Bob Brinker Free Discussion Site 59,820+

Top 454. Aug 2, 2005 8:48 AM

» bob90245 - Re: Critical Mass Rebalance

In response to Critical Mass Rebalance posted by kenp11:

What is your target stock:fixed allocation? Do you want to go to 50:50? Do you have a stable value fund in your 401k? Can you give a percentage breakdown what your asset location is (401k/ira/taxable)? Not enough info to make a recommendation. Also, what is your age? Will Required Minimum Distributions (RMDs) at age 70.5 be an issue (if you're in a high tax bracket)?

-- posted by bob90245

Top 455. Aug 2, 2005 9:15 AM

» solarblast - Brinker's Phantom Fund Notion

Perhaps someone knows the answer, or maybe it's archived somewhere, about the concept of a phantom fund that BB talks about on occasion. The idea is that if you get $1000.00 /year in retirement, how much would your company need to keep on hand to pay you that amount. Assuming a 5% gain the amount would be $20K. Now my question is how does one use that in connection with what percentage of stocks and bonds (fixed income) you should have?

For example, suppose your phantom fund is really $200K, and you are 65, retired. According to the so-called rule of thumb he sometimes cites that you should be in fixed funds in proportion (percent) to your age, and stock to (100-age)%, then does the $200K contribute to this calculation? It seems like it should. So, for example, if you have $450K in GNMAs and $350K in some S&P index fund, your investments are--total: 200K(phantom)+450K(gnma)+350K(stock), fixed: 65% stock: 35%. Agreement with the rule. Would that be the way BB considers it? If not, then--total: 800K, fixed: 56% and stock:44%, which would be in diagreement with the rule. I'm not questioning the rule, just the use of the phantom fund notion in calculations of fixed vs stock investments. I don't think I've heard him talk about these details.

Is this notion particular to Brinker or does someone else describe it?

-- posted by solarblast

Top 456. Aug 2, 2005 9:35 AM

» solarblast - Cisco

Has Brinker offered any opinion on Cisco recently?

-- posted by solarblast

Top 457. Aug 2, 2005 9:44 AM

» allancoleman - Re: Cisco

In response to Cisco posted by solarblast:

no . and bob usually doesn't give opinions on specific stocks .

-- posted by allancoleman

Top 458. Aug 2, 2005 9:48 AM

» allancoleman - Re: Critical Mass Rebalance

In response to Critical Mass Rebalance posted by kenp11:

i have a stable value fund in my 401(k) that NEVER loses n.a.v. so that's what i'm using for my fixed income asset allocation while waiting for the n.a.v. of some of my favorite fixed income mutual funds to come down .

-- posted by allancoleman

Top 459. Aug 2, 2005 10:00 AM

» allancoleman - Re: Brinker's Phantom Fund Notion

In response to Brinker's Phantom Fund Notion posted by solarblast:

you have bob's " phantom asset " idea correct . what i've found interesting in that in the past in the secular bull market , bob used this to increase one's stock market allocation . in recent discussions though , bob doesn't like that idea anymore and has been advising people in retirement to go with a balanced ( 50 / 50 ) portfolio NOT counting any phantom assets . which means that when you throw phantom assets into your total portfolio asset allocation , you're going to come up with LESS than a 50 / 50 mix .

course lately bob has been so bullish on the market , when he has been asked a specific question by some callers , bob has suggested over weighting on the stock side for now and to not be in a hurry to get down to a 50 / 50 mix .

when pressed by a caller , bob usually says to go with what makes you comfortable . and if you're a few percent one way or the other , won't matter in this ever changing market .

-- posted by allancoleman

Top 460. Aug 2, 2005 10:08 AM

» bob90245 - Re: Brinker's Phantom Fund Notion

In response to Brinker's Phantom Fund Notion posted by solarblast:

I never subscribed to the notion of "phantom assets". Here's an example to show what I mean. Suppose a retiree receives $20K COLA'd in SS and pension income. At 4% long bond rate, that would imply a phantom asset of $500K. So if this retiree has $500K in personal retirement accounts, his "total" net worth is $1M. Further, if this retiree wants a balanced 50:50 allocation, that would mean that he has $500K in phantom bonds (from SS and pension) and should put all of his $500K of personal retirement money into stocks. I doubt many retirees would cheerfully comply with this recommendation.

On the other hand, I subscribe to a "needs analysis" approach. Let's say this same retiree receives that very same $20K COLA'd in SS and pension income. And let's further assume that this retiree needs $40K in annual income. So will his $500K in personal retirement money meet his needs? With a conservative withdrawal rate of 4%, I would say yes. 4% times a $500K nest egg would produce $20K in annual income. And how should the retiree allocate his $500K nest egg? I would think that a 50:50 stock:fixed allocation should work.

Also notice that in my phantom example above, the retiree has a "total" portfolio of $1M. For the same conservative 4% withdrawal rate, it would allow $40K withdrawn in annual income. $20K would come from SS and pension. And the other $20K would come from the personal retirement account. I couldn't imagine withdrawing the other $20K from an all stock nest egg.

-- posted by bob90245

Top 461. Aug 2, 2005 3:42 PM

» iamacamera - Re: Re: Brinker's Phantom Fund Notion

In response to Re: Brinker's Phantom Fund Notion posted by Kirk:

Yes, Kirk, I use your method. I call it "my life as a mortgage" I use a TI business Analyst calculator. I believe it is much more realistic but if you drop dead tomorrow it won't help your survivors.

-- posted by iamacamera

Top 462. Aug 2, 2005 7:59 PM

» solarblast - Re: Re: Cisco

In response to Re: Cisco posted by allancoleman:

True, but sometimes a caller questions him on particular stocks. I've heard him comment on Cisco before and have heard callers slide the question in?

-- posted by solarblast