My target portfolio

2 observations:

a) “Sequence of return risk = worst 3 years first” is very pessimistic for a 30 year period

I think this is equivalent to having 2003, 2008 and 2022 in succession. This causes the 10th percentile output to show 65% drawdown after 3 years. I cannot see the results for percentiles below this

b) The simulation spits out expected return for inflation 2.5%: so higher than current 2.2% dividend yield

Thanks for the question it helps my thinking and planning :slight_smile:


sequence risk can be a real beast, so it’s not crazy. i also think there’s usually too much emphasis on just the ‘first x years’ re sequence risk, as it depends so much on the remaining period (till social security & death).

Another -70% from here would be quite special

A post was merged into an existing topic: Portfolio after retirement [2022]

I have been playing with the idea of a ‘bond tent’ lately. In your case, if you have another revenue stream starting in 5 years (pension?), you could aim to reach your final asset allocation at this date. Adding something like a bond ladder for the time in between, with a bond value of roughly the future income maturing each year, would smooth the risk profile for the before & after of your drop in withdrawal rate.

In any case, a withdrawal rate of ~2% after the market had a decent dip seems rather safe.


‘unfortunately’, i’m very far from 65, it’s just the expense side that will go down in ~5 yrs. will you go for a bond tent?

I expect so, but the time to make a decision is still a few years out and I’ll probably fine-tune things a bit more. My current IPS aims at an 80/20 overall allocation, that drops to 50/50 at retirement:

bond tent

I’ll revisit when we get closer. It is quite possible that 1st pillar will look very different by the time we reach traditional RE ages, and a more conservative allocation is needed.

1 Like

my new target allocation (still pondering):

stocks 60% / bonds 24% / real estate 15% / cash 1%

re would be done via ~5 funds with direct holdings. that way their average ter would be off-set via wealth tax/ahv savings, plus distributions are tax-free as well.


What 5 RE Funds do you have on your radar? If you don’t mind sharing? I still struggle to find good RE Funds with direct holdings. The rock solid funds with good propperties generally are the ones with indirect ownership :frowning:


if i had to decide today, my choice would be these (tickers): cif, balsp, cslp, drpf, good

if the indirect ones outperform the direct ones by 1%+ p.a., they could also be of interest.

still pondering, but real estate is certainly growing on me (only even started to seriously consider it after learning about the mentioned potential tax benefits). usually, the bonds part gets allocated to short-, mid- and long-term. the long-term ones are vulnerable to (quickly) rising interest rates, which is true for stocks and real estate as well (see image below wrt re).


so in that regard there’s an unfavorable correlation for all of 'em. a difference between bonds and stocks / real estate is that the ladder two are real assets, which provide some inflation protection. and real estate (funds) also have/had higher distributions than the 10y ch gov bonds (see image below).


following are the charts of 1) sxi real estate funds vs. 2) spi to compare their volatility (ch re crash is missing, as it happened in the 90’s).

in conclusion, i think it’s not totally dumb to basically replace the mid- and long-term bonds with real estate, while still holding enough short-term ones (sequence risk protection) and also, at least slightly, reduce the stocks allocation. something like: stocks at 60-65%, bonds at 20-25%, real estate at 15-20%.

1 Like

This was the first I’d heard about these tax benefits, could you point to any more info about these?

i’m referring to this post and some others in that thread.

Imho, with just 2% spending there’s no risk in being 100% global market cap portfolio:

Still, I’d recommend looking into the concept of risk parity investing for retirement portfolios. Goal’s to maximize SWR and minimize total portfolio volatility by allocating to historically uncorrelated assets.

Also, I’d highly recommend you listening to the following podcasts:

Episode 120 and episode 351 of the BiggerPockets Money podcast:

“Are FIRE Naysayers Bad at Math? Yes. with Michael Kitces”

“Does the 4% Rule Hold During 2022’s Stock Market Crash?”

→ congrats, enjoy the rest of your work-free life, go out and play, don’t waste your time here :stuck_out_tongue_closed_eyes:


do your comments take into account the goal to have a ‘perpetual’ portfolio, not like many of the 30y etc stuff? thanks for your inputs, gonna read & listen.

1 Like

Sure, the risk parity concept implies the goal of perpetual withdrawal rates. Basically a mini individual financial endowment.

1 Like

And if you want an advanced deep dive into risk parity concepts, listen to these guys:

you’re that guy (my first convo here, i think)! :wink: great

so are you still in the ‘golden butterfly’ for the first 10y and then gradually to 100% stocks camp?

1 Like

Yeah, just recalled that thread, might have been repeating myself :grin:

Basically yes, still a great fan of the golden butterfly, because it provides great diversification, SORR mitigation and decent returns.

Of course, you could add some advanced fancy stuff such as trend-following managed futures funds, market-neutral, global macro, carry, long vol etc., but they’re expensive and maybe just not worth it (can’t get insurance against everything :grin:)

Or you can split your equity portfolio allocation into equal weight factors such as value, momentum, low vol, MCW. But the more I read about factor investing, the more I come to the conclusion that it’s just a zero sum game


agree, it’s got a great sortino ratio for any longer-term period:

also adding following chart to remind myself to maybe reconsider gold:

fancy stuff: nope :slight_smile:

factors: already changing weightings on my own