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).
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.
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:
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.
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
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%.
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
Yeah, just recalled that thread, might have been repeating myself
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 )
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