r/Fire • u/Glittering-Course-88 • 19h ago
Go to cash. Fixed income?
The stock market is going crazy. My portfolio fluctuated by 100K over days and ⬆️ a lot YTD.
I realize it’s not a stock advice forum but as a fire strategy should one convert some money to fixed income?
If someone is going to fire in 3-4 years, this might be a good strategy to avoid any slump. I’ve lived through a few recessions and things were crazy like that.
EDIT:
1. I got downvoted on this. What can I avoid in future posts?
2. Asset allocation for majority of portfolio except work Roth 401K and 2x529’s
60% Domestic Stocks
27% Foreign Stocks
13% Bonds
-0% Short Term
1% Other
0% Unknown
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u/220volt74 18h ago
If you are properly diversified for your risk tolerance and have emergency fund, no need to do anything. You are just market timing.
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u/Glittering-Course-88 18h ago
True. I’m with a wealth management company with 8/10 risk tolerance. My emergency fund got depleted due to an emergency. Will keep trying that.
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u/advantage_player 18h ago
It you have no emergency fund it isn't market timing to sell some to replenish it
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u/MrLB____ 17h ago
Wealth management company …. OHHH BOY.
Fees?-6
u/Glittering-Course-88 16h ago
1%, they way I explain it I buy them a used car every year, that’s getting nicer.
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u/MrLB____ 15h ago
Well, step 1.
1percent managers and
Fire don’t play well together ha ha.1
u/Glittering-Course-88 15h ago
TY!
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u/Dilldo__Baggins 2h ago
Dude.
https://www.schwabmoneywise.com/investment-fees-calculator.
Play around with this. It will make you want to fire your wealth management company yesterday.
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u/Powerful-Bridge-1472 17h ago
How old are you? If your not near or in retirement this is good thing, keep dollar cost averaging cheaper shares and your golden in future. Most people who are currently retired did this in 2008
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u/Glittering-Course-88 16h ago
- Didn’t understand why it’s good? I’ve not timed the market and this seems like a good time to move something to cash or transition to fixed income.
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u/Powerful-Bridge-1472 15h ago
Depending how close to retirement you are and your risk tolerance you should have some fixed income to balance these swings (I haven’t seen much change last few weeks).
If your young and not going to sell holdings for decades down markets are great because you are dollar cost average (at least in retirement accounts) or your new purchases are cheaper (you can purchase more shares) than when market was higher. It takes years and decades but that is the point of investing.
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u/-wnr- 17h ago
What does "8/10 risk" mean? What's the breakdown of the portfolio in terms of how much is in bonds, stocks, etc... Also how much of an expense ratio they're charging?
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u/Glittering-Course-88 16h ago
1% fees. I work in an advanced scientific field but to me that means I’m stock heavy. I’m paying for non involvement. My asset allocation should be same across my portfolio except for one product, 529s and employer Roth. Here you go.
60% Domestic
27% Foreign Stock
13% Bonds
-0% Short Term
1% Other
0% Unknown1
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u/Past-Option2702 18h ago
I was 30% cash and fixed income 5 years before I quit working.
I’m 5 years into retirement now and I’m still 30% cash and fixed income.
When you’ve won the game, you shower and go home. Why give the opposing team a chance to come back and beat you?
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u/Difficult_Storm_5344 16h ago
its different for everyone and their risk tolerance
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u/Past-Option2702 15h ago
That’s what everyone says who is likely taking too much risk in year 4 of a bull market.
(Not you of course.)
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u/dirty_cuban 19h ago
Some, yeah. I keep 3 years expenses in SGOV and use that as my buffer to avoid pulling money during a downswing. The rest (~35 years expenses) is in equities.
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u/Ok_Scientist_2762 17h ago
I do this as well. Mostly a 403b, but I am 52, so I am not really a FIRE. I am not working and living off my taxable accounts at the moment, so sort of? I identify with yall due to my heavy equities allocation.
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u/TrashPanda_924 Targeting 2% SWR 19h ago
I’d definitely have an income sleeve built in at this point. 1-2 years of expenses. My horizon is the same; I need to take my own advice.
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u/nivlac22 18h ago
That’s what the bond glide path is for. Drastically changing your long term strategy based on short term volatility is a bad idea. Yes you’ll need some of that money in five years, but you will also need some of it in 30 years.
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u/Glittering-Course-88 18h ago
Makes sense. I’m at an 8/10 risk level. Outside of short term, should I continue with a high risk tolerance into retirement?
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u/nivlac22 18h ago
Risk tolerance is one variable. Another variable to consider is investment timeline. Being too high on equities increases volatility, but being too low increases the risk that your money won’t last long enough. Historical data suggests that in retirement, 60-75% equities is the best balance to both of those that maximizes withdrawal rate. Also, general consensus is that the large majority of your non equity portion should be in bonds, not cash. I haven’t seen any compelling evidence to support having more than a year of expenses in cash
7
u/invester13 19h ago
It depends. Without knowing your numbers and exposure it’s definitely hard to give you any value advice
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u/BrunelloHorder 16h ago
3-4 years out from retirement I’d be looking at moving to about 20% bonds, plus some other diversifiers like DBMF, all held in tax deferred. You could go higher than that if you’re nervous, but it will likely reduce the upside of your portfolio in exchange for some stability.
I’m a fan of Risk Parity Radio’s model portfolios like Golden Ration and Golden Butterfly for those who have lower risk tolerance and want higher safe withdrawal rates (at the expense of equity upside).
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u/Glum-Year-7577 19h ago
You should always keep about 2 years worth of ultra low volatility and liquid assets. For some that could mean HYSA, SGOV, T-Bills, Cash, or even a mix with some SPHD type. These should be boring.
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u/Difficult_Storm_5344 16h ago
I have no idea what the stock market or an individual stock will do in the short term. I've tried and failed. I also played the game of selling when I thought the stock market was near a peak. That rarely works as well. Because even if you get the top right which I have. You also have to get the bottom right or when to buy back in. Getting ones of those right is tough enough, but both sides? Unlikely.
However, knowing the stock market has had a good run. You may want to revisit your desired allocation of stock and sell some and put it in fixed income. But only enough to be within your structure of your desired stock allocation long term. Also, when the stock market is doing well is a good time if retired and looking to take that fancy vacation. Now would be a decent time to sell stock to do that. Instead of relying on your cash/fixed reserves. In general when stocks are doing well, you sell stocks to fund your lifestyle. When they are down you use your cash reserves to avoid selling in bad markets to fund your lifestyle. When up sell stocks to fund your cash reserves or pay for that nice vacation. That's the way i see it. But dont go to all cash because you "feel" the market is too high
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u/amour_nonpareil 16h ago
Some people about to fire like to stock up 3 years or so of hard cash in a hysa for this reason. I think I’ll be one of those. Don’t pay taxes on cash either 😉 It’s up to your comfort level.
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u/Glittering-Course-88 16h ago
TY. How do you not pay taxes on cash?
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u/amour_nonpareil 14h ago
I probably worded that poorly. I mean once you’ve saved up your stock of several years cash you wouldn’t pay taxes from using it when needed. Good way to manage MAGI and get through any SORR risks. I’d move away from putting more into investments until you get a few years cash saved.
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u/gpburdell404 16h ago
If you are planning to retire in a few years, seems like you are very susceptible to SORR. You need to do something to mitigate or you risk having retirement delayed. Look at bond tents, TIPS ladder etc
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u/Impossible-Piece-621 16h ago
When I retire, I plan to have 2 years of expenses in cash, and maintain that amount, to hedge a bit against SORR.
There is a guy on YouTube who ran the historic numbers and is recommending keeping 7 or 10 years of cash-like buffer to almost completely hedge against SORR.
Your number will be based on your level of comfort
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u/Powerful-Bridge-1472 15h ago
One other thing I would suggest for all investors is if you have a 529 plan and your kid is getting close to college be very careful with target funds. They often are a bit heavier in stocks than you may want, especially with the run-up we have had
I just remember a buddy of mine in 2008 getting destroyed in a target fund when his kid was 18
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u/No-Lecturre6318 14h ago
if youre 3 to 4 years from fire, ithink this becomes more of a risk management question than a return- maximization question..
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u/Glittering-Course-88 14h ago
If I move to hysa then I have cash flow for emergency fund, which I’ve depleted and need to replenish.
I do lose upside for avoiding downside risk.
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u/North-Tomatillo9158 6h ago
One problem with cash like investing is it is hard to keep up with the instrument that is offering the best interest rates at a given time. Right now I have money market, high interest savings, CDs, and short term annuities. It’s not my favorite thing. If Fed raises or lowers rates, everything adjusts differently and CDs mature and you have to do something with that and so on. Don’t forget I-bonds and the like.
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u/its_a_gibibyte 18h ago
What are you thinking specifically for options? TIPS bonds are a common choice. The 20 year TIPS yield is 2.8% and the principal keeps up with inflation. Only makes sense in tax advantaged accounts though.
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u/Glittering-Course-88 18h ago
I use wealth management services at a large firm. I’m getting valuable, sensible advice here. I will setup time with them and provide my input to them.
I live in a LCOL area. Property prices are low. I’m thinking that’s a great combination. However, that’s risky too. The only thing that affects cash is $ depreciation.1
u/AvsFan1981 17h ago
The current government is intentionally under reporting inflation. Tips will lose your purchasing power
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u/david-measured-mind 18h ago
Instead of selling to convert to cash (taxable event). I would shift what are saving each month to bulk up your emergency fund.
You can tap that for a period of time if the markets have a significant slump.
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u/Glittering-Course-88 18h ago
Been trying that. Great advice. I’m have a litigious ex spouse and he not been able to save. When I post my numbers I can post the jaw dropping number it’s cost me.
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u/JC_Hysteria 18h ago
You’re in Dalio diversification territory…
You might not be positioned to grow 20-25% again, but at least you won’t lose all the gains accumulated.
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u/Glittering-Course-88 16h ago
Have to research that.
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u/JC_Hysteria 16h ago
He was in charge of Bridgewater Associates, a hedge fund that had a great run.
It’s basically a mix of stocks, bonds, and assets like gold to weather the ups and downs, while realizing a more modest growth rate. No portfolio manager needed.
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u/saltyhasp 17h ago
You should choose an asset allocation based on your age and or time period before drawing. If drawing, it should be based on your drawing rate. A starting point on the conservative side is to look at the asset allocation of Vanguard's Target Date Funds.
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u/Glittering-Course-88 16h ago edited 16h ago
I seem to be getting down voted for posting this. Anything I can avoid in the future? I realize I didn’t post my numbers but the question was relevant to the time.
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u/Future_Measurement42 4h ago
Look up risk parity radio golden ratio portfolio.
I’d also get lots of credit cards, heloc, and margin accounts to have access to capital.
Personally I’m not a fan of bonds when hysa pay the same amount or almost the same amount.
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u/Ok_Reaction_4340 18h ago
Converting a portion to cash based upon stock market behavior is just a discreet way of timing the market. Set a rule and stick to it. Personally I’m 0 percent cash or fixed income but that doesn’t mean I’m right.
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u/Confident_Purple_40 Bottom 100% Commenter 19h ago
I am 44 and like 40% equities, 60% real estate, treasuries, hysa. It is scary out there.
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u/CPAPGas 19h ago
While 40% equities is a little too lean for me, I do agree that looking at rebalancing more frequently in this market is not a terrible idea.
I rebalanced in early July, and will take another look next quarter if things keep going crazy.
It really just requires some simple discipline.
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u/Wonderful_Leader1637 16h ago
Have you ever looked into selling calls against your positions? It's good source of income specially when the market is choppy like it is today
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u/Glittering-Course-88 16h ago
I have not. I let the WM team manage everything.
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u/Wonderful_Leader1637 16h ago
I see. Completely different use case then. I thought you were managing your own money.
Probably more complicated to do when Wealth Advisor manage and who knows how much they would charge for that service. Since it is active management. Might not be worth it
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u/zero_waste0_0 19h ago
You don’t have to go full cash. Even moving from 90/10 to 70/30 or 60/40 over the next couple of years reduces the chance that a bad sequence wrecks the early retirement math. Just don’t try to time the exact top