Investing General Discussion

Blazin · Mar 13, 2017

OU Ariakas said:
I pulled my money out of the market when the DOW was at around 18k because of the volatility around the election and all the market signs pointing to a downturn. Now here we are around 21k and and I am in this awkward place where I don't want to jump back in because I'm buying at a peak but it doesn't seem like the market cares about economic numbers (however, even those are coming around). Anyone else in a similar boat?

You've missed 10% or so but if you're view is out far enough it's rather minor but I definitely sympathize. Don't wait to get back in where you left, but you can wait for a pullback. Those pullbacks so far have been very shallow the last was just under 2% from the high. If you get a gift of a 5% pullback from high I would just bite the bullet and get back in. This is retirement money with a multiple decade outlook then you need to get back in.

the only timing I would ever do if you just want to lower beta would be sell the market when it closes a month below it's 20 month average and buy back in on any monthly close above the 20 month sma. This has about a 100 yr track record of working to avoid the worst of a bear market decline and will usually only result in a couple trades every 10 years, so hardly "market timing"

Gravel · Mar 13, 2017

Wingz said:
A recent documentary put up by Frontline, I thought it was very interesting:

Only about 15 minutes into that, but it's infuriating. I want to punch every single "expert" they've had on there.

I'm also tired of this romanticizing people have of pensions. It's like people think pensions have been the standard for hundreds of years or something. Pensions were around for basically a generation and a half. That's it. Prior to that, you were just poor and died, or worked yourself to death. No one "retired" unless you were wealthy.

Anyway, I got especially pissed off when the reporter, who's in his mid-60's, is told that he's going to have to work part time until his mid-70's. Like, what the fuck? He's been saving since his 20's and can't retire? He's been taken advantage of by leeches his entire life.

Shit, if you start at 30 and only max out an IRA for 30 years, you'll have enough to withdraw about $32k (inflation adjusted, btw) indefinitely if you throw it into a total market index fund. Indefinitely. That money never runs out. Add in Social Security and start drawing the money down, and you'll likely have an income around $45-50k.

They're all fear mongers. "Shit, sorry, you're going to have to work until you're 75. Hope you don't get sick!"

Edit: It was actually pretty good, once they got through the first 20-25 minutes of scaring people. Pretty much once they started talking to Bogle and talking about fees.

Fogel · Mar 14, 2017

I loved when they asked the Jp morgan/prudential people the questions about indexing vs active management etc and you can immediately see them go into spin mode. Give me a fucking break. Especially the head of prudential "Oh, I haven't seen that research, so I don't know!"

Rod-138 · Mar 14, 2017

I'm licensed and I still tell people that's its pretty tough to beat the indexes!

Gravel · Mar 14, 2017

Rod-138 said:
I'm licensed and I still tell people that's its pretty tough to beat the indexes!

I wish people understood that it's possible to beat the index, but almost impossible to do it over an extended period of time.

If a financial advisor is telling someone that it's worth their 1% cut because they can beat the market, a little critical thinking would tell you that if they could, they'd be a billionaire.

So the question you have to ask is; is my financial advisor a billionaire? If the answer is no, he's probably not going to be worth paying a premium for.

It will be interesting if indexes work their way up to something like a 50%+ of the market. I think by that point, people will be able to take advantage of the "herd" and actually make significant amounts of money. Especially since most (all?) index funds only post at the closing price.

Blazin · Mar 14, 2017

Gravel said:
It will be interesting if indexes work their way up to something like a 50%+ of the market. I think by that point, people will be able to take advantage of the "herd" and actually make significant amounts of money. Especially since most (all?) index funds only post at the closing price.

I'll have to double check but I don't believe this is true anymore with the rise of the ETF most index money is no longer contained within mutual funds. We will have to see how it plays out but we don't know how the market is going to behave under serious decline now that ETF's and indexing has become hundreds of percent more popular since the last real down turn. My personal opinion is that when people hit the panic "sell" and we all know they will at some point that sell will be a broad index ETF and that will require fund managers to dump indiscriminately to meet redemption requests and there will be major bargains to be had in individual equities that would not normally fully participate in a strong down turn.

Everything is a pendulum and right now we have had a strong swing towards passive index investing, and we all know right now active management isn't worth paying for but the market has a knack for correcting imbalances when everyone is positioned the same way.

Gravel · Mar 14, 2017

That's...what I was saying. I think, if I understand what you wrote. As indexing gets bigger and bigger, fund managers will actually be able to finally make money again.

Unidin · Mar 15, 2017

I think the value in an advisor is someone to talk you out of selling low and buying high. Very few people actually just put money into an index fund and let it sit. How many people do you know that have been in cash for 2,3,4 or 5 years now because the market is going to correct? I work in a bank and see it all the time.

Blazin · Mar 15, 2017

Unidin said:
I think the value in an advisor is someone to talk you out of selling low and buying high. Very few people actually just put money into an index fund and let it sit. How many people do you know that have been in cash for 2,3,4 or 5 years now because the market is going to correct? I work in a bank and see it all the time.

Many many people have been in all cash or heavy cash for years such is the nature of bull markets, and it's not likely to end until those people finally capitulate and buy then the market will finally sell off. The psychology can take near a decade or more to play out but the same cycle repeats over and over. I do believe the prevalence of the internet and information will result in an even more skeptical investor making these cycles longer than they traditionally were. I don't think baby boomers are going to invest in any large way ever again. The low rates are really hurting them but at their median age now I would be highly surprised to see them re enter the market. Every year that passes and this bull market extends we increase the number of investors who have never experienced a bear market.

At our average age here on this board we should see at least two more round trip cycles in our life time, I for one can't wait. In 2009 I had almost my entire net worth into my business and had very little to put into the market. When the next serious recession hits and the blood flows and everyone is screaming the market is a stupid place to put money, I hope to have the courage to go all in. My problem since the dot com crash is not the courage to buy at lows but but selling too fast when the market gives you that quick 30-50%, cyclical trends are long lasting and bull markets can return hundreds of % if you stay the course.

Cad · Mar 15, 2017

Blazin said:
Many many people have been in all cash or heavy cash for years such is the nature of bull markets, and it's not likely to end until those people finally capitulate and buy then the market will finally sell off. The psychology can take near a decade or more to play out but the same cycle repeats over and over. I do believe the prevalence of the internet and information will result in an even more skeptical investor making these cycles longer than they traditionally were. I don't think baby boomers are going to invest in any large way ever again. The low rates are really hurting them but at their median age now I would be highly surprised to see them re enter the market. Every year that passes and this bull market extends we increase the number of investors who have never experienced a bear market.

At our average age here on this board we should see at least two more round trip cycles in our life time, I for one can't wait. In 2009 I had almost my entire net worth into my business and had very little to put into the market. When the next serious recession hits and the blood flows and everyone is screaming the market is a stupid place to put money, I hope to have the courage to go all in. My problem since the dot com crash is not the courage to buy at lows but but selling too fast when the market gives you that quick 30-50%, cyclical trends are long lasting and bull markets can return hundreds of % if you stay the course.

I'm just happy to continue making 9-11% per year on indexes, I make enough in income that I don't need any big hits or winners from investments I just need to keep making 9-11% and I'll be able to retire with 8 figures in < 15 years.

With that in mind I just keep buying more VTI. Yea, it's high right now. In 10 years it'll be a lot higher and I don't want to sit in cash waiting for the right time since I'm not qualified to know that.

Blazin · Mar 15, 2017

Do you think your lifestyle really needs 8 figures? I'll probably still end up their at some point just because the compounding just starts being a silly amount over living expenses but unless you really want to live well I don't see the point of exposing myself to the risk of being fully invested to no change in actual effect on our lives. I guess that was discussed some in the other thread, everyone views wealth differently but at $5 mil or so I have no interest in any gains outside of just matching inflation. Can make a risk free and largely tax free living of $170-$200/k a year.

I still think like a middle income person and I probably always will, let's say you are at $8 mil in assets in the market and we hit a $30% down turn, do think you'll be able to stomach the $2.4M decline in a year to stay the course for the ride back up to $10M? The real dollars effect my psychology more than the %'s. 30% is 30% but as the numbers grow bigger compared to income and lifestyle, I really dont think I'd have the fortitude to ride that out, and their is no way to stay fully invested to $10M net worth without some serious bumpy rides.

Took a lot of risk and stress to build what I have, and for me at some point I just want off the ride, but I applaud your ability to stay on it. My investments in the market will never again exceed 40% of my net worth and the number will only decline over the next 10-15 years.

Cad · Mar 15, 2017

Blazin said:
Do you think your lifestyle really needs 8 figures? I'll probably still end up their at some point just because the compounding just starts being a silly amount over living expenses but unless you really want to live well I don't see the point of exposing myself to the risk of being fully invested to no change in actual effect on our lives. I guess that was discussed some in the other thread, everyone views wealth differently but at $5 mil or so I have no interest in any gains outside of just matching inflation. Can make a risk free and largely tax free living of $170-$200/k a year.

No but I don't want to quit working at 40, either. Seems like too much future risk (don't know what will come later in life) vs. retiring at 50-53 or so.

I don't think there's a lot of risk in being particularly invested in VTI though, for example. If 2008 happens I'll work a few more years until it recovers. If 1929 happens, same thing. When I do get close to actually retiring, I'll diversify that more.

Blazin said:
I still think like a middle income person and I probably always will, let's say you are at $8 mil in assets in the market and we hit a $30% down turn, do think you'll be able to stomach the $2.4M decline in a year to stay the course for the ride back up to $10M? The real dollars effect my psychology more than the %'s. 30% is 30% but as the numbers grow bigger compared to income and lifestyle, I really dont think I'd have the fortitude to ride that out, and their is no way to stay fully invested to $10M net worth without some serious bumpy rides.

One would hope I can stomach that paper loss knowing every downturn eventually rebounds. If it doesn't rebound, society and myself probably have bigger issues than that 30% loss.

And I can always go back to work. I know several 70+ year old lawyers that still work normal hours.

Blazin said:
Took a lot of risk and stress to build what I have, and for me at some point I just want off the ride, but I applaud your ability to stay on it. My investments in the market will never again exceed 40% of my net worth and the number will only decline over the next 10-15 years.

It's not particularly a ride for me since VTI isn't too exciting.

And I invest that money and basically never touch it so it just piles up... I live entirely off of less than 1/2 of my income.

Blazin · Mar 15, 2017

Yeah the ride (risk) for me was running a company not my investing. I'm a rather boring investor VOO and VYM for me not VTI. I do invest in individual blue chip names outside of retirement accounts but nothing over $150k in an individual name

Since we all love to post winners I like to make sure to mention losses. I sold TGT yesterday at a loss, it's a great dividend stock and my entry was @ $55.75 and I sold at $55.20 so not a major hit but a loss nonetheless. I went with my gut read on this one that there is more pain to come and wasn't interested in holding it for what I think could be another 10-15% decline, and it looks like with the loss of $55 support today I was right and likely headed to low 50s or high 40s. May reenter there and seeing if they stop the bleeding next earnings. I really hate retail but I like to have some retail exposure but I have never made shit investing in it.

How's this for an ugly ass chart:

Blazin · Mar 15, 2017

Thanks Janet! Quite a day in the markets

Gravel · Mar 15, 2017

Blazin said:
I still think like a middle income person and I probably always will, let's say you are at $8 mil in assets in the market and we hit a $30% down turn, do think you'll be able to stomach the $2.4M decline in a year to stay the course for the ride back up to $10M? The real dollars effect my psychology more than the %'s. 30% is 30% but as the numbers grow bigger compared to income and lifestyle, I really dont think I'd have the fortitude to ride that out, and their is no way to stay fully invested to $10M net worth without some serious bumpy rides.

Took a lot of risk and stress to build what I have, and for me at some point I just want off the ride, but I applaud your ability to stay on it. My investments in the market will never again exceed 40% of my net worth and the number will only decline over the next 10-15 years.

Just think about the fact that you're not going to be selling a significant amount in the downturn. Most recessions are very short lived. Even the 2008 one bounced back most of the way within a year.

So if you have $8M and we have a 30% decline, how much are you actually selling to survive? Maybe $50-100k at the most? The rest of your portfolio should bounce back because you're not liquidating the entire thing.

And if you're smart, in retirement you'll be holding a year's worth of expenses in cash, CD's, or something else incredibly liquid. You can use that to ride out the down turn. I don't include bonds because if you're actually using an asset allocation, you should be liquidating most of your bonds during the recession to buy more stock.

Cad · Mar 15, 2017

Gravel said:
Just think about the fact that you're not going to be selling a significant amount in the downturn. Most recessions are very short lived. Even the 2008 one bounced back most of the way within a year.

So if you have $8M and we have a 30% decline, how much are you actually selling to survive? Maybe $50-100k at the most? The rest of your portfolio should bounce back because you're not liquidating the entire thing.

And if you're smart, in retirement you'll be holding a year's worth of expenses in cash, CD's, or something else incredibly liquid. You can use that to ride out the down turn. I don't include bonds because if you're actually using an asset allocation, you should be liquidating most of your bonds during the recession to buy more stock.

I don't think he was referring to the loss of capital for the years of the downturn, but the psychological effect of losing so much on paper for that time period and having the fortitude to not sell/stoploss.

Gravel · Mar 15, 2017

Yes. I was giving him motivation to stay the course in retirement.

Does it hurt seeing a 30% drop? Absolutely. But if you're only going to sell off 3 or 4% of your portfolio in a year, it's only that 3 or 4% that gets hit by the full drop. And if you spread it over a year, it becomes even less; enough so that you might only need to wirthdraw an additional .5% or something to cover the loss. It still sucks, but when the market comes back up you probably won't notice.

Picasso3 · Mar 15, 2017

Shit i thought we pulled out of xom

Cad · Mar 15, 2017

Gravel said:
Yes. I was giving him motivation to stay the course in retirement.

Does it hurt seeing a 30% drop? Absolutely. But if you're only going to sell off 3 or 4% of your portfolio in a year, it's only that 3 or 4% that gets hit by the full drop. And if you spread it over a year, it becomes even less; enough so that you might only need to wirthdraw an additional .5% or something to cover the loss. It still sucks, but when the market comes back up you probably won't notice.

Yea, that was my response as well and I think he rationally knows the market will recover given a few years, but people are monkeys and hindbrain sometimes doesn't function well when you're 68 or whatever and you lose several million dollars in a downturn, you might be tempted to pull it. I mean, it's easy to sit here when I'm in my late 30's and earning as much as I am that naw, I'd let that bitch ride and get my sweet gainz on the back end! But his point is well taken that sometimes these are emotional decisions rather than rational ones and we need to remember that.

Blazin · Mar 15, 2017

Cad said:
Yea, that was my response as well and I think he rationally knows the market will recover given a few years, but people are monkeys and hindbrain sometimes doesn't function well when you're 68 or whatever and you lose several million dollars in a downturn, you might be tempted to pull it. I mean, it's easy to sit here when I'm in my late 30's and earning as much as I am that naw, I'd let that bitch ride and get my sweet gainz on the back end! But his point is well taken that sometimes these are emotional decisions rather than rational ones and we need to remember that.

This.. This is the time in a strong bull market that it's easy to stay the course, this is not at all what a bear market feels like and there are extended periods that the market makes little headway 1966-1982 2001-2009 etc. Older you get the scarier that becomes, but I'm also saying that when you have "enough" the motivation to sell increases because there is less benefit to you as an individual to stay the course. Staying the course from my late teens till my 40s had life changing benefits that is not nearly as much the case as we become older.

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