AI bubble – why not accelerate reallocation to bonds early?

[Anonymous]

Anonymous wrote:A growing consensus appears to be that the stock market is in an AI bubble and will eventually have a correction, but who knows when or how much.

Partly thanks to this bubble, we recently surpassed our goal for retirement savings ($3M) well before we expected to.

I’ve been a set it and forget investor since my 20s, but am now a GS15 fed with 3 years left before retirement eligibility. I do enjoy my work and would be OK working past that date, such as an additional 5 years to get to age 62. My spouse is in the private sector, makes close to what I do and has no interest in retiring anytime soon.

I keep wondering if we should declare victory and accelerate the reallocation of my current TSP portfolio from 90% stocks/10% bonds to 60%/40%. I understand we could be forgoing sizable future upside gains, but am tempted by the chance to lock in our current gains and minimize our future downside.

Am I crazy to be entertaining this?

If there really were a growing consensus the "bubble" would already be over.

[Anonymous]

Maybe? My kids' 529 blew up and surpassed my goals, and since they are less than 5 years away from college, I moved from 100% equities to a very conservative allocation. Once you've won the game, why continue playing? But retirement is much longer than college, and many will argue that moving to bonds is riskier than staying in equities because you'll miss out on market gains that you'll need to keep up with inflation and sustain your withdrawal rate.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Good luck to all market timers on this thread!

Right? Always the same question and always the same answer.

People always like to quote "time in the market beats timing the market," but the whole point of changing allocations close to retirement is that you don't have much time left in the market!

And if you are 3 years from retirement, you've already had "time in the market"! I think that saying applies best to 20 and 30-year-olds. The money you save in your 20s is worth a lot more than the money you save in your 50s, for example.

[Anonymous]

There is a big difference between bond funds and building an individual bond ladder. I recommend that you educate yourself about the difference before moving forward.

[Anonymous]

Anonymous wrote:Umm, you're at 90/10 with three years till retirement?

AI bubble or not, rebalance immediately.

What is your pension? A lot of feds keep TSP aggressive because they have pensions.

[Anonymous]

Please do t make large financial decisions based on the responses here.

[Anonymous]

Anonymous wrote:There is a big difference between bond funds and building an individual bond ladder. I recommend that you educate yourself about the difference before moving forward.

Within the TSP?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Umm, you're at 90/10 with three years till retirement?

AI bubble or not, rebalance immediately.

What is your pension? A lot of feds keep TSP aggressive because they have pensions.

+1. I think 90/10 is very aggressive this many years from retirement but 50/50 at retirement (based on TSP TDF) seems too conservative.

[Anonymous]

Everyone and their dog is aware there’s a massive AI related bubble. But of course markets can stay irrational for longer than people can stay solvent. And the Fed has proven over and over again that they are in the business of blowing asset bubbles. So it’s unclear how this plays out and when. The market will correct, but then the Fed will go to town to levitate asset prices as they always do.

So it’s not a simple play. Except the dollar, which will continue to decline. But that is an inflationary reality, which tends to bring more money into the market. Which helps stabilize that.

But if I had my financial goals realized, I’d use these bubble numbers and move to a more conservative allocation. A very sharp correction is inevitable. Then it becomes about time frame.

Two cents