Investing General Discussion

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Sanrith Descartes

Sanrith Descartes

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tugofpeace said:
I just started doing that; earlier I had about 70% SPY, 20% VXUS, 10% bonds. Got rid of the bonds couple months ago and started going 80/20. Now I'm 100% SPY.

The thing I don't like is that I don't have VTI in my 401k. It's gain since inception is 413% while SPY is 1260%.. caveat is that SPY is very tech heavy. In a limit down or crash scenario I think those holding 100% SPY will lose a lot more than thsoe holding VTI due to the diversification.

It's why I'm trying to figure out how to add some of that diversification into my 401k.. but I don't think I have any real funds which can do that.
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You have to let go of the "in a limit down situation" thinking. Unless you are already retired and on fixed income, this mentality is limiting your returns.

Look at every limit down instance in the last 100 years of the SPY. Did it recover? The answer is yes. The idea is you don't sell in a limit down situation and realize a loss, you buy. Buy, buy, buy.

It's why we say you need to leave you emotions at the door as an investor. If SPY ever goes to zero, we have much bigger problems than our 401k balances. And that is why you diversify your investments with guns and ammo.

And I say all of this as one of the more risk averse people in the thread.
 
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Gravel

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Even as someone who's retired, I don't worry about those. Shit, our retirement started with a good 20%+ drop. It has since recovered all of that. I told my mom the same thing. Unless she planning on dying in the next 2-3 years, the bonds are only holding her back. If she wants her money to last until she's 90, just in case, well, you need to be invested just like someone who's 40 planning to retire in 25 years.

It's one of the fallacies sold to older people that I just don't understand. Yes, you want to preserve your money, but you if you expect to have a 20+ year retirement, I'm not sure bonds are even going to match inflation.

I think Blazin mentioned it a few weeks ago, but there was basically a 30 year bond bubble and outside of that they're shit.
 
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Blazin

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A sustained crash isn't really possible, to believe that you have to believe that the govt will solve it's debt problems that the dollar is not going to be devalued. The market WILL go up, it's delineated in US dollars those dollars are debased, the economy doesn't need to get better, companies don't need to earn more, still goes up. It's a testament to the shittiness of the dollar not the strength of the market.

Real long term concerns are more along the lines of does the market go up enough to keep my purchasing power in place. Unless you are super bullish on DOGe and the govt is about to constrain spending, we are going to solve entitlement issues with medicare /ss and on and on, then I guess we can talk about fearing a deflationary bust (a crash).

Now imagine understanding that and thinking " you know ,I want to own govt debt as a material portion of my portfolio"
 
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Sanrith Descartes

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I don't knock anyone who is in the "stocks early and then go to bonds as I get older" mentality. Why? Because it has been IV fed into you by the media, Wall Street, and pretty much anyone else flagged as an "expert" for a century.

The trick is to get unplugged, look at the data (or if you can't then listen to those who can) and see the truth. To paraphrase a certain Joo who has a sister with giant tits
, "data doesn't care about your feelings." And I speak from experience.

When I first started posting in this thread many years ago, I was one of those who bought into everything they said on CNBC, did the Boglehead cult for a while, the 5 stock strat, owned some shitty bonds, the whole nine yards. And yeah, I owned IXUS too. And emerging market bonds. Chyna stocks. And my returns were shit. Year after year.

Do I own some bonds today? Yes. Farm bonds. 6.35% that I expect to be called in May. I see that as a 1-yr trade that nets me a guaranteed 6.35% return. It was paying more than the interest on my cash core position.
It's not a long term investment. Even at my advanced age. Why? I can make better in equities with an upside over a long time horizon.

It's not that quality bonds are "bad" fundamentally. It's all about opportunity cost and lost compounding. For a retired person 75 years ago who had zero debt, house paid off and a portfolio filled with 7.5% treasures, they didn't care about opportunity cost, they only cared about not touching their principal in retirement to pass the stash on to their kids. It made sense for them. Especially when rhe market was averaging 9% with risk.

Tldr: if you aren't dedicated to investing, own the US index, look at it twice a year, buy more when you can and leave the meme stocks to Roaring Kitty. You will thank us in 30 years.
 
Blazin

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We as a nation are odd about personal finance, people don't understand that wall street banks are the sellers of govt debt. That's their trade. We then ask them what we should do with our money and the debt salesman tells you you should buy debt. It's like being surprised that a car salesman wants to sell you a car. Now I have to stop posting about this issue or I'm going to wake up a full crypto bro.
 
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tugofpeace

tugofpeace

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Sanrith Descartes said:
You have to let go of the "in a limit down situation" thinking. Unless you are already retired and on fixed income, this mentality is limiting your returns.

Look at every limit down instance in the last 100 years of the SPY. Did it recover? The answer is yes. The idea is you don't sell in a limit down situation and realize a loss, you buy. Buy, buy, buy.

It's why we say you need to leave you emotions at the door as an investor. If SPY ever goes to zero, we have much bigger problems than our 401k balances. And that is why you diversify your investments with guns and ammo.

And I say all of this as one of the more risk averse people in the thread.
Click to expand...

Well think of it this way. Let's say for some reason the tech sector takes a bloodbath. Could be China takes control of Taiwan, or something of that nature. Or let's say AI reaches a saturation point, or EVs become undesirable due to production costs, etc etc.

What would SPY's valuation look like if the tech sector dropped 50%, considering SPY is heavily weighted towards 7-10 stocks?

I would imagine if we are gainfully employed, we would simply ignore it and keep DCAing into the fund.. but that's where my doubt is.
 
Sanrith Descartes

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tugofpeace said:
Well think of it this way. Let's say for some reason the tech sector takes a bloodbath. Could be China takes control of Taiwan, or something of that nature. Or let's say AI reaches a saturation point, or EVs become undesirable due to production costs, etc etc.

What would SPY's valuation look like if the tech sector dropped 50%, considering SPY is heavily weighted towards 7-10 stocks?

I would imagine if we are gainfully employed, we would simply ignore it and keep DCAing into the fund.. but that's where my doubt is.
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If you want to invest based on Black Swann events, then ok.

It's like one step to the left of saying "but what happens to the market if a giant meteor hits NYC."

Whatever works for you is the way you should go. What works for me is income statements, balance sheets and market technicals.
 
Blazin

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tugofpeace said:
Well think of it this way. Let's say for some reason the tech sector takes a bloodbath. Could be China takes control of Taiwan, or something of that nature. Or let's say AI reaches a saturation point, or EVs become undesirable due to production costs, etc etc.

What would SPY's valuation look like if the tech sector dropped 50%, considering SPY is heavily weighted towards 7-10 stocks?

I would imagine if we are gainfully employed, we would simply ignore it and keep DCAing into the fund.. but that's where my doubt is.
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Isn't there always winners in any losers scenario? That's the neat trick, the S&P is going to contain the most successful companies. So the top 7 takes a blood bath no matter what their concentration that has no effect on the index if that money simply moves to other S&P companies.
 
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tugofpeace

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On another note.. I diligently track my finances in excel. Having projections of my net worth is nothing new, but today I started wondering when I could retire at the soonest.. not that I want to.

What's really surprising to me is that the number is much lower than I thought. I could conceivably retire with $1.7M if I wanted which, if I stayed single, would take me until 45 (assuming 6% yearly return).. but that's crazy. I always thought it would be close to $3M+. What's really mind boggling is that with a 4% return on that $1.7M, which means I'd pretty much go into 100% bonds at that age, I'd be able to sustain myself with an $8k/month spend for 30-40 years.. wtf!

If I just continue until 55 I'd have between $4-5M assuming 6% yearly return. Makes me question why I've been pinching pennies so long. I need to start being less frugal.
 
Xarpolis

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The down side to your plan is being single the rest of your life. I personally wouldn't want to go that route. I put too much trust in my wife, and it's nice having kids in your life. Even if they are a financial burden, they increase my quality of life. Much happier going this route. Being single is no fun.
 
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tugofpeace

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Xarpolis said:
The down side to your plan is being single the rest of your life. I personally wouldn't want to go that route. I put too much trust in my wife, and it's nice having kids in your life. Even if they are a financial burden, they increase my quality of life. Much happier going this route. Being single is no fun.
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I agree. I mentioned being single as the plan I laid out excludes whatever income my spouse would bring in, which would probably allow an even earlier path to retirement.
 
Sanrith Descartes

Sanrith Descartes

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Xarpolis said:
The down side to your plan is being single the rest of your life. I personally wouldn't want to go that route. I put too much trust in my wife, and it's nice having kids in your life. Even if they are a financial burden, they increase my quality of life. Much happier going this route. Being single is no fun.
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100% this. Especially the "even if they are a financial burden" part. God damn kids are expensive. 😀
 
Hateyou

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tugofpeace said:
I agree. I mentioned being single as the plan I laid out excludes whatever income my spouse would bring in, which would probably allow an even earlier path to retirement.
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Pro tip: Most women spend a lot, especially when they see high numbers in the bank. Clothes, hair, makeup, vacations, keeping up with the Jones’s, and eventually kids. There’s a reason single men typically have a lot of savings and married men don’t.

I’m not saying don’t go that route, just don’t expect a dual income = double your current savings situation.
 
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Xarpolis

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Sanrith Descartes said:
100% this. Especially the "even if they are a financial burden" part. God damn kids are expensive. 😀
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I was listening to a podcast a while ago, but I forget which and who was on it. Anyway, they were explaining how they are much more financially successful than their own parents were, and were saying that it doesn't matter how much money you have, your kids get all of it. You're always trying to give them a better life than you yourself had. Very truthful statement.
 
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Sanrith Descartes

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Xarpolis said:
I was listening to a podcast a while ago, but I forget which and who was on it. Anyway, they were explaining how they are much more financially successful than their own parents were, and were saying that it doesn't matter how much money you have, your kids get all of it. You're always trying to give them a better life than you yourself had. Very truthful statement.
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I thought they were expensive when they were young. Christ I spent more from ages 15-18 than I did from ages 1-15.
 
fris

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Unless you're counting car and insurance, those early years were more expensive. For a few years, day care was more than my mortgage
 
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