . when you shift one the others change .

if you need less than a 3% draw fixed income is fine . if you need or want 4% it is very risky and at 5% you better buy a good shopping cart .

so everything is related .

personally i could never see us saving for decades only to have a limited draw by using fixed income only , when i could have a 25% bigger pay check in retirement by using 40% equities which while volatile has never been risky . but what you do is up to you.

when you have a diversified portfolio 40-60% equities the bond side can support more than a decade of withdrawals if need be . over time the stock side is so much higher that even spending equities when they are still down would almost always still have a higher over all balance than avoiding them .

even at 65 we have money we won' t eat with for 20 to 30 years and that is still very long term money. worrying about the short term with money not being needed for decades has little logic to it .
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You keep hammering on the word "diversification" but you fail to define it and tells me you are cutting and pasting out of "Investing 101" especially when you posted 10% in gold. Reading books is one thing but following the trends is my choice. Know the difference between fish smell and fish stink. Bonds for example have sucked in this long bull so why not invest in 40-50% in CDs with zero risk instead of bonds which have crashed big time in the past and I do mean BIG TIME (Pimco ring a bell?) A monkey knows to diversify but how one does it does not come out of a book. Investing is a gamble so if you want to talk about safe returns through the ups and downs fine but that is cutting coupons during retirement. If one is not willing to risk then do not plan n a rich retirement. Do your homework and above all if you don't feel comfortable and confident then get out until you do. It is your money. If I am wrong then where did my money come from after 40+ years of nvesting?
 
why bonds and not cd's ? because bonds tend to go up when markets falter . unless high inflation is the issue bonds ,especially treasury bonds have responded very well . while the fed was raising short term rates in 2006 and 2007 and bonds were tanking when the crises started to emerge , bond rates shifted and fell . long term treasuries were up 40% .

so i think it is you who may need investing 101 lessons . in fact bonds have done quite well over the years . if i used cd's instead of bonds the last few years , which you had some saying would be a better deal i would be 25k less in balance than i am because of the difference in rates and capital appreciation . that 25k is after the bonds nav came down .

so while yes bonds have come down a bit , the accumulated balance still beats cd's .

cd's are fine , but they offer no fighter cover protection at all .

i can see putting a year or two in cd's but not much more than that . recessions are inevitable and like day follows night all part of the cycle . bonds still can be a very important part of a retiree portfolio along with equities . so it is not as much as what they do in a bull market but what they typically do in bear markets and no this dip is not a bear market .

there are all different types of bond funds out there . some do better in different parts of the cycle . 2 of mine , fidelity ffrhx is up over the last year by more than 4% even with the bond market faltering and fidelity strategic income up 3.77% over the 1 year .

cd's are fine but i would not put more than 1 or two years of withdrawals in them , tops .

for the record everything i do has been just what i have done for more than 30 years , it is nothing out of a theory book .

i have had a dynamic portfolio that swaps funds every now and then as the big picture changes . it has never been a buy and die portfolio . in fact i have been using the fidelity insight newsletter for 30 years so i use their models .

i can put portfolio's together in my sleep but i am a tinkerer at heart . i was always thinking about my next move and 2nd guessing the last move. so to keep me from myself i use the newsletter .

it makes it so easy for my wife to mange things without me . being a widow once already and having disastrous results when she had a mish mosh portfolio dumped in her lap following the newsletter concessional swaps is very easy to do for her .

so , everything i do or talk about is things i have done in real time for decades now .
 
fmdog44 said:
You keep hammering on the word "diversification" but you fail to define it and tells me you are cutting and pasting out of "Investing 101" especially when you posted 10% in gold. Reading books is one thing but following the trends is my choice. Know the difference between fish smell and fish stink. Bonds for example have sucked in this long bull so why not invest in 40-50% in CDs with zero risk instead of bonds which have crashed big time in the past and I do mean BIG TIME (Pimco ring a bell?) A monkey knows to diversify but how one does it does not come out of a book. Investing is a gamble so if you want to talk about safe returns through the ups and downs fine but that is cutting coupons during retirement. If one is not willing to risk then do not plan n a rich retirement. Do your homework and above all if you don't feel comfortable and confident then get out until you do. It is your money. If I am wrong then where did my money come from after 40+ years of nvesting?
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so what bond market crashes do you see . do you know what a crash is ? i see a 40 year bond bull market with a few speed bumps and no crashes or even prolonged dips to date . in fact i see fidelity total bond fund down 1.80% ytd , is that a crash to you ?

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