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Thread: Boghies Account Talk

  1. #1081

    Join Date
    Mar 2006
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    Raleigh, NC
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    3,149

    Default Re: TSP Allocation

    The market seems frothy. Don't worry about the -7% to -10% drawdowns, those happen frequently and happen fairly quickly. If you cannot accept a -10% year than you should not be in equities. That statement DOES NOT mean that if such a decline trends slowly and consistently that one has to camp in some allocation, it just means that you have to accept normal fluctuation. Personally, if I get a drawdown of about 7% from the high point I will allocate more conservatively. If I get a nice consistent up market I move to more risk. I am not going to try to guess.

    Anyway, these are what we are trying to avoid:

    Portfolio #1: G/F/C/S/I 10/30/27/23/10
    Portfolio #2: G/F/C/S/I 30/30/17/13/10
    Portfolio Vanguard 500: G/F/C/S/I 0/0/100/0/0

    AllocationDrawdowns.JPG

    Right now I am in Portfolio #1 which seems to be a comfortable allocation for me right now. All I kinda need to retire at age 65 with a comfortable standard of living is a return of 5.5%. While I usually use Quicken to provide average return and risk, I will use Portfolio Visualizer - which has data from 1987 on. Obviously, that ignores some market data, but it does catch a lot of big and recent market moves as well as the normal blah. Here are the basic metrics:

    Metrics.JPG

    What works for me is avoiding the worst and the worst of the worst. For example, I chunked 2008 with a -11% dump. That is actually a +26% advantage over market returns. Same, same for 2000 - 2003. Also, I am wary of all in/all out strategies. The market can move rapidly. Missing early returns (see April of this year) by being 100% in the G Fund means you lost out on a LOT of gains. True, if you predicted 'The Black Plague of 2020' you saved yourself losses in March, but the sleepers recovered in April anyway. All in/All out trading would have required being right twice during a period of turmoil. I rode it by moving to a conservative allocation (50% out of the market) during the downturn - thus alleviating some of the worst of the temporary dump, and then migrating back to a normal to aggressive allocation and the fear subsided. Never all in/all out. Works for me.
    Lookin' up at the 'G Fund'!!!

  2.  
  3. #1082

    Join Date
    Mar 2006
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    Raleigh, NC
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    Smile Re: TSP Allocation

    I decided to crunch some numbers for various types of retirement programs. For Social Security I am not using the returns promised by politicians, but instead the actual return on investment.

    Since 1989 (average annualized returns):
    • Social Security (G Fund): 4.76%
    • F Fund: 6.38%
    • C Fund: 12.46%
    • Inflation: 3.54%
    • Investing 12.5% of gross salary/year. Thus, initially $3,000 and increasing by inflation/year
    • Retirement Age: 65
    • Croaked at: 85


    Using a simple, inflation adjusted (3.54%/year) initial salary of $24,000/year starting in 1989 at an age of 24. Your retirement package would likely be higher because of promotions and non-COLA pay raised, but this keeps it apples to apples. The 'G Fund' IS invested in Social Security bonds - thus it is a very good proxy of the actual value of those retirement holdings.

    Gross Income/Holdings in today's dollars, at age 65
    Social Security:
    • Balance: $631,163
    • Annual Income: $8,453
    • Monthly Income: $704
    • 2-Week Income: $325

    F Fund:
    • Balance: $893,930
    • Annual Income: $13,715
    • Monthly Income: $1,142
    • 2-Week Income: $527

    C Fund:
    • Balance: $4,006,441
    • Annual Income: $94,410
    • Monthly Income: $7,867
    • 2-Week Income: $3,631

    A few things become clear.
    • It's too bad we could not invest that 12.5% of gross income reasonably. Just camping it in C would have given you a very nice retirement. It would be less what is posted because you would move to more stable investments late in life, but...
    • It appears that the politicians are promising F Fund returns while investing is such a way as to get G Fund returns.
    • And, if the account has a G Fund balance than anything over that is a promise.


    If I were someone counting on Social Security than I would be on the lookout for someone asking for 'shared sacrifice'.

    That means that those future politicians think they get more votes by sacrificing you to buy more votes from others.
    Lookin' up at the 'G Fund'!!!

  4.  
  5. #1083

    Join Date
    Sep 2006
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    Upstate NY
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    Default Re: TSP Allocation

    I hope someday a program comes in where you can invest the social security, but that would be prime target for the inequality crowd so it's not happening soon.

    Agree with those charts. A common misperception, "when you're young you should just be 50% C and 50% S". No consideration to risk, life goals or plans to get there either. Look at that drawdown in 100% C fund compared to 60/40. AGG returned 7% in 2020 which more than keeps up with inflation. Nobody talks about that except for the "fiat" crowd which has been crowing for years about this massive inflation push that will erode all wealth and bring back 10% interest rates. 60/40 portfolio goes another year despite being considered dead.

    We're constantly told to take on maximum risk to get to the goal, whatever that is. For some reason on this MB the goal is just to have more (re: millionaire thread) which is no goal at all. If you have actually mapped out your goals and you can reach those goals with less risk, then the route with less risk only makes more sense.

  6.  
  7. #1084

    Join Date
    Mar 2006
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    Raleigh, NC
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    Default Question: Why is the S Fund booming

    I guess the title says it all: Why is the S Fund (US Stock Market excluding S&P500) booming???

    If we can understand the reason for the advance we can make decisions. The stupid snippets in the media are just day to day trolling. What is the reason for the long term growth of non-S&P500 US stocks?



    Lookin' up at the 'G Fund'!!!

  8.  
  9. #1085

    Default Re: Question: Why is the S Fund booming

    Quote Originally Posted by Boghie View Post
    I guess the title says it all: Why is the S Fund (US Stock Market excluding S&P500) booming???

    If we can understand the reason for the advance we can make decisions. The stupid snippets in the media are just day to day trolling. What is the reason for the long term growth of non-S&P500 US stocks?



    I asked the same thing, doesn't make sense to me.

  10.  
  11. Default Re: Question: Why is the S Fund booming

    I saw something on one of the Kendall Report's videos a while back. He brings it up every now in then. I think he brought it up last week during his 2+hour live webcast discussing what's ahead for 2021. Basically, the Russell has not kept up with the Nasdaq over the past few years and that recovery has been going on since June or so. I'm not sure if this is the whole story or not.

  12.  
  13. #1087

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    Default Re: Question: Why is the S Fund booming

    Much of the future was pulled forward for tech stocks while everything else stood still. Small caps don't have such high concentration in tech sector or FANG stocks and instead ard weighted towards healthcare and financials.

    Most of those popular tech stocks have been stuck in neutral or are down since September.

  14.  
  15. #1088

    Join Date
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    Default Re: Question: Why is the S Fund booming

    That is a super frowny face on the market today...

    Scientifically speaking, it might be time to bail to a conservative allocation...

    All the jibber jabber yokels were a-yokeling about the downturn being caused by FED yammering. But, the FED a-yammered and the market did not improve. Still have a half hour left - and late money is smart money. But, if the countenance continues to be frowny it might be because the market is reacting to the new normal. Will regulation and tax 'enhancements' move the economy forward?
    Lookin' up at the 'G Fund'!!!

  16.  
  17. #1089

    Join Date
    Aug 2011
    Location
    Mississippi
    Posts
    444

    Default Re: Question: Why is the S Fund booming

    I don't think we'll know the answer to that for some time to come, but it's not looking good this week.
    Scott Harrison
    Senatobia, MS


  18.  
  19. #1090

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    Default Re: Question: Why is the S Fund booming

    This is where a plan comes into play that includes a solid asset allocation in good times and bad.

    What about all those who said, "I'll just ride this up as far as I can but when it starts to look bad I'll get out". I seriously can't do anything but shake my head at statements like that anymore.

    It's like when people say, "I'll just buy when there is a dip." When "the dip" comes, they've likely changed their tune to, "I'm just going to see how this plays out."

    And when they miss the upswing, "The market is too high right now."

  20.  
  21. #1091

    Join Date
    Mar 2012
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    Hampton Roads, VA
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    3,160

    Default Re: Question: Why is the S Fund booming

    Sitting on the sidelines waiting for a pull back, for any longer than a few weeks, it seems, If this is the extent of the pullback, more gains have been missed than buying the dip will make up for. TSP IFT limits make this timing game untenable.
    100% S

  22.  
  23. #1092

    Default Re: Question: Why is the S Fund booming

    Hey man, stop reading my mind...

    Quote Originally Posted by Bullitt View Post
    This is where a plan comes into play that includes a solid asset allocation in good times and bad.

    What about all those who said, "I'll just ride this up as far as I can but when it starts to look bad I'll get out". I seriously can't do anything but shake my head at statements like that anymore.

    It's like when people say, "I'll just buy when there is a dip." When "the dip" comes, they've likely changed their tune to, "I'm just going to see how this plays out."

    And when they miss the upswing, "The market is too high right now."

  24.  
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