Date: Wed, 10 Jan 2007 06:53:01 -0600
From: "jIM" 
Newsgroups: misc.invest.financial-plan
Subject: Re: Asset Allocation question: Bonds
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>
> My targeted retirment age is 60 not 65 so i should be more aggressive now
> because I plan on living until 90.  It's simplistic to say I know but I
> would want 30 years living covered by my portfolio.  However the option is
> there to work until 65 or longer of course.  But all my planning for the
> next 10 years will be on retirment at 60.
>
> Now according to your rule of thumb I should not consider bonds until 39. 40
> or 41 Correct?
> >

Correct, adding bonds at around age 40 for someone retiring at age 60.
Create a small position at age 40, then gradually increase this
position as retirement grows closer.  This is my opinion- there are
other ways to do this.

>
> Here is why I feel Conservative investing and why I want fixed income funds
> or holding in my portfolio.
>
> I make blue collar income and my prospects for increased salaries are
> diminished.  I do not have a high school diploma so indeed any shift into a
> white collar position will be rarely presented although not unlikely, and I
> would probably not pursue it.  I do however make a decent slightly above
> national salary now with a stable employment picture.  Good for tax refunds
> directly related to retirement and long term investing.  Unfortunately the
> city where I live in is  I make a low salary.  Bad for cost of living
> expenses.
>
>
> However after all that spiel I'm thinking  several consecutive years with
> bear markets will be harder for me to make up for with a lower salary.  That
> is my thinking.  But if a prolonged bear market (war, running out of oil,
> bankrupt fed blah blah blah etc etc etc.) were to occur do my portfolio
> increases and reinvestments from earlier bull markets allow me to recover or
> does the addition of capital, i.e. a percentage of my salary, allow me to
> recover???  If somebody can guide me on that question with their expience in
> the 70s or 80s or 90s I would be willing to research.  How do you deal with
> a long bear market?  My thoughts are to use it as a buying opportunity.
> Could I use the sale of bonds or fixed income assets to fuel the buying
> during a bear market to make up for a smaller contribution from my salary?
>
> So I think It's my salary that makes me believe to be conservative for my
> age.
>
> And yes I do have emergency funds set aside that will not enter my portfolio
> and no I do not have any consumer or car debts.  In fact I have way too much
> cash in emergency reserves.

I do not think income level suggests a person's risk tolerance.
Conservative would be for someone which does not like seeing their
principal change by 10% in one day, week, month or year.  These are my
interpretations, others will differ.

How much cash do you have relative to a years worth of income?  I think
conventional wisdom suggests a cash position of around 2-6 months of
expenses.  If you keep a larger cash position, I could probably come up
with some logic to invest the rest of portfolio more aggressively (less
bonds, more equities).

At a young age, you have time on your side to ride out a bear market.
Even if the time is 10 years, you have the time to recover.  Over long
time periods stocks tend to reduce volatility on their own (bonds would
be needed to ride out short term volatility).  Long term IMO is more
than 7 years.

In addition your idea of selling bond positions in bear markets to buy
equities would be a form of rebalancing.  That is a good idea, IMO.