One Offs

One very overlooked aspect of retirement planning is the things that cannot be planned for–one offs. I’ve written about the concept quite a few times because depending on events and luck, one offs could be ruinous…unless a generous cushion is built in to the plan. Things in the one off category that I’ve brought up before have included veterinary bills, new tires, replacing the roof, an unexpected dental event and there are of course others. Add to the list refrigerators as our appears to be crapping out on us. Fortunately we don’t need a big fridge–actually a big one won’t fit through our front door–but this will be somewhere between $1000 and $1200 depending on the various sales prices that all seem to end the day we are looking. There are also various forms maintenance that need to be done and costs money. This year we have had to re-stain our house and deck. Earlier in the year I got an eye exam and new glasses. These can be nuisance expenses but if you don’t maintain your house properly then the expense later will be much more than a nuisance. A modest but comfortable lifestyle in today’s dollars might require $50,000 for regular expenses and maybe another $5000 for some sort of annual trip. If $30,000 might come from social security (combined his and hers) then these folks might need a portfolio of $625,000 to make up the difference assuming the 4% rule and that neither spouse has a job. If these folks take their annual trip in June and then later that summer the transmission goes out on...

One Offs

One very overlooked aspect of retirement planning is the things that cannot be planned for–one offs. I’ve written about the concept quite a few times because depending on events and luck, one offs could be ruinous…unless a generous cushion is built in to the plan. Things in the one off category that I’ve brought up before have included veterinary bills, new tires, replacing the roof, an unexpected dental event and there are of course others. Add to the list refrigerators as our appears to be crapping out on us. Fortunately we don’t need a big fridge–actually a big one won’t fit through our front door–but this will be somewhere between $1000 and $1200 depending on the various sales prices that all seem to end the day we are looking. There are also various forms maintenance that need to be done and costs money. This year we have had to re-stain our house and deck. Earlier in the year I got an eye exam and new glasses. These can be nuisance expenses but if you don’t maintain your house properly then the expense later will be much more than a nuisance. A modest but comfortable lifestyle in today’s dollars might require $50,000 for regular expenses and maybe another $5000 for some sort of annual trip. If $30,000 might come from social security (combined his and hers) then these folks might need a portfolio of $625,000 to make up the difference assuming the 4% rule and that neither spouse has a job. If these folks take their annual trip in June and then later that summer the transmission goes out on...

We’re Back!

…after a two day hiatus. Dennis Stattman who runs the BlackRock Global Allocation Fund (MDLOX) was interviewed in Barron’s over the weekend and had a couple very interesting things to say. You may have seen Stattman on Consuelo Mack before and we was on CNBC recently. On why asset allocation funds like his have risen in popularity he said; It reflects the frankly dismal job that the most popular category, equity-only mutual funds, have done, as shown by the dismal results they have delivered to investors over long periods of time. They just haven’t provided a good risk-return trade-off. Furthermore, the idea that somebody can buy six different U.S. stock funds and somehow achieve useful diversification just isn’t an effective idea. It never was a good idea, and now it has been proved wrong. So having the ability to go anywhere is what, ideally, a fund manager should have. But there are very, very few individuals or teams who have the experience and who are equipped to do this. He accomplishes several things in that quote aside from a not so subtle plug and overt shot at narrower or regular equity mutual funds. To the extent mutual fund results have been dismal it is because the typical equity fund needs to be invested in equities. More funds now have broader mandates but if a fund you own needs to be invested then it will go down a lot when the market goes down a lot. It might go down less but it will participate in a large decline, or at least that needs to be the expectation. This is...

We’re Back!

…after a two day hiatus. Dennis Stattman who runs the BlackRock Global Allocation Fund (MDLOX) was interviewed in Barron’s over the weekend and had a couple very interesting things to say. You may have seen Stattman on Consuelo Mack before and we was on CNBC recently. On why asset allocation funds like his have risen in popularity he said; It reflects the frankly dismal job that the most popular category, equity-only mutual funds, have done, as shown by the dismal results they have delivered to investors over long periods of time. They just haven’t provided a good risk-return trade-off. Furthermore, the idea that somebody can buy six different U.S. stock funds and somehow achieve useful diversification just isn’t an effective idea. It never was a good idea, and now it has been proved wrong. So having the ability to go anywhere is what, ideally, a fund manager should have. But there are very, very few individuals or teams who have the experience and who are equipped to do this. He accomplishes several things in that quote aside from a not so subtle plug and overt shot at narrower or regular equity mutual funds. To the extent mutual fund results have been dismal it is because the typical equity fund needs to be invested in equities. More funds now have broader mandates but if a fund you own needs to be invested then it will go down a lot when the market goes down a lot. It might go down less but it will participate in a large decline, or at least that needs to be the expectation. This is...

The Not Permanent Portfolio

A few days ago I disclosed buying the Global X Nordic 30 ETF as part of swapping out of Australia (for “small” accounts we sold Aussie ETFs and bought GXF and iShares Canada, for “large” accounts the Australian exposure has not yet been replaced). For these small accounts we used Australia as a proxy for foreign developed because aside from liking Australia we want no part of Japan or Big Western Europe and the broadest index funds are heavy in those countries. As I mentioned Australia was a very long term hold (we’ll be back in one way or another for large accounts soon) but I felt a change was needed (click through for the rationale) but still wanted to avoid Japan and Big Western Europe. Depending on the client, they’d had EWA since 2004. That is a long time; seven years is almost permanent. Scandinavia has been a region that I have been favorably disposed to and heavy in the portfolio for quite a while and as I would prefer to keep turnover low and 30-40 positions in a small account remains prohibitive, I hope to be able to keep GXF for a very long time as well, maybe almost permanent. If something sours or more correctly if I believe that something has soured I won’t hesitate to sell it but hopefully that does not happen. This got me thinking about an alternative to the permanent portfolio as I am not a huge fan of holding on to something come hell or highwater. I could not feel good about putting 25% of anyone’s money into long term treasuries...