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Talk of The Villages Florida (https://www.talkofthevillages.com/forums/)
-   Investment Talk (https://www.talkofthevillages.com/forums/investment-talk-158/)
-   -   Move all investment money into fixed income? (https://www.talkofthevillages.com/forums/investment-talk-158/move-all-investment-money-into-fixed-income-336869/)

Villages Kahuna 11-22-2022 04:54 AM
About two weeks ago I increased my allocation to fixed income by purchasing two-year Treasuries paying 4.7%. My thinking was, do I sell equities and their upside (and downside) chances in exchange for a U.S. Treasury bond with NO downside risk but an annual payment of 4.7%? With the strong prospect of a recession facing us in ‘23, probably with more stock market downside, it was an easy decision.

I’m still allocated about 1/3 to equities, all blue chip companies, some paying 2-3% dividends. When the recession is over and our economy and the stock market begins to rebound, I’ll reallocate back to equities. Will I miss the rebound? Sure, but limiting further losses by owning Treasuries paying a reasonable dividend is worth it. I’ll make sure to keep a portion of the portfolio in very short maturities or cash, to be able to roll over into even higher paying bonds or to begin buying stocks when the economic recovery becomes apparent.

As far as the inflation rate being higher than the bond yield, the higher inflation rate only becomes applicable when you actually spend the money. Until then it’s purely a risk-reward investment consideration.

bragones 11-22-2022 05:13 AM
Quote:
Originally Posted by 44Apple (Post 2159510)
At what point should one change from being an investor to a "saver"?

I've been retired a number of years and have invested all my adult life. Luckily, we have enough non-investment money to live on.

I now wonder if I should gradually begin selling my ETFs, Mutuals, and stocks and move all the money into fixed income.

I know the outcome will be lower and stable, but I won't have to deal with the daily ups and downs.

I'm familiar with the 60/40 rule but wonder if I should go 0/100.
Actually, the 60/40 rule changes over time. I believe it’s something like 100 minus your age. So when you are 100 you will be in all bonds! Personally, I’m in a similar boat as you so I’m not going to change what has worked for me all my life other than factoring in tax implications.

bragones 11-22-2022 05:22 AM
Quote:
Originally Posted by CoachKandSportsguy (Post 2159664)
The stock market is going lower in the beginning of CY23, interest rates may or may not go higher from here. as inflation has peaked, or is near its peak, but the federal reserve has not finished yet.

Taxes should not be as much of a consideration to sell stock -> taxes are a by product of success, the more success, the more taxes you will pay, and that sure beats taking a tax loss. . .. .Loss of gains is now on what you should be focused, given retirement and only the lottery will significantly change your income to invest more. Indexes or highly diversified portfolios are a bit different. . I sold a large portion of my stocks over two years ago, very near the peak as the divergences were showing cracks, and I have been 20% -25% equities and 60% bonds and 20+ percent cash ever since.

What is going to happen is that inflation is going to drop very quickly, as the recession and calculation base effects occur. Bond will also be bought very quickly as well, so i would encourage some shift, but that is just me, because I m patiently waiting for 3,000 3,200 on the SP500 to go back in, and trying to find a bottom to trade the long bond, and find zombie companies to continue to short on the way down. You can search on some of my posts

With treasuries, you don't have to wait for the maturity to sell, you can sell them anytime as the price rises and you get capital gains versus interest, and you can move that money back to equities if you like. .

good luck. . .

trader guy
Sounds like market timing. It never worked for me.
FYI: you can also sell CDs purchased through Fidelity on the open market. I will need to check if the proceeds are are taxed as cap gains.

tovliteuser 11-22-2022 06:07 AM
Quote:
Originally Posted by 44Apple (Post 2159510)
At what point should one change from being an investor to a "saver"?

I've been retired a number of years and have invested all my adult life. Luckily, we have enough non-investment money to live on.

I now wonder if I should gradually begin selling my ETFs, Mutuals, and stocks and move all the money into fixed income.

I know the outcome will be lower and stable, but I won't have to deal with the daily ups and downs.

I'm familiar with the 60/40 rule but wonder if I should go 0/100.
If your non-investment income covers all the bills, why are you even considering doing this? Leave it alone. How many times have we seen the market go through ups and downs? Stop worrying. Turn off the Bloomberg channel. The market will come back. Always has, always will. And the biggest losers will be those that went to fixed income for a little "peace of mind".

Cobullymom 11-22-2022 07:03 AM
Quote:
Originally Posted by Babubhat (Post 2159561)
4.6 percent on six months Treasury today. All I need risk free,

The inflation rate is nonsense. Control your housing costs and taxes. The rest is insignificant if you have properly saved. Most people have limited time left.

I am a greedy penny pincher but the time has come to spend. Don’t have heirs come to your funeral in a Maserati
The inflation rate is nonsense? What do you mean?

BlueHeronFan 11-22-2022 07:04 AM
I remember a few months ago that I mentioned buying gold as an inflation and investment method. Immediately I was hammered about crypto being being better than gold. Well I have gold in my hands. I can touch it and enjoy watching the gold market. Wonder how that crypto investor feels right now.

mkjelenbaas 11-22-2022 07:34 AM
Quote:
Originally Posted by 44Apple (Post 2159510)
At what point should one change from being an investor to a "saver"?

I've been retired a number of years and have invested all my adult life. Luckily, we have enough non-investment money to live on.

I now wonder if I should gradually begin selling my ETFs, Mutuals, and stocks and move all the money into fixed income.

I know the outcome will be lower and stable, but I won't have to deal with the daily ups and downs.

I'm familiar with the 60/40 rule but wonder if I should go 0/100.
If you have invested for years I am wondering why you would come to this site for EXCELLENT financial advice? Plus if you have to pay taxes when selling when the market is so LOW - what since does that make - remember - buy low and sell high!!! Time for you to make a decision!

mkjelenbaas 11-22-2022 07:39 AM
Quote:
Originally Posted by Babubhat (Post 2159561)
4.6 percent on six months Treasury today. All I need risk free,

The inflation rate is nonsense. Control your housing costs and taxes. The rest is insignificant if you have properly saved. Most people have limited time left.

I am a greedy penny pincher but the time has come to spend. Don’t have heirs come to your funeral in a Maserati
But isn’t it true you can only invest $10k per person per year from ira’s to treasury products??

Tom52 11-22-2022 07:50 AM
Quote:
Originally Posted by mkjelenbaas (Post 2159749)
But isn’t it true you can only invest $10k per person per year from ira’s to treasury products??
I bonds have a low limit but treasury bills have much higher limits. I purchased in excess of $200 K treasury bills on one auction day.

44Apple 11-22-2022 08:39 AM
Quote:
Originally Posted by bowlingal (Post 2159719)
why don't you ask a financial professional instead of all the yahoos on here?

Because I can tell the difference between the yahoos and those that know what they are talking about.

melpetezrinski 11-22-2022 08:42 AM
Quote:
Originally Posted by Daddymac (Post 2159685)
Fed Chair Jerome Powell signaled officials will likely take interest rates even higher than the 4.5-4.75 percent they initially projected in September, but might take smaller steps to get there. That could mean rate hikes worth a slower half a percentage point — and eventually a quarter point.Nov 3, 2022 Bank Rate.
Does NOT support the quote, "Jerome Powell, head of the Federal Reserve, has said that the goal is for interest rates to be more than the inflation rate." Now, it is very well possible that the fed funds rate will exceed the inflation rate in the future but I don't think Powell explicitly stated that goal.

PugMom 11-22-2022 08:45 AM
Quote:
Originally Posted by Two Bills (Post 2159522)
Wife and I living in UK retired 27 years ago. We decided to put all our investments into cash, and avoid the grind of the ups and downs of the S&S market.
We looked for tax free fixed rate government cash bonds, and Government Inflation proof tax free cash bonds.
Ultra conservative, and capital making no spectacular growth, but no spectacular falls either.
In fact with inflation rising all time in UK at present, we are doing very nicely thank you!
It worked for us.
Some folks love the daily market gamble, but we wanted no more of that.
Some even aim to be among the richest residents in the cemetery, but we definitely don't want that either!
will the new fuel prices be a problem for you? i read it's going up considerably.

manaboutown 11-22-2022 09:08 AM
Well, I for one appreciate the serious responses. Most of the folks who were able to retire and move to The Villages got here through hard work and persevered in managing their finances well enough to retire here. We all have different investment experiences and outlooks but apparently most of them worked at least well enough to get and sustain us here.

RickyLee 11-22-2022 09:41 AM
Quote:
Originally Posted by bowlingal (Post 2159719)
why don't you ask a financial professional instead of all the yahoos on here?
I personally like hearing others thoughts & strategies. Knowledge is priceless

SHIBUMI 11-22-2022 10:01 AM
CD's
 
Most folks that play in the stock market at an older age do it as a hobby. You don't gamble what you can't afford to lose. Folks living off of their money are glad to see cd rates up from
2%. 5-10 years rates are lower because banks believe that rates will go back down in the short term. You can get 5+ % on 5-10 year cd's, BUT, they are not call protected. This means banks can call, redeem, them at their whim. That whim happens when interest rates go back down, like in a recession to promote business. Goal is to get the longest term protected rate you can, then sleep easy.
The federal reserve, does what it says it will do. Stock people try to bend and twist their meaning. The rate will go to 5 or 6 until inflation starts to cave. Then it will sit there for awhile, the banks are saying 2-3 years. Enjoy that guaranteed money while you can.
Stock pickers are just playing bingo with the market as they don't have much to do. Get out and enjoy what life you have left. Inflation is a supply side issue that will still take 2-3 years or more to conquer. Sleep better at nite with fixed income. That window will close soon enough. BUT, if you really enjoy playing Bingo, have at it, just stop complaining.


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