The massive stock market crash and the effects on my portfolio were the least of my worries. If you have been following my quarterly reports over the years, you would have already discovered that my portfolio is very conservative. At my age, I am risk-averse. Being risk-averse for retirees is common sense and appropriate if you need the money for retirement as I do. It is not, however, appropriate for young people or a retiree who will give 100% to heirs. For most people younger than 40, it is totally appropriate to have 60% to 80% in stocks and the rest in bonds.

I have so much to be thankful for. First off, for about 15 years, my financial portfolio performed as expected by protecting this retiree from massive losses and participating with reasonable increases when the markets headed up. After it declined by over 200k from a 7-figure portfolio, just last week all the markets bounced back. It was the biggest comeback since the 1930s and evidence of the volatility. No worries. My portfolio has been on “automatic pilot”. It went up and down with the markets but not as volatile because of my 70% bond allocation. Anyway, the specifics of my portfolio performance for the first-quarter 2020 are at the end of this blog post.

March went crazy with the stock market and COVID19! But the last half it got personal. Here’s is what happened…

1. After two months of intense planning, on Sunday, March 15 we announced to our small wedding 50 RSVPed guest list that our celebration at Yucca Valley Tumbleweed Sanctuary and Gardens was canceled.
2. Monday, March 16. A bobcat visited our backyard in the middle of the Rancho Mirage Country Club! What! I am from the farm in northern Wisconsin and I had never seen a Bob Cat ever. What a beautiful animal!
3. On the same day, we discovered a huge beehive in a crack between two of the property border walls. A beekeeper removed them for $200.
4. On Tuesday, March 17, we were attacked by African Bees as we casually walked in our neighborhood (not from the bees in our back yard). We had to run about a quarter of a mile home with a couple of bees in our clothes. Georgiana got stung on her lip and I got nailed on my neck. One bee was so persistent that even though we stripped down from our waist up outside our home, it still got in the house! I got lucky and swatted it while the bee was trying to escape at the window. Talk about bee persistence!
5. Georgiana’s lip swelled and redden for the next three days as a result of the bee sting. Thankfully, it was gone by the time the wedding camera flashed.
6. As the global pandemic worsened each day leading up to our day, March 21st, this terrible event forced us to a wedding celebration plan B. We did not want any external event to stop us from getting hitched.

Of course, almost everyone is torn apart by the coronavirus. Imagine an emotional pendulum swinging with grief/happiness, agitation/contentment, stress/relief, and numbness/love from one feeling to the opposite at random. While it is an interesting and stressful tour of our nervous systems with being stuck in varying degrees of fight-or-flight, we survived and asked myself these questions as we all move forward to get through this unprecedented time:

How can I serve the world most powerfully right now?
Where can I assert my natural leadership?
Where are my unique gifts needed?

Here is the first of two parts in answering these questions. My budget-savvy fiancé and talented planner, Georgiana, and I moved forward with our wedding NO MATTER WHAT!

A Virtual Wedding is Born!

We survived by isolating ourselves starting about March 10th and followed the social distancing policy. We got married in our beautiful backyard with only our friends Frank and his wife Val, the officiant, and our wedding planner who delivered our $1000 worth of flowers (The rest of the flowers were donated to senior centers).

The five of us stayed the appropriate social distance of 6-8 feet. The ceremony was broadcasted on Facebook Live Streaming to friends and family from across the country. Some of the family dressed up with us in their homes and toasted when Frank, my best man, toasted us with his words of wisdom.  Even though about 35 people watched us exchanging vows virtually, it felt like they were with us in person. We had the traditional toast and cutting of our small cake with the cutest cake toppers created for us.

Georgiana wrote our story about how we organized our plan b, virtual wedding and sent it to our local newspaper. We were interviewed and our virtual wedding story was published! (Click here for the Palm Springs Desert Sun Publication).

In part 2, I will continue to report every quarter the performance of my portfolio. During these terrible financial as well as a health crisis, these challenging financial times is where fortunes are won or lost. If you are like me and tens of thousands of Bogleheads you have already planned for stock market crashes by constructing a diversified and balanced stock-bond split portfolio controlling for costs and your appropriate need to take stock market risk, you are in good shape like I am.

I Won the Game!

I am risk-averse! I have no need, nor the stomach to take excessive stock market risks. Why should I? I am retired, living off my investments and a pension, so I have already “won the game.” I will not keeping playing in the fifth quarter! Look, I have plenty of dough and have a fixed income from my pension, social security and Veteran’s Compensation to last for the rest of my days.

Each return is highly correlated with their benchmarks. The major stock market broad averages were down between 20 and 25%. The bonds were up between .15% and 3.5% which is correlated with the benchmark bond that I have been using for years, the Barclays Aggregate Bond’s 3.25% increase.

So the stocks lost 20+% value on paper and my bonds went up between 3.26% and .15%. My portfolio declined by 7.0% because the majority of my portfolio (70%) is in bonds. The stock-bond split, in my opinion, is the most powerful and effective strategy to adjust your risk exposure as we get older (and I sleep soundly!). The general rule of thumb as it is not for everyone, the older we are the more in allocating to bonds. The popular employer-sponsored 401k, 403b or 457b plans have Target Date Funds for their employees. All of the target date funds function the same way, as employees get older to their “target” date retirement, the fund automatically allocates to bonds. Since I am well into my retirement and in my 70s, I have already won the game and no need to “play” beyond the final gun.

Was My Portfolio’s Recent Decline in Value Reasonable?

OF COURSE! Since the last horrific 2008 crash, my portfolio returned reasonable increases in value for 11 years. As you see from the data presented below, my portfolio’s loss in the first quarter of 2020 is both logical and reasonable. That’s why I have been super confident and calm about my portfolio design.  If the market is bumpy, my portfolio bumps a little and when it’s calm, my portfolio is calm also. I know how and why my portfolio performs as the daily financial reports of the Dow Jones Industrial Average, the Nasdaq, the S&P 500 and the international markets tell me every trading day, five days a week, how my portfolio performs. It is never a secret. The stock/bond split makes all the difference in the world and will provide you with the evidence you need to begin to discover what I have discovered for years now. Invest in a broadly diversified with large, mid and small-cap stocks including the international stock markets as well.

Speaking of International stocks! Wow! they took a beating with a loss of 24%, the benchmark for internationals that I use to compare is the MSCI EAFE which declined 23.6%. My Vanguard International Stock Index is right on target only losing a few points more.

The worst performer is the Vanguard Extended Market Index. This index comprises mid and small-cap domestic stocks. I wanted this fund to tilt my exposure to these riskier stocks which preformed higher than the large-cap dominated total stock market index for almost 90 years of data.

 

 

 

Why I Added Vanguard California Muni Tax-Exempt Bond Fund

Because of tax consequences for the IRS requiring people over 70.5 to begin withdrawing our tax-deferred IRA money, my income taxes went up. I decided that I needed to increase my tax efficiency. Make no mistake, my investments are already very tax efficent as most of my money is in index funds which by definition do not trade internally as frequently as managed funds. I added a tax-advantaged muni fund to my mix. It is still a bond fund but the returns are both state and federal tax-free.  It is state tax-free too because the munis are issued from the State of California where I live. I feel very good about controlling my tax bill. But I do believe in paying taxes as I want a civilization!

 

 

 

 

I have written and spoken about keeping investment costs low for years. Perhaps I should not leave this till last because having an extremely low-cost portfolio is important to my financial well being. Since I retired in 2008, I have saved enough from costs alone, the savings paid for my two new electric cars and solar panels. Just be controlling costs, I have about $200,000 in additional money in my portfolio.

 

 

Reasonable Returns and Reasonable Declines

 

That’s it, folks. I hope you got something out of my amateur blog post for the beginning of a new spring season and a new financial quarter. Just remember that my portfolio can be an example of a financial plan that gets me through good times with reasonable returns, and bad times with reasonable declines. It is the Little Red Riding Hood “just right” portfolio for typical retirees who need their investments for retirement.

Our country is in bad times as we continue to fight this pandemic with millions of our fellow citizens losing their jobs. You can get all of the information you need to keep you healthy and safe by just Googling and talking to your health care provider. You can get all of the information you need from google or the hundreds of other financially focused blogs and websites to keep your portfolio safe from this bear market we are experiencing right now.

Many Brilliant Financial Blogs Exist Out There, BUT…

after you try and understand their financial complications involved with the investing process from the books, blogs and websites written by people a lot brighter, talented and work a lot harder than me, just take a 2nd and third look at my simple portfolio above, and my stock/bond split, asset allocation, returns, and costs above, and you will have all you need to achieve, and maintain, your financial goals.

I do not give advice, I simply share what I do FREELY!

I am extremely fortunate that I am will and able to continue paying my cleaning ladies even though we have closed our doors to all people. I am extremely fortunate that I am willing and able to pay for my niece and grandniece’s rent when they both lost their full time paying jobs as waitresses. I am so fortunate that my income keeps coming in as it was designed to do throughout my life as a pensioner through work with additional savings and investing most of my adult life. It is during times like these is when all of that planning comes to fruition, big time!

Steve’s BIO

Stephen A. Schullo, Ph.D. (UCLA ’96) taught in the Los Angeles Unified School District (LAUSD) for 24 years and UCLA Extension teaching educational technology to student teachers. Steve wrote investment articles for the United Teacher-Los Angeles (UTLA) union newspaper for 13 years. He has been featured and quoted in many mainstream media articles about 403(b) plans, including the Los Angeles Times, NY Times, and U.S. News and World Report. He co-founded an investor self-help group 403bAware for teacher colleagues and wrote 7,500 posts in three investment forums since 1997. He testified at California State legislative hearings and honored with the “Unsung Hero” award by his teacher’s union for his retirement planning advocacy.

For the last 14 years, he serves as a volunteer on LAUSD’s Investment Advisory Committee as a “Member-at-Large” and former co-chair. The committee contains collective bargaining reps from the unions and monitors the district’s tax-deferred retirement plans, 457b/403b, of 55,000 former and current LAUSD employees, worth $2.8 billion in total assets.

He started this blog in 2012 to help all PreK-12 public school educators nationwide, especially his Los Angeles Unified School District colleagues. He belongs to a small national group of 403(b) advocates (mostly teachers) who want to bring closer attention to the 403(b). During the last 25 years, 40 newspaper articles have been published and each one says the same thing, TSAs (Tax Sheltered Annuities) are terrible 403(b) plans and the salesperson gets the benefit from lucrative commissions and high-costs. Nobody in educational leadership reads these articles NOR talk about the proper place for annuity products publically.

We come together at 403bwise.com launched by my good friend Dan Otter 20 years ago this month and 403bwise Facebook page https://www.facebook.com/groups/349968819000560/ Come on over if you want to join us so we can help our colleagues avoid these self-conflicted and high-cost Tax-sheltered Annuities (TSAs). In this Video Dan explains the unique 403(b) problems that plague public k12 educators throughout the country: https://403bwise.org/advocacy/video?gclid=EAIaIQobChMIvvf6zPfJ6AIVTlZyCh0FRwa1EAEYASAAEgLoffD_BwE 

 

Steve is the author of two books, Late Bloomer Millionaires and Fighting Powerful Interests: Educators Challenge Tax-sheltered Annuities and WIN!, a story of how a handful of LAUSD educators struggled for years to improve the 403(b) to no avail. But we never quit! We were instrumental in LAUSD’s implementation of the new 457(b) plan and earned a very rare, but very precious “Plan Design” award.

For a copy of both books, email Steve at steve.schullo@latebloomerwealth.com and he will happily email you both books, FREE with no obligation except to read them and get informed, in a pdf file format.