If I had traded based on my opinions or personal biases over the years I would be looking at a very bleak retirement now. More often than not the market has run counter to my expectations. But I learned long ago not to trade based on my opinions and expectations but based on the action of the market itself. A good example was this past December. I was as bearish as anyone and expecting the long awaited corporate credit crisis to hit full force in 2019. I was ready to sit out the year drawing 2.50% in one of Fidelity’s money market market funds. But then out of the blue came a couple of huge and rare momentum days. So as bearish aa I was at the time, I had no choice but to get back into the grind. Trading is a hard game because a good trader has to admit they are often wrong. I think the above would also apply to investors unless one is a strict buy and holder.

FYI: Steven S. in Sylvania, Ohio, just hit one of his lifetime savings goals, and now he’s freaking out.
You’d think it would be a big celebration, reaching a big round savings number ahead of the rule-of-thumb schedules for being able to retire comfortably.
Instead, Steven’s freak-out is that he’s worried about breaking the benchmark — which in his case was amassing $500,000 in retirement savings — in the wrong direction the next time the market heads south.
“I’m excited to have reached $500,000, and before I reached age 50,” Steven said in an email, “but I’m terrified that if we have a bear market I’ll be way behind again. So I’m thinking of protecting what I’ve got by taking most of it out of the market.”
Regards,
Ted
https://www.seattletimes.com/business/investors-next-challenge-is-holding-on/

I think the decision about the amount of cash or low volatility investments to hold is not much about a "right" answer but is highly individual. The average length of a bear market can be misleading. During the Depression and the beginning of this century there were 2 bad bear markets very close together. If an individual was disciplined and replenished their cash when the market reached its all-time highs again they were a lot better off than if they allowed their equity to run in hopes of recovering a bit for lost time. In the 1970s inflation was a killer and it took around 13 years before the purchasing power of an S&P 500 portfolio was back to equal. In most cases I'm aware of the "average" recovery time for bear markets doesn't include dividends, which helps, or inflation, which hurts.
I use a slightly more dynamic approach to my cash/low volatility investments:
- When I retired I made an estimate of the CAGR I'd need to achieve to cover basic living costs (non-discretionary) and "desired" living costs if I lived to various ages, including "forever", including a static 3% inflation rate. I settled on a goal that I thought was conservative, largely due to the inherent uncertainty.
- As long as the S&P 500 is above its 200 day SMA I hold a minimum of 2 years of non-discretionary living costs in cash or effective equivalents.
- If the S&P falls below its 200 day moving average (at the end of a month) my minimum cash & equivalents increases to the larger of 25% or 5 years of "desired" living cost PLUS "potential" costs like the out of pocket maximum on my health insurance plan or a new car if I'm getting close to needing that- things which my estimates of living costs didn't fully include but could have a fairly significant impact if they occurred.
- Additionally, to the extent that I'm ahead of the CAGR I decided I'd like to target, the excess is invested more conservatively. That doesn't mean cash or equivalents, but lower correlations to the stock market.
- Finally, I keep track of my expenses at a very high level just to make sure my original estimates and/or inflation assumptions aren't way out of line and I would make adjustments if needed but I was pretty conservative so hopefully that won't happen.

>> [@msf] Buffett's [mix] implicitly suggests 2.5 years of "near cash". I'd be inclined to go a bit higher and/or use bonds as a second tier resource between cash and equity investments.
Yeah, this to me is key to withstanding (= usually ignoring) all of these manufactured advice articles:
How many years of safe cashflow are you comfortable with projecting you need, meaning earning very little, and how many years of unlikely-to-dip bondy things after that? Not percentages of your total, only years' worth. 1, 2, 3, 4, what?
I just did major (for me) retirement rebalancing, trying this time to apportion more prudently b/w Roth and taxable, and wound up with 21% bondy-cash. More than 5y, gah.
A year and change is in MINT and non-earning dead cash (BoA savings). Better, 2y or more is in PCI, which can dip, but best of all it matches equity funds over certain stretches. The remainder is in PONAX and FRIFX.
I can live with this, or so I say now, and will move amounts into MINT every few months to keep it at perhaps a year's worth.

January 11 Flag (2015)
Basically correct. To the extent that your taxable income remains within the 15% tax bracket, your cap gains/qualified divs gets taxed at 0%.
In 2014, if a couple had $94,100 in AGI (all cap gains/qualified divs), then line 38 (AGI on p. 2) would be $94,100. Subtracting a standard deduction of $12,400 gets us down to $81,700. Subtracting two exemptions ($3,950 each), gets us to a taxable income of $73,800.
Taxable income under $73,800 is taxed at 15% (or less). So if that's your total income, the cap gains/qualified div portion of it is taxed at 0%.
I guess the rate went up just a little ,50% increase ?
Derf

Let's look at how we make use of three years of cash.
I'll go along with @MikeM here. One isn't going to start drawing from cash the instant the stock market drops from a peak. That might be daily noise or the beginning of a bear market, you don't know.
So what's the strategy for starting to draw on cash? Say we start once the market is in correction territory. That's down 10%. So money that we kept in the market instead of cash has dropped 10% from the peak. But the value has likely been flat if we look back a year from the beginning of the correction. That's figuring the market earns about 10% a year. This is especially likely since the market was going up before the correction began (by definition).
For clarity, let's call the time we start drawing cash T1 (market down 10%).
Now the market's 10% down, and we're beginning to draw on cash. Let's say the market drops another 30% from this point. All together, the market drops 10% followed by a 30% drop. So it's worth 90% x 70% = 63% of its peak value. That's a 37% drop, or about what @hank suggested.
We'll call the trough T2.
The average duration of a bear market (peak to trough) is about 22 months. Since we start using our cash reserve (of three years) only after we are already down 10%, we almost surely have at least another year's worth of cash past the trough T2 before we run out.
So let's see where our stock is in another year. So far, it's down 30% - it was flat from a year before the correction until T1 (when we started drawing cash), and the market dropped 30% from there. The average first year recovery after a bear market (T2 - trough) is nearly 50% (same link).
Put these together: 70% x 150% = 105%, i.e. 5% higher than where we started. And before running out of cash.
Of course each recovery is different. But what this shows is that by starting to draw on cash only upon entering correction territory one can expect to have enough cash left to hold on for at least a year, possibly a lot longer, after hitting bottom, to get back to that 10% down level.
Even though we lose a little (10%) value in the stock from the peak, we come out ahead over the longer term (since cash wouldn't have made money before the market peak). So we're usually better off keeping money in stock rather than cash. We just need enough to outlast the worst of the dip. Three years seems fine for that.

If the headline, "dividends the IRS can't touch" means that for some taxpayers the IRS can't tax the dividends, we can say the same thing about lots of funds.
For example, VFIAX (Vangard 500) pays dividends the IRS can't touch "if one doesn't make enough". For taxpayers (roughly) below the 22% tax bracket, the IRS can't touch qualified dividends. Lower threshold, but same idea.
Either a fund's dividends are beyond the IRS' reach regardless of who receives them, or they are not. As an investor, I can't blindly buy these funds confident that the IRS cannot touch their dividends. Despite what the headline says. This is especially important since the article is making a big deal about how much the taxable equivalent would be for taxpayers in the highest tax bracket.
States with AMT (though I don't see how that affects whether the IRS could touch the funds' dividends):

@hank

If your equity heavy portfolio falls by 35% during a 3-year bear market while you draw from your cash reserves, do you really want to start selling your equitiy heavy portion as soon as the bear ends?

Yes.

Say your equity portion is still down 20-25% 3 years later after the bear market has “officially” ended. Having to withdraw funds (even though it’s now a bull market ) could still be problematic

could be

Per portfoliovisualizer, for the period Jan 2000 - May 2019, XLV has a CAGR of 6.99 vs.SPY's 5.22.
XLV had a beta of 0.77 vs SPY. XLV's biggest drawdown during this 20 year period was (35.5%) vs SPY's (50.8%)
So, XLV has modestly outperformed the market, with materially lower volatility.
Disclosure: I own a small position in FHLC (the Fido version of XLV), and also a position in IHF (healthcare provider ETF).

”Nothing magical about 3 years, though I think that is about the average recovery time for a bear market.”

I borrowed @MikeM’s remark for illustration here, but my question applies to many others who have discussed their withdrawal plan (as relates to cash) in event of a bear market during the distribution phase of retirement.
If your equity heavy portfolio falls by 35% during a 3-year bear market while you draw from your cash reserves, do you really want to start selling your equitiy heavy portion as soon as the bear ends? Say your equity portion is still down 20-25% 3 years later after the bear market has “officially” ended. Having to withdraw funds (even though it’s now a bull market ) could still be problematic.
Looks like the average duration (from peak - to bottom - and back up to that level again) is about 5 years. Since that’s just an average, some of these periods during which you would have to either (1) sell depreciated equities & funds or (2) rely on your cash reserves might last considerably longer than 5 years.
https://www.dividendgrowthinvestor.com/2008/07/average-durations-of-previous-bear.html

Minor point, but the headline is incorrect. 10.5% of last year's income from VMO was subject to AMT - the IRS can touch it.
Click on the second to last item under Income breakdown:
Federal Alternative Minimum Tax - National Funds
https://www.invesco.com/portal/site/us/investors/closed-end-tax-guide/#tab_tab2

FYI: What if I told you that I'd found this article posted by @JohnN two days ago with the exact same headline?
https://mutualfundobserver.com/discuss/discussion/50312/3-big-dividends-the-irs-can-t-touch

In the Hotchkis & Wiley family of funds Old_Skeet owns HWIAX which is their capital income fund and it too owns most anything that it wants. Within this fund you will find many of the equity holdings that are also found in HWAAX. HWIAX pays a monthly dividend and has a yield of better than 3% while HWAAX pays annually with a yield of less than 1%. HWAAX is listed by M* as a 85+% equity allocation fund while HWIAX is listed as a 50% to 70% equity allocation fund. Years back, I chose HWIAX over HWAAX because of the higher yield and monthly distributions.

FYI: Old-school value investing demands both cheapness and a margin of safety against financial distress. But the hundreds of value funds on the market today have largely suffered in the past decade. Growth stocks have outperformed since the financial crisis, but that’s not the only factor that has held back value funds: Most own hundreds of stocks that either aren’t so cheap or are cheap for good reason.
David Green goes beyond the traditional metrics. “Just looking at a screen gives you only a snapshot that won’t tell you what a company will do in the future,” says the manager of Hotchkis & Wiley Value Opportunities fund (ticker: HWAAX). “It won’t tell you what a company’s competitive position is, or if it has some hidden liability. So, each company’s earnings profile is determined by our research team.”
Regards,
Ted
https://www.barrons.com/articles/this-value-fund-owns-anything-it-wants-51559830489?refsec=funds
M* Snapshot HWAAX:
https://www.morningstar.com/funds/XNAS/HWAAX/quote.html
Lipper Snapshot HWAAX:
https://www.marketwatch.com/investing/fund/hwaax
HWAAX Ranks #4 In The (85%+E) Fund Category By U.S. News & World Report:
https://money.usnews.com/funds/mutual-funds/allocation-85-equity/hotchkis-wiley-value-opps-fd/hwaax

FYI: Imagine a savings vehicle that allows you, in retirement, to withdraw as much or as little as you wish—tax-free.
This vehicle, the Roth 401(k), is a great tool for many savers, as my colleague Laura Saunders has pointed out. Why don’t more people take advantage of it?
Regards,
Ted
https://www.wsj.com/articles/the-deal-hidden-in-your-401-k-11559917801?mod=searchresults&page=1&pos=1

FYI: With their defensive characteristics and strong free cash flows, infrastructure companies are worth a look for income investors—especially if we are in the later stages of an economic cycle.
Dividend growth for many infrastructure companies is “supported by businesses that have very predictable cash flows,” Ben Morton of Cohen & Steers (ticker: CNS) tells Barron’s. “These businesses tend to be regulated or concession-based.” An example of the latter is a toll road.
Morton, head of global infrastructure at Cohen & Steers, is a portfolio manager of the Cohen & Steers Infrastructure Fund (CSUAX). The fund’s top holdings recently included freight-railroad operator Norfolk Southern (NSC), cellular tower company American Tower (AMT), and utility American Water Works (AWK).
Regards,
Ted
https://www.barrons.com/articles/infrastructure-stocks-dividends-income-investing-railroad-utility-cellular-tower-51559767985?refsec=income-investing

FWIW: https://www.cnbc.com/2015/08/24/8-things-you-need-to-know-about-bear-markets.html
Aug 24, 2015 · In the average correction, the market fully recovered its value within an average of 10 months, according to Azzad Asset Management. The average bear market lasts for 15 months, with stocks .
Derf

https://www.google.com/search?q=what+we've+learned+about+target-date+funds+10+years+later&ie=utf-8&oe=utf-8&client=firefox-b-1-m
Enter News, Quotes, Companies or Videos
Target-date funds have emerged strongly from the damage of 10 years ago, but some advisers say their one-size-fits-all approach to investing isn’t suitable for every investor. Nicolas Ortega
Journal Reports: Funds/ETFs
What We’ve Learned About Target-Date Funds, 10 Years Later
A decade after target-date funds were damaged during the financial crisis, they have re-emerged bigger than ever as retirement investments. But they still have vulnerabilities.
By Jeff Brown
May 5, 2019 10:09 p.m. ET
Back in 2008, many investors looking ahead to retirement in two years had a shock when “target-date funds” designed for them plummeted in value. Many had assumed those funds, targeted to a 2010 retirement, were safe from large moves that late in the game.
Despite the jolt to investor confidence, target-date funds have flourished in the decade since, becoming a staple in workplace retirement plans such as 401(k)s, as a net $532 billion in investor money poured in during that time, according to data from the Investment Company Institute trade group.
Journal Report
Insights from The Experts
Read more at WSJ.com/FundsETFs
More in Investing in Funds & ETFs
Fund Fees Still Vary Too Much
How Much Cash in Retirement?
U.S.-Stock Funds Rose 3.6% in April
529s or Coverdells for College?
ETFs Dial In to 5G
Whether that is a good thing remains a matter of debate. Some financial experts question the value of target-date funds, saying their one-size-fits-all approach to investing isn’t suitable for every investor. Others say the funds can be a good way to save for both retirement and college—as long as investors pay attention to the products’ risk profile, fees and performance, especially as market conditions change.
Of course, the idea behind target-date funds, or TDFs, is to make investing as simple as possible by gradually adjusting to a more conservative investment mix as a target date approaches. As the default option in many workplace retirement plans, TDFs attract investors who don't want to choose and rebalance their own investments and may not be aware that the funds can still own lots of risky stocks close to and even after the target date arrives.
“There is a common misconception among many target-date holders that the portfolio is completely de-risked at retirement, and that simply isn’t true,” says Robert R. Johnson, professor of finance at Creighton University’s Heider College of Business in Omaha, Neb.
A big factor in that growth was Obama-era legislation that encouraged employers to automatically enroll new employees in retirement plans and use target-date funds as the default for those who don’t choose their own investments. Previously, investors who were inattentive—a notorious problem with workplace retirement plans—simply accumulated cash, which doesn’t provide enough growth to build a nest egg that will last for decades.
“It’s certainly a good thing” to use TDFs as the default, says Dennis Shirshikov, financial analyst at FitSmallBusiness.com, an advice service for small-business owners and managers. “This has brought a great deal of consistency to a retirement portfolio, especially since most investors with a 401(k) do not manage their investment actively.”
Another factor in TDF growth, Morningstar says, is the growing popularity of index investing as most TDFs invest in index funds, rather than actively managed funds. In 2017, 95% of new employee contributions to TDFs went to one relying on index funds, according to Morningstar.
Investors can buy target-date funds for their individual retirement accounts and taxable accounts, as well, and most big fund companies offer them. The biggest player is Vanguard Group with about $381 billion in TDF assets in 2017, 34% of the market, Morningstar says. Fidelity Investments had a 20.5% share, and the third-biggest player, T. Rowe Price , TROW 1.89% had a 14.9% share.
The downsides
Retirement experts have mixed views about TDFs’ value in a portfolio. Most say TDFs are better than not investing at all, or putting retirement savings in cash, but the funds can’t take into account each investor’s unique situation. Two investors the same age would get the same fund, even if they have different needs due to dependents, availability of other assets, life expectancy and risk tolerance.
“In an attempt to simplify planning and saving for retirement—certainly a noble endeavor—the entire concept of target-date funds likely is a bridge too far,” Prof. Johnson says. “Individuals are unique, and one parameter, the anticipated retirement date, cannot and should not dictate the appropriate asset-allocation mix and the change in that mix over time.”
Another concern: The automatic investing strategy ignores changing conditions. Patrick R. McDowell, investment analyst at Arbor Wealth Management in Miramar Beach, Fla., says low bond yields in recent years have reduced TDF income after the target date, and increased the risk of losses on bondholdings if rates rise. (Higher rates hurt bond values because investors favor newer bonds that pay more.)
What’s more, he says, stocks and bonds have often moved in tandem in recent years, reducing the benefit from diversification, which assumes one asset goes up when the other falls.
Know your rights
Retirement savers who are automatically put into TDFs have the right to switch to other funds in their retirement plan as they learn more or conditions change, and Mr. McDowell recommends that investors get more involved as retirement nears. He says he often recommends investors nearing retirement leave the target-date fund and buy a mix of stock and stable-value funds—which contain bonds insured against loss and are designed to preserve capital while generating returns similar to a fixed-income investment—to reduce danger from a potential market plunge.
Advisers urge investors to examine the TDF’s ‘glide path’—its investing policy for shifting from stocks to bonds over time. Photo: iStock
“In that strategy, a big drop in equity and fixed-income prices won’t hurt a soon-to-be retiree in the same way it would in a TDF strategy,” he says. “It also helps investors defend against a rising interest-rate scenario” harmful to bonds.
Experts say TDF investors should keep abreast of performance and not just assume they are on track to a comfortable retirement. Morningstar provides data on average performance by target date, as well as details on individual funds.

The link: https://www.wsj.com/articles/what-weve-learned-about-target-date-funds-10-years-later-11557108540
But it requires subscription, so all I learned is target date funds have vulnerabilities.

Hey guys,
Is there a way to back-test a funds positions? Let's say I wanted to look at the top 5 positions of a fund and track that against the S&P 500. Any sites that do that? Thanks!