Most definitely not a professional. But honestly, I haven’t been overly impressed with the professionals we’ve talked to over the years. They can’t seem to predict the market either, and go by their formulas and sometimes what gives them the most commission. The only thing that is guaranteed is their commission.
I did talk my husband off the ledge. A little bit of strategic rebalancing is what we’ll call it, not a major move.
My take - when you get to a place that some pool of money is “play money” then perhaps it should no longer be managed to your “needs” and managed for the next generation. To me that affirms your view that you should not necessarily get more conservative with it under the thinking that, if all goes as planned with the other pool of assets (the “our needs” money) then this will be left to your kids who have a longer horizon and therefore can withstand the vagaries of the market. Everyone needs to decide for themselves what the level is for “need money” and “play money” just like everyone needs to determine their own risk tolerance but the standard rules don’t necessarily apply once you’ve hit a certain level of assets. My 2 cents.
I totally get it. We also have pensions and will have SS so our retirement money also is extra. For that reason, I am willing to withstand more risk with it. But I haven’t given the 1-2% drop we’ve had this week a moment’s notice. That tells me that I’m good with my allocation. Sounds to me like your dh isn’t.
I only asked about a FA, because if you had one they should understand your risk tolerance and advise accordingly. Without one, find an online risk estimator and act accordingly.
I think he’s not so concerned about the drop this week, but the potential for a massive, long term drop if things turn really ugly. Right now it’s the well off in our country sustaining the economic boom, but as conditions worsen and people are unwilling to open up their wallets, companies cut back on hiring for a multitude of reasons, personal and public debt marches higher….its hard to tell where all of this is going.
There are so many concerns right now, I’m not sure moving to cash/treasuries is necessarily a good or even best move. I always think about the famous Mike Tyson quote, “Everyone has a plan until they get punched in the face”.
This past year has seen one of the worse devaluations of the dollar, and inflation looks to be on the rise again. Going to cash or cash equivalents understanding those two risks are one thing. Going to cash/cash equivalents thinking they are “safe” is a very different choice.
I’m not trying to fear monger, nor am I trying to say there is an easy solution. I recommend (to anyone nervous about their asset allocation) to step back and figure out if you have enough information to make wise decisions in spiraling uncertainty.
This is where having an Investing Plan (written out) can be very helpful. It gives you a roadmap of what you will/would do in cases of economic turmoil before you have to face that decision. You can decide on an asset allocation (stocks - both domestic and international, bonds, real estate, cash/cash equivalents) and then ask yourself what you would do in the case of one or more of those investments dropping in value. Would the answer change with a 10% drop, 20% drop, 50% drop? How would you rebalance (before you are looking at having to do it)?
It can also help to write out what your priorities are as an investor. If one of your biggest priorities is actually money to go onto the next generation, stock fluctuations can be easily ignored as they have plenty of time to recover. If it is capital preservation - there will probably be a different set of choices to be made. Again, writing it all out can help one stick to the plan when things go sideways.
The last sentence of my post above might be imprecise. If you cannot predict the market, this might suggest that you are human, except that AI systems probably can’t predict the market either.
The market probably just can’t be predicted (or the one person who was able to predict it is sitting on a beach somewhere on an island that he or she owns, and they are not talking to the rest of us).
A graph of the $ vs Euro valuation over time is below. I don’t think this past year stands out as worst. It barely stands out at all. It’s a similar idea for CPI inflation, which is picture in the 2nd graph. I don’t see a significant increase. If anything it’s closer to a decrease.
Are you thinking they shouldn’t be considered safe because of the possibility that the US govt could default on these, declare bankruptcy? I never thought that could happen, but it does seem like anything is on the table now. Don’t really want to buy gold, though. Who knows what is actually safe money any more.
I don’t think the US gov’t is going to default. I do think there is risk that USD may not be considered the safe and stable haven that it has been for years (for multiple reasons, few of which we can discuss here).
As I said above, I don’t know that there is a simple or easy answer to this. But I think anyone looking to move a large percentage of their overall portfolio (to any other asset), should spend some serious time considering the risks the new asset might have. There is no risk free asset out there.
I wouldn’t recommend gold either for various reasons…but the biggest reason for me - if everything goes to heck who is going to buy your gold? What value will it have, especially if you’ve bought through an exchange where you don’t have physical ownership of the gold? And if you do buy ingots/bullion - how are you going to safely store them so you have easy access while also being security conscious?
I’m sorry I don’t have a foolproof method to protect assets during uncertainty. Personally, we chose our asset allocation between stocks (foreign and domestic), bonds (foreign and domestic) as well as a cash cushion that combined allows us to SWAN (sleep well at night). Our cash cushion is over a year’s expenses and we are looking to have 2-4 years in cash/cash equivalents by the time we retire. Our portfolio is in low cost passive index funds and ETFs, with a blended expense ratio of 0.06% across all our assets.
I can’t control the market, I definitely can’t control what governments decide to do but I can control the expense ratio I pay for my investments. So, I am always looking at trying to spend as little as possible while maintaining diversification through our investments. It is boring, but it allows me to sleep at night and most importantly not change my strategy when markets go up and down.
I do not expect the US government to default on bonds, and I am not sure if defaulting on money is even a thing.
I think that inflation is inevitable, and is likely to get worse at some point. If I just did the math right, something like a 7% inflation wipes out half of the value of money over 10 years. This would not surprise me at all. Something worse than this would not surprise me either.
I do not think that any investment is completely safe. A diversified portfolio is one way to try to make a portfolio less unsafe. For a young person, perhaps appropriate education to build a recession-resistant career might be a good and relatively safe investment.
Only if you are storing your cash in something earning 0% interest, such as a bag under your bed. If you are storing cash in a HYSA or money market, you won’t lose half. Fed rate is correlated with inflation such that short term fixed income accounts like this tend to payout higher amounts when there is a higher inflation. Real fed rate (fed rate after inflation) is approximately the rate you’d gain/lose after inflation if your cash was stored in a short-term treasury product, such as money markets. In the available history since WWII, I believe the lowest annualized over a 10 year period for this metric would be between negative 1% and negative 2%.
If losing cash to inflation is a big concern, there are inflation protected fixed income products. For example, the rate for 10-year TIPS is currently 1.8%/year above inflation. Whatever future inflation occurs, TIPS will pay 1.8% above it.
That said, as graphed in my earlier post, inflation currently isn’t high – it’s near what most economists and the fed consider to be the optimal level. Market expectations of future inflation are also not high. Based on TIPS vs nominal rates for varied durations, one can calculate that market expects inflation to continue to remain near 2.x% for quite some time.
You can actually buy federal agency paper now at 5%. The problem is the longest call you can get is about a year - and every piece I’ve bought, 20, 30 year paper has been called. They are, in essence, federal paper.
You can also buy Google paper. With all their AI expense, they generate so much money, it covers everything and then some. Hence it’s insane bond rating. Microsoft is AAA.
There are very safe places to put your money and earn more than 5%. 100% secure - I suppose not. 99.999% - yes.. For people trying to make 7 or 8% in stocks, 5% isn’t bad with no risk.
Yesterday, you could buy Federal Home Loan Bank and Federal Farm Credit Bureau for 5.3% and likely to be called each time they can be. It’s phenomenal. There are also CDs from 1 month to 1 year - yesterday 3.75-3.85% on Schwab - various terms.
So there are plenty of ways to secure your money and at least keep pace with inflation.
Exactly. With all the outcry about the food aid fraud, which was also a result of sudden Covid largesse, we hear nothing about the ridiculous PPP loans that were forgiven. All of that money was given out frantically which is understandable, but the difference in outrage really makes me mad. I know of financial planners who took the loans and still put their employees on unemployment, for example. Took the money and were not paying employees, which was supposed to be the point. There was not much oversight.
Professionals can’t read the future any better than you or me and don’t have any special advantages for long term market timing.
The best hedge fund portfolio managers and other professionals are good short term traders, primarily by intelligently predicting quarterly earnings reports based in part on their massive investment in information.
I know a professional who manages over a billion dollars. Their personal investments are in index funds.
I feel strongly about indexed funds and long-term strong results from highly diversified investments. Mid-last year, I should have gotten out of a small-cap growth fund that had historically done well but for reasons IDK, it pulled the whole portfolio down to annual results well below the market which did 17.87% for 2025 (and we beat the market consistently for years). I didn’t pull the plug on that investment earlier in the year, which I regret not having done so. Lesson learned.
Our FA speculates that small-cap funds may do well this year based on indicators, but the investments within our 401k choices have limitations and not a choice/chance we want to take.
We are not big spenders, so our nest egg is not going to spend down much. A transition on our home location we anticipate to have some major costs, especially if the new location will require an amount more than what our current home is worth.
One never knows on how long we will live, or if we become disabled enough to require a lot of care in aging or some significant disability. The best we do is the best we do.
SPIVA stats for % of actively managed funds that underperform benchmark (after fees) are below. The results are quite dismal, with >90% of actively managed funds underperforming corresponding passive index fund over longer durations.
I thought this gave some interesting thoughts, and at least worth reading.
Depends where you live and your spending/investing on having $2.5 million last for you (as well as later in life health needs).
This came from sponsored content with MSN.
I find it interesting on the life expectancy - it is up a bit from what I thought. Sounds good to me at my current age, if I can ‘get to’ at least the average life expectancy. “According to the Centers for Disease Control and Prevention (CDC), in 2023 the U.S. average remaining life expectancy at age 65 was 19.5 years across sexes.”
Your suggestions are reasonably compelling if one wants to dial down equity risk. Thanks. I think we have done some of that with an additional 10% of our portfolio over the last few months/year.
In addition, somewhere around 7% (I think) of our portfolio is in gold and an investment in an oil & gas fund that has somehow done remarkably well in the last couple of months. I think I’m also getting between 7.1% and 6.5% from a private credit fund. The monthly payout has declined over the last year.
probably not the right audience here… but anybody familiar with home foreclosure terms? (you folks DO know a lot about financial stuff!)
I have an elderly neighbor who almost lost her house during Covid but got another job (mid 70s) and survived, Now she can’t work and is close to losing her house. Will she still get her equity out it if the bank forecloses and sells it?
I don’t know the answer, but I do know that there are organizations that assist with this sort of thing. If I google “foreclosure prevention and assistance for the elderly” for my state, I find a number of organizations (state and local).
