Comments on: The Backward Portfolio http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/ Wed, 08 Feb 2012 17:31:40 +0000 hourly 1 http://wordpress.org/?v=3.1 By: Potato http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/comment-page-1/#comment-13953 Potato Tue, 04 Nov 2008 07:40:42 +0000 http://blog.canadian-dream-free-at-45.com/?p=548#comment-13953 I think that's a good approach, and at 29, what I'm following myself (98% equities at the moment). I think I'm even more equity-happy, since I don't anticipate having any* bond exposure until <10 years before retirement (with a 10+year time horizon, I'll take my chances with equities). One minor point is that I'd start with index funds then move to picking individual stocks (if at all) -- at the beginning, you won't have enough capital to properly diversify if picking, and index fund accounts (e.g.: TD e-series) often have lower/no transaction fees vs. brokerage accounts. * - ok, I lied: there are major purchases, like a car and a house, in the <5 year timeframe that I had been starting to save for in cash/fixed income. I not-quite-recently-enough (i.e.: before the October stock market brutalization) flipped that over into the market, but new savings are going back into the cash pool since I can only be _so_ aggressive as these dates approach (I also haven't gotten into leveraging). I think that’s a good approach, and at 29, what I’m following myself (98% equities at the moment). I think I’m even more equity-happy, since I don’t anticipate having any* bond exposure until <10 years before retirement (with a 10+year time horizon, I’ll take my chances with equities).

One minor point is that I’d start with index funds then move to picking individual stocks (if at all) — at the beginning, you won’t have enough capital to properly diversify if picking, and index fund accounts (e.g.: TD e-series) often have lower/no transaction fees vs. brokerage accounts.

* – ok, I lied: there are major purchases, like a car and a house, in the <5 year timeframe that I had been starting to save for in cash/fixed income. I not-quite-recently-enough (i.e.: before the October stock market brutalization) flipped that over into the market, but new savings are going back into the cash pool since I can only be _so_ aggressive as these dates approach (I also haven’t gotten into leveraging).

]]> By: Weekly Dividend Investing Roundup - November 1, 2008 » The Dividend Guy Blog http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/comment-page-1/#comment-13782 Weekly Dividend Investing Roundup - November 1, 2008 » The Dividend Guy Blog Sat, 01 Nov 2008 11:03:43 +0000 http://blog.canadian-dream-free-at-45.com/?p=548#comment-13782 [...] backward [...] [...] backward [...]

]]> By: Cash Canuck http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/comment-page-1/#comment-13661 Cash Canuck Thu, 30 Oct 2008 04:36:42 +0000 http://blog.canadian-dream-free-at-45.com/?p=548#comment-13661 There is a graph in the 4th edition of Stocks for the Long Run that displays the basis for this approach. The jist of it is that with a long time frame it is more risky NOT to be in stocks than in them. As the time frame shortens, the lowest risk asset mix moves more towards fixed income. This makes me breathe a sigh of relief about the current market situation. There is a graph in the 4th edition of Stocks for the Long Run that displays the basis for this approach.

The jist of it is that with a long time frame it is more risky NOT to be in stocks than in them. As the time frame shortens, the lowest risk asset mix moves more towards fixed income.

This makes me breathe a sigh of relief about the current market situation.

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/comment-page-1/#comment-13615 Canadian Dream Wed, 29 Oct 2008 12:12:21 +0000 http://blog.canadian-dream-free-at-45.com/?p=548#comment-13615 Kevin, All portfolio's have the same basic idea of getting more conservative over time. The issue with 'age % in bonds' is it assumes that you are retiring around the normal age of 60 to 65. If you want to pull off retirement at 45 you would likely have a bit too much equity instead of bonds at that point. Tim Kevin,

All portfolio’s have the same basic idea of getting more conservative over time. The issue with ‘age % in bonds’ is it assumes that you are retiring around the normal age of 60 to 65.

If you want to pull off retirement at 45 you would likely have a bit too much equity instead of bonds at that point.

Tim

]]> By: Kevin http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/comment-page-1/#comment-13564 Kevin Tue, 28 Oct 2008 17:55:30 +0000 http://blog.canadian-dream-free-at-45.com/?p=548#comment-13564 I agree with Canadian Money, this seems to be a slight variant on the conventional wisdom of starting with an aggressive stock/bond allocation at a young age and making it gradually more conservative over time. In fact your breakdown is very close to the old saw of "age% in bonds". Am I missing something? I agree with Canadian Money, this seems to be a slight variant on the conventional wisdom of starting with an aggressive stock/bond allocation at a young age and making it gradually more conservative over time. In fact your breakdown is very close to the old saw of “age% in bonds”. Am I missing something?

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/comment-page-1/#comment-13563 Canadian Dream Tue, 28 Oct 2008 17:53:13 +0000 http://blog.canadian-dream-free-at-45.com/?p=548#comment-13563 Richard, Yes I agree that rebalancing from some bonds might provide a better return over the long haul. That would be something missing from this method. I suppose you can skip the DRIP on the stock picks and then pour that dividend money back in as method to rebalance. Porpoise, I'm in the same boat with wishing I had more cash right now. Thicken, Good question. No, I don't think I could pull this off myself. I don't have the personality to handle all equities right now. I know I could handle a fairly large % of equities, but I don't think I could drop my safety blanket of bonds entirely. It's my very own sleep at night factor. Tim Richard,

Yes I agree that rebalancing from some bonds might provide a better return over the long haul. That would be something missing from this method. I suppose you can skip the DRIP on the stock picks and then pour that dividend money back in as method to rebalance.

Porpoise,

I’m in the same boat with wishing I had more cash right now.

Thicken,

Good question. No, I don’t think I could pull this off myself. I don’t have the personality to handle all equities right now. I know I could handle a fairly large % of equities, but I don’t think I could drop my safety blanket of bonds entirely. It’s my very own sleep at night factor.

Tim

]]> By: Antony Pranata http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/comment-page-1/#comment-13562 Antony Pranata Tue, 28 Oct 2008 17:50:40 +0000 http://blog.canadian-dream-free-at-45.com/?p=548#comment-13562 I think all depend on risk tolerance of a person. Someone who cannot see his portfolio going down might need more fixed-income securities there. Personally, I use my age as reference on how much money I should put on fixed-income securities vs. stocks/index. For example, since I am not at 30s, I put 30% toward fixed-income (bond, money market), etc) and 70% toward stocks/index. The number is not so difference with yours. I think all depend on risk tolerance of a person. Someone who cannot see his portfolio going down might need more fixed-income securities there.

Personally, I use my age as reference on how much money I should put on fixed-income securities vs. stocks/index. For example, since I am not at 30s, I put 30% toward fixed-income (bond, money market), etc) and 70% toward stocks/index. The number is not so difference with yours.

]]> By: Thicken My Wallet http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/comment-page-1/#comment-13553 Thicken My Wallet Tue, 28 Oct 2008 15:36:00 +0000 http://blog.canadian-dream-free-at-45.com/?p=548#comment-13553 Its a good idea in the tax sense. You stack your portfolio to be tax efficient during your prime earning years and then tax inefficient when you are not making income. Question is do you have the fortitude to go all equities? Its a good idea in the tax sense. You stack your portfolio to be tax efficient during your prime earning years and then tax inefficient when you are not making income.

Question is do you have the fortitude to go all equities?

]]> By: porpoise http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/comment-page-1/#comment-13551 porpoise Tue, 28 Oct 2008 15:14:35 +0000 http://blog.canadian-dream-free-at-45.com/?p=548#comment-13551 This is pretty much how I am approaching investing right now. I am 31 years old and am almost 100 percent in equities. This approach is not from some analysis like above but from the belief that over 30 years stocks will be the best option for me. As I age I will become more risk averse and start adding to bonds, etc.. (i assume). The market downturn is disconcerting, however, I regret not having free cash to make timely purchases. I do think that most people my age would not be able to handle this strategy. This is pretty much how I am approaching investing right now. I am 31 years old and am almost 100 percent in equities. This approach is not from some analysis like above but from the belief that over 30 years stocks will be the best option for me. As I age I will become more risk averse and start adding to bonds, etc.. (i assume). The market downturn is disconcerting, however, I regret not having free cash to make timely purchases. I do think that most people my age would not be able to handle this strategy.

]]> By: Richard http://blog.canadian-dream-free-at-45.com/2008/10/28/the-backward-portfolio/comment-page-1/#comment-13549 Richard Tue, 28 Oct 2008 14:47:12 +0000 http://blog.canadian-dream-free-at-45.com/?p=548#comment-13549 That's an interesting plan - it has the advantage of letting you build up the large "safe" investments during your higher earning years, while giving your early investments time to grow. But, it's based on one big assumption - that an early investment that's 100% in individual stocks or index funds will have a higher growth rate than later diversified allocations. Being able to rebalance a portfolio that includes bonds may help increase the returns (especially over the last couple of years). Ideally you could find several uncorrelated equity classes that all have good long-term returns on their own - as Stocks for the Long Run mentions, this may be easier to do with industry diversification than with country diversification. That’s an interesting plan – it has the advantage of letting you build up the large “safe” investments during your higher earning years, while giving your early investments time to grow.

But, it’s based on one big assumption – that an early investment that’s 100% in individual stocks or index funds will have a higher growth rate than later diversified allocations. Being able to rebalance a portfolio that includes bonds may help increase the returns (especially over the last couple of years). Ideally you could find several uncorrelated equity classes that all have good long-term returns on their own – as Stocks for the Long Run mentions, this may be easier to do with industry diversification than with country diversification.

]]>