# Old Advice vs. New Advice



## fmdog44 (Apr 1, 2019)

*Old advice: Invest a set percentage of your portfolio in stocks,  no matter what **New advice: Consider your risk capacity *
Years ago, investors were told to invest a set percentage of  their portfolio (usually 100 minus their age) into stocks and the  rest in bonds. This means a 60-year-old would invest 40% of their  portfolio in stocks and the rest in bonds, then tweak the amounts  each year as they move toward retirement age. Taylor Schulte, financial advisor and host of the Stay Wealthy Retirement Podcast, says this advice  could do more harm than good in today's environment. People planning for retirement have to consider more than just  their age when investing their money. In addition to risk  tolerance, Schulte says they should consider their "risk  capacity" - or the amount of risk a person _needs_ to take  to reach their goals. On the flip side, "maybe someone has been such a great saver that  they don't need to own stocks at all," he says. The bottom line: There's no one-size-fits all strategy that works  for everyone. ​


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## Aunt Bea (Apr 2, 2019)

fmdog44 said:


> The bottom line: There's no one-size-fits all strategy that works for everyone.



ain't that the truth!


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## JimW (Apr 2, 2019)

I try as best I can to follow the advice in this book! It's a good read with some solid advice. It's written by a couple of local guys here in Mass that have their own investment firm and a weekly radio show as well. You can find the book on Amazon for a couple dollars if anyone is interested.


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## mathjak107 (Apr 3, 2019)

fmdog44 said:


> *Old advice: Invest a set percentage of your portfolio in stocks,  no matter what **New advice: Consider your risk capacity *
> Years ago, investors were told to invest a set percentage of  their portfolio (usually 100 minus their age) into stocks and the  rest in bonds. This means a 60-year-old would invest 40% of their  portfolio in stocks and the rest in bonds, then tweak the amounts  each year as they move toward retirement age. Taylor Schulte, financial advisor and host of the Stay Wealthy Retirement Podcast, says this advice  could do more harm than good in today's environment. People planning for retirement have to consider more than just  their age when investing their money. In addition to risk  tolerance, Schulte says they should consider their "risk  capacity" - or the amount of risk a person _needs_ to take  to reach their goals. On the flip side, "maybe someone has been such a great saver that  they don't need to own stocks at all," he says. The bottom line: There's no one-size-fits all strategy that works  for everyone. ​




age based investing is a horrible way to invest .... we all have different , needs , goals and  pucker factor .. how do you compare a 65 year old investing legacy money for his kids with a retiree with no slack in their plan for cutting back if markets are worst case ?  you can't .... by the same token if someone needs a 2% draw they need no equities to sustain that , but if they need 4% they absolutely need at least 40% equities ..

there is also what is happening to the world around us to consider ...so while wall street loves to cover their ass with target funds they are a bad idea


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## fmdog44 (Apr 3, 2019)

mathjak107 said:


> age based investing is a horrible way to invest .... we all have different , needs , goals and  pucker factor .. how do you compare a 65 year old investing legacy money for his kids with a retiree with no slack in their plan for cutting back if markets are worst case ?  you can't .... by the same token if someone needs a 2% draw they need no equities to sustain that , but if they need 4% they absolutely need at least 40% equities ..
> 
> there is also what is happening to the world around us to consider ...so while wall street loves to cover their ass with target funds they are a bad idea



You always go by some chart or odds but you always ignore the individual and that is fatal. Age based investing is a horrible way to invest???!!! No one has ever said that and never will.


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## mathjak107 (Apr 3, 2019)

You need to learn a whole lot more about this stuff then you think you know if you believe how you invest should be based on age and not who you are investing for , your needs from the portfolio , you own pucker factor ,etc .... that reply you posted about no one believes you shouldnt go by age is bull shit to be honest .. that is an awful way to invest ...YOU ARE IGNORING THE INDIVIDUAL .

. investing is highly individualized by situation , need , ability to stand risk and  flexibility in spending ...as an example,people with no slack in the budget have to be careful with equities because there may be no where to cut back when every thing is a need and markets go badly for an extended period ..


who is that 60 year old investing for ?  Is it legacy money for heirs  and they can be 100% equities if they wanted , Or is it to support themselves with a 4% draw?   What about the 30 year old who bails out in down turns and losses money in a panic every time , should he really be 100% equities even at 30 ?    If someone needs a 2% draw  from their portfolio , why should they have to be in equities because they are 65  and 65 year olds are told they must have equities ...

the answer is age based investing is as wrong as a one size fits all as all the other  nonsensical solutions that  try to portray themselves as one size fits all.


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## Old Dummy (Apr 3, 2019)

KISS: Construct an asset allocation depending on your age, goals, and risk tolerance.

According to numerous sources, asset allocation is the biggest factor that will determine your success. 

Time is the one asset you have no control over; use it wisely.

I'm self-taught, learned "on the job," was lucky enough to not make any big mistakes, and it all worked out quite well.


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## mathjak107 (Apr 4, 2019)

keeping it simple is always a good thing ...but learning and knowing what is right for someone is very complex ... we all have different situations and the least of the factors is age ...  trying to paint everyone with the same brush has worked out  not so well .. but it makes it easy for wall street to cover their asses by  doing it .

how you allocate plays a big part in how much you can safely draw , what your volatility is and how many years are you looking to support yourself . many retire a lot younger then 62 and allocations that produce good results at 62  are not so good for 40 year retirements ...

personally i like to see youngins in 100% equities if they have the pucker factor but many  can't handle that volatility and that is why age based investing fails   on the other hand retirees and pre-retirees can be all over the map...  
 a 65 year year old who is investing for legacy money for heirs is really a very very long term investor and can still be 100% equities if they wanted to .

someone who wants to draw a 4% inflation adjusted income is very different from someone wanting 4 or 5% as far as allocation ...so no one should ever belive investing is as easy as some mythical formula based on age ....


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## Old Dummy (Apr 4, 2019)

mathjak107 said:


> keeping it simple is always a good thing ...but learning and knowing what is right for someone is very complex ... we all have different situations and the least of the factors is age ...  trying to paint everyone with the same brush has worked out  not so well .. but it makes it easy for wall street to cover their asses by  doing it .
> 
> how you allocate plays a big part in how much you can safely draw , what your volatility is and how many years are you looking to support yourself . many retire a lot younger then 62 and allocations that produce good results at 62  are not so good for 40 year retirements ...
> 
> ...



1) Age: Someone 20 should have a much higher allocation to stocks (total stock market) than someone 50-60 (see #3).

2) Goals: Are you saving for retirement (pension? No pension?), mad money, house down payment, college for kids?

3) Risk tolerance: If the stock market drops 50%, will you be okay if your portfolio drops by 50%? 30%? 20%? Adjust bond/cash portion to get the right balance. This is generally tied to age, but not necessarily.

As a basic framework, it doesn't have to be any more complicated than that -- unless one is a broker/financial planner, etc. and you need to justify your fees by making it sound too complicated for the average person to figure out.


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## mathjak107 (Apr 4, 2019)

Old Dummy said:


> 1) Age: Someone 20 should have a much higher allocation to stocks (total stock market) than someone 50-60 (see #3).
> 
> 2) Goals: Are you saving for retirement (pension? No pension?), mad money, house down payment, college for kids?
> 
> ...



i absolutely agree the youngins should have very high equity positions .. there is ZERO  logic from a financial standpoint to a long term investor mitigating temporary short term dips with bonds permanently hurting their long term returns .

but the reality is that having been on the 401k committee at work , the exodus of youngins from their  target funds in 2008 scared them out for many many years .

people of all ages tend to not have the pucker factor they thought and they exhibit poor investor behavior every time there is a drop .

in fact the reason people benefit from paying a 3rd party  to handle their money is it may reduce poor investor behavior by keeping them from the sell button directly .

so right off the bat you can see individual temperament is going to make a target fund   a poor choice ....  couple that with the fact there is no standard in the industry as to just what is the right mix at that supposed age.

the same 2010 target date fund from wells fargo in 2008-2009 lost 11.5% while the t.rowe price 2010 target fund lost 26.5%. that is a target fund that had 2 years to go before retirement. in fact the t.rowe target date fund didn't fall to below 45% equities until 5 years after the target date.

to make things worse after the downfall instead of buying more equities over the next 5 years as good investing tactics would dictate target funds actually shed their holdings further as they reduced down by design the equity side and sold while they really should be buying.

they are quite poor for dollar cost averaging in to . because markets are up 2/3's of the time and down only 1/3 you are buying fewer and fewer shares as time goes on coupled with them reducing equities as part of their plan. the end result is your own performance will lag the funds intention over time.

any method of investing that uses age or age to an event with disregard for the persons own pucker factor and what is happening in the world around them you can bet will not end well or do as well for that particular investor ..

my vote is for retirement investing stay away from target funds , concentrate on a portfolio of funds where you have control over what to shed and what to keep as the big picture changes.

you need to match not only the draw downs to your pucker factor , but you need to match the money to the time frame you need it as time goes on but not of all of us have the same time frame for that shorter term money needs .

i had 3 dental implants put in this morning , so the need for shorter term money comes up unexpectedly for all of us .


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## OneEyedDiva (Apr 7, 2019)

I agree that there's no one size fits all strategy. Most of the financial advice I read gets thrown out the window. Muslims are not supposed to invest in vehicles that pay interest (at least not a significant amount). That 0.001% banks are paying on savings accounts are well below the allowable limits. So there will never be a 40% bonds portfolio for me.  We can however collect dividends and capital gains so I have investments that provide that kind of income. 

I found out after investing for a few years that I have a high risk tolerance. I lean toward aggressive investing which I'm able to do because my pension covers most of my expenses and a good portion of my SS goes to savings and investments  I do have cash stashed and bank accounts, however, that serve as my emergency funds, "mad money" and represent 31% of my portfolio. So I guess at 72, that's very similar to the ratio mentioned in the age old advice.


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## wvnewbie (Jul 24, 2019)

High Risk = High Return --  But lottery tickets!


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