Of course, in 2036, I’ll be 91 years old (if I’m still around), so the combination of age and risk tolerance is pushing in one direction anyway.

And yet…

Perhaps it’s because we don’t have as much of a margin for error as people who make more than we do. If I ever manage to save enough to live on for the rest of my life, I’ll probably reduce my stock holdings to something like 3% as well, because at the point my only goal would be capital preservation. But on a librarian’s salary I’m very unlikely to ever have that much saved.

And so I’m doing what the people who I believe are the most trustworthy experts in the field suggest. I have the percentage of stocks (divided between US and non-US) , bonds, real estate, and cash that’s appropriate to my age and risk tolerance.

I don’t enjoy looking at my statements any more than anyone else does, but it’s a truism that most people sell when they should be buying and buy when they should be selling. Markets turn suddenly and unexpectedly. You do the best you can, blow off steam in conversation, and follow the best advice available.

No great disagreement here–mostly just frustration at the overall advice and failure to note that, well, there really is no guarantee that “often” means “and will continue to do so”…

TIAA-CREF and Vanguard both seem to be fairly good at recommending basing allocation in part on age or other investment horizon. But I think they could have given better advice in terms of adjusting allocations based on general market conditions: that is, buying fewer stocks when their valuations are high by historic standards and more when their valuations are low by historic standards. (They sometimes seem to be discourage this as “market timing”, but on the coarse-grained level, with a long-term horizon, I don’t think it is. You’re not trying to figure out *when* the big drop or rise will be, you just are pretty sure one is coming at some point, and you’ve got time to wait for it.)

I invested somewhat conservatively based on the usually recommended age formulas, so I didn’t get hit as badly as I might have in the current downturn. But I think I could do better if I adjusted more aggressively to the deviations from average than I did. (And they work both ways; in a major recession, stocks often come roaring back at short-term rates much higher than 10 percent, and often do so before the economy as a whole fully recovers.)

(Now, as to the more aggressive financial advisers, who would have people in “growth stocks,” many of which don’t pay any dividends…well, that’s a different situation.)

For instance, at the end of February 1997 the S&P 500 was 790.82, and today it’s 773.14. That’s more than 2% lower than it was in 1997, and that’s not even taking inflation into account.

But let’s say that you bought a CREF stock fund unit at the end of February 1997. It was worth 114.0259 then; it’s worth 135.4558 now. So instead of a loss of more than 2%, you have a gain of more than 18%.

That reflects both the boost from dividends, and the drag of management fees. The difference isn’t due to stock-picking either: CREF’s equity index fund, which buys stocks on autopilot, also gained a little over 18% in the same time period.

Mind you, that return still ends up being less than 2% per year, which still is not a good return, especially when you then account for inflation. A purchase of a TIAA unit in 1997 would have gained you more by now than an equal-valued purchase of a CREF unit then, no question, since this past 12-year interval has not been a good one overall for stocks. But you need to compare returns to returns, not returns to share prices.