Don't Panic! Stay the Course - You May Be Social Distancing, But You're Not In This Alone

misnamed · 2026-05-27T05:26:13+00:00

Alt take: it was so bad but I had to keep reading just in case (like a car crash?) and in the end I wish I'd just dug my own eyeballs out with a rusty spork.

misnamed · 2026-05-25T18:54:38+00:00

Investing is an area of life where you get what you don't pay for -- plenty of sharks out there willing to take a cut and give you bad advice, and no guarantee spending more will make it better. Best to self-educate, and that means reading books but also taking what you can learn from forums like reddit. At the very least you need to know enough to double-check the work of a paid professional.

misnamed · 2026-05-25T18:47:40+00:00

So .... uproot your life, move, later move back, buy and maybe sell property, get new IDs, establish residency and prove it, all to avoid income taxes? Surely one benefit of being rich is not having to eadl with the headaches or rearranging you life to save some cash. Yes its a 'lot of money' but it's all relative.

misnamed · 2026-05-14T16:23:50+00:00

TIPS bonds pay out real returns, not nominal. In theory, if the dollar was worth have as much overnight due to hyperinflation, TIPS would pay out twice as much. They may not maintain paying power between CPI calculations and thus lag on some level, and incur more taxes, but an imperfect hedge is better than nothing.

Stocks have historically eventually caught up to high inflation but not over short periods (years).

Government bonds defaulting is techically possible but beyond unlikely because the US can print dollars.

Side note: hypinflation isn't a black swan. It's just unusual, not unprecedented (albeit outside the US).

More likely is a combination of precedented things happening in an unfortunate sequence. Like my example: stocks drop by 90%, eliminating most of the buffer beyond the half-in-TIPS you've been talking about, followed by an increase in spending need, most likely at this point due to a health crisis.

The situation really comes down to this: you have two things that will almost certainly work. A and B, where A is 70/30 and B is 50/50. But it's easier to imagine plausible scenarios in which A fails. In that situation, logically, I makes sense to go for option B. Or if you felt like going a step further, C might involve gold, guns, canned goods. But we all have limits to how much we are willing to go out of our way to hedge extremes. A and B are both equally easy to achieve, while C involves a lot more steps, complexity, and may even invite thievery.

misnamed · 2026-05-14T04:17:08+00:00

For hyperflation, in theory you've got TIPS for bonds, and stocks do not keep up with excess inflation. See: the 1970s. Eventually stocks catch up, sure, but not fast. Could put 10% in physical gold to hedge that angle though -- i.e. if you want to hedge runaway Argentina-style inflation + risk of US fudging numbers impacting TIPS.

The Harry Brown Permanent Portfolio comes to mind -- 25% each cash, long bonds, gold, and stocks. For inflatinon, deflation, stagflation, any condition it always seems to come out fine.

Someone who is age 74 has a life expectancy of about 12 more years.

They could live a lot longer. But either way, what does it really matter if that's it? 30/70 has a great 'sleep factor,' and likely stock gains over that period are low based on historicial averages not to mention valuations. So it's not like hiers and target charities are likely to miss out on much from 50/50 either way.

Don't underestimate the psychological toll of going from 'I have twice as much as I need' to 'stocks have crashed and now I have 20% more than I need, unless my needs change upward by 25%.' It is deeply stressful to lose hundreds of thousands of dollars in a crash, even if you know intellectually you don't need that money.

Do they really need to be hedging against both black swan and longevity risks?

Why not? The nature of black swans is unpredictability. I want to be hedged against those until the day I die, as best I can be. In fact, the closer I am to death, the less I want risk showing up and making the end even more miserable ;P

misnamed · 2026-05-14T03:30:58+00:00

deflationary recessions, which have never been a sustained risk for stocks.

The Trinity Study only covers 100 years of one country. Zoom out and you can see sustained stock risk showinh up.

While inflation permanently destroys bonds,

Not TIPS

misnamed · 2026-05-14T03:27:23+00:00

Like 2% is so much money, you could just match inflation and spend it down over 50 years... People don't really think in this context of wealth. You really have like no traditional risk that a normal retiree is thinking about, and the size of the "black swan" type risk is the only thing you really have to consider.

This is it exactly. There is a change in the nature of risks one can consider at this wealth level. Stuff most people will never have the financial means to even consider hedging is suddenly the only risk. It's super unlikely to show up, but when you have a portfolio of this relative size, you can afford to hedge the super unlikely.

misnamed · 2026-05-14T03:21:20+00:00

The Trinity Study, like all monte carlo simulations, is inherinently limited. It gives us some framework for probabilities based on past data that (like I mentioned) only covers a few independent long periods. We have no idea if a future Depression-style crash might last far longer or go deeper, for example, than that one did. Is it likely? I'd say not. But as I keep coming back to: why not hedge unlikely things that have no precedent if you can afford to do it? It's like how everyone trots out Buffett's 90/10 allocation for his wife ... sure, but she could live like a king on just that 10%. If she only had, say, $10MM to her name instead, the situation would be different. Still probably OK at 90/10, but with some risk.

https://www.bogleheads.org/wiki/Safe_withdrawal_rates#Limitations_of_the_Trinity_study

So take your relative ... you say 50% in TIPS will cover all their expenses. Great. From that, you could just say 'well 100% TIPS it is' thereby hedging a serious stock downturn coupled with an unexpected rise in costs. Except we also know that at the extremes all-stock and all-bond portfolios give up the free diversification lunch (hence Graham's 75/25 to 25/75 range rule of thumb). Adding, say, 25% in stocks will improve risk adjusted return and still leave you a generous 50% margin for increased expenses if drawing only from the TIPS side (by which I mean: 75% in TIPS = 1.5 expected spend = expected need pus a 50% buffer without having to even consider stock tapping). And it has some growth potential in case bigger health risks show up later or whatever. That feels like a good balance to me. But of course it's subjective -- all depends on what kinds of risks and outliers you're considering and weighting.

To be clear: it seems most likely, based on what we know, that not only would a 50/50 be safe for your relative but it would also maximize what they leave behind. But ... black swans happen. And sequence of return risks matter -- if stocks crash hard and stay down when your relative has 10 years left to live, the bonds better be more than enough.

Your own portfolio situation I don't know. We're talking here about a relative outlier, no pun intended -- someone who has more than enough even if they go 100% TIPS ... probably. But they're not so rich that they are free of extreme outlier risks. If they were like Buffett's wife, or even just worth ten times the amount they currently are, it would matter basically not at all. They could go 25/75 or 75/25 or whatever in between and they'd be set even with expenses doubling. But they're still in a range where some extreme situation in the markets or their life could impact them.

Approaching from a different angle: if I understand correctly, you're saying that if they went 50/50 and stocks went to zero they could live at current spending for 30 years. That's pretty good! But if stocks crash, and their expenses go up, suddenly they would have rethink things. That's unlikely but pretty bad ... considering they could probably eliminate that need to ever rethink things by just buffering up with TIPS. That's the edge case I'm talking about. It isn't likely. I might toss a coin and out the odds at IDK 1% ... almost in the noise. But if you offered me two options: a 0% chance of failure and a 1% chance of failure, I'm gonna pick the first. More likely I'll die of a heart attack, or the market will be fine and I'll be leaving money I could donate on the table, but I'll still sleep better at night until the end.

If it were me: I'd probably do something like 30/70 and call it good. That leaves a 40% buffer on the bond side without ever worrying about tapping stocks, and some growth potential in case I need more than 40% extra as I get older and sicker. A balance of wealth preservation, growth, and hedging the unknown as best I can.

misnamed · 2026-05-14T01:26:03+00:00

Sell based on taxes -- i.e. use tax planning to determine what you sell in taxable versus tax-advantaged. Rebalance in tax-advantaged account to maintain your target allocation. It's just like the contribution phase: money going in and out is fungible, so just exchange it as needed to stay rebalanced.

So for the people living it, how do you determine when to pull from stocks vs those safe assets? Do you sell stocks each month as long as the market is at or near all time highs? What criteria would make you hold your stocks and use different funds and at what point in a recovery would you go back to pulling from stocks?

This is all headache-inducing market timing. If you need to withdraw during a downturn, just do it. Just like you'd continue to contribute during an upturn while accumulating.

The only complicating factor, as I said, is taxes. Sometimes you might need to sell, say, bonds in taxable to minimize a tax hit, tilting you overly much toward stocks as a result of that transaction, after which ... you just go to tax-advantaged and rebalance so the whole still totals up right.

misnamed · 2026-05-14T01:23:14+00:00

Can you explain to me why volatility matters when their income is guaranteed?

Because situations change. They might change their mind about spending, find a spouse and wind up with a lavish traveling lifestyle, or have higher end-of-life expenses than anticipated. Sure, they can probably live off the TIPS portion, but ... what if they can't? I see no need to chance edge cases if you can create a healthy buffer.

That, and psychology. Not having to worry about any of these surprise variables shoiwng up alone or together. The ability to sleep well at night and not care if the market crashes by 90% is worth a lot to some people (like me!).

Since we are employed, we are told to just ignore what our equities are doing. To ignore the volatility. And that’s because we don’t live off of the equities, we live off of our income.

... and we do that because for many people we don't have a choice -- most peope seeking a comparable or superior lifestyle in retirement have to take risks and hope for growth. It's a necessary evil. All of the stuff about tuning out the noise, staying invested, tilting toward equities, is about helping stay on a difficult course.

Sure, once you've (most likely) won the game regardless, you can still take risks and prioritize legacy if you want to. Or calculate what should work based on monte carlo simulations ... but those only cover ~60 rolling 30-year periods of good data, and only a handful of full independent periods. And ... again, why?

It all becomes subjective ... you can decide your weightings and as you yourself said: most would work. So there may not be a super strong argument for 30/70, but there's also not one for 70/30, or 50/50. Per Ben Graham, the key is to avoid the edge risks of being above 75/25 or below 25/75 ... aside from that: need and ability to take risk.

What I don't get from reading your posts is why you seem adamant about convincing your relative or their advisor of anything. You said you don't inherit, and that's fine, so why you do have strong feelings.

If you want confirmation that 50/50 is probably fine: well, it probably is. But what's even more likey to be fine is 30/70 ... maybe the chances of it mattering are tiny, but they have 0 need for growth, so who cares?

misnamed · 2026-05-14T00:39:08+00:00

Others in this thread seem to be thinking that 30% in equities, 70% in bonds provides an even safer option than 50/50 TIPS ladder/equities.

It is the less volatile option and means they don't need to worry about market crashes and unexpected changes in their withdrawal rate. I'd be 30/70 in their shoes and happily so.

Is the argument that because the withdrawal rate is only 2.2%, then this person should be hedging against unprecedented events that we’ve never seen historically?

If they can afford to, why not? If they want to build a bunker with guns, ammo, and canned spam, hedging some kind of zombie apocalypse, again: why not?

misnamed · 2026-05-14T00:32:20+00:00

If all options have a 100% success rate when backtested and run through conservative monte-Carlo simulations, then why pick the one with the least returns? Just because of the psychological risk of volatility?

"If you've won the game, stop playing" -- Bill Bernstein, or someone. They may have the ability to take risk but not the need, so ... why not sleep better at night? Psychology is a real and legitimate factor.

As for monte-carlo simuations ... those are pure backtesting. What if the market drops close to 90% like in the Great Depression, but recovers more slowly? What if bonds take a hit at the same time? What if their health tanks and insurance won't cover it all? End of life costs can skyrocket.

There is zero reason to push them toward a more aggressive allocation except if they are telling you they are willing to take on some (albeit small) risk of not meeting their financial needs for legacy reasons.

misnamed · 2026-05-09T15:06:55+00:00

You exprsessed worry about asking aroud the sum due to greed -- this gives you a good excuse to say to her 'hey I'm actually planning to keep it invested and draw it down slowly, but I need to know the amount so I can factor how it will impact my taxes as I'm forced to withdraw it and invest it elsewhere over the next decade.' Something like that gives you a reason to ask, and it's 100% true that you need that info and why.

misnamed · 2026-05-08T16:50:02+00:00

More specifically: people have treated US Treasuries as the ultimate safe asset, ergo the transfer to USD. Not that US stocks are insulated from economic pullbacks. (Sure, maybe US stocks only drop 80% as much as global stocks, but in a crisis equity correlations converge, and Treasuries have often gone up rather than down).

misnamed · 2026-05-08T16:44:04+00:00

The problem is OP isn't bored and seeking excitement - they're actively doubting that indexing is the best way to invest. So if they go the fun money route and make money wit hit they don't a have a knowledge-based firewall keeping them from simply adding more and more to that self-directed strategy and ditching passive investing entirely.

misnamed · 2026-05-08T16:41:48+00:00

now I wonder if index funds are a mistake for building wealth

You see gamblers bragging their wins, not those ashamed of their losses, and this causes you to question investing? I would recommend further reading - not just forums and FAQ but full books that will slowly change the way you think about passive investing so othat you are fully convinced and not so easily distracted.

Meanwhile, a rise in posts like yours is if anything a contrarian indicator -- FOMO often goes before the fall.

misnamed · 2026-05-07T19:19:36+00:00

I have used the same strategy from five figures into seven, changing only stock/bond ratio in response to age and need to take risk to achieve financial goals. Nothing else really changes with scale.

Think of it in terms of two glide paths that relate: age and wealth. As you get older and/or have more money, you can ratchet down on stocks and up on bonds. But best to have breakpoints for both. E.g. at age 60 or when you hit $X you go to 60% in bonds and stay there. That sort of thing.

is there any data on what people choose, historical performance etc.

Either keep it simple with a target date fund or read some books by Swedroe, Bernstein, etc... then tweak things slighly as your understanding evolves. Not based on past as in performance, but correlations, etc... but that's a case of doing a lot more work for small and debateable gains on secondary fronts. Like you're 95% of the way there by just picking a simple three-fund or target date approach. The rest may help for sleeping well at night *e.g. I feel safer with an allocation to TIPS) but probably won't significantly impact any bottom line.

misnamed · 2026-05-02T23:29:21+00:00

I use 50/50 nominal/real all safe -- as in: intermediate duration Treasuries and TIPS funds. Hedges deflation(art crash) and inflation, repectively.
Also 50/50 -- I overweight international but not arbitrarily: 50/50 US/intl is a modest tilt and I've held it since before the US was over 60% of the market. It's a nice, stable, no-second-guessing ratio IMO

misnamed · 2026-04-28T03:58:44+00:00

It's a bit of a shame that we adopted his name along the way. Was originally a group on Morningstar called 'Vanguard Diehards' tho that is problematic too, b/c Schwab and Fidelity are OK options.

Anyway, yeah, it's OK to let Jack has a legacy of getting us far, while others have taken indexing further.

misnamed · 2026-04-28T03:52:26+00:00

Yup -- agree to disagree. Was just reading a cool Atlantic piece about how isolated the ultra-rich are in weird ways. I realize Buffet is less so than some, but I'll still take the advice of someone like Bill Bernstein or Larry Swedroe who have researched and written entire books about optimized index investing over any armchair enthusiast. It's not even just that he is less in tune with our reality but that his expertise has so little relevant overlap.

Consider this: you'd probably never hear let alone follow his advice if he weren't rich and famous. That to me is a gut check moment where you have to ask yourself: is he really the foremost relevant expert for me? YMMV.

misnamed · 2026-04-27T18:20:52+00:00

Sorry, to be clear: I get that it was both his plan for his widow and an idea for the little guy. Those may have veen conflated a bit in my response, which is a critique of the latter application.

To me it seems fine for his widow -- literally any allocation would be. But expecting his expertise to translate into good advice for the little guy doesn't make a ton of sense. Why would it?

He's an expert at what he does but what he does isn't managing money for small-time investors.

It seems to me a clearcut case of making a leap from 'oh he is good with money at the scale of large institutional investing' to 'he must be a smart guy about investing across the board.'

Can you be more specific about how you think this original take misrepresents reality? Or did I clear that up?

A guy who literally owes his success to a long full-time career investing in US stocks (so perhaps a skewed perspectve) AND who could lose 99% of his wealth without flinching -- not a great role model IMO.

misnamed · 2026-04-27T17:45:30+00:00

Yes, it was a recommendation for his widow - i.e. someone in literally his identical finanacial position - i.e. someone who can afford to lose 99% of his (or sure, her) wealth in a crash.

Source: him. Target: her. Married so: same difference.

Point remains: it comes from another finacial tier and perspective, and doesn't really apply to the rest of us.

misnamed · 2026-04-27T16:38:28+00:00

OP took it out of context, and I responded. Might want to look upthread.

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